Patel Integrated Logistics Ltd Management Discussions.

(Within the limits set by the Companys competitive position)

Economic Scenario:

The Indian economys GDP grew at a rate of 5% in FY20 and for FY21, the rate is anticipated to rise to 6-6.5%. The current slowdown in growth rate is because of slow consumption rate, decline in fixed investment, weak trade activities and a tough manufacturing atmosphere. The fiscal deficit target might be relaxed for FY21, as revival of the economy continues to be the top priority. For boosting the consumer sentiment and sluggish demand, additional fiscal headroom will be created by adopting counter-cyclical fiscal policies.

The overall industrial segment recorded a 2.5% growth in FY20, which was 6.9% in FY19. The Index of Industrial Production

Growth (IIP), which reflects the industrial performance of an economy, was recorded 0.6% for 2019-20. This steep fall is on the back of subdued domestic demand in crucial sectors, like pharmaceuticals and automotive. Additionally, sectors like leather, textiles, basic metals and jewellery also underperformed. Another important factor which had a major impact was the liquidity crunch because of lesser lending by NBFCs.

The nations vision of becoming a $5 trillion economy by 2025 requires strong determination and incorporation of pro-business policies. Providing essential support for new players in the market, improving the ease of doing business, eliminating unnecessary policies which prove detrimental and enhancing trade for job creation are crucial for future growth. Exports of network products has the potential to bring the economy on track, as it can provide impetus to the manufacturing sector and develop numerous jobs. This will be done by merging "Assemble in India for the world" with the "Make in India" initiative. The exports of network products is anticipated to touch $7 trillion by 2025, which will play a crucial role for the Indian economy.

Impact of COVID-19 on Economy:

The economy was in the midst of turbulent tides in the final quarter of FY20. Any hopes of revival in the final quarter of the fiscal year were put down by the outbreak of COVID-19. The outbreak has impacted nearly every sector of the economy, the worst affected being tourism, hospitality and aviation. The retail sector has taken significant hit with supermarkets, malls and theatres being closed. This comes on the back of minimum to no activity in sectors like entertainment, construction, etc. The pandemic is expected to cost Indian trade $348 million. India is one of the top 15 nations which is directly affected due to the manufacturing slowdown in China.

Considering the challenges being faced by businesses and consumers, numerous agencies have revised their growth projections for Indian for the years 2020 and 2021. With travel restrictions, subdued consumption, supply chains disruptions and low investment levels, the country has an uphill task of adapting to the scenario and bringing the economy back on track.

Logistic sector has been awarded infrastructure status which has made it easier for investment inflows and has become a major growth driver of the logistics industry. e-Commerce is another major segment that is expected to support the growth of the logistics industry. The logistics market in India is forecasted to grow at a CAGR of 10.5% between 2019 and 2025. Increasing investments and trade points toward a healthy outlook for the Indian freight sector.

Companys Business in brief:

During the year 2019-20 the Company has divested its Surface Transport Division known as ‘Patel Roadways on a going concern basis to Innovative Logistics Service Private Limited, a subsidiary of Stellar Value Chain Solutions Pvt. Ltd. by way of "slump sale" Presently Company is focused and engaged into Air Cargo Consolidation business under the division Patel airfreight which offers transportation of high-density cargo by air and surface within India. as well as International. With 24 branches across the country, it offers the specialised services. Additionally, it also offers import consolidation services.

Industry Overview:

Despite being highly fragmented and dominated by unorganized players, the Indian logistics industry has shown tremendous improvement over the last decade, starting from scratch and reaching a level where the Indian logistics industry and its players today are competing with the top global players and markets. Reviving domestic demand growth, supported by government reforms, transportation sector development plans, growing retail sales, and the e-Commerce sector are likely to be the key drivers of growth for the Indian logistics industry.

The Indian air cargo industry is poised for significant growth on the back of both the strength of Indias economic growth and many other drivers of growth in Indias commerce.

Advancements in digital technologies, changing consumer preferences due to e-Commerce, government reforms, and shift in service sourcing strategies are expected to lead the transformation of the Indian logistics ecosystem to new heights. Strong growth supported by government reforms, transportation sector development plans, growing retail sales, and the e-Commerce sector are likely to be the key drivers of the logistics industry in India. Indias GDP is expected to reach 3.02 trillion in 2020, representing about 4% of the global GDP.

Open Sky Policy for air cargo and improved international connectivity coupled with expanding cargo-handling infrastructure, both physical and digital have sustained the high growth of air cargo in India in the last few years.

Opportunities & Outlook:

Grant of infrastructure status to logistics, the introduction of the E-Way Bill, and GST implementation are set to streamline the logistics sector in India. Setting up of a logistics division under the Department of Commerce, technology upgrades, and development of dedicated freight corridors and logistics parks are also major moves to upgrade the logistics landscape. Logistics start-ups in India gained a substantial foothold after the onset of e-Commerce, and there are several new companies that are gaining traction in the industry. Online platforms have increased competition and lowered freight costs with real-time data availability and a transparent value chain. This will help the Air cargo service providers to innovate and adapt to the transforming logistics landscape and increase the Volumes.

Strong macroeconomic fundamentals, growth in retail driven by rising levels of disposable income in the hands of more and more people, expansion in domestic air Network by Indian Carriers, End to End solutions by Express Service Providers, growth of new time sensitive verticals like Pharmaceuticals, Healthcare, Electronics, wireless telephony, and Automotive Spares etc. are said to be the factors responsible for the rapid growth of Domestic Air cargo logistics business.

The domestic air freight demand is expected to touch 1.1 million tonne by the fiscal 2025 at a compounded annual growth rate (CAGR) of 7%-9% per cent propelled by rapidly growing e-commerce activity, increasing capacity and improving airline connectivity to smaller cities, according to a research note.

Going forward, it is felt that the focus on improvement in the Ease of Doing Business in India coupled with landmark Government of India initiatives like ‘Make in India, and ‘Digital India, and new norms of " LOCAL TO GLOBAL" coupled with suitable policy, logistics, regulatory, and skills regime will all contribute to facilitating accelerated growth in air cargo.

Risks & Concerns:

Lack of supporting infrastructure, automated material handling systems, and high manual process interference are some key areas where the Indian Air Cargo industry lags.

Industry-wide cargo capacity declined by 42% annually, stemming from the evaporation of the belly capacity of passenger aircraft. Airlines raised freighters capacity notably by converting passenger aircraft into freighters to meet demand.

Though the Freighter operations and Cargo on seat flights have helped to drive the cargo load factor up 11.5 ppts year-on-year but the high pricing of freighter operations is a deterrent to the growth of the air cargo on freighter.

In normal times, this would be consistent with improving air cargo demand. But the current lack of air cargo capacity prevents that demand from materializing, and instead leads to elevated air cargo rates and load factors and moreover forcing the industry to move shipments by other means of transport .

Air Cargo full freighter operations have not developed as was expected and continual efforts through new policies/incentives need to be devised to provide a favourable environment to support growth.

Inspite of the international fuel prices cooling off to all time new low the Indian fuel prices have climbed up the operating costs of the air cargo industry. The ever-increasing cost of fuel is the biggest area of concern as it is reducing profitability.

The warehouse industry in India is still highly unorganized and fragmented. High inventory holding costs, higher storage cost, and improper material handling which leads to damage of the product are the major concern for warehouse industry.

The COVID-19 pandemic situation has been very fluid and has been very unpredictable which has created a huge dent on the industry has a whole. We are also impacted badly by the sudden cancellation of the flights schedule by the domestic airlines due to lockdown and lower passenger demand where by leading to reduction in cargo belly spaces . The COVID-19 impact is continuing to have a cascading effect to the industry as a whole.

Human Resource Management:

Your Company continues to place significant importance on its Human Resources and enjoys cordial

Our constant endeavour is to invest in people and people processes to improve human capital for the organization and service delivery to our stake holders.

Attracting, developing and retaining the right talent will be a key strategic imperative and the organization continues its undivided attention towards that. Your Company recognizes the fact that Human Capital is one of the vital constituents of a successful organization. The management strengthens Human Resources by making available better tools, technology, techniques and training at the work place to harness the latent potential as it has always aimed at bettering the performance of individuals and as a team. Employees health and safety measures were taken care at all work places, The Company is operating in Logistics sector which has been growing rapidly. However, there is an acute shortfall of personnel with adequate training and education in logistical management in India. The management and mid-tier levels are provided with training on leadership skills, jointed skills and positions and being process-driven. Guided by the vision and overall strategy of Company, the focus is to build strong workforce by establishing strong linkages between employees, processes and values. Its focus remains on capability development in employees to maximise productivity and expand skillset.

The Company continues to enjoy peaceful and harmonious relations with all its employees through several proactive measures during the year. The Company employed 341 people as on 31st March, 2020.

Internal Control System:

In your Company, an internal control system is in place to ensure the effectiveness and efficiency control system plays a significant role in the process of risk identification and its mitigation. It is a valuable contribution which ensures compliance of applicable laws and regulations.

The Company is committed to further improve Internal Controls and strengthen the Internal Audit function. Further stress on

Corporate Governance is being given in the current year. We firmly believe that the business can grow and develop on the required lines and profitability can be sustained only through Strong andTransparent Corporate Governance.

Financial performance and segment-wise performance:

The discussion on the financial performance of the Company is covered in the Directors Report. The segment-wise performance is available in note 39 of the notes forming part of the Accounts for the year under consideration.

Details of significant changes (i.e. Change of 25% or more as compared to the immediately previous in key financial ratios, along with detailed explanations therefore:

Description 2019-20 2018-19 Reason if Material Variance
Debtors Turnover 3.69 times 4.43 times No significant variance
Interest Coverage Ratio 1.44 times 1.88 times No significant variance
Current Ratio 2.34 times 2.17 times No significant variance
Debt Equity Ratio 0.53 times 0.64 times No significant variance
Operation Profit Margin (%) 3.07% 3.52% No significant variance
Net Profit Margin (%) 3.09% 1.41% Improvement in the Margin due to profit on sale of surface transport division through slump sale.

Cautionary Statement:

Statements in the Management Discussion and Analysis Report describing Projections, Estimates, Expectations, Future Outlook etc. in connection with the business may be ‘forward looking statements within the meaning of applicable securities laws and regulations. However, the actual results could materially differ from those expressed or implied in the statements made by the Management. Various factors which are outside the purview of the Management Control can cause these deviations. These factors include economic developments in the country, changes in governmental policies and fiscal laws, sudden and unexpected rise in input costs, change in the demand supply pattern in the industry, etc.