Sindhu Trade Links Ltd Management Discussions.

Economic Developments and Industry View

The unprecedented onset of Covid-19 pandemic has heavily impacted the global economy. The pandemic is raging high across the world with rising human casualties. Protecting lives and allowing health care systems to cope have required isolation, lockdowns, and widespread closures to slow the spread of the virus. The health crisis is therefore having a severe impact on economic activity. As a result of the pandemic, the global economy is projected to contract sharply by 4.9% in 2021, much worse than during the 2008-09 financial crisis.

In the pre-COVID scenario, the Indian Economy continued the mid-single digit growth path. GDP growth has been slowing down during this period primarily due to declining rural wages, high unemployment levels, liquidity crunch in the system and slowdown in demand.

First few cases of Covid-19 infection emerged in India in February 2020. Travel restrictions and testing norms were put in place from 1st week of March and these intensified further in the following week leading to a complete lockdown of entire country on 24th March 2020. This led to severe supply bottlenecks as transportation system came to a halt.

Large sections of migrant labour moved back to their villages and movement of goods came to a standstill. Demand also came under pressure as consumers stocked up essential goods but cut down on purchases of non-essential products.

Most companies shut down their operations in the first 21 days of the lockdown. By May 2020, the restrictions on movement of goods were eased and supply chains became operational, particularly outside the containment zones. While companies have started operations of their manufacturing facilities, a large part of the economy especially the hospitality sector, malls and recreation places, travel and tourism, small and medium industry, continue to be impacted even though there has been easing of lockdown in these sectors as well.

Outlook on Opportunities

The COVID-19 pandemic is likely to have a major negative impact across the world. It has led to quarantines, regional lockdowns and social distancing—which are essential to contain the virus — with particularly acute effects on sectors that rely on social interactions such as travel, hospitality, entertainment, and tourism. Workplace closures are disrupting supply chains and reducing productivity. Layoffs, lower incomes, fear of contagion, and heightened uncertainty make people spend less, leading to consumption squeeze and triggering further business closures and job losses. Health care expenditure, support to vulnerable sections of society and reduced tax revenue is likely to put severe pressure on fiscal balances of the government.

We are passing through a global crisis of COVID-19, which has had a phenomenal impact on both humanity and the economy. Most of the governments are in a dilemma of "Lives Vs Livelihood". Efforts are on at a war-footing level to develop a vaccine for COVID-19, but any launch of the vaccine will take a minimum of three to four more months. Till then, we will have to live with certain restrictions and follow strict measures of social distancing. These restrictions will, however, not bring the economy back on the normal track.

Economic activities have a direct correlation with logistics; any negative trend in the economy will result more negatively on the logistics sector. In FY 2020, growth of the logistics sector has witnessed tapered growth compared to the previous few years. The crisis of the pandemic

is going to make the situation more critical in FY 2021. With respect to immediate term impact on logistics, it will be very severe and may force closure of small logistics companies, while in the long term this crisis may turn in opportunity for the Indian logistics sector. As per our estimates, the logistics sector is estimated to shrink by 12-13% in this financial year.

Long term view on logistics is, however, quite optimistic. Current pandemic will lead to a shift in global manufacturing locations. China may be the biggest loser in the race and the most likely gainer could be India, Indonesia, Malaysia, Philippines and Vietnam. India developing as one of the major manufacturing destinations will be a terrific boost for the logistics sector. Also in the long run, other drivers of logistics linked to domestic consumption will be back to the normal pace of growth.

Outlook for Threats, risks and concern

We operate in a very competitive industry, with many unorganized players. Many segments within the logistics industry are highly commoditized and have low barriers to entry, leading to a market with a very high degree of fragmentation. In the recent past, startups and international logistics companies have entered the India market. Competition from these segments is likely to increase. We will need to stay ahead of our competition through consistent investments in modern technology and focus on service quality and value-added services.

The cyclical fluctuations due to economic recession, downturn in business cycle, interest rate fluctuations and other economic factors beyond control has posed a serious threat on the Company policies in finance sector. Newer regulatory updates pose a constant challenge for smooth operations of the Company. Higher cost of funds might lead to reduced bottom-line for the Company. Like in most other industries, opportunity brings itself competition. The different levels of competition in each segment have led to the price cutting as well.

The Indian logistics industry is fragmented and under developed. Logistics costs are relatively high due to poor physical and communication infrastructure; high dwell time at ports; low levels of containerization; and a multi-layered tax system contributing to significant delays at border crossing points.

Human Resources/Industrial Relations

The Company has continuously strive to attract and retain the best talent from the local markets; clearly define their roles and responsibilities; include them into robust performance management systems; create an inspiring and rewarding work environment; engage them into an inclusive work place; impart training and create development opportunities for increasing employee knowledge and efficiency to make them future ready; and create career opportunities within.

The Company is committed in ensuring that the work environment at all its locations is conducive to fair, safe and harmonious relations between employees. It strongly believes in maintaining the dignity of all its employees, irrespective of their gender or seniority. Discrimination and harassment of any type are strictly prohibited. The Company ensures that no employee is disadvantaged by way of gender discrimination.

Segment Wise or product wise performance

Due to the timely execution of the services and efficiency in implementation of policies of the Company, there has been the growth in all the sectors of the company i.e. trading in lubricants, transportation and finance and investment activities from last years performance. With superior methodologies and improved process and systems, the Company is well positioned to lead a high growth path. The details can be extracted from the notes to accounts.

Cautionary statement

Certain statements in the Management Discussion and Analysis describing the Companys objectives, predictions may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward looking statements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India, volatility in interest rates, new regulations and Government policies that may impact the Companys business as well as its ability to implement the strategy. The Company does not undertake to update these statements.

(Satya Pal Sindhu) (Rudra Sen Sindhu)
Managing Director Director
Din no.-00218355 Din no.-00006999