Tinna Trade Ltd Management Discussions.

1. ECONOMIC AND INDUSTRY OVERVIEW GLOBAL ECONOMY

In the Financial year 2018-19, the global economy saw significant volatility. The biggest risk facing economies is the growing evidence that global growth and trade are weakening. The slowing of the Chinese economy, along with growing evidence of European growth under pressure, cast a big cloud of uncertainty. Unsettled trade tensions and developments around Brexit may continue to impact the cross- border trades, while oil-price volatility may impart a further downside risk to the outlook in the investment climate in the Middle East markets. Global growth is projected to decline to 3.3% in 2019.

INDIAN ECONOMY

The year 2018-19 saw the Indian economy yielding the benefits of structural reforms, viz Goods & Service Tax (GST), Demonetisation and Insolvency & Bankruptcy Code (IBC). The year witnessed a pick-up in project awards, improved clearances and fund allocation, resulting in a pickup in execution momentum in the domestic market.

While the global economy is battling headwinds, India continues to be one of the fastest growing major economies in the world in FY 2018-19, driven by strong household spending and corporate fundamentals. Despite external vulnerabilities in the form of high oil prices, trade tensions between major global trading partners and the US monetary tightening, the Indian economy remained resilient. The World Bank estimated the Indian economy to grow by 7.2% in FY 2018-19.

INDUSTRY STRUCTUREAND DEVELOPMENT

The Government of India has been making a significant increase in the MSPs of all the agricultural crops to support farmers as to ensure their income to be doubled by 2022. It is encouraging the lager sowing, higher production of grains and pulses. The Government also has imposed a heavy import duty on the pulses and has banned / restricted the import of some of the pulses to support famers. The production of wheat has crossed a mark of 100 Million MT and also the production of pulses has increased, resulting in lesser dependence on imports.

The company is having a wide network of end users, processors and traders with whom company is engaged in the business for decades. Having a very good network and strong presence in the market, the company is able to reap the benefit of the larger production of food grains and pulses in the country.

2. OPPORTUNITIES AND THREATS OPPORTUNITIES

(a) A higher production of food grains and pulses is bringing more and more trade opportunities, larger volumes and advantage of scale to the company.

(b) The company is exploring opportunities to increase the trade of wheat to the flour millers of South India, who are regular buyers.

(c) The company is exploring the import and sales of bitumen from Middle East to the road construction companies.

(d) The company is focusing to increase its business base in South India in Steel abrasives segment.

(e) A well tested and set network of buyers / processers/end users is helping company to scale the size of the business

(f) Professional set up of dedicated team of traders, executives and financial planners are instrumental to achieve the goals

(g) A very good reputation of the promoters and legacy is providing better opportunities to the company than the peers.

THREATS

(a) Due to the fluctuations in the market price of Agri commodities, the company is exposed to the commodity price risk.

(b) Due to fluctuations in foreign exchange rates, the company is exposed to foreign currency risk.

(c) Any changes in the Government policies as regard to import, custom duties and MSPs may impact the business of company.

(d) The liquidity tightening in the market due to negative atmosphere in the banking industry, the company may not get the adequate credit support from the banks.

(e) As per the industry/trade norms, the Company has been selling goods on credit to its buyers, which expose the company to the credit risk of delay in the receipts of receivables and also in bad debts.

3. SEGMENT WISE AND PRODUCT WISE PERFORMANCE

The company operates in one reportable business segment i.e. Agro Commodities and allied products and is primarily operating in India and hence considered as single geographical segment. The segment reporting of the group has been prepared in accordance with IND-AS-108 on operating segment reporting and are made part of this Annual Report in Note 6 of consolidated Financial Statements.

4. OUTLOOK

In the coming year, the company forsee the excellent opportunity to trade in wheat by purchasing it from the markets of states of origin and to sell it to the flour millers based in southern states, thus to connect the movement of grains from higher producing states of North India to the consumption centers at South India and taking benefit of geographical arbitrage.

The company is engaged in the purchase of chick peas from the producing states of Rajasthan and MP. Also, company has been participating in the sales tenders floated by the government agency NAFED form the stocks held by them, procured from the farmers under MSP.

Apart from trading in agricultural commodities, your company continuous to focus on plans of diversifying its business activities by expanding its trading activities in other products like Steel abrasives and Construction chemicals. During the year under review, your company has hired a team of professionals to generate the business of steel abrasives. The company is further focusing to expand the team as we forsee more and more opportunities.

5.RISKS AND CONCERNS

Risk management is embedded in your Companys operating framework. Your Company believes that managing risks helps in maximizing returns. The Companys approach to addressing business risks is comprehensive and includes periodic review of such risks and a framework for mitigating controls and reporting mechanism of such risks. The risk management framework is reviewed periodically by way of various audits, review by Board and the Audit Committee. Some ofthe risks that the Company is exposed to are:

The Companys principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Companys operations. The Companys financial risk management is an integral part of how to plan and execute its business strategies.

Foreign exchange risk

The fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company has limited currency exposure in case of sales, purchases and other expenses. It has natural hedge to some extent. However, beyond the natural hedge, the risk can be measured through the net open position i.e. the difference between un-hedged outstanding receipt and payments. The risk can be controlled by a mechanism of "Stop Loss" which means the Company goes for hedging (forward booking) on open position when actual exchange rate reaches a particular level as compared to transacted rate

Commodity price risk

The Company is exposed to fluctuations in price of pulses, grains , Sunflower Meal and Crude Degummed Soyabean Oil (including fluctuations in foreign currency) arising on purchase/ sale of the above commodities. To manage the variability in cash flows, the Company enters into derivative financial instruments to manage the risk associated with the commodity price fluctuations relating to all the highly probable forecasted transactions.

Credit risk

The risk that the counter party will not meet its obligation under a customer contract, leading to a financial loss. Customer credit risk is managed by each business unit subj ect to the Companys established policy, procedures and control relating to customer credit risk management

Liquidity Risk

Risk that the Company will not be able to settle or meet its obligations on time or at reasonable price. The Companys objective is to at all times maintain optimum levels of liquidity to meet its cash and liquidity requirements. The Company closely monitors its liquidity position and deploys a robust cash management system

The Companys listed and non-listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. At the reporting date, the exposure to unlisted equity securities at fair value was Rs. 1398.07 lakhs as on March 31, 2019 (Rs.1, 398.07 lakhs as on March 31, 2018).

Political And Economic Environment

Any changes in political and economic scenario of the country will impact the business of the company. Change in government policies may adversely impact the business ofthe company

Regulatory Risks

The Company is exposed to risks attached to various statutes, laws and regulations. The Company is mitigating these risks through regular review of legal compliances carried out through internal as well as external compliance audits. The Company has implemented an enterprise-wide compliance management system, capable of effectively tracking and managing regulatory and internal compliance requirements.

6.INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The companys internal controls are commensurate with its size and the nature of its operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring compliance with corporate policies. Processes for formulating and reviewing annual and long term business plans have been laid down.

The company uses enterprise resource planning (ERP) system that connects all parts of the organization, to record data for accounting, consolidation and management information purposes and long term business plans have been laid down.

The company has appointed M/S O. P. Bagla & Associates to oversee and carry out internal audit of its activities. The audit is based on an internal audit plan, which is reviewed each year in consultation with the statutory auditors and approved by the audit committee

7. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO THE OPERATIONAL PERFORMANCE

Details of financial performance of the company given in standalone and consolidated financial statements of the company including Balance sheet, Profit & loss account, Cash flow statement and other financial information. Further, a detailed discussion on the financial results is given in Directors report of the company. Both, directors report and financial statements forms part of this Annual Report.

8. FINANCIAL RATIOS

The company has identified the following ratios as key financial ratios:

Particulars 2018-19 2017-18 YOY Change
Inventory Turnover Ratio (Times) 48.81 15.07 223.81% Favourable
Debtors Turnover Ratio (Times) 13.58 14.89 -8.78% Favourable
Total Debt / Equity Ratio (Times) 0.32 1.83 -82.32% Favourable
Current Ratio (Times) 1.63 1.15 41.19% Favourable
Interest Coverage Ratio (Times) 1.38 0.96 44.01% Favourable
Operating Profit Margin (% terms) 1.13 0.50 126.66% Favourable
Net Profit Margin (% terms) 0.43 (0.07) 676.35% Favourable
Return on net worth (% terms) 6.17 (1.08) 673.15% Favourable

Reasons for significant changes:

1. Inventory turnover ratio is increased by 223.81 % due to low levels of average inventories held in F.Y 2018-19 which is lesser than 1/3rd of average inventories as compared to F.Y 2017-18.

2. Debt-equity ratio is decreased by 82.32% due to reduction in total debts during the F.Y 2018-19 to Rs. 1077.73 lakhs from Rs. 5781.01 lakhs in F.Y 2017-18. We have no long term debts and lesser utilization of our working capital limits during the current financial year.

3. Current ratio of company is increased by 41.19% during financial year 2018-19 which is majorily due to decrease in borrowings outstanding as on 31 st March 2019

4. Interest coverage ratio of company is increased by 44.01% during financial year 2018-19 which is due to decrease in total finance costs during the F.Y. 2018-19.

5. Operating profit is (EBIT - Other Incomes). Operating profit ratio is increased by 126.66% in F.Y 2018-19 from F.Y 2017-18, which are majorily due to higher profit after tax and decrease in finance cost, other expenses and decrease in other incomes during F.Y 2018-19.

6. Net profit margin percentage is increased by 676.35% due to increase in profit before tax to Rs. 205.98 lakhs in F.Y 2018-19 as compared to (loss) of Rs. (34.09) Lakhs for F.Y 2017-18, major reason for increase in PBT is lower finance costs & other expenses during the financial year 2018-19.

7. The return on net worth for the FY 2018-19 is 6.17 % as compared to -1.08 % in FY 2017-18. Return on net worth is increased by 673.15% due to increase in profit before tax which is Rs. 205.98 lakhs in F.Y 2018-19 as compared to (loss) Rs. (34.09) Lakhs for F.Y 2017-18.

9.HUMAN RESOURCES

The business strongly believes that people are the prime assets of the organization. Your Company continued to focus on attracting new talent, organizing trainings to help employees acquire new skills, explore new roles and realize their potential. The company has 38 employees on its payrolls as on 31st March, 2019. The company has robust HR system and employee-friendly HR policies for the holistic development of its human resource.

10.ACCOUNTING TREATMENT

The financial statements of the company and its subsidiary are prepared in accordance with the Indian Accounting Standards (referred to as Ind AS) prescribed under section 133 of the Companies Act, 2013, read with the Companies (Indian Accounting Standards) Rules, as amended from time to time. Significant accounting policies used in the preparation of the financial statements are disclosed in the notes to the financial statements.