Cosmo First Ltd: Annual Report 2023-24 Analysis

Overview #

Comprehensive Analysis #

This analysis delves into Cosmo First Limited’s (formerly Cosmo Films Limited) Annual Report for the fiscal year 2023-24, examining its financial performance, business segments, identified risks, and Environmental, Social, and Governance (ESG) initiatives.

I. Financial Performance:

• Consolidated Revenue: ₹2,587 Crores (FY24), down from ₹3,065 Crores (FY23). The decrease is attributed to margin pressure in the BOPP & BOPET industry due to increased capacity. However, the company outperformed the industry due to its strong focus on specialty films.
• Consolidated EBITDA: ₹251 Crores (FY24), significantly lower than ₹434 Crores (FY23). Again, this reflects the industry-wide margin pressure.
• Standalone Revenue: ₹2,391 Crores (FY24), down from ₹2,742 Crores (FY23).
• Standalone EBITDA: ₹213 Crores (FY24), significantly lower than ₹396 Crores (FY23).
• Profit After Tax (PAT): ₹62 Crores (FY24), down from ₹244 Crores (FY23). This decrease mirrors the decline in EBITDA.
• Net Debt/EBITDA: 2.2 times (FY24), indicating a manageable debt level.
• Net Debt/Equity: 0.4 times (FY24), suggesting a healthy financial structure.
• Capital Expenditure (CAPEX): ₹298 Crores (FY24), down from ₹380 Crores (FY23). This investment focuses on expanding specialty film capacity and sustainability initiatives.
• Dividend: The board recommended a dividend of ₹3 (30%) per share, down from ₹5 (50%) in FY23.
• Return on Net Worth (RONW): 4.62% (FY24). This is a significant decline compared to the previous year and needs further investigation into the reasons behind the decrease.
• Exports: ₹1,047 Crores (FY24), representing 44% of total sales, showing a substantial global presence. The decrease in export revenue compared to the previous year is notable and might require explanation in the report.

II. Business Segments:

Cosmo First operates across multiple segments:

• Flexible Packaging Films: This is the core business, encompassing BOPP films, BOPET films, thermal films, and various specialty films. The company highlights its leadership positions in thermal lamination films and specialty label films globally and its strong presence in the Indian BOPP market. A significant capacity expansion is planned for FY25 and FY26. The emphasis is on high-value specialty films (64% of FY24 revenue), which mitigated industry-wide margin pressures.
• Specialty Chemicals: Includes masterbatches, coating chemicals, and adhesives. This segment saw ₹142 Crore in sales in FY24 and aims for a larger contribution to overall revenue in the coming years (7-8% in 3-5 years).
• Rigid Packaging (Cosmo Plastech): Manufacturing in-wall containers and sheets for FMCG products, mainly for food. Commercial production started in Q3 FY24, and further expansion is planned. The company obtained FSSC 22000 certification, demonstrating its focus on food safety.
• Pet Care (Zigly): A D2C omni-channel platform offering pet food, supplements, hygiene products, accessories, and services (vet care, grooming). Significant GMV growth was seen in FY24, reaching ₹44 Crores, with a focus on further expansion and potential acquisitions.
• Sun Control Films (Cosmo Sunshield): Planned launch in FY25, aiming to capitalize on growing demand for energy-efficient window films.

III. Risks:

The annual report identifies several key risks:

• Market Demand and Supply Gap: Increased industry capacity could temporarily affect margins. Mitigation strategy: Focus on specialty films and capacity addition.
• Economic Slowdown: Global economic downturn could impact growth. Mitigation strategy: Flexible packaging is relatively recession-resistant.
• Strategic Risks: Shifts in consumer demand, competition, IP protection, and customer loss. Mitigation strategy: Innovation, IP protection, strong customer relationships.
• Operational Risks: Personnel retention, global health crises, IT vulnerabilities. Mitigation strategy: Supportive work environment, IT risk mitigation measures.
• Financial Risks: Exchange rate fluctuations, interest rate volatility, internal control risks. Mitigation strategy: Derivatives, minimization of long-term interest rate exposure, robust internal controls.
• Legal and Compliance Risks: Environmental regulations, climate change, plastic recycling. Mitigation strategy: Proactive compliance measures, IP protection.

IV. ESG Initiatives:

Cosmo First’s ESG efforts are extensive:

• Environmental: Focus on carbon footprint reduction (targeting 50%+ renewable energy by FY25), water treatment (aiming for zero liquid discharge), waste recycling (95%), and the introduction of mono-layered film structures for enhanced recyclability. Significant investments (₹30 Crores) are dedicated to reducing environmental impact and costs.
• Social: Cosmo Foundation undertakes extensive CSR initiatives, focusing on education (impacting 13,000+ rural students), community development (sanitation, healthcare), and environmental conservation (tree plantation).
• Governance: Strong corporate governance framework with a significant number of independent directors (70%), robust risk management systems, and active shareholder engagement. A focus on diversity and inclusion is also emphasized.

V. Conclusion:

Cosmo First Limited demonstrates a commitment to diversification, innovation, and sustainability. While FY24 saw a decline in overall revenue and profitability due to industry-wide margin pressure, the company’s strong focus on specialty films and its strategic diversification into new segments (specialty chemicals, rigid packaging, pet care) position it for future growth. The ambitious expansion plans and significant investments in R&D and sustainability reinforce this positive outlook. However, careful monitoring of the identified risks, particularly those related to market dynamics and the execution of expansion projects, is crucial for achieving the projected growth targets. The comprehensive ESG initiatives show a strong commitment to responsible business practices. Further detailed analysis of RONW decline and export revenue decrease is needed for a complete understanding of the company’s financial health.

Detailed Analysis #

Balance Sheet #

Asset Analysis #

The values for Cosmo First Limited’s financial metrics, as reported in the provided annual report, are as follows (all figures are in Indian Rupees in Crores):

• Total Assets (Consolidated): ₹3,384.50 (Standalone: ₹3,384.50. Note that the standalone and consolidated values are the same in this report)
• Current Assets (Consolidated): ₹1,229.69 (Standalone: ₹1,229.69)
• Cash and Cash Equivalents (Consolidated): ₹11.60 (Standalone: ₹11.60)
• Accounts Receivable (Consolidated): ₹242.57 (Standalone: ₹242.57)
• Inventory (Consolidated): ₹365.19 (Standalone: ₹365.19)

It’s important to note that these figures represent the consolidated financial position, which includes the financial statements of all subsidiaries. The report also shows standalone figures, representing only the parent company’s financials. In this specific report, however, the standalone and consolidated values are identical for the requested metrics.

Liability Analysis #

Based on the provided Cosmo First Limited annual report, here are the values for the requested liability metrics (all figures are in Indian Rupees in Crores):

• Total Liabilities (Consolidated): ₹2,209.14 (Standalone: ₹2,209.14. Note that the standalone and consolidated values are the same for this report.)
• Current Liabilities (Consolidated): ₹1,236.04 (Standalone: ₹1,236.04)
• Long-Term Debt (Consolidated): ₹680.36 (Standalone: ₹680.36. This represents the net long-term debt after subtracting current maturities. The gross long-term debt is higher, as shown in Note 21 of the report.)
• Accounts Payable (Consolidated): ₹693.28 (Standalone: ₹693.28. This includes both amounts due to micro and small enterprises and other creditors. Note 26 in the report gives a breakdown.)

Again, these are consolidated figures, incorporating all subsidiaries. The report also presents standalone data, but, in this case, the values for these specific metrics are identical for the standalone and consolidated reports. Always refer to the specific notes within the annual report for a detailed breakdown and explanation of these figures.

Equity Analysis #

Here are the shareholders’ equity, retained earnings, and share capital values for Cosmo First Limited from the provided annual report (all figures are in Indian Rupees in Crores):

• Shareholders’ Equity (Consolidated): ₹1,174.36 (Standalone: ₹1,174.36. Note that the standalone and consolidated figures are identical in this report.)
• Retained Earnings (Consolidated): ₹1,069.73 (Standalone: ₹1,069.73)
• Share Capital (Consolidated): ₹26.25 (Standalone: ₹26.25)

As with previous responses, these numbers are consolidated, reflecting the entire group’s financial position. The standalone figures, representing only the parent company, are identical to the consolidated figures in this particular report. Always refer to the notes accompanying the financial statements for a comprehensive understanding of these values and the accounting methodologies employed.

Income Statement #

Operating Performance #

The following figures are from Cosmo First Limited’s Consolidated Statement of Profit and Loss (all figures are in Indian Rupees in Crores):

• Revenue: ₹2,587.34

• Cost of Revenue: This is not explicitly stated as a single line item. However, it can be approximated by summing the following expense items from the consolidated statement of Profit and Loss:

  • Cost of materials consumed: ₹1,725.94
  • Purchase of traded goods: ₹20.69
  • Change in inventories of finished goods and stock-in-trade: ₹3.81 (this is a net figure and represents an adjustment)
  • Approximated Cost of Revenue: ₹1,750.44

• Gross Profit: This is calculated by subtracting the approximated cost of revenue from revenue: ₹2,587.34 - ₹1,750.44 = ₹836.90

• Operating Expenses: This requires summing several line items from the Consolidated Statement of Profit and Loss:

  • Employee benefits expense: ₹216.95
  • Finance costs: ₹89.36
  • Depreciation, amortization, and impairment expense: ₹89.48
  • Allowance for expected credit losses: ₹2.58
  • Other expenses: ₹434.10
  • Total Operating Expenses: ₹832.47

• Operating Income (EBIT): This is the Gross Profit less Operating Expenses: ₹836.90 - ₹832.47 = ₹4.43

Important Note: These calculations are approximations. The report does not explicitly provide “Cost of Revenue” as a single line item, necessitating the calculation of an approximation. To obtain the precise values, refer to the detailed notes provided within the annual report, as classifications and calculations may vary slightly based on accounting standards applied.

Bottom Line Metrics #

Here are the values for net income, EBITDA, basic EPS, and diluted EPS from Cosmo First Limited’s Consolidated Statement of Profit and Loss (all figures are in Indian Rupees):

• Net Income: ₹62.19 Crores

• EBITDA: This is not explicitly stated, but can be approximated by taking the Profit Before Tax and adding back Depreciation, Amortization, and Finance Costs. Using the consolidated figures:

  • Profit Before Tax: ₹72.39 Crores
  • Depreciation, Amortization & Impairment: ₹89.48 Crores
  • Finance Costs: ₹89.36 Crores
  • Approximated EBITDA: ₹251.23 Crores

• Basic EPS: ₹23.99

• Diluted EPS: ₹23.64

Important Note: The EBITDA figure is an approximation because the report does not directly provide a single line item for EBITDA. The calculation uses the profit before tax figure and adds back the related expenses. Always consult the detailed notes within the financial statements for precise values and the exact methodologies used by the company.

Cash Flow #

Cash Flow Components #

Here’s a summary of Cosmo First Limited’s cash flows from its Consolidated Statement of Cash Flows (all figures are in Indian Rupees in Crores):

• Cash Flow from Operating Activities: ₹245.22 Crores
• Cash Flow from Investing Activities: ₹(234.89) Crores (negative, indicating net cash outflow)
• Cash Flow from Financing Activities: ₹(18.52) Crores (negative, indicating net cash outflow)

Remember that these figures represent the consolidated cash flows for the entire group. Refer to the notes within the annual report for a complete and detailed breakdown of each category.

Cash Flow Metrics #

To calculate free cash flow (FCF), we need to make some approximations based on the information provided in the annual report because not all necessary line items are explicitly stated. The calculation will be based on the consolidated statements.

• Capital Expenditure (CAPEX): ₹297.51 Crores (This is directly stated in the Consolidated Statement of Cash Flows). This represents the total cash outflow for the purchase of property, plant, equipment, intangible assets, and capital work-in-progress.

• Dividends Paid: ₹12.97 Crores (This is explicitly stated in Note 47 of the annual report).

• Free Cash Flow (FCF): FCF is generally calculated as: Operating Cash Flow - Capital Expenditure. However, we need to consider that the cash flow from operations already includes some capital expenditures related to property, plant and equipment, etc. This means that simple subtraction might overstate CAPEX. The best approach here would be to use the net cash flow from operating activities from the statement of cash flows, which has already considered changes in working capital.

  Therefore, the approximation of FCF would be:

  Operating Cash Flow - Capital Expenditure = ₹245.22 Crores - ₹297.51 Crores = ₹(52.29) Crores. This represents a negative free cash flow.

Important Note: This FCF calculation is an approximation. A more precise calculation would require a more detailed breakdown of cash flows, potentially including items such as changes in working capital that are not fully detailed within the provided summary information of the annual report. For a precise FCF number, one should consult the full detailed statement of cash flows and the related notes within the annual report.

Financial Ratios #

Profitability Ratios #

To calculate these profitability ratios for Cosmo First Limited, we’ll use the figures derived from the consolidated financial statements. Remember that some of these values were approximations due to the lack of explicit line items in the report summary.

• Gross Profit Margin: (Gross Profit / Revenue) * 100

  • Gross Profit (Approximated): ₹836.90 Crores
  • Revenue: ₹2,587.34 Crores
  • Gross Profit Margin: (₹836.90 Crores / ₹2,587.34 Crores) * 100 = 32.37%

• Operating Profit Margin: (Operating Income / Revenue) * 100

  • Operating Income (EBIT) (Approximated): ₹4.43 Crores
  • Revenue: ₹2,587.34 Crores
  • Operating Profit Margin: (₹4.43 Crores / ₹2,587.34 Crores) * 100 = 0.17%

• Net Profit Margin: (Net Income / Revenue) * 100

  • Net Income: ₹62.19 Crores
  • Revenue: ₹2,587.34 Crores
  • Net Profit Margin: (₹62.19 Crores / ₹2,587.34 Crores) * 100 = 2.40%

• Return on Equity (ROE): (Net Income / Average Shareholders’ Equity) * 100

  • Net Income: ₹62.19 Crores
  • Average Shareholders’ Equity: (₹1,174.36 Crores + ₹1,147.30 Crores) / 2 = ₹1,160.83 Crores
  • ROE: (₹62.19 Crores / ₹1,160.83 Crores) * 100 = 5.36%

• Return on Assets (ROA): (Net Income / Average Total Assets) * 100

  • Net Income: ₹62.19 Crores
  • Average Total Assets: (₹3,384.50 Crores + ₹2,948.02 Crores) / 2 = ₹3,166.26 Crores
  • ROA: (₹62.19 Crores / ₹3,166.26 Crores) * 100 = 1.96%

Important Note: These calculations rely on approximated values for gross profit and operating income due to the lack of explicitly stated line items in the provided summary of the annual report. Therefore, these figures should be considered estimates. For precise values, please refer to the detailed financial statements and accompanying notes in the full annual report.

Liquidity Ratios #

To calculate these liquidity ratios for Cosmo First Limited, we’ll use the figures from the consolidated balance sheet (all figures are in Indian Rupees in Crores):

• Current Ratio: Current Assets / Current Liabilities

  • Current Assets: ₹1,229.69 Crores
  • Current Liabilities: ₹1,236.04 Crores
  • Current Ratio: ₹1,229.69 Crores / ₹1,236.04 Crores = 0.99

• Quick Ratio: (Current Assets - Inventories) / Current Liabilities

  • Current Assets: ₹1,229.69 Crores
  • Inventories: ₹365.19 Crores
  • Current Liabilities: ₹1,236.04 Crores
  • Quick Ratio: (₹1,229.69 Crores - ₹365.19 Crores) / ₹1,236.04 Crores = 0.70

• Cash Ratio: (Cash and Cash Equivalents) / Current Liabilities

  • Cash and Cash Equivalents: ₹11.60 Crores
  • Current Liabilities: ₹1,236.04 Crores
  • Cash Ratio: ₹11.60 Crores / ₹1,236.04 Crores = 0.01

Important Note: These ratios are calculated using the consolidated balance sheet figures. The annual report should be consulted for any additional details or nuances impacting these calculations. Also, note that a current ratio below 1.00 and a cash ratio significantly below 1.00 may raise concerns about short-term liquidity. A quick ratio below 1.00 suggests that the company may struggle to meet its short-term obligations without liquidating inventory. This warrants further analysis.

Efficiency Ratios #

Calculating efficiency ratios requires information not fully provided in the report summary. We’ll use the consolidated figures and make necessary approximations where data is not explicitly available. All figures are in Indian Rupees in Crores.

• Asset Turnover: Revenue / Average Total Assets

  • Revenue: ₹2,587.34 Crores
  • Average Total Assets: (₹3,384.50 Crores + ₹2,948.02 Crores) / 2 = ₹3,166.26 Crores
  • Asset Turnover: ₹2,587.34 Crores / ₹3,166.26 Crores = 0.82

• Inventory Turnover: Cost of Goods Sold / Average Inventory

  • Approximated Cost of Goods Sold (COGS): ₹1,750.44 Crores (calculated previously, an approximation)
  • Average Inventory: (₹365.19 Crores + ₹344.58 Crores) / 2 = ₹354.89 Crores
  • Inventory Turnover: ₹1,750.44 Crores / ₹354.89 Crores = 4.93

• Receivables Turnover: Revenue / Average Accounts Receivable

  • Revenue: ₹2,587.34 Crores
  • Average Accounts Receivable: (₹242.57 Crores + ₹157.49 Crores) / 2 = ₹200.03 Crores
  • Receivables Turnover: ₹2,587.34 Crores / ₹200.03 Crores = 12.94

Important Considerations:

• Approximations: The COGS used in the inventory turnover calculation is an approximation. The precise COGS figure would need to be sourced from the complete, detailed financial statements. Similarly, the report did not give detailed age analysis of the receivables. A detailed analysis would help in identifying bad debts and improving the calculation of the receivables turnover ratio.
• Industry Benchmarks: These ratios should be compared to industry benchmarks to assess Cosmo First’s performance relative to its competitors.
• Data Limitations: The summary provided does not give all the granular data needed for completely accurate calculations of the efficiency ratios. Therefore, the values above should be considered estimates. Consult the full financial statements for precise calculations.

These calculations provide a general overview of Cosmo First’s efficiency. A more in-depth analysis using the complete financial statements is recommended for a more accurate and comprehensive assessment.

Leverage Ratios #

Let’s calculate the leverage ratios for Cosmo First Limited using the consolidated financial statements (all figures in Indian Rupees in Crores). Remember that some values are approximations, due to the report summary not providing all the necessary detailed data.

• Debt-to-Equity Ratio: Total Debt / Shareholders’ Equity

  • Total Debt: ₹1,890.31 Crores (sum of current and non-current liabilities from the consolidated balance sheet, excluding provisions and other non-financial liabilities, This excludes non-financial current liabilities.)
  • Shareholders’ Equity: ₹1,174.36 Crores
  • Debt-to-Equity Ratio: ₹1,890.31 Crores / ₹1,174.36 Crores = 1.61

• Debt-to-Assets Ratio: Total Debt / Total Assets

  • Total Debt: ₹1,890.31 Crores (as above)
  • Total Assets: ₹3,384.50 Crores
  • Debt-to-Assets Ratio: ₹1,890.31 Crores / ₹3,384.50 Crores = 0.56

• Interest Coverage Ratio: Earnings Before Interest and Taxes (EBIT) / Interest Expense

  • EBIT (Approximated): ₹4.43 Crores (calculated previously, an approximation)
  • Interest Expense: ₹89.36 Crores (from the Consolidated Statement of Profit and Loss)
  • Interest Coverage Ratio: ₹4.43 Crores / ₹89.36 Crores = 0.05

Important Considerations:

• Approximations: The EBIT used in the interest coverage ratio calculation is an approximation. A more precise calculation would require obtaining a more detailed breakdown of the P&L, which was not available in this summary.
• Debt Definition: The definition of “Total Debt” used in the calculations above excludes provisions and other non-financial liabilities which could lead to an understatement of total debt. A detailed breakdown of the balance sheet notes would provide a more refined value.
• Interpretation: A high debt-to-equity ratio (above 1.00) indicates higher financial risk. A low interest coverage ratio (below 1.00) signifies that the company may struggle to meet its interest payments with its current earnings. This warrants a thorough review of the financial health of the firm.

These leverage ratios provide a broad assessment. Consulting the complete financial statements and related notes in the full annual report is recommended for a precise and thorough analysis. Furthermore, comparing these ratios to industry averages would provide valuable context.

Market Analysis #

Market Metrics #

The annual report provides some, but not all, of the data needed to calculate these market-based ratios precisely. We will make reasonable approximations where data is missing from the summary. All monetary values will be in Indian Rupees.

• Market Capitalization: This is partially provided in the 10-Year Financial Highlights section. The market capitalization at the end of March was ₹1,311 Crores according to the BSE. However, this is an older value and might not represent the market cap at the report’s publication date. To get a truly accurate market cap, one must refer to the live stock market data on the day of the report’s publication.

• Price-to-Earnings Ratio (PE Ratio): Market Price per Share / Earnings per Share (EPS)

  • To calculate this, we would need the current market price per share at the report’s publication date, which is not included. We can only approximate this using the March ending value of the Market cap (BSE) of ₹1311 Cr. Assuming the number of shares was 26,249,727, then the approximate price per share would be: ₹1311 Cr / 26,249,727 shares ≈ ₹50.00.
  • Basic EPS: ₹23.99 (from the Consolidated Statement of Profit and Loss).
  • Approximate PE Ratio: ₹50.00 / ₹23.99 ≈ 2.08

• Price-to-Book Ratio (PB Ratio): Market Price per Share / Book Value per Share

  • We would need the market price per share (as explained above) and the book value per share, which is not explicitly stated. This calculation cannot be done without additional data.

• Dividend Yield: Annual Dividend per Share / Market Price per Share

  • Annual Dividend per Share: ₹3 (as stated in the report).
  • Market Price per Share (Approximate): ₹50.00 (as approximated above)
  • Approximate Dividend Yield: (₹3 / ₹50.00) * 100 = 6%

• Dividend Payout Ratio: Dividends Paid / Net Income

  • Dividends Paid: ₹7.87 Crores (based on the recommended dividend of ₹3 per share and the number of shares).
  • Net Income: ₹62.19 Crores (from the Consolidated Statement of Profit and Loss)
  • Dividend Payout Ratio: (₹7.87 Crores / ₹62.19 Crores) * 100 = 12.66%

Important Note: The PE ratio, PB ratio, and dividend yield calculations above are approximations because they rely on an estimated share price based on older market cap data. To obtain accurate results, you must obtain the current market price per share and book value per share at the report’s publication date from a reliable financial data source. These ratios are only meaningful if they are compared to the industry benchmarks and similar companies. Always refer to the latest financial data for the most accurate calculation.

Business Analysis #

Segment Analysis #

The Cosmo First Limited annual report does not provide a complete breakdown of all requested metrics for each segment. Therefore, some values will be approximations or estimations based on the available data. All monetary values are in Indian Rupees (₹) in Crores, unless otherwise stated. Growth rates are calculated year-over-year (YoY).

Important Notes:

• Approximations and Estimates: Several values are approximations, particularly revenue figures not explicitly stated for certain segments and operating margins (which require more granular data from the full financial statements than available in the report summary provided). Market share information is also not fully available in the report summary.
• Data Limitations: The report summary does not offer a completely detailed segment breakdown. The full annual report would provide a more precise and detailed picture of each segment’s financial performance and market position.
• Revenue for Flexible Packaging: The Flexible Packaging Films segment revenue is an estimation. It’s calculated by deducting all other segment revenues from total consolidated revenue. This methodology can be inaccurate as the allocation of certain costs might vary across the segments. This makes revenue calculation for the flexible packaging sector an estimation.

To gain a complete understanding, it is recommended to consult the full annual report, which contains the detailed segment information and a more precise accounting of each business unit.

Risk Management #

Risk Assessment #

The Cosmo First Limited annual report does not explicitly categorize risks or provide a detailed risk matrix with likelihood and impact scores. However, based on the risk discussion, we can summarize the key risk factors, inferring their categories, descriptions, and suggested mitigation strategies. Trends are inferred from the report’s discussion of the company’s strategy.

Note: The “Impact Severity” and “Likelihood” are subjective assessments based on the information provided in the annual report. A formal risk assessment by the company would likely provide more quantitative data. Trends are inferred and may not perfectly reflect future developments. The mitigation strategies are those proposed or already implemented by the company, and the effectiveness of these strategies will depend on many factors.

Strategic Overview #

Management Assessment #

Cosmo First Limited’s management highlights several key strategic elements, competitive advantages, market conditions, challenges, and opportunities in their discussion and analysis within the annual report:

I. Key Strategies:

• Focus on Specialty Films: Shifting the product mix towards higher-margin specialty films to mitigate industry-wide margin pressure caused by increased capacity in the commodity film market.
• Capacity Expansion: Significant investment in expanding production capacity for CPP and BOPP films (aiming for a 50% increase) to achieve economies of scale and cost leadership.
• Diversification: Expanding into new and high-growth segments, including specialty chemicals, rigid packaging, pet care (Zigly), and sun control films (Cosmo Sunshield). This strategy aims to reduce reliance on any single market and capture emerging opportunities.
• Innovation and R&D: Continued investment in R&D to develop sustainable and innovative products, securing patents, and maintaining a competitive edge through technological advancements.
• Sustainability Initiatives: Implementing various environmentally friendly manufacturing processes and reducing the company’s carbon footprint to meet increasing customer demands and regulations for sustainable packaging.
• Cost Optimization: Implementing various programs aimed at improving operational efficiency and reducing costs to enhance profitability.

II. Competitive Advantages:

• Global Leadership in Specialty Films: Cosmo First holds leading market positions in several specialty film segments, providing a strong competitive advantage.
• Strong R&D Capabilities: A robust R&D center with a dedicated team of scientists and technologists enables continuous innovation and the development of unique and sustainable products.
• Extensive Global Presence: Significant export sales (44% of total revenue) indicate a well-established distribution network and strong international market reach.
• Focus on Customer Needs: A customer-centric approach allows for the development of tailored solutions and strong customer relationships.
• Operational Excellence and Efficiency: The company’s focus on improving operational efficiency strengthens its competitive position.

III. Market Conditions:

• Growth in Flexible Packaging: The global and Indian flexible packaging markets are experiencing robust growth, driven by factors such as increasing demand for convenient and sustainable packaging, e-commerce boom, and changing consumer preferences.
• Margin Pressure in Commodity Films: The entry of new players and increased capacity in the BOPP and BOPET sectors created intense competition and margin pressure on commodity films.
• Growing Demand for Specialty Chemicals: The specialty chemicals market shows significant growth potential, particularly in India.
• Rapid Expansion of Pet Care Market: The pet care industry, especially in India, is expanding rapidly, presenting a lucrative opportunity for Zigly.

IV. Challenges:

• Industry-wide Margin Pressure: Intense competition and excess capacity in the commodity film sector are significant challenges impacting profitability.
• Global Economic Uncertainty: A potential global economic downturn could negatively impact consumer demand and investment.
• Supply Chain Disruptions: Vulnerability to disruptions in raw material supply chains and logistics.
• Talent Acquisition and Retention: Attracting and retaining skilled personnel, particularly in R&D, is a major challenge.
• Stringent Environmental Regulations: Increasing pressure to comply with stringent environmental regulations and meet customer demands for sustainable packaging.

V. Opportunities:

• Growth in Specialty Films: The increasing demand for high-value specialty films offers a substantial growth opportunity.
• Expansion into New Segments: Diversification into specialty chemicals, rigid packaging, pet care, and sun control films provides access to new and growing markets.
• E-commerce Growth: The booming e-commerce sector drives demand for innovative packaging solutions.
• Sustainable Packaging: The rising consumer preference for sustainable packaging presents a significant opportunity to develop and market eco-friendly solutions.
• Technological Advancements: Leveraging technological advancements in packaging and digitalization to enhance efficiency and create innovative products.

In summary, Cosmo First’s strategy centers around navigating the challenges of a competitive commodity film market while capitalizing on the growth potential in specialty films and diverse, high-growth segments. Their competitive advantages lie in their technical expertise, global reach, customer focus, and commitment to sustainability. The success of this strategy depends on successfully executing their capacity expansion plans, navigating market uncertainties, and effectively managing identified risks.

ESG Ratings #

The provided annual report only mentions one ESG rating:

• EcoVadis Sustainability Ratings: The report states that Cosmo First received a green rating from EcoVadis. However, the specific score is not provided.

To find ESG ratings from other agencies, you would need to consult independent ESG rating providers’ websites, such as MSCI, Sustainalytics, Refinitiv, Bloomberg, etc., searching for Cosmo First Limited (or its former name, Cosmo Films Limited). The report itself doesn’t provide a comprehensive list of ESG ratings from multiple agencies.

ESG Initiatives #

Cosmo First Limited’s annual report details various ESG initiatives, highlighting their environmental, social, and governance efforts and sustainability goals.

I. Environmental Initiatives:

• Renewable Energy: The company aims to increase renewable energy consumption to over 50% of total power consumption by FY25 and further to over 60% by FY26. Rooftop solar power plants are installed across manufacturing units. Currently, approximately 15% of power is sourced from renewable sources.
• Carbon Footprint Reduction: The company targets significant reductions in carbon emissions: 1.02 lakh MT CO2 equivalent by FY25 and 1.40 lakh MT CO2 equivalent by FY26.
• Water Management: Initiatives include rainwater harvesting (currently at 17% of water consumed), water treatment plants, and wastewater reuse (currently at 45%, with a target of zero liquid discharge).
• Waste Reduction and Recycling: The company aims to minimize waste generation and boasts a 95% recycling rate for manufacturing waste, utilizing a dedicated recycling plant. The use of mono-layered film structures is also a key initiative to improve recyclability.
• Other Initiatives: The use of water-based coatings, replacement of harmful materials (e.g., PVC with UV-stabilized synthetic paper), and exploration of Oxo-biodegradable films. Noise reduction measures have also been implemented.

II. Carbon Footprint:

The report provides data for the reduction of carbon emissions:

• FY24: 24,843 MT of CO2 equivalent (Scope 1) and 172,537 MT of CO2 equivalent (Scope 2).
• FY23: 20,457 MT of CO2 equivalent (Scope 1) and 151,441 MT of CO2 equivalent (Scope 2).

Note that the reduction is primarily achieved through an increase in renewable power sources.

III. Social Initiatives (Cosmo Foundation):

• Education: Extensive programs focusing on improving educational infrastructure and literacy in rural areas. The report mentions impacting over 13,000 students across 52 schools and 142 villages through initiatives such as computer literacy and basic English learning programs.
• Healthcare: Organizing health camps and promoting health and hygiene awareness, including the installation of toilets and waste bins in communities.
• Environmental Conservation: The Cosmo Fruit Tree Plantation Drive involves working with farmers to plant fruit saplings. The establishment of urban Miyawaki forests is also highlighted.
• Empowerment: Support for women’s well-being and skills development, including programs like four-wheeler driving courses for women and EV automobile technician courses.
• Disaster Relief: Providing assistance and resources to communities affected by the COVID-19 pandemic.

IV. Governance Practices:

• Board Composition: A diverse board with a strong representation of independent directors (70%), ensuring robust oversight and decision-making.
• Board Committees: Active audit, CSR, nomination and remuneration, and stakeholders relationship committees overseeing key areas of the business.
• Risk Management: A comprehensive risk management framework to identify, assess, and mitigate various business risks.
• Compliance: Adherence to relevant laws, regulations, and corporate governance guidelines. Implementation of whistleblower policies and mechanisms for addressing ethical concerns.
• Transparency and Disclosure: Commitment to transparent communication with stakeholders through financial reports, presentations, and the company website.

V. Sustainability Goals:

• Environmental: Significant reduction in carbon emissions, increased renewable energy usage, zero liquid discharge, and improved waste management practices. Emphasis on using sustainable and recyclable materials.
• Social: Continued expansion of the Cosmo Foundation’s community development and empowerment programs. Focus on education, healthcare, and environmental conservation.
• Governance: Maintaining high standards of corporate governance, transparency, and ethical conduct. Continuous improvement of the Company’s ESG framework and policies.

Cosmo First’s commitment to sustainability is evidenced by the numerous initiatives and detailed disclosures in their report. Their ambitious sustainability goals demonstrate a clear intent to integrate ESG considerations into their core business operations.

Additional Information #

Operational Metrics #

Based on the provided annual report:

• R&D Expenditure (Consolidated): ₹9.00 Crores
• Employee Count (Consolidated): 1,241 (as of March 31, 2024). This includes permanent employees and workers (both permanent and non-permanent).

The report provides both consolidated and standalone figures for many metrics; however, for R&D expenditure and employee count, only the consolidated figures are explicitly stated. The full annual report should be checked for any standalone figures or further breakdown of these counts.

Key Events #

The Cosmo First Limited annual report highlights several significant events during fiscal year 2023-24:

• Rebranding: The company officially rebranded from Cosmo Films Limited to Cosmo First Limited.
• Commissioning of Specialized BOPET Line: A new specialized BOPET line was commissioned in FY23 (though the effects would be seen in FY24).
• Launch of Rigid Packaging Division (Cosmo Plastech): This new division commenced commercial operations in Q3 FY24, offering end-to-end rigid packaging solutions. This was a major step in the company’s diversification strategy.
• Entry into Metallized Film for Capacitors: Investment in and commencement of commercial production for metallized film for capacitors in Q3 FY24.
• Planned Launch of Sun Control Films (Cosmo Sunshield): The launch of this new product line is planned for FY25.
• Significant Capacity Expansion Plans: The company announced plans for a near 50% increase in its flexible packaging capacity over the next two years (FY25 and FY26). This expansion will add capacity to both CPP and BOPP lines.
• Acquisition of Petsy Stores Private Limited: The acquisition of this online pet care business in July 2023, expanding the Zigly pet care segment.
• Closure of Cosmo Films Poland: A non-material dormant subsidiary in Poland was closed down.
• Settlement with SEBI: A settlement was reached concerning an alleged violation of SEBI (PIT) Regulations. Specifics are not fully disclosed but the matter was resolved.
• Fraudulent Transfers from Netherlands Subsidiary: The company reported fraudulent transfers from its Netherlands subsidiary (Euro 1.065 Million). This matter is under investigation by Netherlands Police, and an insurance claim is pending.

These events showcase a year of significant strategic moves, including diversification, capacity expansion, and investments in new technologies and business areas. While there were some setbacks (fraudulent transfers and SEBI investigation), the overall tone of the report emphasizes the positive steps taken towards the company’s growth and transformation.

Audit Information #

Auditor’s Opinion:

The independent auditor, S.N. Dhawan & Co. LLP, issued an unqualified opinion on both the standalone and consolidated financial statements of Cosmo First Limited. This means the auditors found the financial statements to be fairly presented in accordance with Indian Accounting Standards (Ind AS) and other generally accepted accounting principles in India. The audit report did, however, highlight the valuation of derivative financial instruments and the effectiveness of hedging relationships as a Key Audit Matter (KAM). This indicates that while the opinion was unqualified, the auditor placed particular attention on this area due to its complexity.

Key Accounting Policies:

The annual report details several key accounting policies applied by Cosmo First Limited, adhering to Ind AS:

• Current vs. Non-Current Classification: Assets and liabilities are classified as current or non-current based on a 12-month operating cycle.
• Property, Plant, and Equipment: Measured at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over specific useful lives.
• Investment Property: Measured initially at cost and subsequently at cost less accumulated depreciation and impairment losses. Fair value is disclosed in the notes to the financial statements.
• Intangible Assets: Measured initially at cost and amortized over their estimated useful lives (e.g., 6 years for software and trademarks). Goodwill is tested for impairment annually.
• Borrowing Costs: Directly attributable borrowing costs for assets under construction are capitalized; others are expensed.
• Inventory: Valued at the lower of cost (weighted average method) and net realizable value. Provisions are made for obsolete and slow-moving inventory.
• Foreign Currency Translation: Financial statements are in Indian Rupees (INR). Transactions are recorded at the spot rate at the transaction date. Monetary items are translated at the closing rate, while non-monetary items are translated at historical rates. Exchange differences are recognized in profit or loss.
• Leases: Ind AS 116 is applied, recognizing right-of-use assets and lease liabilities for most leases. Short-term and low-value leases are exempt.
• Fair Value Measurement: Fair value is determined using a three-level hierarchy (Level 1: quoted prices, Level 2: observable inputs, Level 3: unobservable inputs).
• Financial Instruments: Initial measurement at fair value plus transaction costs (except for those carried at FVTPL). Subsequent measurement depends on classification (amortized cost, FVOCI, or FVTPL). Impairment is recognized using the expected credit loss (ECL) model.
• Hedge Accounting: The company uses hedge accounting for certain derivative instruments to manage foreign currency and interest rate risks.
• Employee Benefits: Includes defined contribution plans (provident fund, superannuation) and a defined benefit plan (gratuity). Actuarial valuations are used for defined benefit plans.
• Revenue Recognition: Ind AS 115 is applied, recognizing revenue when control of goods or services is transferred to the customer.
• Government Grants: Recognized when there’s reasonable assurance of receipt and compliance with conditions.
• Taxes: Both current and deferred tax liabilities are recognized.
• Business Combinations: Acquisition method is applied, recognizing assets acquired and liabilities assumed at fair value.

This is a summary, and the full annual report should be referenced for complete details and explanations of each policy. The specific application of these policies can impact the reported financial figures.