Aarvi Encon Ltd Management Discussions

GLOBAL ECONOMY:

The global economy entered 2025 under a cloud of increasing uncertainty, marked by slowing growth momentum, persistent inflationary pressures, and rising geopolitical risks. According to the International Monetary Funds April 2025 World Economic Outlook, global GDP growth is now projected at 2.8% in 2025 and 3.0% in 2026, a downward revision from earlier expectations of 3.2% for 2025. This deceleration is largely driven by trade tensions, escalating tariffs, and weakening manufacturing activity across major economies. While the global economy has shown resilience post-pandemic, it now faces the compounded impact of tight financial conditions, policy uncertainty, and geopolitical fragmentation. The United States, the worlds largest economy, continues to maintain positive growth, but at a slower pace. Its GDP is expected to grow by 1.8% in 2025, down from the 2.5–2.7% range previously forecasted. A resilient job market and consumer spending are providing support, though higher interest rates and tighter credit conditions are tempering business investment. Meanwhile, Europe is seeing a fragile recovery, with modest improvements in consumer sentiment being offset by structural challenges in the manufacturing and energy sectors. Inflation across advanced economies remains above central bank targets, though it is gradually easing.

In contrast, China faces a steeper path to recovery. Structural issues in the property sector, reduced foreign direct investment, and the cumulative impact of trade restrictions have led the IMF to cut Chinas GDP growth projection to 4.0% in 2025, down from 4.6%. Nevertheless, the Chinese government retains room for policy stimulus, which, if effectively deployed, could support infrastructure activity and stabilize employment. Other emerging markets such as India, Indonesia, and Brazil remain relatively robust. India, in particular, continues to post strong growth and remains one of the fastest-growing major economies globally, supported by domestic consumption, capital expenditure, and structural reforms.

Global inflation, although declining, remains a concern. It is forecast to fall from 5.8% in 2024 to around 4.4% in 2025 and 3.6% in 2026, with much of the decline attributed to tighter monetary policies, normalization of global supply chains, and easing commodity prices. However, the pace of disinflation is slower than previously anticipated, especially due to renewed supply disruptions, rising logistics costs, and commodity volatility triggered by geopolitical events. Asia, in particular, has experienced more moderate inflation trends, allowing some regional central banks to pause or reverse their rate hikes, offering a more supportive macroeconomic environment.

Notably, the Red Sea conflict and escalating global trade disputes have emerged as significant downside risks. Maritime trade disruptions have increased shipping times and costs, adversely affecting supply chains across Asia, Europe, and Africa. The rise in protectionist policies, including historically high tariffs in some developed economies, has further dampened investor confidence and weakened global trade flows. These factors, combined with high sovereign debt levels and stagnating productivity in many countries, have led the IMF to caution against over-optimism regarding the near-term global recovery.

In summary, while the global economy is not in crisis, it is navigating a fragile recovery path with multiple headwinds. For businesses like Aarvi Encon Ltd., the evolving macroeconomic landscape underscores the need to strengthen operational flexibility, invest in digital transformation, and build resilient supply chains. The ability to adapt to rapidly shifting economic conditions will be key to sustaining growth in the coming fiscal year. Sources:https://www.imf.org/en/Publications/WEO/ Issues/2025/04/22/world-economic-outlook-april-2025?utm_source=chatgpt.com

INDIAN ECONOMY:

Indias economy demonstrated significant resilience in FY2024-25, navigating global headwinds and domestic policy shifts with steady momentum, as evidenced by a 6.5% GDP growth for the full fiscal year. While external challenges such as evolving global trade dynamics and geopolitical tensions have posed uncertainties, robust domestic demand and proactive fiscal and monetary policy interventions have continued to support economic growth.

Indias real Gross Domestic Product (GDP) is consistently projected to grow by 6.5% in FY2025-26, a forecast maintained by both the Reserve Bank of India (RBI) in its June 2025 Monetary Policy Statement. Key growth drivers include strong household consumption, the expanding manufacturing sector benefiting from Production Linked Incentive (PLI) schemes, increased infrastructure investments, and a rapidly digitizing services sector. The governments sustained focus on capital expenditure, rural development, and support for MSMEs further bolsters this economic momentum.

Inflationary trends have shown clear signs of easing in recent months, with headline CPI inflation moderating to a nearly six-year low of 3.2% in April 2025. This moderation prompted the Reserve Bank of India (RBI) to adopt a more accommodating monetary stance, notably lowering the policy repo rate by 50 basis points to 5.50% on June 6, 2025, and shifting its monetary policy stance to "neutral." These actions, along with the RBIs downward revision of its CPI inflation forecast for FY2025-26 to 3.7%, indicate a supportive environment for economic growth.

The Union Budget for 2025 significantly strengthened the countrysgrowthagendathroughcomprehensivestructural reforms and targeted fiscal support. Key initiatives include a simplified income tax system, which now eliminates tax liability for individuals earning up to INR 12 lakh under the new regime. Additionally, the budget announced increased investments in infrastructure, logistics, and innovation, alongside a substantial INR 20,000 crore fund to promote private sector-led research, and improved credit support for agriculture, clean energy, and micro, small, and medium enterprises. These measures are expected to boost productivity, create jobs, and enhance resilience in rural areas and various sectors, positioning India to maintain its robust growth trajectory, supported by favorable demographics, increasing investor confidence, and the ongoing formalization of the economy. https://www2.deloitte.com/us/en/insights/economy/asia-pacific/india-economic-outlook.html https://www.pib.gov.in/PressReleaseIframePage. aspx?PRID=2098353 https://www.pib.gov.in/PressReleaseIframePage. aspx?PRID=2098353 h t t p s : / / w w w . p i b . g o v . i n / P r e s s N o t e D e t a i l s . aspx?NoteId=154573&ModuleId=3#:~:text=The%20 major%20decisions%20include%3A,per%20cent%20 with%20immediate%20effect.

GLOBAL STAFFING

The global staffing and recruitment market is experiencing significant growth, with its value estimated at approximately USD 867.36 billion in 2024. Projections indicate a substantial rise to around USD 3,443.56 billion by 2034, reflecting a robust Compound Annual Growth Rate (CAGR) of 14.8%. A key driver of this expansion is the increasing adoption of automation and AI-driven recruitment models, which are streamlining hiring processes and enhancing efficiency. This market surge is further propelled by a combination of global trends. Factors such as increased investment in the green transition of businesses and the broader application of ESG (Environmental, Social, and Governance) standards are reshaping industries and creating new job demands. Additionally, the localization of supply chains is driving regional employment, while continuous advancements in AI and information processing are fostering entirely new job categories. Demographic shifts worldwide also play a crucial role, influencing labor supply and demand dynamics across various sectors. Finally, the expansion of entrepreneurial ventures, particularly in developing countries, is contributing to the creation of new job opportunities globally, all of which underscore the critical role of staffing and recruitment services in the evolving global labor market.

Sources: https://www.factmr.com/report/hr-and-recruitment-services-market

RECRUITMENT TRENDS EVOLVING IN 2025

1. Technological Integration: Technological advancements, including artificial intelligence, machine learning, and data analytics, are reshaping the recruitment and staffing landscape. Automated resume screening, chatbots for initial candidate interactions, and predictive analytics are becoming integral to streamline processes and improve efficiency.

2. Remote Workforce Management: The rise of remote work, accelerated by global events, has led to a surge in demand for virtual recruitment and staffing solutions. Companies are leveraging digital platforms for seamless candidate sourcing, interviewing, and onboarding, fostering a more flexible and adaptive workforce.

3. Diversity and Inclusion: Organizations are increasingly prioritizing diversity and inclusion in their hiring processes. Recruitment and staffing agencies are playing a crucial role in assisting companies to build diverse teams, ensuring a wide range of perspectives and skill sets.

4. Gig Economy Influence: The gig economy is impacting the way companies approach staffing. Temporary and freelance workers are sought after for short-term projects, driving the demand for flexible staffing solutions.

INDIAN STAFFING

The Indian staffing and recruitment market was valued at USD 14.35 billion in 2024 and is projected to continue its strong growth. This substantial growth is driven by the increasing adoption of flexible workforce solutions and skill development initiatives spearheaded by staffing companies. According to recent reports, the formal flexible workforce employed by Indian Staffing Federation (ISF) members reached 1.7 million at the end of Q1 FY2025, indicating a robust and dynamic job market.

In FY2023-24, flexible staffing as an employment format saw a 15.3% year-on-year growth in new employment. The general flexi-staffing industry (excluding IT flexi-staffing) witnessed a new employment growth of 16.2% year-on-year in FY2023-24, and a notable 19.1% year-on-year growth in Q1 FY2025. Indias flexible (contract) staffing sector continues to contribute significantly, with ISF members ensuring timely bank payouts of salaries for approximately 116,640 crores in the last year, with close to 40% remitted towards social security, and contributing around 24,168 crores annually to GST.

Lohit Bhatia, President of the Indian Staffing Federation, continues to highlight the growing trust in flexible employment. This trust is underpinned by the tangible benefits provided to workers, including social security, continuous job opportunities, and avenues for upskilling, positioning flexible staffing as a preferred employment model for both employers and employees.

Theadoptionofflexiblestaffingsolutionsbybothemployers and employees underscores their effectiveness in meeting the evolving needs of todays labor market. Over the past few years, there has been a continued trend of young individuals moving towards the flexible workforce, indicating its widespread appeal and accessibility across different career stages.

Gender-specific data reveals that womens participation in employment-related activities increased from 21.8% in 2019 to 25% in 2024, according to the Time Use Survey 2024. More broadly, the female labor force participation rate (FLFPR) has nearly doubled in India, rising from 23.3% in 2017-18 to 41.7% in 2023-24, with rural women being a significant driver of this change. In the IT flexible staffing sector specifically, the female labor workforce participation rate is averaging at 37%. Delhi NCR is noted for promoting gender balance in flexi-staffing, with a workforce distribution of 55% male and 45% female. Various sectors continue to actively embrace general staffing services to fulfill their workforce requirements. These include FMCG, e-commerce, manufacturing, healthcare, retail, logistics, banking, and energy. The BFSI and fintech sectors show the highest flexi-staffing penetration at 17.1%, followed by logistics, energy, and utilities at 14.6%. Global Capability Centres (GCCs) also show an 8.2% penetration rate for flexible staffing, driven by their rapid growth in India. The IT staffing industry, after a period of slowdown, has shown signs of recovery, with a 1.4% year-on-year growth in Q1 FY2025.

Sources: https://www.siasat.com/indias-it-flexi-staffing-industry-to-see-steady-7-pc-annual-growth-till-fy26-3131316/ https://www.indianstaffingfederation.org/research.php

GIG WORKERS

The gig economy in India continues to evolve as a transformative force in the employment landscape, witnessing robust growth in FY25. With the number of gig workers now surpassing 1.2 crore (12 million), India is on track to meet its projected target of 2.35 crore by 2030. This shift is driven by rapid urbanization, digital penetration, and a demographic dividend comprising a young, mobile-first workforce. The flexibility offered by gig work across a range of professions—from delivery services and ride-sharing to tech consulting and creative freelancing—has made it a preferred mode of employment, particularly among millennials and Gen Z.

Recent data from the Ministry of Labour and Employment confirms the expanding footprint of gig work. The e-Shram portal, launched to register unorganized workers including those in the gig economy, has recorded over 30.5 crore registrations as of January 2025. According to government officials, over 10 lakh gig workers have registered on the platform, reflecting increased awareness and inclusion in formal welfare systems. Further, sectors such as IT, ed-tech, e-commerce logistics, and staffing have seen a sharp increase in project-based hiring, with the demand for white-collar gig roles growing by 17% year-on-year to more than 6.8 million in early 2025.

The distribution of gig work continues to span all levels of expertise. Approximately 31% of workers are engaged in low-skilled roles, such as delivery and warehouse operations, while 47% are in medium-skilled jobs, including customer support and back-end services. High-skilled gig professionals, including software developers, finance consultants, and digital marketers, account for about 22% of the total. This balanced segmentation reflects the broadening spectrum of opportunities within the gig space.

However, despite these promising developments, structural vulnerabilities persist. Reports in 2025 highlight that nearly 90% of gig workers lack financial safety nets and adequate savings. The absence of employment contracts in many cases results in irregular earnings, often below state-level minimum wages. Additionally, less than 8% of gig workers have access to health insurance, and only a negligible percentage are enrolled in retirement benefit schemes. These challenges underscore the precarious nature of gig employment, particularly in the absence of formal social protection.

Recognizing these gaps, the government has taken notable steps to enhance gig worker welfare. The integration of gig workers into the Pradhan Mantri Jan Arogya Yojana (PM-JAY) now provides families of registered workers with health coverage of up to 5 lakh per year. The Budget 2025 announcement reiterated the governments commitment to implementing the Social Security Code, 2020, which mandates identity cards and facilitates access to health and retirement benefits for gig and platform workers. These initiatives aim to bridge the gap between informal and formal employment, offering gig workers greater stability and dignity.

Platform companies have also begun to act, albeit selectively. Firms like Urban Company and BigBasket have introduced minimum income guarantees and insurance coverage for their active workforce. Upskilling programs, led by both public and private actors, are gaining traction, with certifications now helping workers move from low-skilled roles into better-paying jobs. Gender inclusivity remains a concern, with women making up 27.98% of Indias tech contractual workforce in 2024, despite a significant increase from 9.51% in 2020. This growth is predominantly at entry levels, as their representation in senior leadership roles has only marginally increased from 11.43% in 2020 to 13.60% in 2024 across all sectors. This highlights the ongoing need for targeted interventions to improve female participation, particularly in senior roles, and address persistent systemic barriers. These barriers include substantial gender pay gaps, notably an overall 16.10% gap in Global Capability Centers (GCCs) which escalates to 16.4% at senior levels and 22.2% in high-demand tech roles, alongside challenges like unconscious bias, limited mentorship opportunities, and insufficient workplace policies that hinder long-term career progression and retention within this growing segment of the workforce.

In conclusion, FY25 has been a pivotal year for the gig economy in India, marked by accelerated growth, deeper policy engagement, and expanding public awareness. While the sector offers unmatched flexibility and a viable employment alternative, structural reforms are essential to ensure fairness, financial resilience, and long-term sustainability. By strengthening the social security architecture, promoting inclusive growth, and incentivizing responsible platform practices, India can unlock the full potential of its gig workforce in the years ahead.

COMPANY OVERVIEW

Aarvi Encon, a leading Technical Manpower Supply company, provides permanent and temporary manpower services in a variety of industries. It has been providing industrial solutions to the organized sector for over 36 years. Aarvi adds value to various verticals by providing technical staffing solutions and qualified engineers in areas such as electrical- instrumentation services, erection & commissioning, operation & maintenance, instrument calibration, plant shutdown, equipment services & support for O&Ms, airport maintenance, and so on.

Aarvi is one of the most well-known workforce outsourcing firms, providing temporary staffing to a wide range of industries, including EPC firms, power plants, oil and gas refineries, chemicals and petrochemicals, construction, infrastructure projects, renewable energy, ports, terminals, telecom, fertilizers, cement, automation, automobile, aviation, metro & monorail, railway, metals, minerals and so on. Throughout the year, the company successfully welcomed and integrated several new clients into its portfolio.

The company has added O&M services to its service offering. O&M activities currently account for 17% of our revenue. Aarvi Encon has become the preferred partner for O&M services. The Company is moving towards Aarvis Green Transformation, whereby our manpower outsourcing services in the renewable sector accounted for an impressive 9% of the total revenue.

Aarvi has established a significant presence not only in the Indian market but also in several Middle Eastern countries, including the UAE, UK, Indonesia, Oman, and Qatar. Additionally, a new company has been incorporated in Saudi Arabia, where operations are set to commence soon.

OPPORTUNITIES AND OUTLOOK

• Proven Track Record: Aarvi Encon Limited has a well-established track record of over 37 years, reflecting its ability to navigate economic and business cycles successfully.

• Robust Organizational Structure: The Company is supported by a qualified and experienced second-tier management team with clearly defined roles and empowered decision-making, ensuring operational efficiency and strategic continuity.

• Experienced Leadership and Motivated Workforce: Under the visionary leadership of the promoters, Mr. Virendra D. Sanghavi and Mr. Jaydev V. Sanghavi, the Company has grown steadily. Their in-depth industry knowledge and foresight, complemented by a committed and experienced team, have been instrumental in achieving consistent growth.

• Diversified Service Portfolio: Aarvi offers a wide range of services to clients in multiple sectors such as Oil

& Gas, Power, Refinery, Petrochemicals, Pipeline, and Infrastructure, both in India and abroad. This diversification minimizes risk and enhances business resilience.

• Technology-Driven Operations: The Company has implemented a resume data management tool to streamline talent sourcing and enhance operational efficiency. Additionally, it is in the process of digitizing various HR processes, including contactless collection of personal data and other day-to-day activities, to build a more agile and tech-enabled workplace.

• Growth in Placement Services Division: Aarvi is actively scaling its Placement Services Division, which is expected to become a more significant contributor to overall revenue in the coming years.

CHALLENGES AND RISKS

• Dynamic Job Market Conditions: Fluctuations in hiring trends, including key clients reducing workforce or halting temporary hiring, may adversely impact revenue.

• Talent Acquisition Constraints: Despite high demand in the job market, finding the right talent for niche roles remains a challenge, potentially impacting service delivery and client satisfaction.

• Regulatory and Legal Risks: The Company is subject to frequent changes in laws and regulations governing the sectors in which it operates, which may affect operations or compliance requirements.

• Political and Socio-Economic Factors: Political and social developments within India, as well as economic shifts both domestically and globally, may influence the Companys performance.

• Policy and Regulatory Uncertainty: Changes in government policies, taxation frameworks, or labor laws could materially impact business operations or financial results.

• Competitive Landscape: The Company faces intense competition from both domestic and international staffing and engineering service providers, requiring continuous innovation and client relationship management.

• Client Concentration Risk: A significant portion of the Companys revenue comes from a few large contracts, making it vulnerable to revenue fluctuations in case of contract non-renewal or loss.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has in place adequate Internal Financial Controls with reference to financial statements, and these internal financial controls are operating effectively. Your company has adopted policies and procedures to ensure the orderly and efficient conduct of its business, including adherence to the Companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records, and timely preparation of reliable financial statements. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee. The Internal Auditors monitor and evaluate the efficacy and adequacy of the companys internal control systems, ensuring compliance with applicable laws, regulations, accounting procedures, and policies. Based on the reports from the Internal Auditors, corrective actions were undertaken, and controls were thereby strengthened. Significant audit observations and action plans are presented to the Audit Committee of the Board.

RESULTS OF OUR OPERATIONS:

The function-wise classification of the Consolidated Statement of Profit and Loss is as follows:

Particulars	2024	%	2023	%	Remarks
Revenue from Operations	510	100	406	100	26
Employee Benefit Expenses	377	74	293	72	28
Other Expenses	120	24	100	25	20
Total Expenditure	497	97	393	97	26
EBITDA	13	3	13	3	-
Finance Cost	3	1	1	0	200
Depreciation and amortisation expense	2	0	1	0	100
Other Income	2	0	2	1	0
Profit before tax	11	2	12	3	-8
Current Tax	1	0	1	0	0
Profit for the year	10	2	11	3	-9

Consolidated Performance

• Revenue from Operations stood at 510 crore, registering a 26% increase over the previous years 406 crore.

• Net Profit after Tax decreased by 9% to 10 crore compared to 11 crore in the previous year.

• Working Capital (Net Current Assets) increased by 1 crore, from 82 crore to 83 crore.

Significant changes in key financial ratios as compared to the previous year:

Particulars	2024-25	2023-24	Y-o-Y change (%) Reasons for the Increase/ Decrease.
Debtors turnover (days)	82.57	74.57	10.74 Increased due to higher sales during the year.
Interest Coverage Ratio	4.65	9.25	(49.73) Declined due to increased finance costs.
Net capital turnover ratio	6.18	4.95	24.83 Increased in line with growth in revenue from operations.
Current Ratio	2.03	2.56	(20.67) Decrease due to increased debt levels.
Debt : Equity Ratio	0.21	0.08	156 Increased due to additional borrowings during the year.
Operating profit margin (%)	2.80	3.34	(16.21) Reduced due to higher employee and finance costs.
Net profit margin (%)	1.97%	2.79%	(29.54) Decrease attributed to rise in employee and finance costs.
Return on Net worth/ Return on Capital Employed (%)	9.38%	10.71%	(12.44) Decline in EBITDA impacted return on net worth.
Return on investment (%)	7.38%	9.57%	(22.96) Decrease corresponds with reduction in net profit.

Standalone Performance

• Revenue from Operations stood at 464.08 crore, marking a 23% increase over the previous years 377.65 crore.

• Net Profit after Tax decreased by 25% to 7.73 crore compared to 10.35 crore in the previous year.

• Working Capital (Net Current Assets) decreased by 1.23 crore, from 62.10 crore to 60.87 crore.

Significant changes in key financial ratios as compared to the previous year:

PARTICULARS	2024-25	2023-24	Y-o-Y change(%)	Reasons for the Increase/ Decrease.
Debtors turnover (days)	75.78	69.35	9.28	Increased due to higher sales during the year.
Interest Coverage Ratio	3.81	8.52	(55.32)	Declined due to increased finance costs.

 

PARTICULARS	2024-25	2023-24	Y-o-Y change(%)	Reasons for the Increase/ Decrease.
Net capital turnover ratio	7.62	6.08	25.37	Increased in line with growth in revenue from operations.
Current Ratio	1.82	2.26	(19.69)	Decrease due to increased debt levels.
Debt : Equity Ratio	0.25	0.10	160	Increased due to additional borrowings during the year.
Operating profit margin (%)	2.52	3.31	(23.94)	Reduced due to higher employee and finance costs.
Net profit margin (%)	1.67	2.74	(39.16)	Decrease attributed to rise in employee and finance costs.
Return on Net worth/ Return on Capital Employed (%)	8.71	11.23	(22.45)	Decline in EBITDA impacted return on net worth.
Return on investment (%)	5.78	9.32	(37.99)	Decrease corresponds with reduction in net profit.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT

The Company believes that Human Resources are its key assets. The total number of employees and consultant of the Company is 6891 which includes Permanent Employees: 220, Contract Employees: 6218 and Contract Professionals: 453. The Companys HR policy focuses on developing the skill and competencies of all the employees, facilitating team work and total employee involvement, providing a happy work environment to the employees and support to their families and remaining a socially responsible Company contributing to the society.

Learning is given the utmost importance in the Company. Training programs focus on improving employees current skills and competencies as well as developing them for their future roles as part of their career development. The Company ensures overall development of every employee and all inputs are provided to reach the expert level of their skill and competency.

In the Company, HR processes are aligned to make employees feel that they are a part of the Company family. The Company creates the platform for employees to voice their opinion and make suggestions to improve the working environment. The Company maintains regular communication with employees to make them feel connected with the Company and perform their jobs most effectively.

The Company focuses on inculcating the habit of continuous improvement and motivating employees to participate in improvement activities for the organization. The Company continues to maintain its record of industrial harmony.