arex industries ltd Management discussions


Overview

The Company is engaged in manufacturing of all types of woven and printed labels, which promotes brand image of the customers. The Companys product is largely used by the garment manufacturers within India and abroad.

Industry Structure

The war between Russia and Ukraine has led to an increase in commodity price and disruptions in supply chain, resulting into inflations across goods and services and impacting economies across the globe. The major forces that shaped the word economy in 2022 seem to continue in 2023 with changed intensities. Debt levels remain high, limiting the ability of fiscal policymakers to respond to new challenges. The Covid-19 and the war between Russia and Ukraine had challenged the textile industry significantly which is now recovering. Demand in from fashion industry and growth of e-commerce platforms is expected to drive the industry growth over few coming years.

Persistent of Global Inflation and possibilities of recession has led to weakening of demand in Textile sector. Inflation has affected consumers and manufacturers alike as they have to pay more along all stages of their supply chains, from cost of freight to wage increases of workers. Despite global slowdown the Indian Textile and apparel industry is expected to grow and to be worth more than US$ 209 billion by 2029. The industry is poised to grow, led by boost in demand and the government support in the form of various schemes.

Opportunities, Threats, Risk and Concern

The Government Support in the form of various schemes shall help for the development of the Textile Industry. India is expected to be benefited by the

‘China Plus One diversification policy adapted by multinational corporations and for such corporations India has greater appeal as an attractive option for manufacturing and exports of textiles and apparels. The growth of the technical textile market shall also provide attractive opportunities. Increasing demand from the fashion industry and currently ongoing growth of e-commerce platforms shall help boost the growth of the textile and apparel industry.

The textile industry is a labour-intensive sector and shortage of skilled workforce impacts the operations of the industry. The global trends in the economy are expected to have an impact on the Industry and the inflation is expected to remain high for the foreseeable future, due to increase in commodity prices. Also increase of interest rates by Central Banks in the coming period are also expected to lower growth and exert pressure on economies particularly those in emerging markets. Diminishing purchasing power and demand due to the economic circumstances could result in fundamental shifts in consumer behaviours and adversely impact the market for textiles and apparels. The management of the Company continuously strives to make dynamic strategy to adapt to the changing global circumstances impacting the textile industry and try to effectively workout for the minimal impact on the operations and stability of the Company.

Outlook

The Company continues its belief to continuous upgradation of its technology for efficient and better productivity. The Company has spent amount of about Rs. 124.19 lacs for spare parts and upgradation of its machineries. Due to the overall weak demand in the Textile Industry the revenue from operations of the Company has been impacted and it stands reduced by approx.16.25% in comparison to the previous year. The Companys operation at the two units, i.e. at Chhatral and Anjar have been satisfactory in line with the affected demand for apparels. The Company believes in providing quality products and its such belief leads towards its products being well accepted in domestic and overseas markets.

Internal Control Systems

The Company has implemented adequate and effective control systems with proper checks and balances to safe guard the assets and to prevent frauds. The Audit Committee meets at regular intervals and actively reviews the internal control systems. The Company also takes suitable actions whenever necessary.

Review of Financial Performance

The Revenue from Operations of the Company was impacted due to global weakening of the demand in the Textile Industry. The Revenue from Operations of the Company stands reduced by 16.25% in comparison to the previous year. Due to decrease in revenue from operations, increase in commodity prices, labour cost and supply chain costs, the Company has earned a profit of Rs. 70.08/- lacs as against a profit of Rs. 369.79 lacs. Your Directors do not recommend dividend for the current year.

Human Resources

The relations between the employees and the management remained cordial throughout the year.

Significant Change

The changes in various ratios have been provided in the notes to the Financial Statements.

Cautionary Statement

Statements in this report on Managements Discussion and Analysis describing the Companys objectives, projections, estimates, plans, exceptions or predictions may be forward looking. These statements are based on certain assumptions and exceptions of future events. Actual results could however differ materially from those expressed or implied. The Company assumes no responsibility in respect of forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information or events.