Arex Industries Ltd Management Discussions.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

Overview

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

Industry Structure

Global economy continued to disappoint in terms of growth with deceleration in activity in emerging and developing economies like China, Brazil, Russia overshadowing modest recovery in major high income countries, resulting into decline in commodity prices, subdued global trade, bouts of financial markets volatility and weakening capital flows. However, India recorded a growth of 7.6% as per Central Statistical Office (CSO) estimates, despite decline in exports. Rebalancing in China, Commodity prices and monetary policy of major Countries like US will influence the global outlook.

The Indian textile industry is continued to be one of the leading sectors of the Indian economy contributing significantly to the economic growth in terms of employment generation and foreign exchange revenue. The Indian textile and apparel industry is estimated to have contributed 14% to industrial production, 5% to GDP and 17% to the Countrys foreign exchange earnings on account of export of textiles and clothing.

Opportunities, Threats, Risk and Concern

Textile industry contributing significantly to employment generation in India remained most important sector with growth potential. Industrys future looks with strong and rising domestic consumption. The Government has introduced Amended Technology Upgradation Fund Scheme (ATUFS) to accelerate the Industry with employment generation, exports, conversion of existing looms to better quality technology looms and improved quality of production to achieve the objects under Make in India campaign for the textile sector. The Government has so far approved 24 new textile parks.

However, the demand for woven and printed labels largely depends on the demand for ready- made garments. The major concern for the textile and apparel industry is the rising production costs, power costs and interest costs in addition to the poor infrastructure, inflexible labour laws, competition from low cost neighbor countries etc. The Company has strategic plans to continue its operations with quality products and to face competitive markets, borrowing costs, inflationary conditions and entry of unorganized sector in the weaving and processing segment in textile industry.

Outlook

The Company is vigilant to upgrade its technology for efficient and better productivity. The Company has spent amount of about Rs.7 Crore for installation of new machineries and other miscellaneous supporting systems. The Company has further ambitious and strategic expansion plans for total outlay of Rs.30 Crore. The Company is quality conscious and its product is also 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 Company has sustained and continued on the path of growth. The Companys performance was satisfactory during the year under review despite adverse market conditions. The sales (net) were decreased by about 2.6 % over the previous years sales but the profit before taxes was increased by about 13% over the previous years profits.

Your Directors are pleased to recommend dividend at 30% (i.e. Re.3/- per share) out of the current profits and balance out of the surplus in the profit and loss Account, subject to approval of the members in their ensuing Annual General Meeting.

Human Resources

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

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.