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 Company’s product is largely used by the garment manufacturers within India and abroad.

Industry Structure

The Global economy was impacted by COVID-19 pandemic in the year 2020 which infected crores of people and causing deaths in lacs. Manufacturing and Service sectors were significantly impacted during the initial months but proactive measures by various governments across the globe helped various economies to recover from the impact. However the employment and social impacts are far reaching. As per the World Bank’s January report, it was mentioned that the Global Gross Domestic Product (GDP) shrank by 4.3% in the year 2020, being sharpest contraction in the decade.

The Indian Economy shrank by 7% during the financial year ending March 2021. The economy which had contracted sharply in the first quarter started to show quick recovery primarily powered by government expenditure and exports. The contraction of over 15% in the first half was offset by 3% growth in the second half. The textile sector largely depends on discretionary spending of the consumer and consumer spending was severely affected during the fiscal year 2020-21 in wake of the pandemic. The industry witnessed significant contraction of demand in both domestic and international markets, till the second quarter. However, consumption and production improved during the latter half of the year on account of improved demand as economy started to revive. Overall the Indian apparel market is estimated to have declined by 27% during 2020.

Opportunities, Threats, Risk and Concern

Business environment for the Textile Industry in which the Company operates is highly dependent on discretionary spending by consumers and movements of people. The various lockdowns imposed by the authorities across the Country to restrict the spread of the pandemic the performance of the Company were affected during the first and second quarter of the year under review. The Company had to witness loss of production, order cancellations and loss of revenue alongwith continued burden of fixed costs. During the Financial year 2020-21 the Industry witnessed US - China trade disputes, worldwide Anti-China sentiments providing opportunities to textile industry in India. Various companies have shifted their businesses from China to other countries including India. The Government Amended Technology Upgradation Fund Scheme (ATUFS) scheme being introduced 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. The various relief packages announced by the Government in addition to the concept of building New India under the campaign of ‘Make in India’ is helping the industry to recover from the effects of the pandemic. Various countries opening up and now recovering from the effects of the pandemic leading to movements of people are providing growth opportunities to the Industry.

The global textile and apparel industry will continue to grow along with growing consumption of textile and apparel products in developing countries and a gradual economic recovery of major developed economies. However, the demand for woven and printed labels largely depends on the demand for readymade garments, fashion trends, expanding consumption patterns, rising income levels etc. 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. Non-availability of skilled manpower also affects the industry. With the availability of vaccines and aggressive vaccination drive adopted by various countries including India, it is hopeful for revival of overall market conditions. The Company has strategic plans for 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 continues its vigilant to upgrade its technology for efficient and better productivity. The Company has spent amount of about Rs. 83.44 lacs for installation of machineries and other miscellaneous supporting systems. The Company’s overall business was affected due to the ongoing global pandemic which has affected businesses worldwide. The Company’s operation at the two units, i.e. at Chhatral and Anjar were affected due to the pandemic during the first and second half of the quarter for the year under review, but its operations thereafter has been satisfactory. The Company believes in providing quality products and it’s 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 Company’s operations were affected during the first and second quarter during the year under review. The sales (net) were decreased by 13.33% over the previous year’s sales and the Company has incurred a loss of Rs. 100.47 lacs as against profit of Rs. 88.29 lacs in the previous year. 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.

Cautionary Statement

Statements in this report on Management’s Discussion and Analysis describing the Company’s 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.