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

Global economy witnessed continuous US-China trade dispute in addition to overall slow down market conditions. The projected global economic growth, albeit downgraded, was 2.9%. However, Indian economy grew by 4.2% as against 6.1% expansion in 2018-19. Further, due to COVID-19 pandemic the International Monetary Fund has projected a sharp contraction of the global economy to a status much worst than what resulted from 2008-2009 financial crisis. The Reserve Bank of India has reviewed from time to time and also reduced the interest rate during the year. Further, US-China trade tension, weak microeconomic situation and tight monetary policy in China have contributed to slowing down of growth.

The COVID-19 pandemic followed by complete lockdown has adversely affected Indian economy but with the right economic stimulus and the gradual opening of the lockdown announced by the Government, the whole economic situation is expected to improve, although complete recovery of the economic situation may take some more time.

Even though apparel industry is dominated by developed markets of EU and US, the emerging markets led by countries such as India, China, Russia and Brazil are becoming consumption markets. Simultaneously, India and China have strong textile manufacturing base and also emerging as both sourcing and consuming nations. The Indian textile industry is the oldest industry of the Country. The Industry has a major contribution to the growth of domestic economy in terms of direct and indirect employment generation and net foreign exchange earnings. The Indian textile and apparel industry is estimated to have contributed 14% to industrial production, 2% to GDP and 11% 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 continues to remain most important sector with growth potential. Industrys future looks with strong and rising domestic consumption. Despite having favorable demographic profile, labour and skill shortage continues to be one of the key concerns for the Indian Textile industry. The Government has come up with a number of export promotion policies for the textile sector including steps for allowing 100% FDI in Textile sector under automatic route. The Government has revised rates for incentives under the Merchandise Exports from India Scheme (MEIS) for two sub-sectors of Textile Industry- Ready-made Garments and Made ups from 2% to 4%. The Government has also 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 Indian textile industry is adversely affected due to COVID-19 pandemic and conservative approach on spending on fashions. However, the economic stimulus and other relief packages to compensate pandemic situation due to COVID-19, as announced by the Government, in addition to the concept of building New India under the campaign of Make in India, Atmanirbhar Bharat, Vocal for Local etc are expected to boost economic growth and investments activities in the years to come.

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 ready- made 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. We hope for revival of overall market conditions with the mission of New India, Make in India, repealing of irrelevant existing laws and enactment of new laws by the Government of India. 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 is vigilant to upgrade its technology for efficient and better productivity. The Company has spent amount of about Rs.113.27 lakhs for installation of new machineries and other miscellaneous supporting systems. The Companys expansion project at Anjar (Kutch) has started its operations and its operations are satisfactory. 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 increased by 15.84 % over the previous years sales but the profit before taxes was decreased due to adverse circumstances. 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 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.