Arex Industries Ltd Management Discussions.

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

As per the reports of the international agencies, the global economy is projected to slowdown and the significant reasons are Russia-Ukraine War, escalation of sanctions on Russia resulting in increase in energy prices, Lock-downs in China due to the Omicron. Many Countries are moving on from the phase of COVID-19 crisis, but deaths and hospitalisation especially among the unvaccinated remains high. Various fiscal and monetary policies around the world helped through the peak of the pandemic resulting in lighter economic impact. Advanced, emerging and developing economies are expected to have a slowdown in its growth.

India, being developing country, as per the reports of FICCI estimated growth in F.Y. 2021-22 between 8.3% to 8.8% and further estimated equally strong growth or more than 7.4% in F.Y. 2022-23. Indias economic growth has also been hit by the Russia-Ukraine War with rising energy prices, wheat, fertilizers and edible oil. India has strong fundamentals and further due to growth enhancing policies and schemes such as production-linked incentives and governments push towards self-reliance and increased infrastructure spending leading to effects on job and income, higher productivity and more efficiency all will lead to accelerated economic growth.

Opportunities, Threats, Risk and Concern

The overall size of Indias textile and apparel market is estimated to be around US$ 140 billion in 2021 out of which approx. US$ 99 billion is estimated from the domestic market which has recovered from the drop in 2020 due to the pandemic. The Market is expected to grow and reach at US$ 190 billion by 2025. The production capacity in India has increased owing to the setting up of new manufacturing units across the value chain. The domestic textile and apparels market had declined during the peak of the pandemic in 2020. Market is on recovery mode but has still not reached at pre-pandemic levels, however with strong fundamental the market is expected to grow at a significant pace. The Indian government has been proactive in incentivising and encouraging the textile industry. The government has introduced Production linked scheme to industry for setting textile and apparel manufacturing in man-made fibre based products.

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 neighbour countries etc. Non-availability of skilled manpower also affects the industry. 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. 94.45 lacs for spare parts and upgradation of its machineries. The revenue from operations of the Company has increased by approx. 31.50% in comparison to the previous year due to increase in demand from its customers and overall recovery in the textile industry. The Companys operation at the two units, i.e. at

Chhatral and Anjar have been satisfactory. 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 Companys operations were satisfactory due to increase in the demand from its customers due to overall increase in the demand in the textile industry. The sales (net) were increased by 31.50% over the previous years sales and the Company has earned a profit of Rs. 369.79 as against a loss of Rs. 100.47 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.

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.