Hexa Tradex Ltd Management Discussions.

OVERVIEW - FINANCIAL PERFORMANCE

Company overview

The business objective of Hexa Tradex Limited ("Hexa" or "the Company") is to act as an import and export agent, representative, contractor, selling agent, broker on a wholesale cash and carry basis for metals, minerals, iron and steel products, pipes, household items, general merchandise etc; and holding investments in other entities and to buy, invest in, acquire, hold shares, stocks, debentures, debenture stocks, bonds, and securities of any kind etc.

OUTLOOK

Global Economy

The COVID-19 pandemic has spread with alarming speed, infecting millions and bringing economic activity to a near-standstill as countries imposed tight restrictions on movement to halt the spread of the virus. As the health and human toll grows, the economic damage is already evident and represents the largest economic shock the world has experienced in decades. As per the international monetary fund, June 2020 publication on world economic outlook update, global growth is projected at -4.9 percent during 2020. The COVID 19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previous forecast. In 2021 global growth is projected at 5.4 percent. The COVID 19 pandemic is a global public health crisis without precedent in living memory, continues to result in a widespread loss of life and severe human suffering. To contain the spread of the virus and save lives, most governments throughout the world imposed stringent containment measures to slow the spread of infections, although these measures fail to contain the virus completely. Activity in many sectors are shut down completely and travel and mobility curtailed. These measures have resulted in large-short term economic disruption and tighter financial conditions.

The economic outlook is largely and exceptionally uncertain. The recovery is likely to be hesitant and could be interrupted by another outbreak if containment measures prove ineffective.

In addition to pandemic the world trade is impacted by nationalism in various countries, trade war between USA and China and trade protective measures taken by various governments. More countries are using non-tariff measure to control or restrict import for supporting local industry or curtail imports from targeted trade partners for muscle flexing.

Indian Economy

The Indian Economy completed the journey for FY2019-20 with moderate growth rate of 4.2 percent. The outlook for FY 2020-21 is not good, there is projection of growth varying from -4 to -7 percent on a single wave outbreak of pandemic, this may worsen with second wave outbreak. The outlook for FY 2021-22 is however positive with moderate growth rate of about 4 percent.

Due to flattening of demand, excess supply and lack of coordination between crude oil producers, crude oil prices have reduced significantly. Brent is hovering around $ 40 to $ 45 per barrel against peak price of $68.6 per barrel in previous six months prior to pandemic. This has helped economy in controlling general inflation (although other supply side constraints caused increased in inflation) and allowing government to raise much higher taxes on crude oil products.

The government is providing fiscal and liquidity support to bring the economy on track by staggered opening of economic activities. We expect the economic activities will be mostly normal in short period.

Outlook

The outlook remains uncertain, the pandemic has caused widespread disruption in almost all sectors of economy. The fallout of lockdown on economy was severe however with opening up of economy various economic parameters are improving although at slower pace. Subsequent local and regional lockdown are causing hinderance in lifting the economy however opening up is getting pace. Efforts are to minimize the fallouts of the pandemic on economy and jobs although there are limitations on efforts, resources and policies, even though it may not be quick recovery but a gradual recovery in almost various sectors in time span of two years. Certain sectors of economy will take longer period to recovery however many will not be able to see the pre pandemic levels. The pandemic will change people habits and work culture this will impact established establishments and most of the establishments may have to reorient their business activities and products to meet new aspirations of their customers and employees.

Opportunities and Challenges Opportunities

A large customer base, under developing economy, vast middle class and mostly young population makes India one of the major target market for any establishment seeking market for its product and services. Many of the earlier entrants established their footprints in the Indian market and now reaping the fruit of the same. Many multinational establishments now consider India as their major market which contributes significant to their top line and bottom line financial reported figures. India throw a significant opportunity and challenge to any business establishment whether Indian or multinational. There are many uniqueness in the economic opportunities available in India, those who understand it now have established well and are growing their business opportunities.

The Company is part of O P Jindal Group which is one of the largest producers of Iron and steel products, in India. As the business model of the Company involves carrying out trading activity, it is exploring all possible trading opportunities not only within O P Jindal Group but also from open market.

Pandemic has caused financial and liquidity challenges to small and medium enterprises in terms of availability of working capital financing which is opening up business avenues for the Company.

Challenges

Trading businesses are associated with various risk and challenges which can be faced on account of domestic and global economic scenarios, geo-political conditions, competition, trade protection measures by various economies etc. The success of any business always depends upon its ability as how it faces the challenges and survive in the highly challenging environment. Further, different business and economic conditions throws new and different kind of challenges and risks which needs to be faced and mitigated. The Company continuously works on developing various systems and strategies and also take the help of technologies and artificial intelligence to face the risks and challenges.

Risk Management

Trading and financing business faces risks. Risk is defined as the likelihood of an event and its consequences. Risk management is the practice of using processes, methods and tools for managing these risks. The Company believe that risk management is not a one-off exercise. Continuous monitoring and reviewing are crucial for the success of the risk management approach which ensures that risks have been correctly identified and assessed and the right controls put in place. It is also a way to learn from experience and make improvements.

The Company has identified following major risks to its business:

a) Strategic Risk: Trading businesses are highly competitive in nature.

b) Commercial Risks: Failure of the vendors or customers poses risk to the business.

c) Financial Risks: Trading businesses are also exposed to finance risks for non or delayed payments by the customers. Increase in finance costs also poses a risk which can impact the margins and profitability significantly. Whereas, the Company takes view on the profitability on case to case basis, however does not compromise significantly on the credit risk unless the transaction are with regular customers.

d) Geo Political Risks: Cross border trading transactions poses political and global economic risks.

The Company is having effective strategy and system to safeguard it against wide range of risks. The Management conceives various elements and analyse the Risk involved and take effective steps to reduce the risk against the business of the Company. The Management system is reviewed periodically, and suitable changes are made depending upon the risk prevailing in the market.

Financial Performance

The Companys total revenue from operations for the year under review is 1.44 lakhs as compared to 1.04 lakhs in the previous year. Company has suffered a loss of (217.00) lakhs under review as compared to (137.55) lakhs in the previous year. As at March 31, 2020, the Net worth of the Company increased to 25,902.45 lakhs from 25,539.34 lakhs as at March 31, 2019. The Company has non- current investments aggregating to 27,454.39 lakhs as at March 31st, 2020. This also includes certain investments which were part of a reorganization that completed during the year 2013-14. The reorganization was done in compliance with the applicable laws and procedures under the guidance of legal and accounting experts. The investments, directly or indirectly held by the Company through entities on the date of such reorganization, have been maintained and the values have been preserved.

Adequacy of Internal Control System

The Company has a proper and adequate system of Internal Controls, to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and that all the transactions are authorized, recorded and reported correctly. The Company has an internal audit and control department to monitor, review and update internal controls on an ongoing basis. The Company has put in place a well-defined organization structure, authority levels and internal guidelines for conducting business transactions. The Internal audit and control department conducts audit of all key business areas as per the pre-drawn audit plan. The audit plan is approved by the Audit Committee, which regularly reviews compliances to the plan. All audit observations and follow up actions are reported to Audit Committee. The Audit Committee periodically reviews audit plans, observations and recommendations of the audit report with reference to significant risk areas and adequacy of internal controls.

Human Resources and Industrial Relations: Recruitment and retention of human resources is always a challenge in the growing business organizations. The business as of now involves a limited no. of professionals however with growing business needs your Company may be required to hire the additional talent pool of requisite experience and qualifications.

Cautionary Statement

The Statement in this Management Discussion and Analysis report, describing the Companys outlook, projections, estimates, expectations or predictions may be "Forward looking Statements" within the meaning of applicable securities laws or regulations. Actual results could differ materially from those expressed or implied.

Certificate Regarding Compliance of Conditions of Corporate Governance

To,

The Members, Hexa Tradex Limited,

We have examined the compliance of the conditions of the Corporate Governance by Hexa Tradex Limited ("the Company") for the Financial Year ended 31st March, 2020, as stipulated in Regulations 17 to 27 and clauses (b) to (i) of Regulation 46(2) and para C, D and E of Schedule V of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 [hereinafter referred to as "Listing Regulations"]. The compliance of the conditions of the Corporate Governance is the responsibility of the Management of the Company. Our examination was limited to review of the procedures and implementation thereof, adopted by the Company for ensuring compliance with the conditions of Corporate Governance as stipulated in the said Regulations. It is neither audit nor an expression of the opinion on the Financial Statements of the Company.

In our opinion and to the best of our information and according to the explanations given to us and the representations made by the Management, we certify that the Company has complied with the conditions of Corporate Governance as stipulated in the above mentioned "Listing Regulations" as applicable during the year ended 31st March, 2020.

We further state that such compliance is neither an assurance as to the future viability of the Company nor of the efficiency or effectiveness with which the management has conducted the affairs of the Company.

For N.C. Aggarwal & Co.

Chartered Accountants

Firm Registration No. 003273N

G.K. Aggarwal
Partner
M. No. 086622
UDIN: 20086622AAABBX7503
Place: New Delhi
Date: 05th August, 2020