Hexa Tradex Ltd Management Discussions

COMPANY OVERVIEW

The operations of Hexa Tradex Limited essentially focus on national and international trading of good and services. The companys key objective is to operate as a dealer, trader, import & export agent, representative, contractor, buyer, seller, and broker. It focusses on buying, selling, and trading a wide variety of products on a wholesale, cash and carry basis.

OUTLOOK

THE GLOBAL ECONOMY

The global economy is currently passing through a critical phase and has been dealt with a severe blow due to the United States unilaterally announcing tariffs on major trading partners and critical sectors, bringing effective tariff rates to levels not seen in several decades. The International Monetary Fund has projected global growth, in April, to 2.80% in 2025 and 3.00% in 2026, sharply lower than the 3.30% projected for both years in January. The escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activities, though it remains unclear how the tariff war will evolve.

IMF has cut its growth forecast for advanced economies to 1.40% in 2025 and in the US to 1.80% in 2025 on account of the policy uncertainties, trade tensions, and softer demand momentum. The growth forecast for the euro area has been cut to 0.80%. In emerging markets and developing economies, growth is expected to slow down to 3.70% in 2025 with significant downgrades for countries affected most by the tariff measures, especially China. The growth outlook for India seems relatively more stable at 6.20% in 2025-26. India is relatively less affected largely due to private consumption, particularly in rural areas.

The forecast reflects increased tariff restrictions affecting trade flows and the waning effects of cyclical factors that have underpinned the recent rise in goods trade.

THE INDIAN ECONOMY

The global uncertainties emanating from the global trade frictions is likely to dampen the prospects for the Indian economy in 2025-26. The Reserve Bank of India has cut its forecast on growth in the Indian economy in 2025-26 to 6.50% from 6.70% earlier, with quarterly growth rates ranging from 6.30-6.70%. The forecast of an above normal southwest monsoon and looser monetary policy projects a favourable environment for the Indian Economy. The focus of the Budget on long-term development drivers and reforms, anchored around the ambition of Viksit Bharat, adds to the confidence in domestic economic resilience.

India has been proactively engaging with the US on tariffs and is likely to be the first country to sign a bilateral trade deal to avoid reciprocal tariffs. According to the IMF the growth outlook for India is at 6.20% in 2025-26 which is substantially higher than other global economies. India is relatively less affected largely due to private consumption, particularly within the rural landscape.

India will continue to be the fastest-growing among all major global economies, though the trade related disruptions have exacerbated uncertainties clouding the economic outlook.

OPPORTUNITIES

The focus of the Budget on long-term development drivers and reforms, anchored around the ambition of Viksit Bharat, support the companys growth. Infrastructure projects drive demand for construction materials, while the push for electric vehicles and renewable energy under initiatives creates new opportunities for specialised alloys and metals.

In the consumer goods segment, the growing preference for packaged foods, toiletries, and household items offers market expansion. The electronics and electrical appliances sector grows with technological advancements and increased consumer spending.

CHALLENGES

Trading businesses are associated with various risks and challenges which can be faced on account of domestic and global economic scenarios, geo-political conditions, competition, trade protection measures by various economies and more. The success of any business always depends on its ability to face challenges and survive.

Due to the United States unilaterally announcing tariffs on major trading partners and critical sectors, effective tariff rates are at levels not seen in the last several decades. The escalation of trade tensions and extremely high levels of policy uncertainty can have a significant impact on Hexa Tradex. The company has developed systems and strategies to mitigate risks, has enhanced its risk management framework with advanced analytics and scenario planning to better anticipate and respond to disruptions caused by the growing uncertainty in the global trade scenario.

RISK MANAGEMENT

Trading and financing businesses carry significant risks, particularly in volatile industries like ours where investments and performance are heavily influenced by prevailing mega-trends. Our ability to fulfil commitments hinges on how these factors impact our operations and future prospects. Factors such as adverse regulatory changes or economic fluctuations in the global market can directly impact our revenue streams.

At Hexa Tradex, we view risk management as an ongoing process rather than a one-time activity. Continuous monitoring and regular reviews are essential components of our risk management strategy. This approach ensures thorough identification and assessment of risks, enabling us to implement effective controls. It also serves as a mechanism for learning from past experiences and taking corrective actions.

Hexa Tradex has identified several significant risks to its business:

a) Strategic Risk: The trading industry is intensely competitive by nature.

b) Commercial Risks: The business faces potential risks from vendor or customer failures.

c) Financial Risks: Non-payment or delayed payments from customers and increased financial costs pose significant threats to profitability and margins. Hexa Tradex evaluates profitability on a case-to-case basis but prioritises credit risk management, particularly with regular customers.

d) Geopolitical Risks: Cross-border trading exposes the company to political and global economic uncertainties. Hexa Tradex maintains a robust strategy and risk management framework to mitigate a broad spectrum of risks. The management systematically assesses various factors, analyses risks, and implements effective measures. Regular reviews of the management system ensure adjustments are made to align with current market conditions.

FINANCIAL PERFORMANCE

The companys total income from operations, for the year under review is 677.25 lakhs as compared to 2.27 lakhs in the previous year. The Company has earned a profit (after tax) of 187.87 lakhs for the year under review, as compared to a loss (after tax) of 259.29 lakhs in the previous year. The Companys other equity has increased to 3,74,016.17 lakhs as of March 31, 2025, as compared to 2,90,141.60 lakhs as of March 31, 2024. The increase is due to majorly recognition of profit of 83,686.83 lakhs (net of taxes) in Other Comprehensive Income (OCI), which is mainly on account of fair valuation of investments as of March 31, 2025, the net worth of the company increased to 3,75,121.08 lakhs in comparison to 2,91,246.51 lakhs as of March 31, 2024.

ADEQUACY OF INTERNAL CONTROL SYSTEM

Hexa Tradex has implemented a robust system of internal controls to ensure the safeguarding and protection of all assets against unauthorized use or disposition. Additionally, it ensures that all transactions are properly authorized, recorded, and reported timely. The company maintains an internal audit and control department that oversees, evaluates, and updates internal controls regularly. It has established a clear organizational structure, defined authority levels, and internal guidelines to govern its business operations effectively.

The internal audit and control department conducts audits across all key business areas according to a predefined audit plan, which is approved by the audit committee. This committee regularly reviews compliance with the plan. Audit observations and subsequent actions are reported to the committee, which also periodically reviews audit plans, observations, and recommendations related to significant risk areas, ensuring the adequacy and effectiveness of these controls.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Hexa Tradex follows a process-driven recruitment policy aimed at nurturing and retaining its talented professionals. Despite this commitment, retaining human resources remains a challenge for expanding organizations. Currently, Hexa Tradex employs a limited number of professionals but anticipates the need for additional qualified talent to support its future growth.

Cautionary Statement

The statement in this Management Discussion and Analysis report, describing Hexa Tradexs outlook, projections, estimates, expectations or predictions may be a forward-looking statement within the meaning of applicable securities, laws or regulations. Actual results could differ materially from those expressed or implied.