Hexa Tradex Ltd Management Discussions

COMPANY OVERVIEW

Hexa Tradex Limiteds main objective is to operate as a dealer, trader, import and export agent, representative, contractor, buyer, seller, and broker. They focus on buying, selling, and trading a wide variety of products on a wholesale basis.

THE GLOBAL ECONOMY

The global economy has shown resilience, with steady growth,as inflation gradually returns to target levels, despite challenges such as supply-chain disruptions, the global energy and food crisis due to Russias invasion of Ukraine, and a war in West Asia. According to the International Monetary Fund (IMF), global growth is projected to remain at 3.2% for 2024 and 2025, driven primarily by emerging markets and developing countries like India, which is expected to grow at 6.8% in 2024-25. This steady growth is supported by stronger-than-expected performances by the US and India. However, growth will not be uniform, with the European sector experiencing subdued growth due to weak consumer sentiment & high energy prices along with low-income economies facing large output losses. Despite the unprecedented monetary tightening, the global financial system has remained robust, especially in emerging markets. Nonetheless, growth projections for 2024 and 2025 are still below the historical average, hindered by high policyrates,theunwindingoffiscalsupport and low productivity growth.

THE INDIAN ECONOMY

Despite global economic challenges, the Indian economy has continued to thrive, with a projected growth of 7.6% in 2023-24; up from

7% the previous year. The GDP grew at 8.2% from April to December, the first time, since 2016-17, that growth exceeded 8% in the first three quarters. The October - December quarter saw a six-year high growth rate of 8.4%, driven by increased investment and government spending. Key indicators such as the composite purchasing managers index and retail inflation are also positive. Supply chain disruptions have provided opportunities for India, with significant investments under the Aatmanirbhar Bharat initiative. The 2024-25 Interim Budget focuses on fiscal consolidation and capital expenditure,aimingtoreducethefiscaldeficit and increase capital expenditure to 3.4% of GDP. The budget also includes reforms to position India as a developed nation by 2047, allocating 75,000 crores for state-level reforms. The finance ministry projects India to become the third-largest economy by 2027, with the Reserve Bank of India forecasting 7% growth for 2024-25.

OPPORTUNITIES

Government initiatives like Make in India 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. The companys entry into beauty products and over-the-counter drugs diversifies revenue streams, leveraging rising awareness towards health & wellness.

CHALLENGES

Trading businesses face risks from economic scenarios, geopolitics, competition and trade measures. Success depends on overcoming these challenges.

The Russia-Ukraine conflict in 2023 disrupted global energy markets, leading to volatile commodity prices and higher transportation costs. Western sanctions on Russia further complicated operations in the region. Global inflation rose to 6.6% in 2023 due to higher energy prices and supply chain disruptions, prompting central banks to raise interest rates. Geopolitical tensions like U.S.- China trade disputes have increased tariffs and regulatory scrutiny, complicating trade flows.

To mitigate these risks, Hexa Tradex has developed systems and strategies to handle unforeseen contingencies. The company has enhanced its risk management framework with advanced analytics and scenario planning to better anticipate and respond to disruptions. By staying agile and proactive, Hexa Tradex aims to effectively navigate the complex global trade environment.

RISK MANAGEMENT>

Trading and financing businesses carry significant risks, particularly in volatile 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 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 revenue from operations, for the year under review is 2.27 lakhs as compared to 4.77 lakhs in the previous year. The Company has suffered a loss of 259.29 lakhs for the year under review, as compared to a loss of 282.44 lakhs in the previous year. The Companys other equity has increased to 2,90,141.60 lakhs as of March 31, 2024, as compared to 1,93,625.54 lakhs as of March 31, 2023. The increase is due to recognition of profit of 96,775.35 lakhs (net of taxes) in Other Comprehensive Income (OCI), which is mainly on account of fair valuation of investments. As of March 31, 2024, the net worth of the company increased to 2,91,246.51 lakhs in comparison to 1,94,730.45 lakhs as of March 31, 2023.

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. 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.