Company overview
Hexa Tradex Limiteds operations essentially focus on national and
international trading of good and services. The companys key objective is to carry
out the business of dealer, trader, import & export agents, representatives,
contractors, buying and selling agents, brokers, importers, buyers, sellers &
exporters and to buy, sell, or otherwise trade and deal in goods, produce, articles and
merchandise of all types, on a wholesale, cash and carry basis. The products the company
deals in, include minerals & metals, stainless & special steels, alloys, ferrous
& non-ferrous metals, auto parts, tools & implements, dies jigs, steel pipes,
tubes & pipe fittings, iron & steel products, cast iron, steel & tubular
structural scrap, tubes & allied products, chemicals & petrochemicals, capital
goods, household articles & general merchandise, groceries such as packaged food
items, fruits & vegetables, household items like toiletries, electronics, electrical
appliances, general merchandise, apparels, accessories, stationery items, over the counter
drugs, home & office furnishing and beauty products.
OUTLOOK
The Global Economy
Global economic shocks in the past were severe but spaced out in time.
This was witnessed in the third decade of this millennium. At least three shocks have hit
the global economy since 2020. It all started with the pandemic-induced contraction of the
global output, followed by the Russian-Ukraine conflict leading to a worldwide surge in
inflation. Subsequently, the central banks across economies led by the Federal Reserve
responded with synchronised policy rate hikes to curb inflation. The rate hike by the US
Fed drove capital into the US markets causing the US Dollar to appreciate against most
currencies. This led to the widening of the Current Account Deficits (CAD) and increased
inflationary pressures in net importing economies. The rate hike and persistent inflation
also led to a lowering of the global growth forecasts for 2022 and 2023 by the IMF in its
October 2022 update of the World Economic Outlook. The vulnerability of the Chinese
economy further contributed to weakening the growth forecasts. Slowing global growth,
apart from monetary tightening may also lead to a financial contagion emanating from the
advanced economies where the debt of the non-financial sectors has risen the most since
the global financial crisis. With persisting inflation in the advanced economies and the
central banks hinting at further rate hikes, downside risks to the global economic outlook
appear elevated. (As per Economic Survey 2022-23)
The Indian Economy
India marked 2022 as the 75th year of Independence. India became the
worlds fifth largest economy, measured in current dollars. Indias GDP has
reached $3.75 trillion in 2023, from around $2 trillion in 2014; moving from 10th largest
to 5th largest economy in the world. India is now being called a Bright Spot in the global
economy.
The rise in consumer prices has slowed considerably. The annual rate of
inflation is below 6 per cent. Wholesale prices are rising at a rate below 5 per cent.
Although the high oil price this year compared to last year, has infiated Indias
import bill and caused the merchandise trade deficit to balloon, concerns over the current
account deficit and its financing had ebbed as the year rolled on. Foreign exchange
reserve levels are comfortable and external debt is low. India had a good monsoon, and
reservoir levels are higher than the last 10-year average. The fundamentals of the Indian
economy are sound as it enters its ‘Amrit Kaal, the 25-year journey towards its
centenary as a modern, independent nation. Policies pursued carefully and consciously have
ensured that the recovery is robust and sustainable. India is currently the worlds
fastest-growing economy, according to institutions like the World Bank and IMF. With a GDP
growth rate of 7.2%, India is expected to become the third-largest economy, surpassing
Japan and Germany by 2027.
Opportunities
A large customer base, developing economy, vast middle class and a
growing young population with higher spending power, sets India as an important target for
any establishment seeking a market for its product and services. Several multinational
corporations consider India as a potential market that contributes significantly to their
top and bottom line. The ‘Made in India and ‘AatmaNirbhar Bharat
initiatives of the Indian government aim to boost local production and increase the
competitiveness of Indian industries. This presents many prospects for Hexa Tradex to
expand its operations locally. Government Policies like Production Linked Incentive (PLI),
Jal Jeevan Mission and PM Ji-van Yojana that are targeting development in various sectors
like infrastructure, housing and development, offer many opportunities for the company to
further strengthen its position.
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.
Unexpected circumstances, such as the Russia-Ukraine conflict, can affect the
companys operations, supply chain, product demand and severely disrupt logistics. In
the framework of international trade, geopolitical conflicts can present a threat to the
companys business. Geopolitical conflicts can result in trade barriers, taxes and
other trade restrictions, limiting Hexa Tradexs trading opportunities due to limited
access to new markets. Towards this end, Hexa Tradex consistently works on developing
various systems and strategies to equip itself for any unforeseen contingencies.
Risk Management
There is a considerable risk involved in trading and financing
businesses. Since the company operates in a volatile industry, its investments and
performance are shaped by mega-trends in the operating environment. The companys
operations and future performance depend on how these existing scenarios affect its
capacity to deliver on its commitments. Adverse regulatory or economic conditions in the
global market, for instance, can directly and negatively affect the companys
revenues.
Hexa Tradex believes that risk management is not a one-o_ exercise.
Continuous monitoring and reviewing are crucial for the success of the risk management
approach, which ensures that risks have been correctly identified & assessed, and the
right controls put in place. It is also a way to learn and take corrective measures from
past experiences.
Hexa Tradex has identified the following major risks to its business: a)
Strat egic Risk: Trading businesses are highly competitive in nature. b) C ommercial
Risks: Business failures of vendors or customers pose a risk to the business. c) F
inancial Risks: Trading businesses are also exposed to financial risks because of non or
delayed payments by customers. Increase in financial costs also poses a risk which can
significantly impact margins and profitability. Hexa Tradex takes into account the
profitability on a case-to-case basis. However, it does not compromise significantly on
the credit risk, unless the transaction is with regular customers. d) G eo Political
Risks: Cross-border trading transactions are subject to political and global economic
risks.
Hexa Tradex upholds an effective strategy and risk management system to
safeguard itself against a wide range of risks. The management of the company considers
various elements, analyses the risks involved and then takes effective steps to reduce
risk. The management system is reviewed periodically and suitable changes are made based
on the risks prevailing in the current market scenario.
Financial Performance
The companys total revenue from operations, for the year under
review is 4.77 lakhs as compared to 1.89 lakhs in the previous year. The Company has
su_ered a loss of 282.44 lakhs for the year under review, as compared to a loss of
178.94 lakhs in the previous year. The Companys reserve & surplus decreased to
1,93,625.54 lakhs as on March 31, 2023 as compared to 2,12,712.95 lakhs as on March 31,
2022. The decrease is due to recognition of loss of 18,804.97 lakhs (net of taxes) in
Other Comprehensive Income (OCI) on account of fair valuation of investments (Quoted and
Unquoted) of 18,804.74 lakhs (net of taxes) for the year under review. As on March 31,
2023 the net worth of the company decreased to 1,94,730.45 lakhs in comparison to
2,13,817.86 lakhs as on March 31, 2022.
Adequacy of Internal Control System
Hexa Tradex has a reliable and effective system of internal control to
ensure that all assets are safeguarded and protected against loss from unauthorised use or
disposition, and that all transactions are authorised, recorded and reported correctly.
The company has an internal audit and control department to monitor, review and update
internal controls on a regular basis. It has put into place a well-defined organisational
structure, authority levels and internal guidelines to conduct its business operations.
The internal audit and control department conduct audits 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 the committee. It periodically reviews audit plans, observations &
recommendations of the audit report with reference to significant risk areas, and adequacy
& efficacy of these controls.
Human Resources and Industrial Relations
Hexa Tradex has a process driven recruitment policy and believes in
nurturing and retaining its talented pool of professionals. However, retention of human
resources often poses a challenge in growing business organisations. The business as of
now involves a limited number of professionals but keeping the companys growth trend
in mind, it foresees a requirement for additional talent, with the requisite experience
and qualifications, in the near future.
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.
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