Vaxfab Enterprises Ltd Management Discussions

1. Global Economy and Outlook:

In 2023, the global economy exhibited unexpected resilience despite facing significant challenges, including concerns about stagflation and recession. Economic activity remained robust, with inflation rates descending from their mid-2022 peak. This resilience was bolstered by higher-than-anticipated government spending and household consumption, along with an unforeseen expansion in labour force participation. Central banks across the globe implemented interest rate hikes to restore price stability, while adjustments in mortgage and housing markets mitigated the immediate impact of these rate hikes. The global growth rate for 2023 stood at a steady 3.2%. Although modest by historical standards, this rate reflects the resilience of the global economy amidst high borrowing costs, reduced fiscal support, and geopolitical tensions, including the Russia-Ukraine War and the Red Sea Crisis.

Projections from the International Monetary Fund (IMF) suggest that the global economy is poised to expand by 3.2% in both 2024 and 2025. Building on the resilience shown in 2023, there is potential for gradual improvement and a return to a more robust growth trajectory. Inflation is expected to decline gradually, especially in advanced economies, as central banks begin to ease policies. Furthermore, increased multilateral cooperation to tackle issues like climate change and geo-economic fragmentation could foster shared prosperity. By collaborating to facilitate the transition to green energy and promoting inclusive growth, nations can contribute to a more resilient and equitable global economy.

2. Indian Economy and Outlook:

The Indian Economy continues to show resilience amid Global Uncertainties. Despite significant challenges in the global environment, India was one of the fastest growing economies in the world. Indias Growth was driven by strong investment activity augmented by the governments capex push and buoyant private consumption.

Dwelling on the outlook for FY2023-24, the Economic Survey 2022-23 issued by Ministry of Finance projects that, Indias recovery from the pandemic was relatively quick, and growth in the upcoming year will be supported by solid domestic demand and a pickup in capital investment. It further affirms that aided by healthy financials, incipient signs of a new private sector capital formation cycle are visible and more importantly, compensating for the private sectors caution in capital expenditure, the government raised capital expenditure substantially.

The Indian economy expanded impressively by 7.6% during FY24, driven by robustness across various sectors. Consumer confidence surged, as indicated by the RBIs household survey, reflecting growing household optimism. Enterprise surveys supported this sentiment, highlighting favourable business conditions, increased production levels, and improved employment prospects. The economy demonstrated vigorous activity, supported by strong GDP growth and corroborated by high-frequency indicators such as e-way bills, toll collections, and automobile sales. The labour market showed improvement, with the unemployment rate declining to 7.6% in March 2024. The organised sector, in particular,saw increased job creation, enhancing employment opportunities across the country. Agricultural activities also contributed significantly to rural employment, particularly with the onset of the rabi harvest, which led to decreased demand for work under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). Fiscal management remained prudent, with the gross fiscal deficit of the Union government within estimates and direct tax collections growing by 21.6% Y-o-Y. Inflation moderated throughout the fiscal year, with both food and core inflation easing. While rural inflation experienced a marginal uptick, urban inflation moderated, with the all-India CPI stabilising at 4.9% in March 2024.

3. Indian Textile Industry:

India is the worlds second-largest producer of textiles and garments. It is also the sixth- largest exporter of textiles spanning apparel, home and technical products. The Indian textile and apparel industry is expected to grow at 10% CAGR from 2019-20 to reach US$ 190 billion by 2025-26. India has a 4% share of the global trade in textiles and apparel. The Textiles and apparel industry contribute 2.3% to the countrys GDP, 13% to industrial production and 12% to exports. The textile industry has around 45 million of workers employed in the textiles sector, including 3.5 million handloom workers. Indias textile and apparel exports (including handicrafts) stood at US$ 44.4 billion in FY22, a 41% increase YoY.

Total textile exports are expected to reach US$ 65 billion by FY26. The Textile and Apparel market is poised to grow, led by boost in demand and the government support in form of Attractive schemes such as Production Linked Incentive (PLI), Mega Investment Textile Parks (MITRA) will further drive the way for the US$ 250 billion target. Another step taken by the Ministry of Textiles towards positioning India as a global leader in technical textiles manufacturing is the invitation of Research proposals for Funding for Design, Development and Manufacturing of Machinery, Tools, Equipment, and Testing Instruments under NTTM.

Exports of readymade garments cotton including accessories is expected to surpass US$ 30 billion by 2027, with an estimated 4.6-4.9% share globally.

4. Industry structure and development:

India is the worlds second-largest producer of textiles and garments. It is also the fifth largest exporter of textiles spanning apparel, home and technical products. The textiles and apparel industry contribute 2.3% to the countrys GDP, 13% to industrial production and 12% to exports. The sector employs around 40 Million workers. Indian textile players have undertaken various initiatives to boost textile sales viz. investment to Expand production capacity, using technology to optimize the value chain, leveraging strategic partnerships and strengthen sustainable textiles business. Textile industry has been steadily recovering post pandemic amid increased raw material prices and container Shortages.

Moreover, 10,683 Crore Production-linked Incentive scheme is expected to be a major boost for the textile manufacturers. The scheme proposes to incentivise MMF (man-made Fibre) apparel and MMF fabrics.

5. Opportunities and Threats:

• Opportunities:

Securities businesses are expected to benefit from the structural shift in the financial savings environment as well as the improving technology infrastructure of India. Some of the broad macro trends that underline the opportunities are:

1. India has been and is expected to remain a high savings economy. The young working population is expected to increasingly channel a higher share of their savings into financial assets. The growing preference for equity among retail investors, as an asset class coupled with and the relative under-penetration in terms of both market capitalisation to GDP ratio or ratio of investments in shares and debentures to GDP, signify a positive outlook for equity-based businesses in India.

2. Capacity expansion and production efficiency.

• Threats:-

a. Increase in cost of supply chain and logistics

b. Increase in inflation rate and cost of products

c. Non availability of manpower, farm labors

d. Uncertainty of monsoon rain and threat of global warming. India agrarian economy is mainly dependent on the agriculture production which largely contribute to the farmers income.

e. Increasing global trade war and sanction

f. Unstable Indian Rupee exchange rate against major foreign currencies.

g. Monsoon has a direct impact on cane farming and a weak monsoon can impact the availability of cane and hence sugar for exports.

The Company recognizes that above risks are an integral part of business and is committed to control & manages these risks in a proactive and efficient manner. The Company assesses various potential risk factors from time to time in the internal & external environment and incorporate risk mitigation in its strategy, business and operation plans using cost-effective available tools to minimize its impact on the overall businesses.

6. Segment-wise or product-wise performance:

The Company is operating in only one segment i.e. Textiles and Clothing business. Therefore there is no requirement of Segment wise reporting.

7. Future Outlook:

Looking ahead, we remain optimistic about the prospects of our export of yarn to the domestic trading market. We will focus on the following strategies to sustain growth and Capitalize on emerging opportunities:

• Demand for textiles

• Raw material availability and prices

• Technological advancements

• Sustainability and eco-friendly practices

• Global trade and geopolitical factors

• Online Expansion

• Premiumisation and access to global brands

• Further Growth of Private Brands

• Focus on analytics

8. Risks and concerns:

Management recognizes the following principal risks that may influence decisions made by investors given their significant impact on business conditions as stated in the securities report, and among matters pertaining to accounting status, consolidated companies financial status and business performance, as well as cash flows. Our risk management system addresses the increasingly complex risks that we face in our day-to-day operations. The risk management system conducts risk analysis of economic and social changes and implements preventive measures that are best suit for the Company.

9. Internal control systems and their adequacy:

The Company has implemented proper system for safeguarding the operations / business of the company, through which the assets are verified and frauds, errors are reduced and accounts, information connected to it are maintained such, so as to timely completion of the statements.

The Company has adequate systems of Internal Controls commensurate with its size and operations to ensure orderly and efficient conduct of business. These controls ensure safeguarding of assets, reduction and detection of fraud and error, adequacy and completeness of the accounting records and timely preparation of reliable financial information. The Company has internal audit and verification at regular intervals.

The requirement of having internal auditor compulsory by statue in case of listed and other classes of companies as prescribed shall further strengthen the internal control measures of company.

10. Discussion on financial performance with respect to operational performance:

The financial performance of the Company for the Financial Year 2023-24 is described in the report of Board of Directors of the Company.

11. Material developments in Human Resources / Industrial Relations front including number of people employed:

The cordial employer- employee relationship also continued during the year under the review. The Company has continued to give special attention to human resources.

12. Caution Statement:

Statements made in the Management Discussion and Analysis describing the various parts may be "forward looking statement" within the meaning of applicable securities laws and regulations. The actual results may differ from those expectations depending upon the economic conditions, changes in Govt. Regulations and amendments in tax laws and other internal and external factors.

Registered Office:		By the Order of the Board of
F6 -603, The Palace, Surat (M Corp OG) (Part), Surat City, Parvat Patia, Surat, Choryasi, Gujarat, India, 395010		Vaxfab Enterprises Limited
	Sd/-	Sd/-
	Rohit Naval	Keshav Makhija
Place: Surat	Managing Director	Director
Date: 6th August, 2024	DIN:10542718	DIN:10542719