MANAGEMENT DISCUSSION AND ANALYSIS

Indian economy is slowly emerging out of the sluggishness experienced during the last 3 financial years characterized by slow manufacturing growth, rising inflation, weak currency and drop in foreign investments. With strong focus on reducing policy paralysis and steps taken to enable ease of doing business, the Government of India ("GoI") initiative like 'Make in India', 'Digital India' and 'Swachh Bharat Abhiyaan' have contributed to the current improved state of the economy. The GDP growth was reported at a much higher figure of 7.3% during FY2015. Further, as per the fiscal consolidation planned by the GoI, the fiscal deficit is expected to decline from 4.1% of GDP in FY2015 to 3% by FY2018.

The expectation of more than normal rainfall in 2016 will have a positive impact on the Agricultural and Manufacturing Sectors. Thus the economy looks poised for rapid growth in the second half of the financial year.

BOMBAY REALTY

INDUSTRY STRUCTURE AND DEVELOPMENTS

After a sluggish 2 to 3 years, realty experts believe that the year 2016 will be positive for the sector and may witness a pick up in sales with an improvement in the sale of unsold inventories across class. The year gone by, saw regulatory changes that included relaxing of foreign direct investment laws and the Parliament approving the much awaited Real Estate Bill. The sector has strong linkage with various industries like cement, steel, chemicals, paints, tiles, etc., which enables private sector involvement in the economic growth of the Country.

The Sector is undergoing transformation from being largely fragmented and unorganized to becoming structured and organized through development of integrated townships, industrial parks and affordable homes.

Residential real estate in India accounts for 80% of the real estate sector. The demand for residential real estate market in India is expected to be good as the economy grows, disposable incomes increase, credit availability improves and urbanization picks up pace.

To this end the rate cut of 50 basis points by Reserve Bank of India and the implementation of the seventh pay Commission will boost the demand for housing.

The Real Estate market has been adjusting to aligning supply to the available demand. Developers across all categories are paying more attention to the requirements of buyers and have started supplying inventories at a quicker pace. New launches across all markets have reduced and the developers are more focused on completion of their projects. High demand for ready-to-move in projects and increased focus on project completion will set the contours for the realty sector outlook in 2016.

Industry experts also feel that, though the government is focusing on mass affordable housing, the super luxury products will continue to have an increased demand in this fiscal. The positive outlook of the economy coupled with an improved growth rate will induce the well to do sector in the community to support in a sustained basis demand for both investment and end use luxurious products in prime locations.

OPPORTUNITIES & THREATS

Both houses of Parliament have passed the Real Estate (Regulation and Development) Bill, 2016.

The regulations impacting the real estate sector include - the Real Estate (Regulation and Development) Bill 2015, the Land Acquisition, Rehabilitation and Resettlement bill, the FDI rules for building townships, housing, built-up infrastructure and construction development projects. Some of the FDI norms have been relaxed providing more opportunities to invest in Real Estate for foreign players. The Land Acquisition, Rehabilitation and Resettlement bill outlines the rules under which the land can be acquired and rehabilitation provided to the affected families by the land acquisition.

According to experts, the overall urban housing demand is expected to reach 15 million units by 2019 on account of population growth & rapid urbanization. The total demand for housing is expected to reach 3.4 million units between 2015 & 2019.

Most property markets are expected to see a significant turnaround in the later part of 2016. There is bound to be consolidation in the sector and the new Real Estate Regulations will act as a catalyst for your Company. Regulation is always good for companies that are well-managed.

Important events like banks lowering interest rates, RBI offering incentives for infrastructure financing, creation of Real Estate Investment Trusts (REITs), relaxation of FDI norms in construction sector will only boost real estate development.

Your Company enjoys the benefits of two large contiguous land parcels with clear titles, giving it a significant advantage over other real estate players. The strategie location of two sites, well connected with the commercial hub of Central Mumbai and equidistant from the commercial hubs of South Mumbai and Bandra-Kurla Complex, is expected to add value to the sites. The plan is to develop these sites as mixed-use developments, comprising of residences, offices and luxury retail, with well-planned amenities and large open spaces.

RISKS AND CONCERNS

Slow pace of economic growth and structural challenges of the real estate industry in terms of delays in approvals, high construction costs, limited availability of institutional funding and an inventory overhang have come in the way of the growth of the industry. This may continue if the Government fails to redress the issues of the construction industry in a time bound manner.

The Company's projects were affected due to legal and regulatory delays. Excessive supply of 'luxury residences' in the Central Mumbai area by competing developers may impact the project profitability.

HOME & YOU

Industry Structure and Developments

Domestic textile sector has evolved over the years. Changing tastes for vibrant new designs aside, the consumer is exploring alternative sales channels for purchase and convenience. E-Commerce and Large Format Lifestyle Stores are fast evolving as the brferred shopping destinations with wider product choices and customised experiences. Traditional general trade is turning out to be the destination only for niche customers.

Innovations in Products and Designs are gaining significance to attract emerging young consumers across the value chain. Increasing disposable income and nuclear families will continue to expand the growth opportunities for the Category. Various researches and studies indicate the industry to grow upwards of 8% over the next 10 years.

OPPORTUNITIES & THREATS

Your Company see's enormous opportunity in Product and Design innovations to address the changing tastes of young vibrant India across all bed, bath and co-ordinates categories. The Company will be investing in reviving the brand visibility, digital media and product merchandising to reinforce its leadership and to connect with the youth. Sales Channels proliferation in urban as well as semi urban markets will be its thrust area. The Company will widen product availability, offer numerous product ranges and provide unique shopping experience to its customers. The Company will be investing aggressively in technology to jump shift Speed to Market, improve Customer Experience and facilitate seamlessly integrated operations.

The sector continues to be influenced by fluctuations in commodity prices and constant inflow of cheaper alternatives from unorganised sector as well as neighbouring countries. Any increased activity in the un-organised sector and irrational dumping can have a bearing on the Division's performance.

OUTLOOK

Your company is geared up to exploit all emerging opportunities in the market place. Through investments in organisation capabilities, brand, new products and information technology enabled, the Company expects to grow ahead of the industry and retain its market leadership status.

RISKS AND CONCERNS

Emerging alternate channels like e-commerce, large life style and cash & carry stores have been investing in their private labels as alternates to branded home textiles. Proliferation of such Private labels may have direct impact on volumes of your Company and make the cost of merchandising expensive as well.

The key concern for business remains the sluggish consumer demand, both in the urban and rural markets. This coupled with the intense competition from the existing players and new players will provide a major challenge.

POLYESTER BUSINESS

Industry Structure and Developments

Your Company is one of the four producers of Polyester Staple Fibre (PSF) in the country with a market share of about 15%. While the market leader is fully vertically integrated, the other producers, including the Company are stand-alone PSF manufacturers.

PSF industry saw a meagre volume growth of 2% which was mainly met through increased cheap imports from China. The overall polyester industry's capacity utilization remained under 80%, but the Company's utilization remained comparatively stable at 91% (brvious year 93%). The division recorded a negative growth in sales volume of 6% during the year.

Raw material, PTA and MEG prices remained very volatile in line with crude oil prices. With the commissioning of new production capacity of PTA in the country, the availability in the domestic market improved. However, due to imposition of Anti-dumping duties on imports of PTA, and consequential increase in price by domestic PTA producers, the cost of raw material has increased during the year.

Lower fuel prices have resulted in reduced conversion cost of PSF.

Recycled polyester has been gaining market share due to brferential excise dutytreatment in India. However, fibre produced by your Company is of much superior quality and has wider usage compared to such recycled fibre. Therefore, despite competition from such cheaper fibre, your Company is able to maintain the market share. The Government of India has partially addressed the differential excise duty structure for recycled polyester in the budget for fiscal year 2016-17.

OPPORTUNITIES AND THREATS

The opportunity for PSF is driven by its durability, versatility of end usage and lower price as compared to cotton and other substitute fibres, natural or man-made. Polyester is used in apparels, sportswear, home furnishing, automotive and industrial textiles. India has an enormous market potential, with per capita consumption of all fibres at approximately 50% of global per capita consumption. The Government of India's push to substantially increase the size of the textile industry output will pave the way for larger man-made fibre consumption due to limited availability of cotton, benefiting the polyester industry at large.

New PSF production capacities aggregating 12% of existing domestic PSF capacity have been announced and likely to be commissioned in 2016-17 creating new competition for your Company.

China has a dominant influence on polyester, fibre inter mediares and downstream textile industries. Any significant developments in the Chinese polyester chain could impact your Company's business dynamics.

OUTLOOK

The year 2015-16 was a challenging year from the polyester business perspective. Meagre domestic demand growth, increased imports and volatile raw material prices put increased brssure on margins. With crude oil prices and petrochemical prices having stabilized and tight situation in cotton supplies the demand for PSF should improve in the current year.

Improving demand, sustained efforts to achieve higher capacity utilization, continuing focus on cost reduction and development of value added products should result in improved performance.

RISKS AND CONCERNS

Prices of raw materials as well as energy cost, the two major input costs for PSF Division are significantly dependent on crude oil price. Changes in oil prices could lead to an impact on margins and profitability. With the main input costs based in US$, fluctuations in the Indian Rupee/ US$ exchange rate could impact the business and margin. Supply and price of cotton and any significant change in the size of cotton crop in India and globally could have an impact on the demand of PSF Increased competition from new capacities being built in the country may result in brssure on margins due to price undercutting by new entrants.

SEGMENT-WISE PERFORMANCE

Segment wise performance together with a discussion on operational and financial performance has been covered in the Directors' Report which should be treated as forming part of this Management Discussion and Analysis.

GENERAL

INTERNAL CONTROLS

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.

M/s. Ernst & Young, Chartered Accountants, are the Internal Auditors

of the Company. The reports and findings of the internal auditors and the internal control system are periodically reviewed by the Audit Committee. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board.

The Internai Auditors monitor and evaluate the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiary. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are brsented to the Audit Committee of the Board.

HUMAN RESOURCES

The Company continues to strengthen its people capabilities in its quest to build a growing and sustainable business. An increased focus is being maintained to further build employee retention at all levels in the Company.

Towards this several programs related to Learning & Development, Reward & Recognition are being worked upon. The HR structure is being revised to manage Company's talent pool in a better manner so that employees can have successful long term careers and can productively contribute to the Company's working and success in the future.

RESOURCES & LIQUIDITY

The liquidity brssures felt during the year are expected to ease with the proposed sale ofthe Textile Unit and improved sale offlats.

The working capital requirement of the Company continued to be funded by a consortium of banks led by State Bank of India.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations or brdictions may be forward-looking statements' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include raw material availability and prices, cyclical demand and pricing in the Company's principal markets, changes in Government regulation, tax regimes, economic developments within India and the countries in which the Company conducts business and other incidental factors.