MANAGEMENT DISCUSSION AND ANALYSIS REPORT

This report covers the operations and financial performance of the Company for the year ended 31st March, 2016 and forms part of the Directors' Report.

During the year under review, Earnings before interest, tax and debrciation (EBITDA) of the Company have shown some improvement as compared to brvious year. However, due to increase in interest burden because of charge of interest to revenue account, relating to completion of one office building at Mumbai and expansion of capacity of the plant at the Manikgarh Cement unit in Maharashtra, the Company's net profit has been adversely affected. Further, due to demand recession and brssure on selling prices of cement, the financial performance of the cement units has suffered a setback. If investment in infrastructure development, making of smart cities and housing projects for all is accelerated, then, the demand for cement and prices should improve. The financial performance of the Textile and Paper segments has been improving and is expected to be better in the coming years.

The Indian economy has witnessed two successive monsoon failures plus damage due to unseasonal rains, which has adversely impacted growth. An expected normal monsoon in fiscal 2017, will give agriculture a growth kick which will prove good for the Indian economy and should lift upward, the sagging rural demand and overall GDP growth.

There has been a strategic shift in China's growth priority, shifting from exports led growth to domestic consumption led growth with high value added component. Due to expected lower exports from China, the domestic demand for products manufactured by the Company should increase in the near future. The circumstances brvailing in each of the business segments of the Company are separately discussed. Efforts to improve the performance of the Company are continuing.

2.1 Business Segment - Textiles (Cotton fabrics, Denim cloth, Yarn, Viscose Filament Yarn & Tyre Yarn) Cotton Textiles, Yarn and Denim:

a) Industry structure & Development:

The Indian textile industry market share brsently is USD 108 billion, out of which USD 68 billion is domestic consumption and USD 40 billion is exports, due to which India emerges as the second largest exporter after China having 6% share in the global trade. The industry is taking all steps to promote textile exports, which is the need of the hour.

Costs are increasing due to rising input costs, including labour and power. The fall in the Rupee against the US dollar should act positively for promotion of exports. Focus on new product development and value added products is continuing in this segment.

b) Opportunities & Threats:

India has the potential to double its market size in the long run as China is losing its competitive advantage in textiles mainly on account of increasing labour & power costs, the apbrciating Yuan, and focus on the domestic market with high value products. The shift from China to India is expected to happen in the long run, to make India a dependable source of supply for the World.

Increasing competition from countries like Bangladesh, Vietnam, Pakistan and Sri Lanka due to favorable tariff structures on exports to developed markets like the US, EU, Canada, Australia, etc poses a significant challenge to Indian exports. Exports from India attract a much higher duty as compared to other Asian countries.

c) Segmental Review and Analysis:

The technical performance of our Textile unit viz. Birla Century near Bharuch in Gujarat has been steady and there has been some growth in turnover. Due to a general market recession, the demand and prices for textile products remained weak. In the Domestic market, with the help of continuous new product development and increasing Value added product supply, the Company is offering a wide range of high quality products to all categories of the customers with continual developments in blends, weaving structures, designs, finishes, etc. This should enhance our margins in due course in-spite of increase in labour cost, power cost, etc. In exports, due to a globally weak retail sentiment, mainly in the US, the brssure would remain on sales & prices. Our new stitching facility for made-ups will provide better opportunities in this segment.

d) Risks and Concerns:

The US dollar has strengthened continuously against the Indian Rupee and other currencies, due to the turmoil in the China market and recession in the European market. Due to a demand recession across the globe, increasing prices in Indian markets has become extremely difficult. The input costs are continuously increasing without commensurate increase in selling prices.

Outlook:

To overcome the challenges and competition, we have taken various initiatives to reduce the operational cost, development of new innovative value added products, and exploring new markets based on certain parameters, to achieve better margins in the future.

Century Rayon - Viscose Filament Yarn (VFY) [Pot Spun Yarn (PSY) & Continuous Spun Yarn (CSY)] and Rayon Tyre Yarn.

a) Industry Structure and Development:

Production of VFY mostly remained confined to Asia, with China and India being major players. While marginal capacity addition has been witnessed in India, China too witnessed capacity addition in CSY. New stringent environmental policy norms adopted by China have led to the closure of 2 VFY plants in China, having a capacity of 29000 Tons per annum. As a result, the net capacity has been reduced.

Imports from China have witnessed a declining trend, which enabled domestic producers to offload the inventory. The US Dollar has strengthened against the Rupee, which has led to a rise in the landed cost of imported material, allowing domestic producers to increase their prices. However, domestic prices are still lower compared to the Chinese material.

The emerging trend in the consumption of VFY from fine deniers to super fine deniers continued, with weavers offering more value added products made out of super fine deniers.

Emerging demand in Super fine deniers has led to a reduction in the production of coarser deniers which reduced our market share, both in domestic as well as the export market, paving the way for competitors to capture these markets.

Steady demand and consumption of Rayon Tyre Yarn in Europe, Japan and USA have led to full capacity utilization of the Rayon Tyre Yarn capacity.

With stable demand across all the segments of VFY (PSY, CSY) & Rayon Tyre Yarn, the unit was able to utilize its full capacity for the second consecutive year.

Imports of Carbon-di-Sulphide (CS2) continued, that affected the demand supply scenario in the market, resulting in downward price adjustments. Demand and prices of other chemical products like Caustic Soda Lye, Hydrogen, Liquid Chlorine and Sulphuric Acid remained volatile during the year.

b) Opportunities and Threats:

While introducing a wide range of products is a continuous process at the unit level, the newly introduced products in 30/24 and 75/30 in the CSY segment, have found ready acceptance in the market. The unit is taking further initiatives to introduce new product variants in CSY, for larger usage, which would create an opportunity to keep competitors at bay.

Commissioning of additional eight CSY machines to produce super fine deniers has paved the way for the unit to consolidate its brsence further in this segment.

Opportunity of expanding the market share by offering more production in the domestic segment, could not be fully tapped due to capacity constraint. An application is filed by the unit with the MoEF for giving consent to operate beyond 25000 TPA. The requisite approvals are expected to be received during the first half of the current financial year.

While substitution by polyester in the furnishing and embroidery segments poses a risk to VFY, it is expected to remain confined at a marginal level.

Due to comfort and being a fashion fibre, demand for VFY is expected to rise, as disposable income of Indian middle class is witnessing a steady rise.

Efforts by Tyre manufacturers to replace rayon tyre yarn with HMLS Polyester continues to pose a long term threat, but the success rate in HP and UHP is limited and increasing demand for rayon tyre yarn in Europe, USA and in China should give relief to the industry.

Tyre manufacturers are demanding dipped fabric instead of Rayon Tyre yarn, which the unit is not able to supply as it does not have a conversion facility. In the long run, this may threaten our brsence in the International market.

c) Segmental Review and Analysis:

Liquidation of accumulated inventory coupled with a better consumption trend in the domestic market helped the unit to achieve more volume during the year under review. Increase in price on account of currency fluctuation helped in protecting the margins.

Various initiatives undertaken for cost optimization, particularly in labour and power, helped the unit to maintain its margin at reasonable levels. Better maintenance practices adopted by the unit has reduced the down time and enhanced productivity.

Based on the existing trend of consumption and prices, it is expected that the unit would be able to work on 100% capacity utilization, thus achieving better productivity and reasonable margin.

d) Risks & Concerns:

Substantial drop in the availability of water witnessed in the current year has led to a water crisis in the area where the unit is operating. The unit has already received intimation from the Maharashtra Government for a 35 % cut in water supply. A rebrsentation has already been made to the appropriate government authority for re-consideration. Though the division has initiated various steps to reduce water consumption, if the water cut is enforced by the authorities, it would severely affect the working of the unit in terms of production as well as margins.

The adverse impact of the Rupee Dollar parity has also led to increase in the cost of raw material.

A rebrsentation made by the unit through Association of Man-Made Fibre Industry of India (AMFII) for reconsideration of the proposed new environmental norms for the man-made fibre industries, are at the hearing stage. If imposed, it would be difficult for the industry to meet the new environmental norms without huge capital investment.

The biggest concern for the industry is the review of the Anti dumping duty on imports emanating from China which is due for re-validation in May 2017. The Industry through its Association (AMFII) has already appointed an agency and constituted a committee to take up the matter with the requisite authorities.

Rapid urbanization in and around the unit has led to attraction of multi storey residential complexes, which would lead to operation of the unit becoming more difficult.

e) Outlook:

As stated in last annual report, the division has successfully commissioned Doubled and Twisted (D&T) yarn capacity for production of 150 Tons/Month, thus becoming the first and only major player in the organized sector to make its brsence in this segment. Having well established the product in D&T yarn segment, the unit is exploring possibilities for further expansion in this segment.

The unit could procure orders for Rayon Tyre yarn for the year 2016 and is expected to operate at its full capacity. However, it could not get any increase in the price for about four years, which is a matter of concern.

With the introduction of more speciality yarn, the unit is expected to maintain its progress in introducing value added products.

Overall outlook for the unit is expected to remain satisfactory.

2.2 Business Segment - Cement (Cement & Clinker)

a) Industry Structure and Development:

The Indian cement industry has an installed capacity of about 400 million tonnes with the most modern cement plants coupled with latest technologies and are comparable to the best in the world.

The first decade of the new millennium 2001-2010, witnessed an all -round growth in the cement industry which was never seen before in the nine decades of its existence. Buoyed by the government's ambitious plans for infrastructure and large budgetary allocations for development of roads, ports, airports, rural housing, special economic zones etc, the cement companies undertook the ambitious expansion through both, green field and brown field projects.

The period of 2011-2014 has been a comparatively challenging time for the cement industry owing to the economic slowdown, excess production capacity and sluggish demand. The cement demand remained sluggish primarily due to slow pick up in infrastructure projects as well as lack of demand from the rural sector, resulting in large cement plants having idle capacity.

During the FY 2015-16, cement production in India is expected to be about 283 million tonnes as against 270 million tonnes in the FY 2014-15, witnessing a growth of about 4.6% as against 5.5% in the brvious year.

In India, about 67% of the cement demand emanates from housing, 24% from infrastructure and commercial construction and 9% from the industrial sector.

With a stable growth-oriented perspective of development, aided by suitable government policies, the infrastructure and investment cycle is expected to pick up and simultaneously the demand for cement is expected to increase by 6% in FY 2016-17 from an estimated 4.6% in FY 2015-16.

b) Opportunities and Threats:

With greater emphasis in the 2016 Budget on the infrastructure segment, such as roads, highways, irrigation, push to "Housing for all" scheme, Smart City development and Metro Rail Projects, the demand for Cement is also likely to spur, thereby bridging the gap between demand and supply.

Ever increasing duties and input costs are pushing the cost of production without a corresponding increase in the marketing scenario. This will pose a threat to improving the overall scenario in respect of cement.

c) Segmental Review and Analysis:

During the FY 2015-16, the Company has produced 102.14 lac tonnes of cement as compared to 96.30 lac tonnes in the brvious year, witnessing a growth of 6.06%. Due to poor demand, cement prices remained under brssure and had an adverse impact on the profitability of the cement division. Levy of Central Cess @ 2% of the Royalty for Natural Mineral Exploration Trust and District Cess at 30% of the Royalty for Mineral Foundation Trust collectively, have resulted in higher cost of production. Substitution of high cost coal in the kiln by pet coke has been initiated, which has helped in restricting the overall cost and shall benefit the Company in the years to come. Continuous efforts are being made to increase productivity, control cost and improve quality.

d) Risks and Concerns:

Despite the initiatives announced by the government, cement demand did not pick up as anticipated. Many projects / policies were announced / initiated by the government to support and aid the growth of the industry. However the pace of investment and construction activities continued to remain low. Expectations and ground realities are yet to converge. With substantial surplus capacity, the cement industry is relatively at a low level of capacity utilization.

Both, coal quality and prices are a matter of concern. Increase in "Clean Environment Cess" on coal, from Rs. 200 per ton to Rs. 400 per ton and levy of Krishi Kalyan Cess @ 0.5% on services, will have a negative impact on the profitability.

High incidence of taxes and duties is a matter of concern for the industry.

e) Outlook:

Given the enormous need for infrastructure and housing, which require large quantities of cement as a basic building material, the prospects for the industry are favorable. Consistent increase in demand should absorb the excess supply and also improve utilization of the industry's capacity.

2.3 Business Segment -Pulp and Paper (Pulp, Writing & Printing Paper, Tissue Paper and Multilayer Packaging Board)

a) Industry Structure & Development:

Paper being a commodity product, is cyclical in nature and is strongly co-related with global economic factors. Equilibrium between demand and supply in the domestic market is determined by the economic scenario of the neighbouring countries.

With the expectation of a growing global economy, the demand for paper is likely to increase in the domestic as well as international markets.

b) Opportunities and Threats:

With changing lifestyles in the country, growth in value added paper products is strongly visible. We are the only Indian paper manufacturer producing all ranges of paper products i.e. Writing & Printing Paper, Copier Paper, Tissue and Board. Hence, demand-supply mismatch in any product gives a business opportunity to the Company. Over the years, the country-wide dealer network has also been strengthened and that gives the Company a competitive advantage.

Reduced import duties and surplus paper capacities in the neighbouring countries have led to cheaper imports, resulting in brssure on domestic prices. New medical regulatory norms introduced by the developed countries, in relation to export of pharma products from India, have adversely impacted demand for paper board used by Pharma Industries.

c) Segmental Review and Analysis:

During 2015-16, quarter over quarter, Century Pulp & Paper continued to improve its performance. Being one of the best quality producers, we strategically launched a range of value added products, which helped to increase our sales volumes by 15%, along with an increase in realisations as well as margins.

During the year, our improved performance is despite two newly installed capacities becoming operational by other players in the Multilayer Packaging Board business. With new capacities, the demand supply equilibrium in the domestic market shifted towards excess supply. With strong demand for our products, we are expecting a good growth in our volumes, with further improved margins, next year.

Risks and Concerns:

Regular availability of wood at reasonable prices is and continues to remain the biggest concern for Indian paper manufacturers. The availability of bagasse is mainly dependent on adequate rain and growth of sugarcane. During the year, most of the areas in the central and northern parts of the country had insufficient rain, hence this negatively impacted the availability of sugarcane as well as bagasse.

Some smaller manufacturing set-ups, which enjoy lower cost of production due to advantageous levels of overhead expenses and taxes, have upgraded the quality of their products, and provide good competition to large units in terms of both, quality and price.

The disrupted availability of coal and its increased price are further risks that the industry has to cope with.

e) Outlook:

With more thrust by the government on promotion of education i.e. introduction of educational cess, the demand for paper is expected to grow. Hence, the long-term outlook for the Indian paper industry appears to be strong & positive. Improvements in internal efficiency, launching new value added products, adopting a more customer centric approach and strengthening product quality to navigate uncertainties in the market, will remain our priority areas.

3. Internal control systems and their adequacy:

The Company has a well established framework of internal controls in all areas of its operations, including suitable monitoring procedures and competent personnel. In addition to statutory audit, the financial controls of the Company at various locations are reviewed by the Internal Auditors, who report their findings to the Audit Committee of the Board. The

Audit Committee is headed by an Independent Director and this ensures independence of functions and transparency of the process of supervision. The Committee meets on a regular basis to review the progress of the internal audit initiatives, significant audit observations and planning and implementation of follow-up action required. The Company conducts its business with integrity and high standards of ethical behaviour and in compliance with the laws and regulations that govern its business.

5. Human Resource Development / Industrial Relations:

The total no. of employees as on 31.03.2016 was 13107 (12949 as on 31.03.2015). The Company has adopted a progressive policy for helping employees to develop their organizational skills, knowledge and abilities to achieve efficiency. The focus of all aspects of Human Resource Development is on developing a superior workforce so that the organization and individual employee can accomplish their work goals of service to customers.

6. Health and Safety Measures:

As a conscientious and caring employer, the Company actively pursues safety and health measures continuously. Modern occupational health and medical services are accessible to all employees through well-equipped occupational health centers at all manufacturing units. At all our plants, adequate safety measures for brvention of any untoward incident have always been taken. The Company has a range of policies, including on quality, safety and health aspects to guide the employees' work practices, actions and decisions. The Company strives to continuously improve the effectiveness of its policies and the employees are encouraged to contribute their best in this direction. All employees are obliged to ensure that they fully understand all policies and they do fully comply with the requirements thereof.

7. Cautionary Statement:

Statements in this report on Management Discussion and Analysis, describing the Company's objectives, projections, estimates, expectations or brdictions may be forward looking, considering the applicable laws and regulations. These statements are based on certain assumptions and expectation of future events. Actual results could, however, differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include global and domestic demand-supply conditions, finished goods prices, raw materials costs and availability, fluctuations in exchange rates, changes in Government regulations and tax structure, economic developments within India and the countries with which the Company has business contacts.

The Company assumes no responsibility in respect of the forward looking statements herein, which may undergo changes in future on the basis of subsequent developments, information or events.