MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The following Management Discussion and Analysis Report has been brpared in accordance with the provisions of Clause 49 of Listing Agreement with a view to provide an analysis of the business and financial statement of Company for the F.Y. 2014-15, hence it should be read in conjunction with the respective financial statements and notes thereon.

Economic Outlook:

With the advent of a new political Government, all round growth and improvement of macro - economic fundamentals are visible. The GDP growth which was sluggish during brvious two -three fiscals, got energized as it grew to 7.4% in F.Y. 2014-15. The forecast of GDP Growth rate for F.Y. 2015-16 is likely to exceed 8.0%, as has been hinted by Hon'ble Union Finance Minister. Further IMF forecast, which is generally conservative, is projected at 7.5% GDP Growth rate for the fiscal 2015-16. In other words, the overall gloomy picture of Indian economy is turning bright though its pace is somewhat lower than expected. This is because of a clear majority of the brsent government in the Lok Sabha which raised the expectation at such a high level that it contrasts with the ground political reality. At one hand, rapid reforms in the economic policy for attracting overseas investment required substantive legislative changes which the brsent government is unable to keep pace due to political constraints. Nevertheless key legislative changes have been brought about and that resulted in all time high foreign exchange reserves at 350 Billion USD with the RBI. This is why the Current Account Deficit which was 1.7 % during brvious fiscal could be brought down to 1.3% as a percentage of GDP growth in the fiscal 2014-15. Moreover the inflation which has been a perennial problem for last about a decade could be brought under tight leash viz. at WPI level, it showed negative trend in the year 2014-15 against 5.7% in the brvious fiscal. Even at the Consumer Price Index level, the inflation fell to 5.2% in the year 2014-15 from 6.8% in the brvious fiscal. With all these positive trends, the potential of the Indian economy is poised for double digit growth in next three to five years which will brsent phenomenal opportunity for the Company to grow its business as ABS market, like in China, in years to come, will turn into a million ton plus market against 0.25 million market currently estimated at. The only battle which the Indian economy requires to win is arresting the falling value of Rupee which is attributable to sluggish growth in export. This too will change as the causative factor is gloomy European economy and huge trade imbalance between India and China. "Make in India" campaign will contribute towards maintaining trade balance between India and China and similarly augmenting exports to USA, will result in the reversal of negative foreign trade balance. Since the brsent Government and US Government have forged strong relationship, the advantage can be reaped by India to increase its export to USA in a substantive way and USA's investment in India in its nuclear energy development programme and defense sector is likely to rise substantially in the next three to five years. All these ongoing efforts will strengthen the Indian Rupee (INR) as India is becoming the most attractive investment destination for FIIs and FDIs.

As has been brought out in the text of Board Report that domestic producers of ABS are unable to cope-up with the continually rising demand, there is little scope for delay in implementing capacity expansion programme of the next phase viz. 85 KTPA in second phase and 150 KTPA in third phase and especially when the current ongoing expansion programme with plant modernization to 67 KTPA capacity is getting completed by December-2015. Company's focus on manufacturing high value added products will continue as it is likely to get big boost in market penetration in automotive segment due to establishment of Joint Venture (JV) with Nippon A&L INC, Japan. The JV Company is enabling BEPL to manufacture specialty grades viz. ABS Resins, AES Resins and ASA Resins to cater to the automotive segments and earn imbrssive economic gain. JV Company is parallely working to position a few special grades of ABS in consumer durables and electronic market segments which has resulted in significant increase in production of high value added ABS extrusion grades by BEPL. The typical picture which emerges is that consumer durables company like Samsung and LG have started outsourcing from BEPL extrusion grade ABS to manufacture refrigerator liners which hitherto was made from HIPS resins and now it has been shifted to special extrusion grade ABS and your company has no difficulty in manufacturing and delivering these grades. This is the most emerging ABS market segment from consumer durable industry.

Industry Structure and Development:

With turnaround of Indian economy and anticipated increase in GDP growth rate, ABS demand will grow at much faster rate than it has been growing in the span of last 15 Years. As the growth of ABS demand is well linked with that of GDP growth rate, the logical connection between the two emanates from availability of higher disposable income in the hands of consumers and its channelization through acquisition of lifestyle goods by them. Hence BEPL business model is on a sound footing from the point of view of ABS market demand, manufacturing capability and appropriate ABS grades befitting the technological requirement of the varied consuming segments.

Opportunities and Threats:

Opportunity is huge as has been dealt with in the brceding narration but to leverage such opportunity, the company has to remain consistently a quality producer and keep upgrading its technology and man power skill resulting in overall fitness to remain qualitatively and cost-wise competitive.

The inherent disadvantage of HRG, being manufactured at Satnoor Plant of Company in Madhya Pradesh and transported to Abu Road-Rajasthan covering distance of about 1000 Kms, is a major cost escalation factor when compared to the other domestic producer(s). Though, in the product mix weight wise, the HRG is about 25% and its cost impact per KG of ABS is below Rs. 1/-. Recovery of this added cost is possible by actualizing higher price realization as there is a technological edge over the domestic competitor. This is due to positioning of new JV grades in the import substitutive ABS market.

On the basis of Inter-Firm comparison, the company has observed that it is one of the lowest cost ABS manufacturers as its per KG power consumption; manpower cost and overhead expenses are one of the lowest globally. This advantage will magnify substantially and is likely to be even bigger when 150 KTPA expansion project is eventually realized. Therefore, the formidable challenge is to maintain its status of a low cost but high quality producer from the OPEX angle. This will be possible if overall performance efficiencies are maintained/improved upon. Moreover the company has also to maintain its current status of being a long term debt free company. Further it has to maintain or decrease cost of funding working capital which is indeed a tough call as internal accruals will be fully deployed, to incur capex. However through leveraging higher quantum of buyers credit, it may be possible to fund OPEX at relatively lower cost.

Risk and Concerns:

The typical nature of ABS business in India is exposed to the risk of Foreign exchange fluctuations as the key raw material i.e. Styrene monomer is import dependent, as there is no indigenous producer for the same. Moreover Acrylonitrile monomer has a single supply source whose business pattern is erratic, therefore the import dependence of this raw material also cannot be wished away. The only raw material which is indigenously available is Butadiene monomer which is weight wise only 16-17% out of the total raw material composition. The company's skill in Forex management requires considerable honing which is being seriously addressed.

For and on behalf of the Board

M. C. Gupta

Chairman

(DIN: 01362556)

Place: Mumbai

Date: 30th May, 2015