MANAGEMENT DISCUSSION AND ANALYSIS

BUSINESS ENVIRONMENT

Global Economic Outlook

The global economic environment continues to remain challenging. The International Monetary Fund, in its latest outlook has trimmed down world GDP growth projections for 2016 from 3.4% to 3.2%. The downward revision is on account of weakening growth prospects in emerging and developing economies led by slowdown in the Chinese economy, debrssed commodity prices and strains in some large emerging market economies like Brazil and Russia. It also projects a modest albeit uneven recovery to continue in the advanced economies.

The US continues to grow moderately, supported by consumption, however, lower investments and exports could weigh on growth.

In the Euro area, real GDP growth is expected to decrease to 1.5% in 2016 from 1.6% in 2015. Decelerating global growth outlook, increasing geopolitical risks and a revised inflation forecast (0.1% from 1%) for 2016, prompted the European Central Bank (ECB) to expand the scope of its quantitative easing programme, cutting its policy rates and revving up asset purchases to €80 billion/month from €60 billion/month. ECB is expected to continue the monetary stimulus till March 2017. Low oil prices and favourable financing conditions are supporting consumer spending and investment. However, high public and private sector debt, elevated unemployment, and structural rigidities will continue to weigh on the outlook. Further, uncertainty around the European Union (EU) referendum on Brexit could weigh on business investment.

Japan's economic performance remains subdued. A volatile yen and low oil prices are keeping the economy on a positive growth trajectory. Aging population and slow productivity growth due to lack of structural reforms continue to create challenges. Government measures may be required to achieve the growth and inflation targets. An ultra-accommodative monetary policy stance will remain in place for the foreseeable future.

China's economy is expected to slow down to 6.5% in 2016 compared to 6.9% in 2015, as it continues to face strong decelerating forces due to the structural changes that are taking place, i.e. moving from investment towards consumption and services. Though the total debt in China stands at 249% of GDP, the government debt is in the range of 40-50% of GDP. Thus, the government can provide enough support if the banks decide to deleverage.

There is a heavy overhang of capacity in China across sectors. Hence, potential dumping of chemicals, metals, and electronic items by China in the global trade markets could be an area of concern. Also, China's faster-than-expected slowdown in exports and imports is reflecting its weak investment and manufacturing activity, which is having spill-overs to other economies, thus impacting confidence and increasing volatility in financial markets.

Low global crude oil prices will impact the fuel exporters' growth prospects, while supporting growth and demand prospects in importer countries. The four key transitions that are likely to continue influencing the global outlook are:

i. The gradual slowdown and rebalancing of economic activity in China away from investment and manufacturing towards consumption and services

ii. Lower prices for energy and other commodities

iii. Gradual tightening in monetary policy in the US led by a resilient US recovery even while several other major advanced economies continue to ease monetary policy

iv. Downside risks to the EU economy closely linked to Brexit

Domestic Economic Outlook

The Indian economy continues to gradually recover from a growth slowdown in the past two years, high fiscal deficit and stagnant industrial activity. The investment activity is likely to pick up, led by Government efforts to boost investment in infrastructure, particularly roads, railways and urban infrastructure. The growth, based on the new GDP series was 6.6% in FY 2014, 7.2% in FY 2015. The Government expects India's GDP to grow at 7.6% in FY 2016. Expectations of a normal monsoon after two consecutive years of rainfall deficiency, improving real incomes of households and lower input costs of firms should contribute to strengthening the growth.

The Governments' commitment to stick to the fiscal discipline (3.5% in FY 2017) in the Union Budget 2016-17 created space for the RBI to cut interest rates further. The recent reduction in interest rates on small savings also paved the way for a rate cut of 25 bps in its recent monetary policy review on 5th April, 2016.

The FY 2017 estimates are also realistic, with growth in tax revenues estimated in line with expected growth. Foreign investors would also be enthused by the various measures announced to eliminate tax distortions and improving ease of doing business. The Government has maintained a strong thrust on rural and infrastructure spending and accommodating the additional expenses for the pay commission recommendations, without violating the fiscal deficit targets. The farm sector saw a 94% increase in allocation, with crop insurance and irrigation being the biggest beneficiaries. For the non-farm community, while there are measures to provide a safety net, the increase in allocation is moderate compared with last fiscal. At an overall level, rural development spend (mostly non-farm) is budgeted to grow at a moderate pace of11% per year in FY 2017 compared with 15% in FY 2016. However, some key issues facing rural India could be further looked into such as focus on agri-markets development and push to agriculture investment, steps to increase farm profitability, long-term solutions to impart skills training and create employment in the non-farm sector.

The focus on infrastructure investments will have spill-overs on growth, if implemented effectively. Despite brssure on fiscal consolidation, enough room has been created for infrastructure spending through the Government's own resources, especially PSUs to invest more, specifically on roads, highways, agriculture and rural development.

The RBI is targeting a 5% inflation rate by end of FY 2017. However, it is based on the assumption of normal monsoon, current level of international crude oil prices and exchange rate (considering these factors, the 5% inflation estimate for FY 2016-17 seems low and the actual inflation figure could be higher at around 5.6% in 2016­17 while the Wholesale Price Index (WPI) is estimated at 2.5% in  2016-17).

COMPANY OVERVIEW AND SUSTAINABLE PROFITABLE  GROWTH STRATEGY

Tata Chemicals Limited ('the Company' or 'TCL') is a global company serving customers across five continents, with sustainability and innovation at the core of its business. TCL is the world's second largest producer of soda ash, reaches over 650 million consumers through its Tata Salt brand and touches 85% of India's arable land through its agri business, together with its subsidiaries Rallis India Limited (Rallis) and Metahelix Life Sciences Limited (Metahelix).

The Company continues to transform itself from a commodity and an inorganic chemicals manufacturer towards providing wellness solutions, led by strong growth in consumer, agri and specialty businesses while further strengthening its core. TCL is making significant progress in its transformation journey of LEAP - Lead, Engage, Aspire and Perform by focusing on building brands through greater customer centricity and technology led differentiation.

The Company, in each of its businesses, is addressing requisite capability building to meet the critical success factors based on long term value creation. In the chemicals business, the Company faced global headwinds from falling market demand and volatile prices. The business will continue to focus on turning units in Kenya and UK profitable and drive cost reduction and throughput at its Mithapur and USA units to maintain its leadership position.

The agri-business will continue efforts to make its unit in Haldia profitable, drive cost reduction and throughput at its Babrala unit and further build the specialty agro chemicals and seeds business through its subsidiaries Rallis and Metahelix. Anticipating a good monsoon in the year ahead, the Company plans to leverage its strong farmer connect and digitisation initiatives to provide solutions to improve productivity and profitability of farmers.

The consumer products business witnessed strong growth across all categories through relentless focus on customer centricity and brand. Tata Salt was voted as No. 2 on India's most trusted brands (Source: ET Brand Equity Most Trusted Brands 2015) and Tata Sampann has been launched (for pulses and spices). Looking ahead, the business will further improve the reach of salt and build scale for pulses and spices. The business aims to delight consumers by offering everyday nourishing foods that form a part of the Indian thali (plate).

The Innovation Centre in Pune will continue supporting the diverse needs of TCL's businesses along with synergistic programmes with the Tata Group companies. It will continue its R&D in 4 key areas of nano-scale specialty chemicals, advanced materials, nutraceuticals and green chemistry and catalysis platforms. The Nutritional Solutions unit, operating as a start-up, will focus on building scale in specialty businesses.

Industry structure and developments

The Company is an integrated manufacturer of basic and value-added chemicals, key among them being soda ash and sodium bicarbonate.

With a capacity of approximately 4.3 million tonnes across its manufacturing facilities in India, UK, Kenya and the USA, the Company has a competitive advantage as the world's most geographically diversified soda ash company, with more than 6% global capacity share (~70% of this capacity is natural soda ash based). The Company's natural soda ash operations are located at the Green River Basin, Wyoming, USA, where the world's largest known deposits of trona are found, and at Lake Magadi in Kenya. Natural soda ash provides the Company with a low energy and environmental footprint manufacturing process. Synthetic soda ash and sodium bicarbonate are manufactured at Mithapur, India and Northwich, UK. This process uses brine (salt water) and limestone as key raw materials.

With manufacturing facilities located across the four continents of  North America (TCNA), Europe (TCEL), Africa (TCML) and Asia (TCL), the Company can efficiently serve customers across the globe.

Soda Ash

Emerging economies have been the primary growth driver for soda ash over the past decade with increasing glass and detergent usage. However, FY 2015 witnessed demand slowdown in key markets including China and India. Global soda ash demand remained flat at almost 56 million tonnes in FY 2015-16. Looking ahead, world demand is forecast to grow at 2.5% p.a. through 2020.

Indian market demand remained almost flat for FY 2015-16 after a growth of almost 10% in the brvious period. While a stagnating rural market impacted detergent demand, glass demand remained subdued due to lower infrastructure spends. North American demand grew by a healthy 3% in FY 2015-16, a significant development over the flat nature in the past few years. Export markets in Asia registered moderate growth but Latin American markets were constrained. The UK market remained reasonably flat for the year with the Company maintaining its market leadership, sourced by production from our UK facility and US imports. Demand growth in key markets of the Company's African operation remained mixed

Global soda ash capacities remained flat at 67.5 million tonnes. Regional over-capacity and shift in governmental policies resulted in major consolidation in China as net capacity dropped by 1 million tonnes in FY 2015-16 over last period. Even though there is no new capacity addition across Europe and America, substantial debottlenecking is being considered across Indian subcontinent, Middle East and Central Europe. Global supply is forecast to grow at 1.9% p.a. through 2020, with Turkey leading the way.

India continues to be a favourable export destination for most soda ash manufacturers, with 0.6 million tonnes of imports in FY 2015-16. The Company believes in delivering value to its customers by assuring competitive supplies in a fair trade market. While the Indian market is supplemented by soda ash from US and Kenya, UK demand is also catered to by substantial imports from US.

Globally, pricing volatility persisted through the year due to slow demand growth, low shipping and energy costs, strengthening dollar and other geo-political considerations. Chinese prices dipped through the year due to weak domestic sentiments and surplus exports, before correcting back upwards towards the year-end. US prices remained firm and even improved slightly towards the year end with strong export sales. The same strong dollar resulted in upward pricing brssures in Europe and Asia. While regional price variations and supply-demand gaps will persist, it is expected that the global prices will reflect movement in broad commodity and energy cycles.

Sodium Bicarbonate

Sodium bicarbonate is commonly used as an ingredient in leather tanning, dyes & textiles, food additives, animal feed, pharmaceuticals and air pollution control. The Company is the world's fourth largest producer of sodium bicarbonate with about 6% capacity share (FY 2015-16) and is the market leader in India and UK.

Indian sodium bicarbonate demand grew by almost 4% in FY 2015­16 against the trend of 7-8% growth. Even though demand drivers faltered in this year, the Company believes in the long term sound fundamentals of this business and continues to maintain market share in excess of 50%. The Company continues to develop and deliver value added offerings to its customers.

Cement

In addition to soda ash and sodium bicarbonate, the Company also manufactures cement. The cement plant was setup in 1993 to convert solid wastes (generated as by-products of soda ash and fly ash from the captive power plant) to value-added products. Demand and price brssures were brvalent for most of FY 2015-16 due to lacklustre infrastructure development. The Company is focused on driving profitability in this business by consciously operating in low freight zones and by expanding into value added product portfolio.

Business Performance

India Chemical Operations continued strong focus on operational efficiencies and lower energy cost which contributed to improved profitability of the business in a mixed business environment.

The Company's unrelenting emphasis on safety was championed by the implementation of a structured safety program "Suraksha Jyot" to bring about sustainable behavioural changes - being awarded with the coveted British Safety Council (BSC) "Sword of Honour" bears testimony to these efforts. On the sustainability front, the Company believes in "Sustainability driving Strategy" and strives to move beyond compliance to betterment of the community and ecology. Accordingly, use of fresh water for process has been reduced to zero in Mithapur. Similar efforts have been made around efficiency improvement in filtration and recycling of soda ash solids in cement.

Production levels of most key products remained steady in FY 2015­16 with second highest annual production of Soda Ash and record production of sodium bicarbonate. Operational efficiencies were driven by focus on planned maintenance, rigorous implementation of continuous improvement programs. Supply chain supported the operations with similar performance through record transfer of products through multi-modal channels. Increased rail movement, innovation in the bulk transport of soda ash, safe transportation of bromine in ISO tankers and exploration of coastal dispatch options are few notable achievements during the year.

TCNA net revenues dropped from the brvious year due to lower production. There was some favourable sales mix and pricing gains along with lower finance costs, through debt reduction.

TCML registered an improved performance driven by low operating costs, lower sea freight and costs rationalisation. TCML also undertook key strategic initiatives related to debottlenecking of Soda ash plant, improving product quality, supply chain efficiency and ensuring a deeper engagement with the local stakeholders. TCML continued its focus on improving its cash flow position through several measures including aggressive working capital management.

For TCE, plant operation at Lostock achieved highest output since 2012. The site also celebrated an exceptionally good environmental performance in the year where the safety accident rate (TRIFR) improved significantly on FY 2014-15. The modified sodium bicarbonate at Winnington has run strongly and reliably enabling very steady customer service delivery during the year.

Salt retained its strong market share throughout the period and delivered a positive EBITDA performance. TCE commenced a 60 day statutory consultation on the closure of the historic Brunner Mond Defined Benefit pension scheme.

Outlook for business

Given the long-term favourable macro-economic trends in emerging economies, higher infrastructure investment and increasing disposable income; the Company continues to believe in the long term fundamentals of the soda ash and sodium bicarbonate industry. In the backdrop of this positive business outlook, the Company is focusing on executing its LEAP strategy

The Indian soda ash demand is expected to maintain its growth momentum of around 4-5% in the next few years. Over the next 4 years, a total of 0.9 million tonnes capacity is expected to be added-both through debottlenecking of existing operations and entry of new player. However, the projected increase in domestic demand is expected to be more than offset any potential increase in domestic capacity. Pricing brssure is expected to continue in the medium term. In light of the mid-term review of anti-dumping duties (ADD), the Company is committed to a logical and fair trade market.

Sodium bicarbonate continues to offer immense potential as the domestic industry matures. Growth rates of 6-8% p.a. are anticipated for the next 5 years with increasing value-addition and branding. Apart from the traditional sectors of food and animal feed, development of applications in flue gas treatment, pharmaceuticals are expected to generate value.

Outlook for TCNA remains positive with soda ash manufacturing continuing to remain sold out. Domestic pricing continued to improve with increases achieved on calendar year 2016 contracts. Opportunities continue in South Africa and further consolidation of the UK supply position. Export pricing suffered a decline in 2016 contracts mainly due to the brssure from increased Chinese exports caused by a softening of domestic demand, improved cost competitiveness and exceptionally low global sea freights.

The soda ash demand for TCML is expected to remain balanced in FY 2016-17 with no new major capacities targeted. Competitiveness will be derived by price and quality which means strategic market mixes will determine gains or losses. Africa has shown indications of growth and this will remain key to TCML's growth.

TCEL expects to continue to strengthen its financial performance further in FY 2016-17 as it drives on from the reorganisation in 2014, with profit forecast to grow in all major products - soda ash, sodium bicarbonate and salt - during the coming year.

Risks and Opportunities

The Indian market scenario brsents some key opportunities which the Company is addressing. The Company is strengthening the product portfolio with value added and branded product variants especially for bicarbonate and cement. These variants would help meet unique requirements of high-end applications. It is also, through leveraging digitisation, establishing a stronger customer connect and improving business processes through creation of new IT platforms. In addition, the Company is evaluating expanding production volumes to strengthen market leadership in key products.

At TCNA, the focus is on production stabilisation and securing 2.5 million tonnes of production. There is an opportunity to drive production to 2.6 million tonnes. Margin optimisation measures including energy hedging, rail fleet management and cost control are continuously reviewed.

At TCML, the focus is largely centred on the growth of key products and cash flow improvement. In addition to SAM debottlenecking, development of the dried salt and Crushed Refined Soda (CRS) product could create further growth opportunities. Better utilisation of existing assets, continued focus on process improvement initiatives and optimal working capital management will support a positive cash flow position in the future.

Opportunities at TCE span across both operational and commercial areas. Several projects driving towards increasing energy effectiveness for the Winnington CHP plant and soda ash business over the coming years are under review. Growth opportunities for sodium bicarbonate in the Asian market are being pursued. Amidst energy price volatility, TCE has a strongly hedged position in FY 2016-17.

In India, any adverse impact on domestic price realisations due to removal of ADD will be mitigated through even greater focus on cost reduction by increasing operational efficiencies and improving fixed cost structure. The Company is also working to ensure adequate supply of cost competitive raw materials by increasing captive production and entering into competitive sourcing arrangements.

Aggressive pricing from competitors, as a result of worsening global conditions and strong dollar, tightening regulatory and environmental legislation as well as the renegotiation of the labour contract and reliability of plant production are the key risks for TCNA. Rigorous project management and continued engagement with all stakeholders are critical to manage these risks.

Areas of significant risk for TCML surround the ability to recover trona quality, reduce siltation in Lake Magadi, a deteriorating road infrastructure, water scarcity and land & environmental brssures. Through concerted efforts including technical collaboration with third parties, greater engagement with local and national stakeholders and focused cost control measures are underway

TCE operations face key risks related to volatility of exchange rates and energy costs, and increasingly stringent environmental EU norms. Contractual arrangements to address volatility and engagement with relevant stakeholders are underway to manage the risks.

Industry structure, developments and performance

The country witnessed a second consecutive drought year in FY 2015­16, due to prolonged El Nino conditions. The monsoon deficiency at 14% was higher than the brvious monsoon's 12%.

The fall in overall food grain production in FY 2014-15 at about 4.9% was exceptionally sharp. However, it is heartening that the fall has not only been arrested in FY 2015-16, but may actually witness some growth, due to a comparatively better Rabi season.

In spite of the two consecutive droughts, the food grain stock is still higher than 50 million tonnes (this was hovering around 20 million tonnes in 2005-08) and can be treated as a testimony to the growth of food grain production in India. These high stock levels buffered the citizens from being directly affected.

The situation, however, did have an adverse impact on demand for agri inputs. The debrssed sentiments for commodities in the early part of the year combined with the fear of crop failure resulted in the farmers exercising abundant caution on spending and limiting it only to the bare essentials

The industry, largely, views the last two years as an exception, indeed some segments like Water Soluble Fertilisers witnessed new entrants during the year. The specialty fertiliser sector also witnessed very intense competition this year. As the growth opportunities were limited, there was lot more stress on the price front, to capture volumes. However, this can be seen as an indication of the industry's growing realisation of the importance of specialty fertiliser in the basket of nutrients and also of an increasing awareness of the same among farmers - not only from the horticulture segment but also from the cereals segment. The Company has been a thought leader and early entrant in this segment and the current situation not only confirms its belief but also gives confidence on its long term view on this segment.

Urea

The domestic production of Urea in FY 2015-16 at 24.5 million tonnes was 2 million tonnes higher than FY 2014-15. This remarkable growth was aided by an improved viability of volumes produced above the re-assessed production capacity. Urea imports into India at 8.5 million tonnes was marginally lower by about 0.2 million tonnes. The increased availability resulted in an increased sale of about 1 million tonnes (sales estimated at 32 million tonnes) and an increase of stocks with industry of 0.8 million tonnes.

The year also saw increased activity from the Government in terms of advocating the New Urea Investment Policy. Only one producer has announced an expansion project. The Company continues to hold to its decision of not undertaking any new investment in Urea capacity, in view of uncertainties on policy, gas availability, etc.

During the year, the Government's New Urea Policy attempted to move industry towards a common set of energy parameters over the next 3-4 years. As a part of this exercise, the energy norms for the Company also were revised marginally downwards.

The Government also announced a Gas Pooling Mechanism during the year. Under this policy, the inputs for all natural gas based fertiliser plants will be recognised for subsidy on the basis of pool price, irrespective of their actual sources. The difference between their purchase price and the pool price is to be settled between the companies through GAIL (nominated as the pool operator).

Complex Fertilisers (DAP, NPK, SSP)

The controlled imports of DAP in FY 2014-15 meant that the year opened with reasonable stock position. Some early rains led to higher imports of DAP in advance of sales. Hence, the FY 2015-16 witnessed an import of 5.6 million tonnes of DAP, which was about 1.8 million tonnes higher than the brvious year. The domestic production also increases by 0.4 million tonnes to 3.8 million tonnes. The sales of DAP at 9.7 million tonnes was 2.1 million tonnes higher than the brvious year. However, considering the on ground conditions, the actual consumption is expected to be much lower.

NPK production witnessed a sharp increase in early part of the year, with the production in the first half being 30% higher than the similar period of the brvious year. However, as the year progressed, production was scaled down and by the end of the year, overall production figures stood at 8.3 million tonnes compared to 7.8 million tonnes in the brvious year, an increase of about 6.4%. The imports also increased from 0.3 million tonnes to 0.6 million tonnes.

The MOP segment witnessed serious demand erosion, with the overall imports falling from 4.2 million tonnes in FY 2014-15 to 3.2 million tonnes in FY 2015-16.

Exchange rates remained volatile throughout the year and contributed to brssure on the bottomline, especially in the MOP business where the prices are fixed on an annual basis. While the prices of DAP varied due to demand and also due to exchange rates, however, the price of Phosphoric Acid was not affected much, largely because of limited suppliers and the quarterly nature. This had a serious impact on production margins and frequent disruptions in production due to the non-viability of the product, compared to imports.

Subsidy payments

FY 2015-16 ended with a large unpaid subsidy on account of the subsidy burden carried forward from the brvious year. This has resulted in additional working capital during the year. The Subsidy outstanding at the end of the year stood at Rs.1,901.33 crore. With a fertiliser subsidy budget of Rs. 70,000 crore next year, the situation is unlikely to improve.

De-regulated portfolio

The increase in food demand can be met only by improving the productivity. To this end, the Company, along with its subsidiary Rallis, offers a unique and diverse product portfolio in non-regulated branded agri inputs space ranging specialty nutrients, pesticides, seeds and farm services.

The deficiency level of secondary and micro nutrients in Indian soils have reached a critical level and together with low organic carbon content of Indian soils, it has started to affect the nutrient use efficiencies. Better yields can be achieved only through better nutrient management practices, viz. use of high nutrient efficient fertilisers like water soluble fertilisers, PGRs, secondary and micro nutrients and soil amelioration methods using organic manures. The seed replacement rate and use of hybrid seeds is showing an increasing trend. The unavailability of agricultural labour is driving an increase in usage of herbicides.

As mentioned earlier, this segment is attracting attention of many domestic and international players. The Company will continue to have focus on non-regulated branded agri-inputs space in FY 2016­17 by providing high quality agri-inputs and solutions to farmers.

Customised Fertilisers

Customised fertilisers are crop and region specific fertilisers carrying macro and micro nutrients providing holistic solutions to mitigate the deteriorating soil health. In this context of depleting NPK balance in soil and worsening deficiencies of secondary and micro nutrients there is great relevance for the product. The Government is giving greater emphasis on balanced nutrition.

Despite receiving a favourable feedback from farmers on convenience of use, increased yield, improved quality of the produce etc., the sales have been low due to the initial hesitation in adopting a new fertiliser application practice. The Company is continuing its efforts in popularising the product by targeting selected clusters and following focused awareness building activities in those areas. In the FY 2015­16, the Company could sustain the volumes inspite of availability of competing products at much lower price points.

The Company has received good support as well as documented recommendations regarding adoption of the sugarcane grade through continuous interaction with sugar mills and Government agencies. The Company is hopeful that sustained efforts will help it to strengthen the brand further.

Tata Kisan Sansar (TKS) and Rallis Kisan Kutumb

TKS, a dedicated franchisee retail network model for distribution of agri inputs provides a trust worthy store offering "One Stop agri input and services" to farmers. The franchisees also act as active agents for knowledge transfer and adoption of best management practices. They provide direct connect with the farmers to understand their changing needs and tailor products and services accordingly. TKS also offers farm advisory services, subsidised Soil Testing, Hello Krishi-mobile based agri information service, Smart Krishi- service offered to the farmer for certain critical farm operations with the use of latest technology and well researched farm practices. TKS has a unique farmer relationship management programme under TATA Kisan Parivar Membership (TKPM) programme. Currently, there are more than 800 TKS's in operation.

Outlook

The Union Budget 2016-17 provides major focus on agriculture and rural India, with specific emphasis on water resources and irrigation. There has been an equal focus on agri-credit and interest subvention on farm credit (Rs. 15,000 crore allocated towards interest subvention). Another notable feature was the allocation of Rs. 5,500 crore towards the new crop insurance scheme.

On the monsoon front, most global models are indicating continued weakening of El Nino conditions over the coming months and a chance of La Nina development by fall. All these signals are favourable for an above normal monsoon rainfall over the country during June to September, 2016. India Meteorological Department estimates that monsoon will be 106% of the long period average (LPA).

In light of the above, the consumption is expected to grow. The hindrances will be the lack of cash available to farmers in the first half of the year, as they are coming out of consecutive droughts. A high adoption of agri insurance and reforms in leasing rules could renew interest in agriculture. However, the budget was disappointing as far as the fertiliser sector was concerned. The fertiliser subsidy is pegged at Rs. 70,000 crore, which is a reduction of nearly Rs. 3,000 crore. Thus, the subsidy arrears by end of FY 2016-17 may cross Rs. 45,000 crore, forcing the industry to continue to depend on their own working capital borrowings. While the Economic Survey stressed on the need of reforms in the fertiliser sector, this budget has been silent on that, except for an announcement of a pilot project for Direct Benefit Transfer.

Opportunities and threats

For FY 2016-17, the environment is expected to provide opportunities for growth in the regulated as well as the de-regulated segments. In the long run, increasing consumption provides substantial opportunities for the Branded Agri Business, in terms of higher value speciality inputs for better quality agri produce. The increasing need for mechanisation is also an opportunity for which various models are being reviewed.

FY 2016-17 is expected to open with an inventory overhang in the P&K segment; which may pose a challenge to selling prices and credit terms. With good consumption the situation can be expected to normalise. In the Urea segment, no short term threats are envisaged, as the domestic demand-supply gap will continue to exist till such time that new capacity is added to achieve self-sufficiency.

The falling gas prices and the falling international prices for Urea also do not appear to be a concern given the highly energy efficient plant in Babrala.

Risks and concerns

The margins from Haldia operations, being a function of imported prices for the comparable products and the input prices primarily Ammonia and Phosphoric Acid continues to be a cause of concern going ahead. The high credit and forex exposure on bulk trading continues to be concern. The growth in non-regulated segment brings to fore the challenges in terms of quality management of third party sourced products. High subsidy and market outstanding continues to be a cause of concern leading to high working capital and interest cost eating the profit margins.

Rallis

The Indian crop protection industry, which has been growing at a CAGR of 8%, suffered severe reversals in recent years due to back to back droughts. The domestic industry is estimated to have registered a negative growth in FY 2015-16 compared to the brvious year, with most southern states and Maharashtra severely affected. This has led to challenging business scenario with the industry carrying higher levels of inventories compared to the brvious year.

Cotton and Paddy crop segments registered a decrease during the year due to water shortage and led to decreased acreages. Pest brssure was also low. Cotton crop in North India was severely affected by White Fly pest menace; the change in pest occurrence affected overall spraying practices. Pulses crop segment improved over last year due to increase in the Minimum Support Price (MSP) and good commodity prices. Several molecules were adversely affected, largely on account of decreased pest occurrence and price brssure in the markets.

Despite challenging market conditions, the branded Domestic Formulation Business of Rallis held on to revenues at the same level as in the brvious year. The new products introduced in the market have been well received, despite tough market conditions. Rallis' focus during FY 2015-16 was to improve its reach and penetration, with a view to increase the market share in spite of a sluggish season.

Indian seed industry has grown at over 15% for the past 5 years and was at Rs. 15,000 crore for FY 2015-16. Rallis, along with its subsidiary Metahelix is focusing its efforts on establishing its own seed brands in various segments of cotton, rice, maize, millet, wheat and mustard.

High potential segments and geographies have been identified and suitable products selected to establish seed brands, with the support of consistent, strong and extensive field activities.

A significant drop in the yield and quality of crops in the country has brought into focus the need for promoting the balanced use of fertilisers, and continued education of the farmer about the deficiencies of secondary and micronutrients in the soil. Indiscreet agricultural practices in many parts of the country have increasingly led to removal of secondary and micronutrients from the soil and multiple nutrient deficiencies, which are becoming major constraints on raising agricultural production. As a move towards sustainable agriculture, Rallis is increasing its focus on plant growth nutrients. Rallis has a wide range of specialty nutrient products and is focused on greener and cleaner products to address sustainable agriculture. These products will not only address the concerns of deteriorating soil health and crop health concerns, but also facilitate catering to small and marginal farmers.

Globally, crop protection sales in almost all regions declined, with the highest fall occurring in Europe and Latin America. Conditions in Ukraine improved, however, economic weakness affected the Russian market. The USA market was again affected by a delayed start of sowing, impacting the br-emergence herbicide market. Canada suffered from high crop stocks and low prices as well as cool dry summer. Mexico has benefitted from better rainfall than in 2014.

Various factors like variable weather patterns, drought / El Nino phenomenon, lower prices of agricultural commodities, high inventory levels at distributor level in many countries, strengthening of US dollar, including a weak monsoon resulted in the on-going steep decline in global crop protection market during 2015 to 51 billion USD, from 56 billion USD in 2014.

Despite the adverse conditions, Rallis' international business recorded sales of over Rs. 400 crore during the year, contributing to 25% of its overall revenues. Rallis' is focusing on building a business platform on contract manufacturing for leading global players. During the year, discussion and activities with some leading companies progressed well. There are several projects which are at various phases of evaluation

OTHERS

Consumer Products Portfolio Industry structure and developments

Salt

The estimated current annual consumption of edible salt in India is 5.9 million tonnesA. The demand for edible salt is expected to grow at a rate of around 1.5%a. Of the total edible salt consumption, it is estimated that 65% of sales is in packaged form with the remainder in loose form or under local labels. There is increasing consumer awareness about the need for better product quality, visible purity, adequate saltiness, free flowabilty and iodine content which is causing a gradual change from unbranded to branded salt. Pioneering efforts are being observed in the fortification area, with salt as a carrier of micronutrients - Tata Salt Plus, an Iron fortified Iodised salt, being one such example. (^Source: Estimation shared by Indian Salt Manufacturing Association and Salt Commissioner's office).

Pulses

India produced over 18 million tonnes of pulses and imported over 4 million tonnes to fulfil an annual demand estimated at over 22 million tonnes in the current year. A large proportion (99%) of the overall pulses market is still unbranded. However, with increasing consumer awareness about the importance of pulses quality in their diet, there is an increased demand for branded packaged pulses, driving further growth, and many business houses have entered the market in the last couple of years.

Spices

Though almost 75% of the market is unbranded, the branded segment is growing at a rate of 26% p.a. in terms of value. This shift from the unbranded to branded segment is being driven by increasing need for convenience and hygiene, and is catered to by a clutch of strong regional brands. Within the branded spices market, Blends are expected to outgrow Pures in terms of value over the next 5 years due to increasing consumer adoption of Blends.

Water Purifier Business

Water purifier category size in India is estimated to be at ~ Rs. 3,500 crore. Out of this, the value of Non electric, gravity storage purifiers is estimated to be at ~ Rs. 800 crore. The growth for next 5 years in Water Purifier is expected at ~20% CAGR.

Product-wise performance Salt and Related Products

The salt portfolio consolidated its leadership position in the market. Tata Salt continues to be the leader in the national branded salt segment and I-Shakti is the third largest brand in terms of market share. Overall, the salt portfolio commands a market share of 68.5% (12 months average) in the National Branded Salt segment with Tata Salt at 60.3% (Source: Nielsen retail Audit March 2016).

This has been achieved through sustained efforts in enhancing operational efficiencies of the supply chain, along with distribution and branding, which is evident in the distribution reach and overall brand performance metrics. Tata Salt continues to be the largest distributed brand with a reach of 16.8 lac retail outlets across India. In addition to this, constant brand building efforts through contemporising packaging, building visibility at retail and activations across media - traditional and digital, have helped strengthen the Tata Salt brand amongst consumers. This was reflected not just in a strong Brand Power score (in the top 5 percentile of TNS database), but also in the strong upward movement to the No. 2 position (from No. 13 position) in the Economic Times Brand Equity 'Most Trusted Brands'

survey, 2015 (Tata Salt was also ranked as the No. 1 food brand in the 'Most Influential Brands' study conducted by The Hindu Business Line for the year 2015). Tata Salt Lite continues to be the leading brand in the low sodium salt segment, with robust growth in volumes year on year. Tata Salt Plus, a double fortified salt that contains Iron and Iodine, was launched pan India during the year to address the widesbrad national health concern of Iron Deficiency Anaemia.

Pulses

Tata I-Shakti was successfully re-launched as Tata Sampann, marking a significant step in the brand journey towards a profitable growth with a sharper and more relevant message to consumers of 'high protein' in dals. The Company also successfully established the 'low oil absorb' proposition for Tata Sampann Besan, making it a clearly differentiated offering in the market place. The brand grew aggressively in terms of both volume and value through focused marketing and distribution initiatives. The brand is now available at over 1,22,000 outlets pan India. Its unique 'Dal on Call' service has been revamped and is currently available in 4 cities: Mumbai, Delhi, Bangalore and Chennai.

Spices

Tata Sampann Spices was successfully launched in October 2015, after a test launch in Punjab, Haryana and Himachal Pradesh in FY 2015. The superior product quality and unique 5-in-1 packaging are becoming the USPs for the brand. The range has been created using Chef Sanjeev Kapoor's expertise, and each variant has been crafted keeping regional consumer brferences in mind. The product is gaining traction and has garnered a market share of1.2% (in markets where it was launched in October 2015). Currently, Tata Sampann Spices are available in 13 states across north, east and west India.

Water Purifier Business

Water purifier business continues to expand its footprint in affordable drinking water segment through alternate marketing channels including NGOs.

Outlook for the business

Taking forward the LEAP strategy framework created for the Company, the Consumer Products Business steadfastly continues to put in place key enablers to drive rapid business growth. The focus for the year would be on actions such as design and implementation of market specific distribution strategies, focused product and packaging development, integrated branding approach through campaigns that use multiple media touch points, digitising supply chain to make it more efficient and responsive, upgrading supply chain infrastructure and bringing greater focus to consumer engagement.

While the salt business continues to be the mainstay in terms of revenue generation, the fast growing foods portfolio is expected to contribute significantly to the overall business by the end of FY 2020. In terms of reach, the business intends to expand its retail footprint to 25 lac outlets from the current 16.8 lac outlets. This will be achieved through greater use of smaller SKUs, along with new Go-to-market models. In addition to growing the current retail network, the business is also focusing on Modern Trade and non-traditional channels such as e-Commerce, to ensure availability at a multitude of consumer touch points.

The business is also focusing on building powerful umbrella brands in the form of Tata Salt and Tata Sampann. Along with focus on marketing and distribution, the supply chain is being strengthened to ensure greater responsiveness and efficiency.

Opportunities and threats

New go-to-market models and special cross functional teams are being deployed to develop our footprint in semi urban and rural markets as well as alternate distribution channels such as Modern Trade and e-Commerce. The ability to leverage raw material supplies, such as farm inputs, to support the foods business and extension of existing brands to new categories are opportunities identified for the business. Linking with Rallis, for sourcing, and integrated media campaigns focused on the umbrella brands in the salt and foods categories are some of the ways this can be achieved.

Competitive threats from branded and unbranded businesses are being addressed through the roll out of more value added products and by creating significant product differentiation. Media and consumer activations will also be used to drive brand differentiation. Cost inflation brssures across the value chain are being mitigated through network redesign and mechanisation

Risks and concerns

The Company's agri-produce based portfolio carries with it the inherent risk of market volatility in sourcing. Harvest time buying in key crops protects the business from fluctuations in the market and makes it competitive.

Food safety norms have become more stringent in the form of FSSAI guidelines. Due to the growth of modern trade and e-commerce, there is a risk of competition from private labels.

Nutritional Solutions

The Nutritional Solutions business targets optimal nutrition through dietary solutions in the form of ingredients, formulations and personalised services. The initial focus is on ingredients and formulations that improve human digestive health and comprises brbiotics, such as dietary fibres and other complementary ingredients, and formulations that nutritionally enhance end-products of players in the food industry. Through extensive immersive partnering with customers, based on sharp consumer / customer insights and cutting-edge science and technology, the Company anticipates a growing future for this business.

FY 2015-16 was the first full year of operations of the green-field manufacturing unit at Sriperumbudur, near Chennai. During the year, the unit produced at above planned levels, producing and selling over 450 tonnes of Fructooligosaccharides (FOS) in India. The product is already being available in 92 Indian cities and serves 615 customers. Customer feedback has been positive and has translated into repeat orders from most customers. Additionally, customer inputs identified several complementary products that were subsequently added to the portfolio to maximise synergistic benefits. Overall, in this first full-year of operations, the business achieved a turnover of Rs. 8.09 crore.

During the year, the Company's FOS received GRAS (Generally Recognised As Safe) approval status from US-FDA. This will allow FOS exports to customers in the USA.

The first clinical study on FOS has also been carried out and such studies will support product differentiation through unique claims in the marketplace.

INNOVATION AND TECHNOLOGY

Innovation Centre

The Company established the Innovation Centre (IC) in 2004 to undertake research in applied sciences, with a view to seeding new businesses, using the principles of sustainability and green chemistry. To date, IC has filed for 66 patents out of which 16 have been granted.

The IC continues to work with Tata Chemicals business units; particularly in the nutritional solutions segment and consumer products unit (where it developed the low fat absorbing besan offering); other Tata companies and third parties as well as carrying out its own independent research and development activities.

Centre for Agri-Solutions and Technology

The Centre for Agri-Solutions and Technology (CAT) is an in-house Department of Scientific and Industrial Research (DSIR) (Ministry of Science & Technology, Government of India) recognised Research & Development Centre for Crop Nutrition & Agri business (CNAB) unit of the Company. It was set up primarily to develop innovative crop nutrition products and services; as well as providing advice to farmers on sustainable farming practices and technical knowledge back­up for the CNAB field force. The Centre is located at Aligarh, Uttar Pradesh (UP) and is equipped with a state-of-the-art Crop Nutrition Laboratory and is assisted by trained technical personnel engaged in field experiments in about 10 states.

HUMAN RESOURCES

Over the past couple of years, the business environment has become increasingly complex and challenging. The Company's human capital, which is so integral to its transformational strategy has exhibited a remarkable resilience and has established very creditable achievements. As a result of the restructuring within the organisation, there is now a greater traction on people related issues as the Company goes forward. The future holds more exciting yet challenging times as the organisation is poised to grow, supported by the LEAP program. The achievement of the Company's growth objectives will depend largely on the ability of its employees to connect closely with its customers and deliver value through innovative offerings at competitive costs.

In order to deliver these outcomes, the Company has adopted a holistic approach to managing its workforce; through focusing on synchronising the multiple elements of talent sourcing, work design and processes, performance management, talent management, competency building and rewards and recognition. All of these are supported by operating in a collaborative environment of trust and ownership.

To be in sync with the current business model and to strengthen strategy execution, the Company restructured various roles across the business units and support services. It has brought in talent with specialised skills in Food & Nutrition science, Consumer  Insights, Digital Marketing, IT technologists, Business Development, Agri-Specialists, etc.

The Company strongly believes that sustainable competitive advantage for each of its businesses is only possible by constantly investing in building the capability of its people. Therefore, efforts are geared towards enhancing workforce capabilities across the entire spectrum of skills, be it the frontline operational and sales force or managerial and functional / business leadership levels across the organisation.

Training continues to be an important focus area and a blend of classroom and on-the-job training is extended. Other developmental activities include job rotations, projects, deputations, cross functional assignments and exposure through seminars, conferences, access to memberships of professional bodies and partnership with industry and academic bodies. Employees have the option of taking a sabbatical for pursuing developmental goals. Learning is also supplemented through the use of online and mobile learning platforms such as SkillSoft and Quizbiz.

To meet the long term growth aspirations of key talent in the Company, "Springboard" the Company's Talent Development process is in place which uses the 3E framework of Education-Experience-Exposure to meet their development needs.

Besides career growth, the Company is working on other key drivers of employee engagement. For instance, the frequency and quality of communication with employees has undergone a refreshing change in content, tone and tenor. Quarterly business updates, Monthly MD's LEAP Post, Town Halls, GET interactions, Let's Chat, Coffee & Conversations, Confluence, TCL Tube, Screen savers etc. - all such initiatives serve to reinforce employee connect and trusting relationships.

As the workforce profile undergoes a change, the Company has modified / introduced policies that address the changing needs and aspirations - notably among them are policies relating to flexible work timings, enhanced medical cover, employee referrals, Long service awards, etc. along with Simpli-5 which address work process simplification - all of these ushering in a refreshing change from the older rule and transaction-based relationship to one of mutual trust and collaboration. Multiple interventions at the workplace have brought in the element of health and wellness. Further, the rewards and recognition process is now aligned to bring to the forefront individuals and teams who display the Company's values of SPICE (Safety, Passion, Integrity, Care and Excellence) in their interactions with all the key stakeholders.

Last year through a process of dialogue and mutual trust, the Company continued to enjoy a harmonious industrial relations climate helping it to address routine operational issues in a smooth manner and work towards enhancing productivity, safety and compliance levels.

Employees also have many opportunities to engage themselves with activities outside of routine daily work responsibilities through events and initiatives like quizzes, competitions, assessments, and programmes like offsite visits, LSS (Lean Six Sigma) ICON, Ethics Month, Sustainability and Volunteering, both at the Company and at the Group level.

Efforts are on-going to make TCL an aspirational and brferred employer of choice for our current and future employees. The Company believes that the foundations of its Employer Value proposition go from its Brand promise, the progressive and employee friendly policies, learning, growth and development opportunities provided, the camaraderie at the workplace, and in the ethical and fair treatment that is extended to all our stakeholders. Efforts over the year has seen the Company register quite significant positive shifts in its Employee Engagement scores and Tata Chemicals was also listed among Aon Hewitt's India Best Employers 2016 listing. This motivates the Company to continue enhancing the value proposition it can offer.

The overall head count as on 31st March, 2016 is 4306, sbrad across 3,102 in India, 559 in North America, 393 in UK, 249 in Kenya and 3 in Singapore.

SAFETY AND HEALTH

Safety is one of the core values at Tata Chemicals. The Company is committed to continuously improve its safety performance by targeting Zero Harm: Zero Harm to People, Zero Harm to Asset and Zero Harm to Environment, through world class safety practices."Target Zero Harm" continues to be the focus across geographies which helped us to align the safety improvement initiatives to a common goal of Zero Harm.

The Company has a Board level 'CSR, Safety and Sustainability Committee' for exclusive oversight in this area. The Board provides valuable direction and guidance to the management to ensure that Safety and Sustainability implications are properly addressed in all new strategic initiatives, budgets, audit actions and improvement plans. The senior leadership also plays a critical role in encouraging positive attitudes towards safety and help in creating an environment that fosters safety culture, by setting the direction, establishing clear and transparent policies such as the Corporate Sustainability Policy, SHE Policy, Cardinal Rules of Safety and TataChem Golden Rules of Safety. The Company has adopted voluntary standards such as Tata Group Safety Standards, Responsible Care, OHSAS - 18001, ISO -14001, Dupont Safety standards, British Safety Council guidelines, AIChE-CCPS Process Safety Management guidelines, to ensure  continual improvement in the SHE performance. Senior managers seek to demonstrate effective safety and health leadership from line functions and have integrated the same with their responsibilities and daily duties.

In FY 2015-16, Mithapur and Haldia received Sword of Honour from British Safety Council and Babrala was recertified for 5-Star rating for their Health & Safety Management System. Tata Chemicals India operations also retained their Responsible Care (RC) logo for a period of 3 years. Mithapur continued with Suraksha Jyot, an innovative safety excellence initiative, to review the hazard-risk assessment, effective implementation of mitigation plans, and its communication to the workforce in a focused manner. Haldia continued with SRESHTO (Securing Reliability of Equipment and Structure at Haldia through Team Spirit and Obsession), to address the issue of ageing assets and to continue to ensure safe working environment. Babrala site is adhering to Process Safety Management guidelines in a deliberate manner. Nutritional Solutions plant at Sriperumbudur is working on implementing and standardising safety practices. Safety Amnesty program of Tata Chemicals Europe has ensured good level of employee engagement to improve safety performance.

Sadly, Magadi witnessed a fatal incident at the lake and a major rail incident involving employees and contractors. TCL India operations achieved a TRI free (Total Recordable Injury) 4 months for the year.

For employees, regular health check-ups are conducted based on work area hazards, to monitor all aspects of health including occupational parameters. Employees working in hazardous areas undergo health check-ups twice a year while others undergo annual check-ups. For non-site, a free medical check-up is available for employees above 40 years of age once every year. For employees between 30-40 years of age are also eligible for free health check-ups once every two years.

SUSTAINABILITY

Business Responsibility Report (BRR)

In accordance with Regulation 34(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the inclusion of BRR as a part of the Annual Report is mandated for top 500 listed entities for the year 2015-16 based on the market capitalisation. Although the BRR is not mandatory for the Company for the year 2015-16, as a responsible corporate citizen, it has decided to voluntarily brpare the BRR in the format brscribed by SEBI. The Company's BRR will be available on its website www.tatachemicals.com Any shareholder interested in obtaining a physical copy of the same may write to the General Counsel & Company Secretary at the registered office of the Company.

Sustainability reporting

The Company strives to be a leader in corporate sustainability and continues to focus on the triple bottomline. One of the key elements of sustainability is ensuring transparency and disclosures. The Company continues to use the GRI-G4 guidelines as a basis for informing all stakeholders our sustainability performance. The Company plans to publish its seventh Sustainability Report for FY 2015-16 in the public domain shortly. It will integrate reporting on sustainability from all geographies covering operations in India, US, UK and Kenya. The Company's sixth Sustainability Report can be viewed on our website www.tatachemicals.com

United Nations Global Compact (UNGC)

The Company is a signatory to the UN global compact that promotes ten principles in the areas of human rights, labour standards, environment and anti-bribery. The Company has been brparing and uploading the Communication on Progress (COP) since 2005. The Company continues its commitment to the UN global compact and will submit its COP on the ten UNGC principles for FY 2015-16. The details of UNGC can be viewed on www.unglobalcompact.org <http://www.unglobalcompact.org> and on the Company's website www.tatachemicals.com

Carbon Disclosure Project (CDP)

CDP's carbon action initiative believes the companies to implement cost-effective greenhouse gas emissions reduction initiatives in line with emerging best practice. It is becoming increasingly important that they are able to evaluate exposure of a specific company to the material risks and opportunities brsented by climate change, both in its direct operations and in its value chain.

The Company uses the power of measurement and information disclosure to improve the management of environmental risk. The Company has been responding to CDP since FY 2008-09 and is consistently maintaining its position under the Carbon Disclosure Leadership Index (CDLI) since FY 2010-11. The Company commenced CDP water reporting in FY 2012-13. CDP's supply chain program enables organisations to implement successful supplier engagement strategies, reduce upstream emissions, control water impact and manage risk in a changing climate.

BUSINESS EXCELLENCE

The Company remains committed to continually raise the bar on performance in all aspects of the business. The Tata Business

Excellence Model (TBEM) serves as a pivotal framework that allows the Company to gain insights into its performance and establish continuous improvement initiatives for attaining superior business results and maximising satisfaction and value to the customers. The TBEM framework covers six core aspects of the business: Leadership, Strategic planning, Customer focus, Measurement, Analysis and Knowledge Management, Workforce focus and Process Management. For a global organisation which has its manufacturing operations sbrad across four continents, with diverse business segments and employees from different cultures, TBEM serves as a platform to establish a common standard of excellence. The Company participates annually in the Tata Group level TBEM assessments, which provide valuable inputs into the strengths and areas of focus for the Company to strengthen the culture of excellence and progress towards becoming a world class organisation.

INTERNAL CONTROLS

The Company has robust systems for internal audit, risk assessment and mitigation and has an independent Internal Audit Department with well-established internal control and risk management processes both at the business and corporate levels. The Chief - Internal Audit and Risk Officer reports directly to the Chairman of the Audit Committee of the Board of Directors, which ensures process independence.

Internal Audit function plays a key role in providing to both the operating management and to the Audit Committee of the Board, an objective view and reassurance of the overall control systems and effectiveness of the Risk Management processes across the Company and its subsidiaries. Internal Audit also assesses opportunities for improvement in business processes, systems and controls and provides recommendations designed to add value to the operations.

The scope and authority of the Internal Audit Department is derived from the Audit Charter approved by the Audit Committee. Internal Audits are performed by an in-house team of multidisciplinary professionals comprising Chartered Accountants and Engineer. Reviews are conducted on an on-going basis, based on a combrhensive risk-based audit plan, which is approved by the Audit Committee at the beginning of the year. The internal audit department which operates on a decentralised basis continuously monitors the adequacy and effectiveness of the internal control environment across the Company and the status of compliance with operating systems, internal policies and regulatory requirements.

The Audit Committee meets on a quarterly basis to review and discuss the reports submitted by the Chief Internal Audit & Risk Officer and also review closure of all agreed actions. The Audit Committee also meets the Statutory Auditors separately to ascertain their views on the adequacy and efficiency of the internal control systems.

The Company believes that every employee has a role to play in fostering an environment in which controls, assurance, accountability and ethical behaviour are accorded high importance. To supplement the reviews carried out by the Internal Audit teams, the Company follows a robust system of Control Self Assurance (CSA) (self-audit) which is carried out during the year. The CSA coverage includes all critical departments in the organisation.

The IT enabled CSA process provides a bottom-up approach and build up for the CEO CFO certification, as required by Listing Regulations, as well as helping create awareness of the importance of controls across a wide segment of the Company employees. This complements the Internal Audits conducted to ensure total coverage during the year.

RISK MANAGEMENT FRAMEWORK

The following section discusses various dimensions of the Company's enterprise risk management. The risk-related information outlined in this section is not exhaustive and is for information purpose only. The  discussion may contain statements, which may be forward looking in nature.

The Company's business model is subject to uncertainties that could cause actual results to differ materially from those reflected in the forward looking statements.

Overview

Risk Management and Internal Audit functions complement each other. Enterprise Risk Management (ERM) at TCL seeks to minimise adverse impact on the business objectives and enhance stakeholder value.

Over the years, the ERM process has evolved into a robust exercise entailing a balanced bottom up and top down approach covering all units, functions and departments of the Company and its subsidiaries. The Company's risk identification and assessment process is dynamic and hence, it has been able to identify, monitor and mitigate the most relevant strategic and operational risks, both during periods of accelerated growth and recessionary brssures.

Cautionary statement

Statements in the Management Discussion and Analysis describing the objectives, projections, estimâtes and expectations of the Company, its direct and indirect subsidiaries and its associates, may be forward looking statements' within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include, among others, economic conditions affecting demand/supply, price conditions in the domestic and overseas markets in which the Company operates, changes in Government regulations, tax laws, and other statutes and incidental factors.