MANAGEMENT DISCUSSION & ANALYSIS REPORT

Pursuant to Regulation 34 of the SEBI Listing Agreement, a Management Discussion & Analysis Report covering segment-wise performance and outlook is given below:

(A) Industry structure and developments - 2015

Your Company operates across all three major market sectors of the lubricants industry - Automotive, Industrial and Marine & Energy applications. Your Company along with the Indian national oil companies lead the overall lubricants industry contributing approximately 55% of the market in terms of volumes. Another 20% of the market, by volume, is accounted for by other multinationals which are mostly integrated oil companies and the rest of the market is constituted by numerous smaller players, largely local in nature. There are over 30 established players in this industry, making it very competitive. The market for automotive applications, where your Company has established a well-entrenched position over the years, is the brdominant one amongst the three sectors within the lubricant industry.

Demand drivers: India is an important market for the lubricant industry world-wide, contributing to 6% of global automotive lubricants demand and over 4% of industrial lubricants demand.

Lubricant market demand is impacted directly by the economic activity in India. Demand for automotive lubricants is driven largely by the dual forces of growth in vehicle population and the extent of use of these vehicles. 'Automotive lubricants' is a collective term to describe the vehicle-fluids requirements of two-wheelers, passenger cars and commercial vehicles.

The demand for lubricants in the Industrial sector is primarily driven by industrial production. The Index of Industrial Production (IIP) has been observed to have a strong correlation to consumption demand for industrial lubricants in India.

In case of Marine applications, global and local ship movements are the drivers of its demand. Large-scale global movement of goods happens brdominantly by sea and demand for shipping services drives fleet utilization rates and freight rates for shipping companies. This in turn drives the consumption of marine lubricants. The installed base of off-shore rigs along the coast-line of India and their up-time drive demand for Energy lubricants.

Supply drivers: Lubricants are manufactured by blending baseoils and additives, with baseoil being the main component. Majority of the lubricants use mineral baseoil although there has been a significant growth in demand for brmium lubricants in automotive and industrial segments which use synthetic baseoils.

India is a net baseoil deficit market and also many additives used in lubricants are manufactured outside India. This necessitates large-scale imports of baseoil and additives and thus also exposes lubricants businesses to fluctuations in foreign exchange rates. While the Rupee continued to debrciate through most of 2015, mineral baseoil prices have dropped following the decline in the crude oil prices.

Major industry developments

After a challenging business environment in 2014, GDP growth in 2015 has been a robust 7.3% and inflation rate has been 5.8% through the year. The lubricant industry has seen a favourable cost of goods environment for the year due to the brvailing crude pricing and supply situation all through the year.

Automotive sector

Vehicle sales grew by 2% in the year 2015 compared to the brvious year. With respect to sales in the brvious year, commercial vehicle sales increased by 7% overall, with Heavy Commercial Vehicle sales growing by 30%, while Light Commercial Vehicle sales declined by 5%, and Tractor sales declined by 18%. Passenger car sales increased by a healthy 8%, while two-wheeler sales grew only marginally by 0.7%.

Other longer term macro-trends in the industry remained largely unchanged. The choice of lubricant and its specification plays a key role in enabling Original Equipment Manufacturers (OEMs) to comply with tightening regulations on tail-pipe emissions and to meet demands for lower cost of operations. This places onus on the lubricant industry to respond with new products that are able to cope with the increasing sophistication of these modern vehicles. These improved lubricants, typically synthetic in nature, are also able to maintain their physio-chemical and performance properties for a longer period of usage than earlier generation lubricants thereby lengthening oil drain intervals. However, this has an impact on structural demand in the industry as lubricant consumption decreases while per unit cost and price realization increases. Therefore, other drivers remaining unchanged, the growth in demand for lubricants is expected to lag vehicle population growth rate in the foreseeable future.

Two-wheelers: In the two-wheeler industry, gearless scooters seem to be gaining popularity with consumers over the past few years. Scooter sales continued to grow, clocking 13% growth in 2015 and this helped the industry offset somewhat the decline in motorcycle sales (-3.6%). This has translated into an increase of 9% in two-wheeler population in the country and a similar growth in demand for two-wheeler oils.

With an increasing number of two-wheelers being sold into the smaller towns and villages over the past decade, an estimated 50% of the two-wheeler population resides in rural India today. However, in 2015, weak monsoons have affected farm output and consequently rural incomes have declined, impacting demand for two-wheelers.

Passenger cars: Passenger car sales posted a strong growth of 8% in 2015. The year witnessed an 8% increase in passenger car population due to higher sales in last few years. This has, in turn, increased demand for car engine oils, which got slightly offset by the shift to higher quality, synthetic lubricants, that provide longer drain intervals in these cars.

Commercial vehicles: The vehicle parc for Heavy & Medium Commercial Vehicles and Micro-Light Commercial Vehicles grew by 5% and 3% respectively while Tractor vehicle sales declined by 18% in 2015. Off-road vehicle sales and utilization have also seen a reversal of trend. Positive sentiment by the new Government did not immediately lead to a positive change in the market in 2015; liquidity continued to be a challenge for key Building and Construction players due to stalled projects.

Non-automotive sectors Industrial lubricants

Industrial production, measured by the IIP, has shown only modest improvement during 2015. Most of the key industrial sectors faced slower than expected local and global demand during the year.

As economic reforms continue to gain momentum, India's manufacturing sector performance is likely to return to a sustained growth phase during 2016. India's growth is also likely to accelerate towards its high long-run potential with a major new national programme - 'Make in India', which is designed to facilitate investment, foster innovation and drive manufacturing in the country. To realize the full potential, progress on domestic reforms, roll out of national Goods and Services Tax (GST) and renewed focus on manufacturing sector can be transformational and significantly improve the competitiveness of Indian manufacturing firms.

Marine and Energy lubricants

Globally, the shipping industry is still passing through one of its worst phases in several decades. The Indian shipping industry has followed the global pattern to a large extent, where global trade had grown 12.6% during 2010 before slowing down to 2.81% in 2015.

The ban on iron ore export from India and changes in taxation structure of coal exporting countries, coupled with high cost of funding and trade sanctions against certain countries, have exacerbated the problems of the Indian shipping business.

However, the Central Government's push to de-bottleneck infrastructure projects has improved prospects, with global trade growth estimate pegged at 3.9% in 2016.

Oil prices plummeted to below $40 and as a result, rig utilization declined throughout the year with day rates following suit. Early contract terminations, particularly for floating rigs (semi submersibles and drill-ships), have become more commonplace than at any other time in history and delivery dates for rigs under construction continue to be delayed. Spending by oil companies fell by 20% in 2015 and a further 11% drop has been forecast for 2016.

Impact of foreign exchange, crude oil and raw material prices

The year 2015 posed different challenges on account of baseoils, forex and crude. It started favorably on back of falling crude in late 2014 which resulted into decline in baseoil prices but Rupee debrciation continued to diminish the potential value throughout the year. Overall business environment was very volatile especially during later part of first half with firming crude, seasonal demand of baseoil and Rupee debrciation which resulted into high input cost. In contrast, most part of second half witnessed unbrcedented falling crude prices which pulled the baseoil prices down.

These market dynamics continued to challenge your Company through the year.

The following graph indicates the trend of crude prices and Rupee/USD for the year 2015.

Additives and Chemicals prices stayed largely stable to soft but benefits were wiped out by Rupee debrciation. Polymer and steel prices too followed declining trend in 2015 which together contributed in reduction of input cost in these categories.

However, in highly uncertain and challenging business environment, your Company continued generating value for its investors through strategic sourcing, value improvement initiatives, extensive focus on service and continuous monitoring of costs.

Your Company worked determinedly on a best value purchase model and value-based inventory management, keeping a close watch on cash-costs and working capital.

B) Market behaviour and outlook

GDP growth has been higher in 2015 than it was for

2014, at 7.3%, but falling marginally short of planned rate of 7.7%. Consumer Inflation has been at 5.8% in 2015, negating to some extent the favourable impact of higher GDP growth in the year. Consumer sentiment is expected to be marked by higher levels of optimism than before, given that we have a stable majority government.

Automotive sector

The outlook for the automotive sector in 2016 has been examined closely by your Company through the three broad dimensions of demand drivers, distribution channels and competitive activity.

1. Demand drivers

The key drivers of demand growth in each segment where your Company operates are explained below:

Two-wheelers: The two-wheeler population is expected to grow by 7% during 2016 and is expected to drive the demand for two-wheeler lubricants. Rural segment will be leading the growth in motorcycle sales in India. The scooter oils sub-category has done very well in 2015 and is expected to continue the momentum of growth in coming years due to surge in demand for gearless scooters.

Passenger cars: Passenger car population is also expected to grow by 7% in 2016 over the brvious year while car sales are expected to be a key growth driver - likely to grow at 5% compared to 2015. In spite of the strong trend of increasing oil drain intervals and use of higher quality lubricants, passenger car engine oil industry is expected to grow by 7% in 2016.

Commercial vehicles: Overall, commercial vehicle population is expected to grow by circa 5% in 2016. However, lubricants demand for this category is expected to be static as a result of longer oil drain intervals with the improvement in the quality of the lubricants.

Your Company expects lubricant demand growth in Micro-Light Commercial Vehicle segment parallel to the growth in the vehicle sales; and in the Construction and off-highway OEM sectors as a result of revival in the infrastructure investments whilst the demand for lubricants for old generation commercial vehicles is expected to continue to decline.

Your Company expects lubricant demand for tractor oils to remain flat as the oil drain intervals become longer despite an increase in area under sowing and improved price realization benefitting the agriculture economy.

2. Channels of distribution

Castrol products are distributed through 370 Distributors who service approximately 80000 customers. We are also leveraging our distribution network to reach Castrol Bike points, Castrol Car Care and Pit stops. Castrol authorized service associates and Independent workshops in the two-wheeler segment. Urban sub-distributors have been appointed for last mile connectivity whilst Castrol sub-distributors reach additional outlets in rural markets. The Castrol Engine Experts Club (CEEC) programme, a mobile based platform to reach to 35,000 independent vehicle mechanics across commercial vehicles, motorcycles and passenger car segment was backed up by physical visits through Distributor resources. This distribution network reaches out to 53% of retail universe (trade bazaar outlets) and 7.5% influencers (Independent Workshops). Further, we are servicing over 3000 key accounts through our Distributors and Business to Business (B2B) Sales team.

In recent years, demand for brmium products have seen an upward trend especially in urban India whilst rural consumers have also begun to make their brsence felt with higher levels of consumption demand for the category. The composition of dealer types within the retail channel continues to evolve as government investment in the rural economy has seen a rapid rise in the disposable incomes of rural households leading to increasing economic activity in small towns and villages.

Your Company has yet again pioneered the development of effective and efficient distribution networks to harness this opportunity. Over the last two years, innovations in the route-to-market have led to exponential growth in business from small towns and rural India. In urban markets, your Company's focus has been on improving the customer service by providing increasing levels of reliable service and more relevant customer oriented loyalty programmes. Your Company has, as in the past, stayed at the cutting edge of technology to service customers better - be it through usage of Personal Digital Assistants (PDAs)

which enables its sales force to customize offers to dealers or through the use of GPS technology to reach out to smaller dealers and workshops in urban India.

3. Competitive activity

The competitive situation remains largely unchanged with all major international lubricant players brsent in the market. Television remains the most popular medium for reaching out to consumers with brand messages across the automotive sector, with different players dominating different categories. Your Company continues to be one of the leading brands in the retail automotive sector, followed by the public sector brands. In the urban retail automotive segment, against a background of strong competitive action, your Company has seen a slight reduction in overall market share from 22.8% in 2014 to 22.4% in 2015. However, in our key focus categories i.e. passenger cars, motorcycles and scooter segments, there has been strong growth in market shares in 2015.

Non-automotive sector Industrial lubricants

With economic reforms gaining momentum, India's long term prospects for growth remain optimistic. 'Make in India' programme is expected to drive the growth of manufacturing sector including some key industrial sectors like automobile manufacturing, automotive components and machinery manufacturing.

Lower fuel prices and stable interest rates, in particular, are expected to drive the demand for cars and two-wheelers and hence automotive manufacturing, in 2016.

Marine and Energy lubricants

The marine industry continues to operate in a very challenging environment. During 2015, many Indian shipping and ship management companies increased scrapping and sale of vessels, with several going bankrupt. This, and the lower utilization rates of fleets, higher lay-ups and the adoption of slow steaming, has led to a drop in the volumes of marine business.

Ratings agencies expect muted global trade growth and the economic slowdown in emerging markets to exacerbate overcapacity, leading to declining and volatile freight rates. But performance will vary across the segments, with dry-bulk and container shipping under brssure, while tanker and LNG shipping fare better

China's slower growth and economic transition will pose particularly significant risks for the shipping sector due to its key role in global trade, accounting for two-thirds of global iron ore imports and 20% of world coal imports.

The Energy lubricants sub-sector witnessed significant turmoil in 2015 resulting in withholding future investments in 2015 and will continue to see similar impact on activities and expansion in exploration and drilling even in 2016.

(C) Opportunities and threats Automotive sector

(i) Opportunities

a. First Time Users (FTUs) of personal mobility:

With higher share of domestic private consumption and household income distribution moving from pyramid to diamond structure, Indian households have higher disposable incomes. This in turn has given significant boost to personal mobility through two-wheelers and four-wheelers. The first time users of personal mobility are young, more tech savvy and require reliable solutions to ensure the upkeep of their prized investments. This requires product and marketing communications to bring the new consumer segments on board.

Two-way engagement media, prominently digital and social media, are emerging as strong alternatives to communicate with these FTUs. The next two points detail out the further opportunities in the personal mobility space.

b. Two-wheelers in small towns and emergence of gearless scooters: With increasing rural incomes and better sources of finance, the macro trend of growth of two-wheeler sales in rural markets is expected to continue.

Already, 50% of two-wheelers are sold in the small towns and villages. Providing reliable supply of engine oils in these geographies is a sizeable opportunity.

The share of gearless scooters in two-wheeler sales has also consistently risen over time, with increasing number of women drivers. Tapping this emerging category is a material opportunity.

c. Partnerships with Original Equipment Manufacturers (OEMs): Building strong partnerships with key OEMs across vehicle types is a significant opportunity for your Company. The need of the hour is not only to join hands for business but also for technology development to address the total cost of ownership challenge faced by OEMs. Despite infrastructural challenges, international automotive OEMs continue to increase activity and commitment to operate in India.

Stronger emission norms and demand for fuel efficiency is driving OEMs to keep developing new engine technology at a faster pace. These factors will result in a demand for lubricants with very specific physico-chemical and performance properties.

d. Micro-Light Commercial Vehicles (MLCVs): The

MLCV segment has emerged as a robust last mile connectivity option and the vehicle population in this segment is growing at a healthy pace. Although the segment has been moderately impacted by economic downturn, it is still underpenetrated and offers good opportunities.

(ii) Threats

(a) Economic uncertainty: With the world becoming more and more interconnected, events in any part of the globe could have repercussions on other geographies as well. Although we are witnessing a downward spiral in crude prices, the trend might change in late 2016. The Indian Rupee has shown moderate volatility throughout 2015 and this trend is likely to continue in 2016.

(b) Competitive activity: Competition in the Indian lubricant market is intense and is likely to remain so in the foreseeable future. Most international players have identified India as a focus market. The industry has also witnessed a trend of some OEMs introducing lubricants under their own brand name, further impacting the competitive landscape.

Non-automotive sector (i) Opportunities Industrial lubricants

The industrial output growth in 2016 is likely to be better than recent past. Your Company's inherent focus on customers from core segments i.e. automotive manufacturing, automotive components, machinery manufacturing and metals, amongst other segments, would ensure superior performance in 2016 led by volume growth.

Marine and Energy lubricants

State owned oil and natural gas companies have plans to double the gas production from current levels in next four to five years thus keeping a positive long term outlook for offshore drilling sector.

Central Government has proposed to develop sixteen new ports projects with focus on port connectivity and development of inland waterways to improve the capacity for the transportation of goods. This will be an emerging opportunity in coastal trans-shipments and inland waterways shipment in India.

Central Government is aiming to raise cargo and passenger movement through waterways from the current 5% to 30% in the next 15 years. This means that there will be demand for more coastal ships, barges and passenger vessels. The government initiatives like 'Jal Vikas Marg' and 'Sagarmala' projects will enhance transportation through inland waterways considering the recent approval for the development of 101 waterways across the country

(ii) Threats Industrial lubricants

While the Indian manufacturing industry is expected to do better in 2016, increasing brssure on competitive pricing may pose some challenge.

Marine and Energy lubricants

In short to mid-term, Energy companies may reduce their capex and put field development plans on hold as oil prices fall. This may in turn negatively affect the energy lubricants demand. In addition, competition may become aggressive on pricing of marine lubricants given the softening of crude and emerging opportunities for sector.

The number of rigs under contract has fallen in the past year and indications are that a continued decline is probable, continuing into 2016 as well.

D) Performance of segments and categories

I. Automotive lubricants Overview

Your Company continued to deliver a strong performance across the truck, passenger car and two-wheeler oil categories in the year 2015, driven by performance of its Power Brands - Castrol Activ, Castrol Power1, Castrol GTX, Castrol MAGNATEC, Castrol EDGE, Castrol CRB Turbo and Castrol VECTON. The Castrol brand continued to pioneer and drive the syntheticization of the category in response to demands from vehicle manufacturers (OEMs) for better performing and environment-friendly products, while also selectively making a play in the mid-price segment in certain categories. Your Company continued its close association with its Key Strategic OEM partners, especially Maruti Suzuki, Volkswagen group, Tata Motors, Ford and JCB.

Your Company also continued to invest in building relations with key retail channel partners through the highly successful Anmol Ratn programme during the course of the year 2015. Castrol Engine Experts Club has been successful in endearing brand Castrol further to mechanics, who are key influencers in the choice of oil and who are the primary handlers of lubricants.

There were however, significant challenges that your Company encountered in the Heavy Duty category, which caters to large fleets, mining, and building & construction equipment applications. This is due to the twin effects of lowered economic activity in this category and rising input costs for the industry.

The following sub-sections of the Management Discussion & Analysis Report detail out the performance of each category within automotive lubricants.

Personal Mobility

Two-wheeleroils: The two-wheeler oils segment comprises engine oils for four-stroke and two-stroke engines that power motorcycles and scooters. Oils for four-stroke motorcycle engines dominate the category currently, while the gearless scooter segment is growing rapidly. Castrol operates in this space through three product brands - Castrol Activ, Castrol POWER1 and Castrol Go!. Castrol has a special offering for gearless scooters - Castrol Activ Scooter. Castrol Bike

Points are stock-and-sell independent two-wheeler workshops and are a key driver of growth for your Company in this category.

The two-wheeler segment was the key growth driver of your Company's performance in 2015 and delivered strong volume and value growth. This reflected in gain of 70 basis points in the volume share as per Nielsen Retail Audit, indicating superior performance versus category. Castrol Activ continued to dominate the category on television advertising as well as digital media. Your Company leveraged sponsorship of ICC by giving an opportunity to the whole of India to be a part of the ICC Cricket World Cup Australia and New Zealand 2015 through an innovative online campaign.

Castrol got cricketing legend Anil Kumble, Sanjay Manjrekar and well-known cricket commentator Harsha Bhogle together on a Google Hangout to discuss how today's passionate cricket fan demands to be in the middle of all the cricketing action and is no longer satisfied with being on the sidelines. Fans were encouraged to participate in digital contests built around the brand proposition of 'Cling On' and the lucky winners were featured on LED boards in the cricket stadiums, thus being a part of the cricketing action, reaching millions of households through television. Through media and sponsorship activation, the brand continued to have robust brand equity, the strongest in the category.

Your Company continued to build Castrol Activ Scooter brand, a product customized for gearless scooters, through advertising and mechanic education.

Castrol Power1 continued to engage young, passionate bikers, on digital platform. The social community -'Castrol Biking', - is 1.6 million strong, with fans sharing their passion for biking on the platform. The 'Castrol Power Biking' app connects passionate bikers, helps them plan biking trips and find Castrol Bike Points on the way, for their vehicle servicing needs.

Your Company continued to expand its service network of Castrol Bike Points to provide consumers access to servicing their motorcycles using the best of Castrol products.

Passenger Car Oils in the After-Market (PCO Retail): Passenger Car Oils portfolio comprises engine oils for cars and utility vehicles and brake-fluids. Your Company caters to this segment with three product  brands - Castrol GTX, Castrol MAGNATEC and Castrol EDGE. Passenger car oils sell through two major channels in the after-market - retail channel and the stock-and-sell independent workshops.

The year 2015 witnessed a turnaround in the passenger cars industry in India. The PCO Retail market experienced volume growth. Your Company continued driving synthetic products, focusing on key metro cities through 360 degree marketing and activation plans aimed at growing market share.

The lead brand, Castrol MAGNATEC STOP-START,

which has been developed specifically to protect against damage caused by driving in dense traffic, stop-start conditions, was driven through outdoor, radio and digital platforms and performed well in the market place.

Your Company continued to educate mechanics about special requirements of modern engines and explain why Castrol MAGNATEC is the right solution for these engines. This has helped build brand equity amongst mechanics who are key influencers for this category.

Passenger Car Oils in OEM Franchised Workshops

(PCO FWs): The PCO Franchised Workshop segment consists of engine oils and drive-line oils. OEM approvals and strong grassroots relationships with Franchise Workshops of OEMs are the business drivers for this segment. Working in close co-operation with OEM partners, global and local, your Company has embarked on a journey to cater to this specialized channel through a dedicated range of products called the Castrol Professional series. Through a combination of variants - Castrol MAGNATEC Professional, Castrol GTX Professional and Castrol EDGE Professional, your Company caters to the engine oil requirement of franchise workshops of Maruti Suzuki, Ford, the Volkswagen group, Jaguar-Land Rover, Tata Motors and other OEMs.

Castrol Champions League: This is a dedicated Service Advisor advocacy programme run across key Maruti Suzuki Franchised Workshops. Your Company reached out to end consumers through these Service Advisors who interact directly with car owners and are able to explain the benefits of the Castrol Professional range to them.

Growth in Maruti Suzuki Franchised Workshops:

Through a combination of key account acquisitions and gaining share in existing accounts, your Company delivered a significant volume growth in the Maruti Suzuki network. The Castrol Champions League was a key enabler in delivering this outcome.

Growth in European OEM segment: Through exclusive tie-ups and aggressive account retention programmes, your Company tapped into the rapid growth in population of European cars in the country and delivered 20% growth in volumes in this segment during the year.

Commercial Vehicle Oils (CVO)

Commercial vehicle oils category comprises lubricant applications for small and large trucks, farm equipment and specialized products for the Heavy Duty segment. In product terms, it comprises engine oils for new and old generation commercial vehicles, hydraulic oils and the 'Specialty Products' range. 'Specialty products' is an umbrella term rebrsenting essential vehicle fluids other than engine oils; such as drive-line oils, greases and coolants. Castrol CRB is the oldest and best known brand in this segment, participating in the agri-sector and old-generation Medium and Heavy Commercial Vehicles with Castrol CRB Plus and in the new generation commercial vehicles segment with Castrol CRB Turbo. Castrol RX Super leads the play for your Company in the mid-price segment in truck applications along with Castrol CRB Multi which was a new entrant in 2015.

The year 2015 continued to pose a challenging market environment resulting in marginal decline in lubricants for New Generation truck segment and severe decline in old generation commercial vehicles. While overall performance was impacted by the unfavourable economic conditions and poor monsoon, mentioned below are some of the highlights of the business during the period under review:

a. Your Company further broad-based its participation in the mid-tier price segment in trucks with the launch of Castrol CRB Multi.

b. Your Company launched two new products in the fast growing CI4 segment; both these products, Castrol VECTON and Castrol CRB Turbo Plus have been received very well in the market.

c. New products launched to leverage growing segments in 2014 and 2015 namely Castrol CRB Mini Truck, Castrol VECTON and Castrol CRB Turbo Plus, have been very well received in the market.

II. Non-automotive lubricants Industrial lubricants

The year 2015 was a very successful year for Castrol's Industrial business as it delivered good growth in margins despite tough external environment and strong competition. The India industrial business has been one of the fastest growing businesses within Castrol businesses worldwide. Your Company increased its share of business in key customer accounts and also won new brstigious accounts by providing superior technology and better customer service.

Marine and Energy lubricants

Your Company continues to focus on customer intimacy and provides products and services that are best-in-class in this segment. Introduction of environment friendly biodegradable lubricants for stern tube and value added services like fleet optimiser and Scavenge drain analysis (SDA) were embraced by marine customers. It is also in advanced stages to launch a unique chemistry product for use in low sulphur environment, which has a state of art ash control technology. In addition, your Company will also continue to focus its efforts to bring in more efficiency in its operations and concentrate on value driven and profitable customers to maintain its value and thought leadership position in the Marine segment.

Your Company has maintained its leadership position in the offshore drilling segment during the year under review, by focusing its efforts on value offers despite minimal drilling activity in the segment. Introduction of environment friendly biodegradable lubricants to offshore drilling sector was welcomed by the major drillers in the country. As drilling moves into deeper seas, your Company will maintain its focus on value and specialist offers such as sub-sea solutions, to further consolidate its market share in the offshore drilling segment.

(E) Risks and concerns

The economic growth still remains inconsistent with stressed balance sheets of banks and corporates posing challenge to growth and hence lubricants consumption and demand. This may impact your Company's performance during 2016. The aggressive pricing strategy by local as well as international competition, in an attempt to gain market share, and commoditization of products in the brmium segments, will have an impact on overall industry margin. The economy is to be watched cautiously for revival signs in some key sectors. In addition, forex uncertainty may also have adverse impact on cost of goods despite crude softening.

Employee attrition could result in loss of knowledge and business disruption, which may impact your Company's ability to support its growth agenda.

Safety and product integrity continue to be focus areas for your Company. Given the extremely challenging road conditions in India, road safety is an area of particular concern for your Company as it moves its goods and people across the country.

Your Company has put together a plan to address the impact of the identified risks and put in place the necessary monitoring and mitigation actions.

(F) Technology

Your Company continued to derive sustainable benefits from its India Technology Centre located in Mumbai until the first half of 2015. Following a safety incident outside the Technology Centre and a subsequent re-evaluation of the risk scenarios in and around the site, it was decided to shut down the Wadala site in June, 2015. Following this move, the technology activities which were being undertaken at the India Technology Centre have been shifted to alternate locations within and outside India to ensure continued support to the business without disruption.

During the year, your Company's product development capability helped the business meet brssing consumer needs, partner closely with its customers and leverage strengths of its global affiliates to meet the needs of the local market.

Your Company focused on optimizing current formulation in the personal mobility segment through value engineering. Your Company also focused on the Indian passenger car market to develop a range of fuel efficient, durable SAE 5W-30 and 0W-20 engine oils, for gasoline and diesel applications to meet future emission requirements.

Considering the demand for higher quality oils due to tougher emission quality standards, your Company launched Castrol Vecton CI4+ with system 5 technology and Castrol CRB Turbo Plus with Durashield booster™ after extensive trials in local vehicles.

In 2015, a number of technology initiatives were taken in the Industrial product range. Your Company focused on the localization of Castrol Clearedge 6519 and Castrol Almaredge 61 FF to drive the growth in soluble metalworking fluids for automotive and machine manufacturing segments. These products have successfully delivered differentiated benefits to customers at competitive cost. Your Company launched mid-flash Rust Preventive to meet the new norms of tube industry and customer requirements on reduced costs. The product was developed keeping the technology ahead of competition and targeting significant growth in the market place.

Another major milestone achieved during the year was the renewal of the ISO 14001, 9001:2008 and TS16949 certifications for the India Technology Centre. The ISO 9001:2008 assured the management of your Company that the operations of the Centre continue to be streamlined and efficient even after the activities were shifted to an alternate location at the Company's Silvassa Plant. The ISO 14001 certification is a mark of your Company's commitment to the customer and shareholders to be environmentally responsible and to adopt sustainable business practices.

(G) Internal control risks and their adequacy

Your Company maintains an adequate and effective Internal Control system commensurate with its size and complexity. We believe that these internal control systems provide, among other things, a reasonable assurance that transactions are executed with management authorization and that they are recorded in all material respects to permit brparation of financial statements in conformity with established accounting principles and that the assets of your Company are adequately safe-guarded against significant misuse or loss. An independent Internal Audit function is an important element of your Company's internal control system. The internal control system is supplemented through an extensive internal audit programme and periodic review by Management and the Audit committee.

(H) Health, safety, security and environment (HSSE)

Your Company has been fully committed to comply with all applicable laws and requirements and maintains highest standards of Occupational Health, Safety & Environment. This is also spelt in the HSSE policy which uniformly applies to every member of the workforce which includes employees and others who work for us (contractors, audit agencies, suppliers, NGOs, etc.). Safety and Environmental Performance has been integral to the business performance of your Company and it continues to focus on the goal: 'no accidents, no harm to people and no damage to the environment'.

Your Company ensures safe, systematic, reliable and environmentally friendly operations through its Operating Management System (OMS). All three blending plants of the Company are certified to the Environment Management System (ISO 14001:2004) and Occupational Health & Safety Management System (OHSAS 18001: 2007). Your Company is also certified for ISO 9001:2008 (Quality Management System Standard). Compliance to these systems has been certified by internationally recognized and accredited bodies. Regular internal and external audits help to continually improve the process and make Your Company more efficient. Your Company is also helping the environment by improving the fuel efficiency of the engines and hence helping to conserve brcious fossil fuels. Patalganga Plant was a finalist for its efforts on safety, at the BP Helios Awards in 2015 which is a Group level recognition of activities strongly demonstrating BP values (Safety, Respect, Excellence, Courage, One Team). Your Company was also recognized by various external agencies like National Safety Council and Greentech Foundation for the work done in the area of Safety & Environment.

Initiatives to mitigate possible safety and environmental risks and reduce environment footprint are in place. All efforts are taken to minimize energy consumption, water consumption and waste generation from manufacturing operations viz. optimizing the manufacturing batch sizes, maximizing the use of natural lighting, use of LED and energy efficient lighting, regular water monitoring and audits and many other environment management programmes. Your Company is also committed to regularly work on logistics process optimization to  bring in efficiency and thereby reduce the carbon foot print along with reduction in road related safety risk.

Road Safety continues to be the prime focus area for your Company with many initiatives undertaken to ensure everyone goes home safe every day. The Company has continued to engage the driving community in the flagship community outreach programme 'Family Connect' which is organized in different parts of the country throughout the year. Sales employees who drive for business drove more than five million kilometers without any severe accident, keeping focus on safety at all times. Your Company has also reached out in various communities, educational institutions and other industries, taking a lead in promoting awareness on Road Safety.

(I) Developments in human resources management

Values & behaviours and employee value proposition

People are a key resource for your Company. During the year under review, the focus was on building the One Castrol organization which sharpens the focus on efficiency and simplification with a view to ensuring alignment to the overall business strategy and readiness to achieve your Company's 2020 Vision.

One of the key focus areas during 2015 was employee engagement and talent management, leveraging the One Castrol reorganization to provide career opportunities and support the realization of people potential.

Your Company has continued to actively drive values and behaviors through an inclusive process of dialogue and articulation of your Company's Values & Behaviours, with a special focus on 'Respect' at the workplace.

Your Company has continued on its journey to build a diverse and inclusive workforce during the year 2015. As part of entry level talent programmes (Graduate and Sales Trainee programmes), - we have increased our gender diversity to 50% and have successfully focused on diverse lateral hires in frontline sales roles.

Reward and Recognition

Your Company continues to focus on recognition through the Castrol STAR Club Awards. This programme is based on bringing your Company's values to life and lays emphasis on recognition rather than reward. There are five categories of awards based on each Value -

Safety, Respect, Excellence, Courage and One Team. The recognition acknowledges the demonstration of your Company's values and behaviours at the work place.

Control and compliance

In order to further strengthen controls on all the processes, in 2015, the entire Human Resources and payroll processes were mapped and documented with Workflows and Internal Control Templates (ICT). Key controls were put in place and monitored to provide assertions to the Management on design and operating effectiveness of these processes. Further design and effectiveness were checked and found to be in good order.

During the year 2015, your Company continued its high degree of compliance with employment legislations by conducting Gap analysis in many of its locations and took actions to close gaps in all locations audited. It also improved two-tier compliance monitoring system comprising of quarterly compliance checklist and a self-assessment checklist (for monthly reporting) which enabled improving and sustaining the compliance culture in your Company.

Employee relations at Plants

Your Company has a contemporary employee relations scenario with a participative culture, receptive to technical upgradation, at the Plants.

There continued to be a harmonious employee relations environment at all three Plants and the Technology Centre, throughout the implementation of Capex projects, and other initiatives. The Plants have also acquired accreditations like TS 16949, making them OEM ready. During the pendency of settlement negotiations, there has been no loss of productivity at the Paharpur Plant, nor at the Patalganga Plant where negotiations are in progress.

The engagement and communication with the workmen through initiatives like the Plant Performance reviews, leadership team interactions and town halls, have been apbrciated by them. The care and concern for the health and well-being of the employees and their families, through financial assistance, workshops and family engagements have been exemplary. The strength of the employee relations at the Plants is also indicative by the absence of unionization of contractual labour, which is brvalent in the neighbouring industries.

The total number of people employed in your Company as on 31st December 2015, including factory workmen, was 763.

(J) Discussion on financial performance with respect to operational performance

Your Company delivered a strong Gross Profit growth of 17% in 2015 over 2014, due to lower material cost and sustained selling price, although volumes declined due to weak demand in commercial vehicles and heavy duty segment.

Cost of sales declined during 2015 by 17% over the brvious year primarily due to lower baseoil prices. Your Company managed to sustain the selling price due to its focus on delivery in personal mobility segments and sale of brmium product mix.

Operating and other expenses increased by Rs. 67 crores as compared to 2014 due to investment in safety, people, brands, Corporate Social Responsibility (CSR) and business growth opportunities.

The Profit After Tax (PAT) has increased by Rs. 140.7 crores and is at Rs. 615.3 crores compared to 2014 mainly due to higher gross profit and a write back of provision no longer required.

With the drop in crude oil prices, the input costs for 2016 are expected to be slightly lower than 2015 cost. However, the Indian Rupee is yet to show signs of stabilizing against US Dollar. While there is an overall optimism in the economy, the industrial and economic growth has been slow compared to the expectations. This may continue to put brssure on your Company's margins.

The Management is confident that your Company, with its strong brands, enduring relationships with key stakeholders and commitment of its staff, will continue to sustain its strong performance during the year 2016.

On behalf of the Board of Directors

Omer Dormen  

Managing Director DIN: 07282001

Rashmi Joshi

Director Finance & Chief Financial Officer

DIN: 06641898

Place : Mumbai

Dated: 24th February, 2016