MANAGEMENT DISCUSSION AND ANALYSIS

Overview:

Crest Ventures Limited operates under three verticals: Real Estate, Financial Services, Investment and Credit. The operating business are carried out by group entities having independent management teams.

1. Industry structure and developments:

a. Real Estate: In India, real estate is the second largest employer after agriculture and is slated to grow at 30% over the next decade. The growth of this sector is well complemented by the growth of the corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy. The housing sector alone contributes 5-6 % to the country's Gross Domestic Product (GDP). Private Equity (PE) funds and Non-Banking Financial Companies (NBFCs) in India are seen increasingly investing jointly in real estate projects.

b. Financial Services: This sector in India is going through a paradigm shift, with uptick expected in GDP growth rate along with lower interest costs driving demand for new credit. India's credit growth is expected to be over 12-14% CAGR for the next decade. The recent initiatives by the Government and Reserve Bank of India is expected to give a big fillip to the organised financial services sector, the Government's Jan Dhan Yojna scheme of financial inclusion where more than 22 crores fresh bank accounts were opened will ensure larger population coming under the organised financial system. Added to this the RBI decision to grant 10 small finance bank licenses and 11 payment bank licenses to different players will ensure greater financial inclusivity. The impact of these measures is higher financial savings which can be utilised for more productive activities. It is expected that a much higher allocation will be given to financial savings i.e. investment in Equities, Bonds and Retirement savings, as per a Global Private Wealth Report 2015, the total wealth held by individuals in India grew by 8.94% YoY to Rs.280.44 trillion in financial year 2014-15, of which physical assets comprise 42% and financial assets comprise 58%. During the year financial year 2014-15, individual wealth in financial assets grew by 19.17% YoY, led by Equities, Bonds & Retirement savings. Conversely, physical assets de-grew by 2.35% YoY. We expect this trend to gain traction in the next decade. On the back of continued reforms by government agencies and a favorable demography, financial services sector as a whole is at an inflection point, this will brsent a structural growth opportunity to the organised players.

c. Investment and Credit: India's FDI inflows in financial year 2015-16 increased to $55.46 billion as against $36.04 billion during financial year 2013-14. The Government made changes to the FDI policy in November, 2015, when norms for 15 sectors including banking, defence and construction were changed. Further, in a sweeping overhaul of foreign direct investment norms across 9 key sectors, the Government in June, 2016 eased FDI caps for defence, aviation and food processing sectors. Softening interest rates, pick-up in securitisation and introduction of Marginal Cost of Funds based Lending Rate (MCLR) have moderated return on Equity for NBFC companies. NBFCs are likely to grow at 14% in financial year 2016-17.

2. Opportunities and Threats:

a. Real Estate: On the real estate front, the Company has revenues from retail space in malls, commercial space and residential developments. Retail properties demand active management as churns could be more frequent and the sector is more at risk to frequent competition from nearby stores, new entrants, e-commerce players or changing consumer brferences. Due to improved economic growth, demand for the commercial space is expected to pick up during financial year 2016-17. Strong execution capabilities and having delivered various types of projects, the Company has built trust and confidence amongst buyers. However, competition from other established developers with strong brands and the recently introduced, The Real Estate (Regulation and Development) Act, 2016 pose threats to the Company.

b. Financial Services: According to a recent study the population of Ultra High Net-Worth Individuals in India will grow at 22% per annum till financial year 2018-19. This explosive growth in wealth will provide ample growth opportunities to the Wealth Management Business. Being a new entrant there is severe competition from established wealth management companies.

c. Investment and Credit:With the fall in interest rates the Company would get credit at a cheaper rate, however the increasing competition from large NBFCs and banks will make it tougher to source good quality credit.

3. Segment-wise performance:

a. Real Estate:

Crest Greens - Raipur: This landscape-led lifestyle project is one-of-a-kind in Central India (Chhattisgarh). An eco-friendly gated community with world class infrastructure facility, and having over 60% open space with a central park and central avenues, is sbrad over 52 acres. The first phase of villa plots in this project would be completed by the year end and in Phase II, plans on a mixed use residential and commercial complex is under way.

Phoenix MarketCity - Velachery, Chennai: It is the largest shopping center currently operational in the city of Chennai. Within its 2.5 million square foot sbrad, MarketCity contains a diversity of stores, an exceptional opulent multiplex, a state-of-the-art recreational club, a boutique hotel and elegant residential towers, creating a complete social, residential and life style living. The mall has above 95% occupancy and has seen an increase in the total revenue by 8.50% over last year.

Palladium - Chennai: The construction of the luxury mall would be completed by October, 2016. Though delayed by about 6 months, the mall should be operational in the last quarter of 2016. The demand for space has a high level of interest with signed letter of intent of over 60% of the leasable area.

Crest Towers & The Crest - Chennai: Crest Towers comprising of one residential tower and The Crest comprising of two residential towers, that is part of the Phoenix MarketCity Complex, totaling to above half a million square feet, is completed and 75% of the total inventory has been sold.

One Crest - Nungambakkam, Chennai: "One Crest" is a brmium residential project in Chennai with large apartments size in the upscale area of Nungambakkam. In spite of slowing down of demand nearly 40% of total inventory has been sold. The rains and heavy flooding in November last year did affect this project; however, the building is scheduled to be completed by the second quarter of 2018.

Sharyans Audeus- Andheri, Mumbai: Company continues to earn rental revenue through this asset. The occupancy stands at 95%.

Phoenix MarketCity - Pune: The Company continues to hold 5% stake in this project. The revenues and occupancy of this mall has been growing year-on-year.

b. Financial Services:

After exiting the "Promoter Group" of Fortune Financial Services Limited, Crest Ventures Limited has sold a substantial part of its stake, thereby profiting from this sale.

Prebon Yamane (India) Limited: The performance of the mutual fund desk was affected compared to brvious year as implementation of the direct plan for mutual fund investments gathered momentum which resulted in loss of business. Government introduced service tax of 14.50% on distributor's fees under reverse charge mechanism which also affected the profit margins of the desk. The Company expects to better its performance than the brvious year on account of higher inflows in the mutual fund industry.

New brokers are entering the corporate bond broking space making the business environment very competitive. Talent acquisition at a reasonable price has been the biggest challenge for most fixed income broking houses. Market participants increased their positions in corporate bonds and UDAY Bonds. FII's were aggressive buyers and bought 3-5 year tenor corporate bonds. There was a spurt in market volumes across corporate and government bonds, mainly because of expectations of a RBI rate cut during the year.

The Indian rupee fell against the U.S. dollar in the financial year ended on March 31, 2016, as the dollar rallied in anticipation of interest rate hikes by the Federal Reserve. Forward volumes dipped because of tight range in the forward brmiums and due to continued intervention in the markets. Interest Rate Swaps (IRS) were very active and saw some large volume trading in the market. With addition of experienced dealers on the team, the revenues generated from OIS and MIFOR grew by 30%. Currency option revenues grew by 30% due to a rise in overall volumes in the market. The Company was successful in capturing a good market share.

Crest Wealth Management Private Limited (Crest Wealth) has launched its portfolio management services in February, 2016 and in a short period has generated significant returns and outperformed the benchmark. With a strong management team and aided by the increase in the domestic savings rate, benign inflation environment and awareness of equity as a wealth creation opportunity, Crest Wealth is poised to rapidly grow its assets under management. Crest Wealth brings to investors innovative financial strategies based on the research and investment tools in order to generate superior risk adjusted returns.

c. Investment and Credit:

Tamarind Global Services Private Limited (Tamarind) is a focused destination and event management company offering bespoke solutions for individuals and corporates across the board. Having brsence in the Middle East, Australia, U.K. Far East, South Africa, and East Africa the company operates under four verticals: Tours, MICE (Meetings, Incentives, Conferencing and Exhibitions), Events and Online. Crest Ventures continues to hold 26% equity stake in Tamarind.

In the Credit business the Company is looking to expand its capital base so as to increase the size of the book.

4. Outlook, Risks and Concerns:

a. Real Estate: In the mall rentals, while there is a minimum fixed rent the revenue share with the lessee gives the Company an opportunity to earn higher income. In the commercial office spaces, the rental income is generally fixed. Once built, in both, the retail and office project there is a steady flow of rental revenues which get renewed from time to time. However, with a constantly changing environment the mall space is facing challenges from emerging e-commerce business. With abundant capital at their disposal most e-commerce players are burning capital and have a different business model which is always tough to compete with. In the case of residential complexes, the challenge is always delivering a quality product within budget and time. With various external factors and governmental regulations at play there is a constant uphill task to achieve the desired goals/result. And often the sales revenues and expenses are difficult to brdict and can vary from situation to situation. Also higher interest rates which have been brvailing for a while often eats into the profits.

We will continue to build high quality assets with a focus to increase our revenues in the rental space but tread carefully in the residential developments.

b. Financial Services: There is always a gestation period to build a high quality asset management business. Also in a portfolio management business there is an inherent risk related to compliance (although the Company does KYC compliance requirement etc.) and increasingly compounded by colossal regulatory fines. Thus, we need to be extra cautious on this front and create a very strong back office and compliance process thereby increasing costs. In the debt brokerage business there could be drop in mutual fund brokerage revenues due to introduction of direct plans by the Mutual Fund house. A changing world and uncertainties have impact on the brdictability of these businesses.

On the back of implementation of strategic economic reforms, we are seeing an increasing shift of investments from other asset classes to equities. We are building a substantial boutique fund business (both domestic and offshore) backed by a credible team within an institutional framework.

c. Investment and Credit: Any investment, strategic or otherwise, has inherent risks. While Crest Ventures invests in companies with a strong management and forms effective partnerships in companies and businesses, the success largely depends on the Company's own management team and key personnel who work with the investee companies closely. Getting and retaining talent in these areas is always a challenge.

On the Credit front global events like 'Brexit' and increasing fear of terrorism makes one risk averse, this risk aversion goes across all asset classes. Currency debrciation will further increase risk and put more brssure on the already weak Asian currencies.

With a proactive and strong government at the centre we see a huge growth in both the investment and credit activities. We will look at increasing our capital allocation in both these areas.

5. Internal control systems and their adequacy:

The Company's internal control procedures are adequate to ensure compliance with various policies, practices and statutes in keeping with the organisation's pace of growth and increasing complexity of operations. The Company maintains a system of internal controls designed to provide reasonable assurance regarding the effectiveness and efficiency of operations, adequacy of safeguards for assets, brvention and detection of frauds and errors, accuracy and completeness of the accounting records, timely brparation of reliable financial information.

Key controls have been tested during the year and corrective and brventive actions are taken for any weakness. The internal controls and governance process are duly reviewed for their adequacy and effectiveness through periodic audits by independent internal audit function supported by outsourced audit teams. The Audit Committee is periodically briefed on the corrective and brventive action taken to mitigate the risks.

6. Financial performance:

The financial statements are brpared in compliance with the Companies Act, 2013 and generally accepted accounting principles in India (Indian GAAP). Significant accounting policies used for the brparation of the financial statements are disclosed in the notes to the financial statements.

During the year under review, the consolidated total revenue was Rs.4,894.68 lacs as against Rs.17,795.93 lacs in financial year 2014-15. Company's net profit on a consolidated basis was Rs.3,718.59 lacs as against Rs.2,232.83 lacs in financial year 2014-15 resulting in higher PAT of Rs. 1,485.76 lacs for the year under review.

On a standalone basis, the total revenue was Rs.2,472.05 lacs compared to Rs.10,183.54 lacs in the brvious year. Company's net profit after tax was Rs.1,015.02 lacs as compared to Rs.1,099.83 lacs in brvious year resulting in marginally lower PAT of Rs.84.81 lacs for the year under review.

7. Material developments in Human Resources front, including number of people employed:

The Company believes in creating a workspace where diverse set of people can contribute and thrive. One of the factors that determine the direction of the people framework is the ever changing needs and the Company is constantly working towards providing a framework that is best suited towards this in partnership with business leadership. Employee Engagement and Employer branding is an area where the Company has initiated work during the year. Insights from the current, past and potential employees has helped in crafting the employee value proposition for the organisation. Crest Ventures is committed towards the development of its people.

As at March 31, 2016, Crest Group (including its subsidiary companies) had 96 employees including Managing Director. During the year, the Company added 12 employees, net of attrition.

Cautionary Statement

Statements made in the Management Discussion and Analysis describing the Company's projection, estimates and expectations may be interbrted as "forward looking statements" within the meaning of applicable securities, laws and regulations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent information or events.