MANAGEMENTS DISCUSSION AND ANALYSIS

CAVEAT:

This section of Annual Report has been included in adherence to the spirit enunciated in the code of Corporate Governance approved by the Securities and Exchange Board of India. Though, utmost care has been taken to ensure that the opinions exbrssed by the Management herein contain its perceptions on most of the important trends having a material impact on the company's operations, no rebrsentation is made that the following brsents an exhaustive coverage on and of ail issues related to the same. Further, the discussion following herein reflects the perceptions on major issues as on date and the opinions exbrssed here are subject to change without notice. The Company undertakes no obligation to publicly update or revise any of the opinions or statements exbrssed in this report, consequent to new information, future event, or otherwise.

INDUSTRY OVERVIEW:

The export of shrimp which accounts for 40% in volume terms of total sea food exports reported a marginal increase of 3% in exports in quantitative terms as compared to brvious year. However, the overall Indian seafood product exports growth during 2015-16 is negative in quantitative terms more particularly for the export of fish, cuttlefish, dried fish and live items.

The total sea food exports were approximately Rs.30,000 crores in 2015-16 as against Rs.33,442 crores in 2014-15.

Like brvious years, shrimp exports remained as a major contributor to the total basket of sea food exports accounting for 66% in value terms and 40% in volume terms of the total sea food exports from the country in 2015-16. The total shrimp exports were around 370000 MT in the year 2015-16 as compared to 357505 MT in 2014-15 in volume terms. In value terms the shrimp exports were Rs.19,400 crores as against Rs.22,468 crores in 2014-15. The reduction in exports in value terms is on account of reduced international prices.

The major export market has been USA followed by Europe, Japan and South East Asia during 2015-16 for shrimp exports like in brvious year.

For five consecutive years from 2010-11 to 2014-15 the shrimp culture industry registered growth of 20% on an average and doubled the exports from 151465 MT in 2010-11 to 357505 MT in 2014-15. However, in the current year i.e 2015-16 the production and exports remained stagnant at almost same levels as in 2014-15. The main reason for no growth in the shrimp output is lack of adequate rainfall and diseases to culture during the 2nd half of the year 2015-16 in major shrimp producing regions.

However, the rains in December'15 in Tamilnadu and Andhra region have replenished the water bodies and water is available in good quantity for the first crop which started from March-April'16 and progressing on expected lines. The farmers of other regions where disease was reported in October-December period have done extensive pond brparation and brventive measures during the 3-4 months period and their first crop of the season is also progressing well.

We expect the shrimp culture to grow around 10% in 2016-17 over brvious year 2015-16.

STRENGTHS, WEAKNESS, OPPORTUNITES AND THREATS:

STRENGTHS:

The Company has been in the field of aqua culture industry engaged in manufacturing high quality feed for shrimps, operating Vannamei hatchery and processing & export of shrimps. The Company has also well trained technical team to provide technical support to the farmers and assist farmers with information and knowledge of global standard aquaculture practices and also updating developments in culture methods and processes. Presence of strong dealership network, former base and committed work force stands in good stead in sustained growth of company's business. Added to this, the company has strong technical and marketing tie up with THAÏ UNION Group of Thailand to strengthen company's capabilities in the field of aqua culture. The global shrimp consumption is also expected to increase in future, assuring consistent market.

The Company is operating a Vannamei hatchery on a leasehold hatchery producing Vannamei seed to supply good quality Vannamei seed to the farmers. As informed in the brvious year discussion, Company has acquired land in Village Gudivada, near Visakhapatnam, Andhra Pradesh for setting up 400 million shrimp seed hatchery which will be implemented in two phases of 200 million each. The formalities for obtaining necessary statutory approvals are completed and the construction for 1st phase of project is planned to commence from September, 2016 and completed by March,2017. It is planned to start operations of ls1 phase from April, 2017. The 2nd phase of the project work is scheduled for commencement from January, 2017 and complete byJuly, 2017. The project has been delayed due to certain unforeseen circumstances and also delay in obtaining the statutory approvals.

In the brvious year discussion we had stated about our plan to set up shrimp feed manufacturing plant with 1,25,000 MT per annum capacity in Andhra Pradesh. We are glad to share with you that your Company acquired land for the project in September'15 at Village Bandapuram, West Godavari District in Andhara Pradesh. This location is 20 kms away for our existing shrimp feed manufacturing plants at Kowur. The project work commenced in December'15 after obtaining ail the statutory approvals and is expected to be completed in July, 2016 and commence trial production.

Divestment of Shrimp Processing and Export Division: In order to secure global recognition for shrimp processing and export business, the Company during the year transferred this division to its own new subsidiary' Avanti Frozen Foods Private Limited'. Thai Union Group will join this Company with 40% staketo extend support in this business. The subsidiary Company is in the process of implementing a new state of art shrimp processing facility atYerravaram in East Godavari District of Andhra Pradesh. This facility is expected to commence operations from September, 2016.

WEAKNESS :

Although shrimp culture has doubled in the past 5 years, the shrimp culture industry is continued to be concerned about inadequate infrastructure facilities, particularly inadequate power supply to aquaculture farmers and inadequate cold store chain available for farmers which are matters of great concern. Though, it is similar to agriculture in many respects, the recognition of aquaculture on par with agriculture is evading government's approval in order to avail some of the benefits available to agriculture sector.

OPPORTUNITES:

The sea food consumption is increasing ail over the world as compared to other forms of meat. With long coast line, India is ideally suited for development of seafood industry. A planned development would provide abundant opportunities for seafood industry. The successful adoption of Vannamei Species shrimp culture needs to be replicated for other species of exportable fishes like Seabas, Krouper, red tilapia, Halibut and crab for broad basing the export basket.

THREATS:

The aqua culture activity is dependent on climatic conditions brvailing during season to season, which is unbrdictable. Natural calamities like floods, cyclones, during the culture season can have serious impact on the prospects of successful culture. Inspite of technical advancement and development of Specifies Pathogen

Free (SPF) seed, the possibilities of the shrimps getting affected by virus and diseases cannot be ruled out.

Volatility of international prices of shrimps and fluctuating foreign exchange rates, US anti-dumping duty and US Countervailing Duty continues to bethe major areas of threat for the industry.

However, development of potential domestic market to support exports, strict adherence of traceability, scientific pond management, a judicious approach on prices and forex management is expected to reduce the impact of threats to a great extent.

OUTLOOK:

Feed Market:

First crop of Shrimp culture in current year i.e., 2016-17 is progressing well. Reports indicate there is 10% growth because of increase in the area of culture in East and West Godavari Districts in Andhra Pradesh and change over of black tiger cultivating farms to Vannamei culture in Odisha and West Bengal. The international shrimp prices are also reasonable and remunerative enough for the farmers to go ahead with the culture.

Processing & Export of Shrimp:

During the year your Company divested its Shrimp Processing & Export Division to its subsidiary M/s. Avanti Frozen Foods Private Limited (AFFPL) by way of slump sale, under Business Transfer Agreement. This was done in order to improve business efficacy and to bring global recognition to Shrimp Processing Business. The effective date of transfer of the Shrimp Processing & Export Division to AFFPL was 01.11.2015. Consequently AFL has to transfer the statutory and regulatory licenses within India and in USA to AFFPL so as to carry on the Business in AFFPL's name. The process of obtaining the approvals from ail departments is a lengthy process. Once the inland approvals are obtained, AFL has to approach US Department of Commerce for 'Changed Circumstances Review' to permit transfer of name from AFL to AFFPL in their records. This will allow AFFPL to export to US at current Anti Dumping Duty of 2.96% which is brsently applicable to AFL. In the absence of this transfer, ail exports to USA by AFFPL will attract 10.17% ADD. It is given to understand that US DOC generally takes around 3-5 months time for effecting this change. In order to maintain the continuity of the business during this change over process, your Company is continuing the Shrimp processing & Export business in its own name on behalf of AFFPL.

During the year 2015-16 due to reduced availability of shrimp because of diseases and lack of water issues the exports from the Country are at almost at the same levels as in 2014-15.

However, your Company was able to procure raw material because of better network and goodwill it enjoys with the farmers and recorded increase of 22% in exports in volume terms.

In the current year i.e. 2016-17, brsently the international prices are at reasonably good levels and orders are being placed consistently. So we expect 2016-17 will be a good year for material availability and exports.

POWER:

The Company has investment in the following power projects :

(a) The 3.2 MW Wind Mill Project in Chitradurg, Karnataka State is operational and has generated 49.97 lac units during the year.

(b) Srivathsa Power Projects Pvt Ltd, is a 17.2 MW gas based independent power project in which company holds 49.99% shares. The unit was not in operation since July, 2014, as gas supplies were stopped by Gas Authority of India Limited (GAIL) due to blast in their gas supply pipeline.

The gas supply was resumed from 27.01.2016 and now the plant is operational. During the year 2015-16, the Company reported a turnover of Rs.485.66 lakhs and a loss of Rs.212.96 lakhs after charging interest and debrciation.

(c) Patikari Power Private Limited, the 16 MW Hydel Power Project in Himachal Pradesh with Company's investment of 25.88% as a joint venture project, was commissioned in February'08. During the year 2015-16, the Company generated 564.80 lakhs saleable energy units, yielding a gross sales income of Rs.1270.73 lakhs and a net profit of Rs.11.24 lakhs after charging interest, debrciation and tax.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The company has a proper and adequate System of internal controls to ensure that ail assets are safeguarded and protected against loss from unauthorized use or disposition and that ail transactions are properly authorized recorded and reported correctly. Further, the internal control System is designed to ensure that all the financial and other records are reliable for brparing financial statements and for maintaining accountability of the assets.

In addition, Company has an internal Risk & Compliance Department headed by a Chartered Accountant having 18 years of experience in the relevant field. The department is responsible to ensure compliance of ail the statutory requirements by the company. This department is also responsible for internal audit and periodical risk appraisal, internal as well as external, of ail the functional departments in the organization. On the basis of the appraisal, potential risks are identified and brventive measures are initiated depending on the perceived gravity of the risk.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

The financial statements have been brpared in compliance with the requirement of the Companies Act, 2013 and Generally Accepted Accounting Principles (GAAP) in India. In the year under consideration, your company reported profit of Rs.23,257.63 lakhs before tax adjustments as compared to profit of Rs.17,984.68 lakhs in the brvious year.