MANAGEMENT DISCUSSION AND ANALYSIS

COMPANY OVERVIEW

KEI Industries Limited (hereinafter "the Company" / "KEI") is a leading Indian cable manufacturer, with strong brand equity and a robust business model that has continuously steered its growth over the years. The Company has a well-balanced nucleus of strengths, spanning a diversified product mix and a wide distribution network.

KEI's 400-strong product portfolio comprises a healthy mix of Extra High Voltage (EHV) cables (upto 220 kV), Low Tension (LT) and High Tension (HT) cables, Control and Instrumentation cables, Specialty and Rubber cables, Stainless Steel wires and winding, Flexible and Housing wires, Submersible cables. Its diverse range of products is designed to address the complete cabling needs of private and public sector customers across Power, Oil Refineries, Railways, Automobiles, Cement, Steel, Fertilizers, Textiles and Real Estate. The Company's products find utility in the domestic and overseas markets, lending it a distinctive position as one of the top three cable manufacturing companies in India.

The Company has strengthened its competitive edge through its foray into the Engineering, Procurement and Construction (EPC) business since 2008. In the EPC segment, KEI's offerings include execution of power transmission projects (of 66kV to 400kV sub-stations) on a turnkey basis, EPC of EHV and HV cable systems, electrical balance-of-plant for power plants and electrical industrial projects.

Having commenced production of EHV cables in 2010, KEI is today the third largest producer of these cables in India. The Company has a technical collaboration with Switzerland-based Brugg Kabel AG to manufacture EHV cables (ranging from 66kV to 220kV) at its Chopanki (Rajasthan) facility. KEI's state-of-the-art manufacturing facilities are located at Bhiwadi, Chopanki and Silvassa.

The Company is well positioned to harness the plethora of possibilities it sees opening up across its business segments, domestically and globally, as it continues to deliver on its promises to its customers.

ECONOMIC REVIEW

Calendar Year (CY) 2014 was a year of modest global economic growth. As per data released by the International Monetary Fund's April, 2015 World Economic Outlook, world output grew by 3.4% - similar to the levels achieved in CY2013. Advanced economies, in particular the US, led the growth - US economy grew 2.4% in CY2014 compared to 2.2% in CY2013. Growth in consumption expenditure, backed steady job creation and income growth, boosted US economy, which got a further fillip due to decline in crude oil prices and improved consumer confidence. The Euro area also witnessed recovery, albeit subdued, to grow by 0.9% during CY2014 vis-a-vis contraction of 0.5% in the brvious year. Lower oil prices, increase in exports and financial repair were the key drivers of growth in this region. However, risks of low inflation and stagnation persist in the Euro area. Growth was also subdued in Japan, where structural bottlenecks continue to plague the economy. The emerging markets and developing economies witnessed slowdown in economic growth - from 5% in CY2013 to 4.6% in CY2014, due to region-specific factors in China, Brazil and Russia. China's economy recorded a deceleration in growth from 7.8% in CY2013 to 7.4% in CY2014.

Though global growth is expected to increase in 2015 and 2016, the growth will remain modest relative to the br-global crisis. As per IMF estimates, world GDP is projected to grow from 3.4% in CY2014 to 3.5% in CY2015 and 3.8% in CY2016. Growth, going forward, will largely be driven by advanced economies, where growth is expected to increase from 1.8% in CY2014 to 2.4% in 2015 and 2016. The US economy is once again projected to clock the strongest growth at 3.1% in CY2015, driven by lower oil prices, fiscal consolidation and benign inflation. In the Euro area, efforts by the European Central Bank to bring back the region on a faster growth trajectory through supportive monetary measures is expected to boost growth to 1.5% in CY2015. In contrast, the emerging and developing economies are likely to witness decelerating growth in the absence of structural reforms to remove the existing bottlenecks. Growth is expected to slip from 4.6% in CY2014 to 4.3% in CY2015, before making a recovery to 4.7% in CY2016. While GDP growth in China is projected to slow down below 7% in CY2015 due to decline in investment growth, Russian economy is expected to shrink mainly on account of the declining oil prices. On the other hand, the falling oil prices are expected to benefit India, South Africa, South America and some other economies in emerging markets.

Indian economic scenario

Aided by the sharp decline in global crude oil prices, domestic macro-economic variables showed recovery during the FY15. Inflation, measured by the Consumer Price Index (CPI), eased from 8.3% in March, 2014 to 5.2% in

March 2015. Fiscal consolidation efforts narrowed the fiscal deficit in India to 3.99% of GDP in FY15 to Rs. 5.01 lakh crores, exchange rates remained stable and interest rates came down during the year. However, despite the improvement in market sentiment following the installation of a stable government with a strong electoral mandate, and notwithstanding recovery in key parameters, the Indian economy witnessed only a marginal pick-up in growth. As per the new data, rebased to 2011-12, released by the Central Statistics Office (CSO), GDP growth was at 7.3% in FY15 compared to 6.9% in FY14.

While economic revival has been moderate, there have been plenty of positives during FY15 which augur well for the economy, going forward. The oil price decline has kept inflationary levels within manageable limits and provided comfort in budgetary and fiscal management. The gradual reforms undertaken in India have enhanced business and investor confidence, encouraging capital inflows. FDI inflows are gaining traction, mirroring the increased confidence of foreign investors in the Indian economy. As per recent statistics, FDI inflows are likely to be around US$ 34.9 billion in FY 2015 - accounting for 1.7% of the GDP. The Indian rupee is also likely to remain stable with foreign exchange reserves recording an all time high of US$ 351.86 billion for the week ending May 1, 2015, and also as a result of strengthening of gold reserves. Further, the Current Account Deficit (CAD) reduced to 0.2% of the GDP in the last quarter of FY 2015 -the lowest in a year. Trade deficit was also under control, shrinking to $10.41 billion in May, 2015.

The index of industrial production (IIP), which includes the level of activities in manufacturing, mining, electricity and construction, grew by at 2.8% in FY15, from a contraction of 0.1% in FY14. More importantly, since April 2014, IIP growth has been negative only once, compared to six times in FY14. This lends credence to the government's view that revival is imminent. Strengthening this viewpoint, industrial activity picked up in April 2015, clocking 4.1% expansion, up from 2.5% in the brvious month.

Among the several measures undertaken by the government to provide a renewed thrust to economic growth is its flagship program - Make in India, a campaign to revive manufacturing in India. Faster clearances for projects in infrastructure and industry, government's clear focus on simplifying procedures for doing business in India, bringing in a stable and brdictable tax regime, de-licensing of defence items, allowing auction of coal mines to the private sector, closing allocations in the telecom sector at a fast pace and resolution of structural bottlenecks to facilitate investment are some of the other measures likely to improve business sentiment. The positive steps to implement Goods and Service Tax (GST) in place of several state and central tax laws on indirect taxation are also expected to boost confidence.

While India remains one of the fastest growing major economies in the world, the rate of economic growth in recent years has fallen short of expectations to remain below the country's potential. Nonetheless, given the positive reforms being implemented by the government, its high growth agenda and the various global developments such as sharp decline in crude prices and other major commodities, there is good reason to believe that FY16 will be a promising year for India. The International Monetary Fund (IMF) brdicts that India will emerge as the fastest growing economy in the world, with growth expected to rise to 7.5% in FY2016.

INFRASTRUCTURE & POWER SECTOR SCENARIO

Public Private Partnerships (PPPs) have emerged as an important growth driver for the infrastructure sector. Aided by government support, PPs are increasingly gaining prominence. PPPs tend to take lesser time for completion and at the same time, enable the government to leverage its limited public resources besides augmenting the efficiency of service delivery.

The importance accorded to infrastructure growth can be gauged from the measures announced in the Union Budget 2015-16 to fast-track projects.

• Rationalisation of capital gains regime for the sponsors exiting at the time oflisting of the units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).

• Targeted increase of Rs. 700 billion in infrastructure in 2015-16, over the brvious year.

• Proposal for the establishment of National Investment and Infrastructure Fund (NIIF) with an annual flow of Rs. 20,000 crore.

• Allocation of Rs. 25,000 crore corpus towards the Rural Infrastructure Development Fund (RIDF) for rural infrastructure.

• Tax-free infrastructure bonds for the projects in the rail, road and irrigation sectors.

The government is also revisiting the PPP model lower the risk for the private developers, which will facilitate fast-tracking of projects.

The Power sector has also received a major boost in the Budget proposals, which include extension of 10-year tax holidays on projects encompassing power generation, transmission or distribution; allocation of funds towards Ultra Mega Solar Power Projects and award of projects through a transparent auction system, among others -thereby, improving the attractiveness of the new investment in the power sector.

The Mega Power Policy announced by the Government in February, 2014 is also expected to further augment growth in the sector. Besides approving changes for provisional mega power certified projects, the Policy introduced several key amendments for the sector. Developers are now required to tie-up 65% of installed capacity/net capacity through competitive bidding and 35% of installed capacity/net capacity under regulated tariff, as per specific Host State Policy. The Policy makes it necessary for approval to be taken by the respective regulators under the long-term Power Purchase Agreements (PPA) with Discoms or State-designated agencies. Other amendments relate to extension of completion of date of import of provisional mega projects for tax related purposes and one-time dispensation, limiting to first 15 projects (19,000 MW), located in states having mandatory host state power to tie-up policy of PPAs under regulated tariff.

GENERATION, TRANSMISSION & DISTRIBUTION

Power generation

Despite a multifold increase in installed capacity - from 1,713 MW in 1950 to 2,74,818 MW as on 30th June, 2015 (<http://powermin.nic.in/power-sector-glance-all-india>) -the 12th Five Year Plan (FYP) assessment of capacity addition required to meet the demand shortage by the end of the Plan stands at 88,537 MW. While FY 2012-13 witnessed highest ever annual capacity addition of 20,622.8 MW (against the target of 17,956.3 MW), FY 2013-14 saw an addition of 17,825.1 MW against the target of 18,432.3 MW. FY 2014-15 has seen an addition of 12,510.4 MW*, taking the aggregate capacity addition to 50,958.3 MW during the 12th FYP (Source: Working Group on Power for 12th Plan, Planning Commission) *Upto 15.01.2015

Ultra Mega Power Project initiatives

In order to meet the growing needs of the economy, there is a requirement to double the power generation capacity every ten years for the next three decades at least. This has triggered the need for development of large capacity projects to meet the requirements of the States. The proposed development of five coal-based supercritical Ultra Mega Power Projects (UMPPs), having a capacity of about 4,000 MW each, is a step in that direction. These projects are proposed under tariff-based competitive bidding route using super critical technology on build, own, operate basis, and are aimed at substantially reducing power shortages in the country. The FY 2015-16 Union Budget laid emphasis on a revived UMPP policy approach through a plug-and-play model.

At brsent, UMPPs of Sasan (Madhya Pradesh), Mundra (Gujarat), Krishnapatnam (Andhra Pradesh) and Tilaiya ( Jharkhand) have already been transferred to the identified developers and are at different stages of implementation.

The Mundra UMPP (5x800 MW) is commissioned and operational. Three units of the Sasan UMPP (3x660 MW) have just been commissioned. The remaining units (except the last unit of the Tilaiya UMPP) are expected to be commissioned and operational during the Twelfth Plan. These large projects are likely to unlock an investment potential of around X 1 trillion.

Some recent initiatives to augment power generation

• Approval of 100% foreign equity in generation, transmission & distribution and trading in the power sector without any upper ceiling on the quantum of investment.

• Fuel Supply Agreements (FSAs) to be signed with the Ministry of Coal/Coal India Limited for a total capacity of 78,000 MW, including tapering linkages; as on May 2015, FSAs have been signed for 162 units, totalling capacity of around 74,000 MW.

(Sources: <http://articles.economictimes.mdia> times.com/ 2014 10-19/news/551973341fsas-fuel-supplycoal-india; <http://articles.economictimes.indiatimes.com/> 2015-05-15/news/62192174 1 fuel-supply-agreements-fsas-brsidential-directive)

• Allocation of new coal blocks to NTPC for its power projects. (Source: <http://businesstoday.intoday.in/story/> coal-mines-allotted-to-central-state-psus/1/

217277.html)

• Approval of pass-through mechanism for the concluded Power Purchase Agreements (PPAs) (14,000 MW-Case I and Case II post 2009 plants) in June 2013.

• Incorporation of PPA condition for coal block allocation at the time of executing mining lease with Independent Power Producers (IPPs) for coal block allocation, so that the benefits of low cost coal can be passed on to the consumers

• Launch of Deen Dayal Upadhyaya Gram Jyoti Yojana for electricity feeder separation and strengthening sub-transmission and distribution systems in rural areas. (Source:<http://> www. energy sector.in/power-news/5-government-initiatives-to-improve-power-sector)

• Additional efforts by the Ministry of Coal to come out with a fresh linkage policy to avert disruption in power generation for the IPPs. (Source: <http://wwww.newindianexbrss.com/> states/odisha/Fuel-starved-IPPs-Await-New-Coal-Policy/2015/05/19/article2822386.ece)

• Passage of the Coal Mines Bill in Lok Sabha in March 2015, which provides for allocation of coal mines that were cancelled by the Honourable Subrme Court in 2014. (Source: <http://wrww.prsi.ndia>ww.prsi.ndia org/theprsblog/ Rs.p=3487)

• Further improvement of the system of Third Party Sampling to monitor coal quality. (Source: <http://pib.nic.in/newsite/PrintRelease> .aspxRs.relid=114221)

Expansion in transmission system and capacity

In order to ensure that power reaches the end-consumers, transmission and distribution capacities are also planned for augmentation, commensurate with the addition of generation capacities. The 12th FYP envisages 37,800 MW of inter-regional transmission capacity addition (out of which 20,300 MW has been added in the 12th FYP so far, taking the cumulative capacity to 47,450 MW), along with about 1,09,000 circuit kms. (ckm) of transmission lines (out of which 60,941 ckm has been added in the 12th FYP so far, taking the cumulative capacity to 3,18,422 ckm), 13,000

MW High Voltage Direct Current (HVDC) terminal capacity (no progress in the 12th FYP as on date), AC transformation capacity of 2,70,000 MVA and a quantum jump in 765 kV Transmission systems. (Source: Working Group on Power for 12th Plan, Planning Commission)

Creation of a National Grid

The need to maintain the stability of the electricity grid cannot be understated. Such stability is necessary to manage transmission more effectively in order to meet the growing demand for power. India has been finally able to fulfill its dream of 'One Nation One Grid', with South India joining the National Grid Connectivity, thus integrating the entire country into one seamless network for delivering power. The integration was achieved through the commissioning of the Raichur-Solapur 765 kilovolt (kV) single-circuit transmission line by state-owned Power Grid Corporation of India Ltd. With this, the Indian power sector has now the largest operating synchronous grids globally, with about 232 GW of installed power generation capacity. (Source: Livemint.com India is now one nation, one grid published on 1st January, 2014)

Distribution

Distribution plays a crucial role in the overall functioning of the power sector. The Government has implemented various schemes aimed at benefiting power consumers. These include

• Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) - Rajiv Gandhi Grameen

Vidyutikaran Yojana (RGGVY) has now been subsumed under DDUGJY. The programme has been launched with the objectives of facilitating Power Distribution Companies (Discoms) to judiciously roster the supply to agricultural and non-agricultural consumers; strengthening of sub-transmission & distribution infrastructure and metering in rural areas.

• Integrated Power Development Scheme (IPDS) - Restructured Accelerated Power Development and Reforms Programme (R-APDRP) now stands subsumed under IPDS initiative. The programme has been launched with the objective of strengthening the sub-transmission and distribution network and metering of distribution/feeders/transformers/ consumers in urban areas.

Apart from availability and access, the Government has recognised the need for supplying reliable and quality power by building adequate reserves and redundancies across the value chain to meet unforeseen exigencies. (Source: Government of India's Economic Survey 2014-15)

CHALLENGES AND OUTLOOK

The Government's targets for the Power sector are critically dependent on consistent fuel supply (coal as well as gas), better financial health of the State Electricity Boards (SEBs) and making PPAs of IPPs economically viable. All these factors also affect the capital expenditure program in the Power sector. To manage these concerns, some steps have been initiated for restructuring Discoms' finances, strengthening governance standards, rationalising tariff structure and optimising power procurement cost.

Retail Division

The retail division, comprising household wires as well as LT and HT cables, has witnessed considerable growth in recent years, currently contributing around 27% to the Company's revenues.

A wide distribution network, sbrad across India and overseas, has continuously driven the division's expansion, enabling KEI to position itself as a specialist cable manufacturer. Backed by the Company's strong brand equity, its dealer network of 900+ has led the aggressive growth plans of KEI, particularly in the Northern and Western regions of India. The Company's dealer-driven expansion plan is based on a pan India approach seeking to create new avenues of collaborative growth with realty developers, building contractors and architects, among others.

With a new retail head infusing fresh energies into the business on the strength of his 20 years of experience, the Company successfully grew the retail segment through the year under review. A strong marketing push, backed by intensive brand promotion and multi-media communication strategy, led to increase in house wire sales during FY15, resulting in revenue growth in this segment by almost 21%.

As the Company continues to scale up the value chain and intensify its brsence in this segment, the focus on augmenting relationships with customers is also being enhanced. KEI has expanded its market strategy to encompass TV advertising (promotions have already commenced in FY 2015-16), thereby opening up another large window to strengthen its brand recall.

Exports Division

With operations in more than 47 countries, KEI has a strong exports base, which has witnessed consistent CAGR growth in recent years. Though the division witnessed some slowdown in FY15, the inherent strengths of the business and the overseas opportunity matrix shall continue to drive exponential growth in this segment in the coming years.

Exports declined to X 147 crores in FY15, from X 197 crores in the brvious fiscal, mainly on account of delay in execution of several contracts. This was largely attributable to customer-related issues and disturbances in the concerned markets. With these issues having since been resolved, execution of the contracts is back on track post March 31, 2015, and the exports division is consequently set to get a fresh boost.

Cognizant of the immense potential for growth in the overseas markets, KEI continues to strengthen its global brsence, with offices set up in Singapore, Nigeria and Kazakhstan, in addition to Dubai/Abu Dhabi. The Company also operates in Australia through agents. KEI's overseas product basket consists of EHV (66kV to 220kV), MV (6.6kV to 33kV) and LV (<6.6kV), with customised solutions at competitive prices a key driver of growth. The Company is continuously reaching out to new clients in these markets through several touch points, including participation in international exhibitions.

Institutional Division

The year marked a big leap in the EHV institutional business for the Company, which has garnered a substantial Rs. 200 crores worth of orders from various customers. The turnover from this business for the year stood at Rs.  59 crores. EPC contracts also added to the revenue kitty, contributing Rs.  298 crores to the Company's turnover.

Outlook

The demand for cables is expected to go up significantly as the Government of India plans to spend $1trn on infrastructure in the next five years. Growth in this sector is likely to get a boost as a result of major expansion in steel, cement, oil & gas, energy, automobiles, highways, ports, airports, SEZs, housing, IT parks, hotels, shopping malls and BPOs. Retail will consequently be a major biggest beneficiary in the cables industry. Power transmission and distribution are also set for increased thrust, further facilitating growth in the cables industry. The institutional cables segment, in particular, will get a huge fillip as a consequence of growth in both, infrastructure and power segments. As the cables demand rises, the Company will also continue to increase the capacity utilisation at its plants to bring in better operating leverage and improved margins.

QUALITY, ENVIRONMENTALAND OCCUPATIONAL HEALTH & SAFETY MANAGEMENT SYSTEM STANDARD

KEI's Management System is accredited with various key certifications, awarded by Det Norkse Veritas (DNV), a world leading independent certification body, on the basis of periodical audits.

ISO 9001:2008

ISO 9001 certification endorses the Company's Quality Management System's compliance to the best practices standard. It provides a framework for enhanced customer and product focus, increased process performance and greater effectiveness. The emphasis is on continual improvement and objective measurement. While helping the Company to achieve consistency, improve internal processes and fulfill contractual obligations, the certification lends competitive advantage and increases customer confidence for the Company.

OHSAS 18001:2007

OHSAS 18001:2007 certification proves that the Management System of the Company is built to ensure proactive protection of the health and safety of the workforce. It also underlines the Company's commitment to the health and safety of its employees, reduces overall liability as well as occurrence of ill health and injuries, and provides assurance that legal compliance is effectively managed.

ISO 14001:2004

ISO 14001 certification demonstrates that the Company's Environment Management System has been measured against the best practice standard and is found compliant. It indicates the Company's systematic approach towards minimizing the negative impact of its business on the environment and the community around it. The Company is cognizant of the fact that an effective environment management system can significantly reduce the environmental impact of its business, increase operational efficiency and identify opportunities for cost savings, and hence the Company is committed to continuous strengthening of its Environment Management System.

INTERNAL CONTROLS & SYSTEMS

The Company has in place a robust and streamlined system of internal controls, ensuring regular:

• Authorization, recording and reporting of transactions.

• Recording and safeguarding of assets against unauthorized use or disruption.

• Maintenance of proper accounting records and reliability of financial information.

RISKS AND CONCERNS

Cognizant of the importance of controlling and regulating the risks - both expected and unforeseen - faced in the conduct of its business, the Company has developed a detailed risk management strategy encompassing proper and in-depth identification, assessment and prioritization of risks. This is followed by speedy mobilization of resources to minimize, monitor and control the probability of unfortunate and unforeseen events. Listed below are some of the major risks to which the Company is exposed, and the various measures in place to mitigate the same.

HUMAN RESOURCES

People are vital engines of the Company's growth strategy and the Company has a well-planned strategy in place to nurture talent. With a strong focus on the development of its human capital assets, the Company is continually investing in building the same. Its well documented HR strategy has given the Company a strong strategic edge as it strives towards operational excellence. Regular HR initiatives include skill mapping and matching, as well as assessment of training & development programs. Such assessment helps in ensuring proper performance appraisals.

Adequate training, skill development and mentoring programs are designed to bridge gaps, if any. The Company has set for itself clear objectives and goals, which help lend objectivity to performance. During the year, industrial relations continued to be cordial.

DISCLAIMER CLAUSE

Statement in the Management Discussion & Analysis describing the Company's objectives, projections, estimate, expectations are 'forward -looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operation and include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the government regulations, tax, corporate and other laws and other incidental factor.