MANAGEMENT DISCUSSION AND ANALYSIS

OVERVIEW

In this document, the terms 'Company', 'Polyplex' and 'Group' refer to the consolidated operations of Polyplex Corporation Ltd.

Polyplex is one of the leading integrated producers of thin Polyester (PET) films in the world. Polyester is used in everyday life - when we eat or drink, at home, in the office, when we shop, etc. The largest application of thin PET films is flexible packaging. Better packaging not only improves the shelf life of the products but is also essential for improving product appeal in a highly competitive consumer goods industry.

Polyplex also offers other substrates (BOPP, CPP and Blown PP/PE) used in the flexible packaging industry. BOPP, CPP and Blown PP films are polypropylene (PP) based films, which are br-dominantly used in packaging besides certain industrial applications like tapes, labels and thermal lamination. This has enabled Polyplex to offer a variety of products and solutions to customers. Flexible packaging companies supply their laminates to consumer product companies for packaging of a diverse range of products like food products, household goods, personal care products, etc.

As part of its concentric diversification strategy, the Company has entered into thick PET film suitable for a range of industrial applications including imaging & graphics, photovoltaics and flat panel displays.

Over the past few years, the Company has ventured into downstream businesses like Metallizing, Silicone Coating, Extrusion Coating, & Offline Chemical coating. This has enabled Polyplex to offer products for a variety of applications - general packaging, specialty packaging, electrical, liners, roofing and a whole gamut of industrial applications like hot stamping foil, flexible air conditioning ducts, book lamination, yarn, etc. The new Blown PP line at Thailand has further expanded the product line of its silicone coated films. The Company has also introduced an innovative non tearable polyester film in India designed especially for digital print media segment for photo albums, commercial printing, promotional & customized digital printing, label and flexible packaging applications.

Other ventures of the Company include the business of marketing, sales & distribution of packaged beverages and food products in India and a recycling unit in Thailand to provide sustainable solutions for film based process waste.

PET film is made from Polyester resin (chips), which in turn is produced from Purified Terephthalic Acid (PTA) & Mono-Ethylene Glycol (MEG). The Company produces its own PET resin.

GLOBAL OPERATIONS

Polyplex has attained a leadership position in the thin PET film business with manufacturing and distribution operations in six countries viz. India, Thailand, Turkey, USA, China & Netherlands, which along with warehouses in Poland, Spain, Germany, Italy & Mexico facilitate active sales in all major regional markets/customers across the globe.

The current Group structure can be depicted as follows:

Polyplex (Asia) Pte. Ltd. (PAPL)

PAPL was established as a 100% subsidiary of PCL in July 2004 and has a shareholding of 34.5% in PTLason March 31, 2015. PAPL is, inter-alia, engaged in trading of various plastic products. The issued and paid up capital of PAPL as of March 31, 2015 isUSD1.13million.

Peninsula Beverages and Foods Company Private Ltd. (PBF)

PAPL acquired 99.90% shares in PBF in February 2013. In May 2013, PBF, which is in the business of trading in packaged beverages and food products became the wholly owned subsidiary of PAPL. The issued and paid up capital of PBF as of March 31,2015 is Rs. 987.44 Lacs.

PAR LLC (PAR)

PAR LLC is a United States Limited Liability Company incorporated in Texas in May 2011. The Company is 100% owned by PAPL. The Company was set up for providing shared services to the group companies. The issued and paid up capital of PAR LLC as ofMarch 31,2015 standsatUSD2.2 million.

Polyplex (Thailand) Public Co. Ltd. (PTL)

PTL was incorporated as a private Company in March 2002 to manufacture and distribute PET film. In August 2004, the Company became a public Company and subsequently listed on the Stock Exchange of Thailand (SET) in December 2004. As on date, PCL has 51% stake in the Company through both direct and indirect shareholding and the balance 49% is with the general public. The issued and paid up capital of PTLas of March 31,2015 stands atTHB 800 million.

Polyplex (Singapore) Pte. Ltd. (PSPL)

PSPL was established in July 2004 as a wholly owned subsidiary of PTL, which further invested in Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sjrketi (PE). The issued and paid up capital of PSPL (including Preference Share Capital) as of March 31,2015 is Euro 9.14 million.

Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi (PE)

PSPL had incorporated a 100% owned subsidiary Company, PE in Turkey for setting up a Greenfield polyester film plant to cater to the European and other proximate markets. The commercial operations started in December 2005 with the start up of the first thin PET film line. The issued and paid up capital of PE, including additional contribution from PSPL, as of March 31, 2015 stands at Euro 8.83 million.

Polyplex Trading (Shenzhen) Co. Ltd (PTSL)

In September 2009, PTL invested in the setting up of a wholly owned trading Company in Shenzhen, China, through PSPL. The decision to invest in the setting up of the trading Company in China was a strategic initiative to establish the Company's brsence in China, which is one of the largest and the fastest growing market in this industry. The issued and paid up capital of PTSLasatMarch 31,2015 isUSD0.4million.

Polyplex (Asia) Pte. Ltd. (PAPL)

PAPL was established as a 100% subsidiary of PCL in July 2004 and has a shareholding of 34.5% in PTLason March 31, 2015. PAPL is, inter-alia, engaged in trading of various plastic products. The issued and paid up capital of PAPL as of March 31, 2015 isUSD1.13million.

Peninsula Beverages and Foods Company Private Ltd. (PBF)

PAPL acquired 99.90% shares in PBF in February 2013. In May 2013, PBF, which is in the business of trading in packaged beverages and food products became the wholly owned subsidiary of PAPL. The issued and paid up capital of PBF as of March 31,2015 is Rs. 987.44 Lacs.

PAR LLC (PAR)

PAR LLC is a United States Limited Liability Company incorporated in Texas in May 2011. The Company is 100% owned by PAPL. The Company was set up for providing shared services to the group companies. The issued and paid up capital of PAR LLC as ofMarch 31,2015 standsatUSD2.2 million.

Polyplex (Thailand) Public Co. Ltd. (PTL)

PTL was incorporated as a private Company in March 2002 to manufacture and distribute PET film. In August 2004, the Company became a public Company and subsequently listed on the Stock Exchange of Thailand (SET) in December 2004. As on date, PCL has 51% stake in the Company through both direct and indirect shareholding and the balance 49% is with the general public. The issued and paid up capital of PTLas of March 31,2015 stands atTHB 800 million.

Polyplex (Singapore) Pte. Ltd. (PSPL)

PSPL was established in July 2004 as a wholly owned subsidiary of PTL, which further invested in Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sjrketi (PE). The issued and paid up capital of PSPL (including Preference Share Capital) as of March 31,2015 is Euro 9.14 million.

Polyplex Europa Polyester Film Sanayi Ve Ticaret Anonim Sirketi (PE)

PSPL had incorporated a 100% owned subsidiary Company, PE in Turkey for setting up a Greenfield polyester film plant to cater to the European and other proximate markets. The commercial operations started in December 2005 with the start up of the first thin PET film line. The issued and paid up capital of PE, including additional contribution from PSPL, as of March 31, 2015 stands at Euro 8.83 million.

Polyplex Trading (Shenzhen) Co. Ltd (PTSL)

In September 2009, PTL invested in the setting up of a wholly owned trading Company in Shenzhen, China, through PSPL. The decision to invest in the setting up of the trading Company in China was a strategic initiative to establish the Company's brsence in China, which is one of the largest and the fastest growing market in this industry. The issued and paid up capital of PTSLasatMarch 31,2015 isUSD0.4million.

In July 2011, PAH was established in USA as an Investment and Trading & Distribution Company. PAH is a 100% subsidiary of PTL. PAH has further invested in Polyplex (USA) LLC, which is the manufacturing/distribution entity. The issued and paid up capital of PAH (including the Additional Paid-In Capital) as on March 31,2015 is USD 29.62 million.

Polyplex USA LLC (PU)

Polyplex USA LLC was established in July 2011 as a 100% subsidiary of PAH. PU was incorporated to expand the global manufacturing footprint into North America by setting up a thin PET film line, a continuous process PET chips plant and metallizing capacity. The members' contribution which rebrsents the paid up capital of PU is USD 29.5 million as on March 31,2015.

EcoBlue Ltd. (EL)

Eco Blue Ltd., a 74% subsidiary of PTL was established in October 2012 in Thailand to provide end-of-life solutions for film-based process waste. The paid up capital of Eco Blue Ltd as at March 31,2015 isTHB 10.65 million.

Polyplex Europe B.V. (PEBV)

PEBV was established in Netherlands in April 2013 as a 100% owned distribution subsidiary of PTL, to better service EU customers for Polyplex products. The paid up capital of PEBV as at March 31,2015 is Euro 0.2 million.

Polyplex Paketleme (Jozumleri Sanayi Ve Ticaret Anonim SJrketi (PP)

In September 2013, PE established a Company in Turkey, named Polyplex Paketleme ((ozumleri Sanayi ve Ticaret Anonim SIrketi (PP) holding 100% of its share capital for trading of PET Film, PET chips and other products of the Company to cater to the need of domestic market more efficiently. The registered share capital of this Company is Turkish Lira 100,000 as of March 31, 2015, which has been fullycalled and paid up.

PET FILM BUSINESS

The traditional method of segmenting the PET films business has been thin and thick films based on distinct applications and lack of supply side substitutability. Thick films generally refer to films with a thickness range of 50-350 micron whereas films below 50 micron are characterized as thin film. In recent years, several intermediate thickness (23-150 micron) lines have also been installed. The PET film industry has seen many structural changes over the past few years with Asian countries dominating production and consumption.

All these years, Polyplex was brdominantly operating only in thin PET films, which rebrsents three-fourth of the overall global PET film demand. The growth in flexible packaging has over the years shifted the production and usage patterns of thin PET films. The Company's relevant segments of Packaging, Industrial and Electrical constitute 99% of the total thin demand and the traditional high-end technology segments like magnetic media, printing media and imaging segments constitute less than 1% of the total consumption of thin PET films due to evolution of technology.

Commercial production has already ramped up at the Company's first Thick Film line at Thailand during the year under review. The first film line in India had also been revamped in December 2011 to produce intermediate thicknesses as well as specialty films. This has enabled Polyplex to straddle the entire spectrum of end-uses by accessing the traditional industrial & electrical applications for thick films as also targeting several new & promising applications in optical and photovoltaic segments.

Thin PET Film

The largest application of thin PET films is flexible packaging, which accounts for 72% of the total thin films used. Flexible packaging plays a key role in source reduction on the principle of 'use less packaging material in the first place' which has ensured higher-than-GDP growth in the flexible packaging industry across the globe. PET film, being a higher-end brferred substrate within packaging, has grown more rapidly than other substrates, averaging around 7-9% per annum. Demand in packaging is quite resilient as it relates to consumption of food products and consumer staples which are to a large extent non-discretionary in nature. This characteristic of the packaging segment has resulted in steady growth in demand, despite economic slowdown/muted growth witnessed in the past.

An increase in the purchasing power in the developing countries has brought with it a rise in the per capita consumption of packaging material. The key drivers of demand growth in these regions are the increase in the share of organized sector in retailing, increasing consumerism, population growth and lifestyle changes arising out of higher disposable incomes, need for brand differentiation, environmental awareness, continuous product innovations, health awareness, favorable demographics and the resulting need for better and more convenient packaging. However, as compared to the mature markets, per capita consumption of packaging material in developing countries is still very low.

Asia is the largest market for thin PET films with more than three quarters of the global consumption in this region. Within Asia, India & China are the largest consumers of PET films, growth in Asia is driving the overall global marketplace.

A similar trend is also evident on the supply-side with most of the new capacities being added in low-cost developing countries. A large proportion of the new capacity is also focused on the packaging segment, with an emphasis on high productivity and low operating costs. This has adversely impacted the traditionally large producers of PET film operating with high cost structures, who have chosen to concentrate in niche technologies like films for LCDs, solar panels, touch screens and specific high-end applications within packaging. While trade defense measures like anti-dumping and countervailing duties have been frequently invoked in the past, in an increasingly competitive market environment, they were unable to address the inherent problems of old and less efficient assets operating in the developed countries producing standard films.

Since the past 3-4 years, the thin PET film industry is witnessing a significant oversupply scenario due to excessive capacity addition following the exceptionally high margins witnessed in the PET film industry in 2010/2011. The supply overhang is expected to continueforsometime.

Global thin PET film growth rates are expected to be at about 7-8% for the next few years, with the demand in India & "Other Asia" growing at a higher rate of 9-10%. Companies with consistent quality products, diversified product portfolio, access to international customers and a better supply chain model stand a better chance of participating in the market growth and improving/maintaining their margins above the industry averages.

During the years 2005 to 2012, global average capacity utilization of PET film manufacturers was in the range of 80-90% of rated or nameplate capacity. Since the year 2013 utilization rates had declined sharply and reached to the level of 67% in the year 2014 due to excess capacity built up in the industry. The levels of 80-90% are considered high being close to the full machinery capacity. In practice, some producers produce lower than the nameplate capacity due to the long use and hence the poor condition of machinery while some produce with capacity utilization even higher than 100% of the nameplate capacity using new and modern machinery and based on their long-time expertise and experience.

Thick PET Film

The demand for thick PET film is mainly concentrated in Central & East Asia region which accounts for around 75% of global consumption. Electrical and Industrial are the key end-use segments in the thick film industry. The demand of thick PET film has grown at a CAGR of about 6.0% to 7.0%. Global growth has been apparent in all end use sectors with the exception of the Medical/Other X-ray. Over the past few years, China has emerged as the largest market for BOPET thick films, having overtaken Japan which was the world's leading market in 2007.

New innovations and new applications in the Electrical segments (like Flat Screen panel, photovoltaic, etc) have been driving the growth in the recent years and would help this industry to continue to grow at a CAGR of about 5% in the medium term.

Similar to thin PET Film business, the additions in the capacity of thick PET film have been mainly by countries within Asia like China, South Korea and Japan. Producers in Europe and USA constitute around 20% of world capacity

Upto 2011, global average demand has increased with a CAGR of 7% whereas capacity has increased with a CAGR of 5% only thus resulting in an upward trend in the utilization rates of Thick PET film. Since the year 2011, the increase in the capacities has been substantial with a CAGR of 16-18% whereas the demand has increased only with the rate of 4-5%, resulting in overall excess supply situation.

BOPP&CPPFILMS BUSINESSES

The BOPP film industry is driven by markets and areas of the world that historically have been considered "developing nations". Similar dynamics are also seen in CPP business. Growth in Asia especially China & India has been strong in the past and is expected to continue in the long term. These businesses are more regional in nature and therefore the regional demand supply balances are more relevant. The long-term fundamentals of these investments continue to be good.

SILICONE COATINGANDEXTRUSION COATINGBUSINESSES

The Silicone coating business produces - release liner, which is used for carrying adhesive labels until these are removed from the release liner and are applied to the final surface. Applications ofsiliconised polyester release liner include release liner for adhesive tapes, cast polymer materials, electronic applications, roofing and other industrial uses. The Company had expanded its capacityfor this product range bycommissioning a second coating plantin Thailand in March 2012.

PTL has also commissioned a Blown PP/PE line in October 2013. This new product has enabled better usage of the silicone coating facility with broadening of the product range including the "Peel & Stick" liner segment for the roofing market in North America and Europe.

The Extrusion coating business involves the combination of PET/BOPP film with an extruded adhesive layer to produce a thermal lamination film. Thermal lamination film is used for the application of plastic film to the surface of another item like paper in order to improve the durability and give it an aesthetic appeal. The main uses of this are in teaching aids, maps, certificates, posters, menu cards, book covers, carton board boxes, reflective insulation and food packaging. Considering the growth opportunities, PTL has added a second extrusion coating line at the existing facility in Thailand which started commercial production inJune2013.

USA& EU are the main legacy markets for the products from these businesses. However, future growth rates are expected to behigherin Asia.

OFFLINE COATINGBUSINESS

With the objective of boosting its product portfolio, Company also diversified into Offline Coated films in Turkey and India in March 2014 and September 2014 respectively. Further with enhanced capability of value added products through the new assets, Company enhanced its product portfolio into following segments in the global market:

> Transparent Barrier Films (incl. Aloxcoated films)

> Low Emissivity Films

> Peelable Sealable Films

> Yarn Grade Films

These products have various applications in food packaging, lidding, textile and industrial sectors. These products helped Company to harness greater margins in the value chain as well as to reduce dependence on commodity films.

FLEXIBLE PACKAGING INDUSTRY IN INDIA

India is one of the world's biggest and rapidly growing flexible packaging markets. The thin PET film market size in India was estimated to be around 280,000 tonnes for the FY 2014-15. During the FY 2015-16, growth of 10-11% is expected with sustained growth in the flexible packaging industry. The total capacity of BOPET thin films in India is about 560,000 tonnes with some of the surplus being exported to other parts of the world.

The BOPP market in India is estimated at about 260,000 tonnes for the year under review with a capacity base of 590,000 tonnes. Demand is expected to grow around 10-11% annually.

Exports of converted product have increased in recent times aided by strengthening of US Dollar vs. Rs. The demand of PET film in India has recovered from the steep cutback in demand due to ban on use of plastics in Gutka/Pan Masala in early part of the year 2011. Large capacity additions post the year 2010 has led to significant excess capacity. Capacity utilization of existing Indian capacities is expected to improve in FY2015-16 but maybe negatively impacted thereafter as several lines are under implementation/consideration.

STRATEGY

Polyplex seeks to maximize long-term returns to the shareholders by following a differentiated approach and proactively responding to anticipated changes in the business and environment. The key elements of this strategy have been:

• Manufacturing or distribution brsence in the key regional markets for an efficient delivery model with manufacturing operations in four countries - India, Thailand, Turkey & USA and distribution operations in two countries - China & Netherlands. The warehouses in Poland, Spain, Germany, Mexico & Italy and rebrsentative office in Malaysia & Korea are further steps towards strong global delivery capabilities with a combination of near-shore and onshore production base and efficient onward distribution network.

• Acquisition of the distribution Company in the USA in early 2006 had been a strategic move of the Company which has created the base for subsequent investment into a manufacturing operation. This was supplemented with the acquisition of the plastic metallizing assets of Vacumet Corporation, based in Georgia, USA, a fully owned subsidiary of Scholle Corporation, USA in July, 2012. These assets have been relocated to Decatur, Alabama and integrated with the thin PET film line while some shifted to other Group locations.

• Concentric diversification has helped the Company to establish itself as a complete packaging substrate provider. Setting up of the CPP line, Thick PET film line & Blown PP line in Thailand and BOPP line in India are the steps taken in this direction.

• Accelerated investment in niche downstream products to exploit synergies in operations, broad base product portfolio and provide a platform for further growth. Setting up of the Extrusion Coating lines in Thailand, Silicone Coating lines in India & Thailand, Offline Coaters in Turkey & India and sheeting facility in India for Digital Print media segment are some of the downstream investments. There is a continued focus on enhancing the proportion of specialty product revenues.

• Integrated manufacturing facilities with high productivity assets to ensure cost competitiveness.

• Continuous improvements in all aspects of the operations, productivity improvement initiatives and cost optimization initiatives through several projects undertaken viz; use of rice husk boiler for heating instead of more expensive furnace oil, packing & freight cost reductions, quality improvements and waste reductions, standardization of business processes etc.

• Creating & investing in systems to enable cross learning and sharing of best practices/benchmarking across the various units & business of the Group to bring about better efficiencies & synergy.

• Increased emphasis on upgrading technical services and development of new product by leveraging in-house R&D capabilities.

• Maintaining a liquid and strong balance sheet which gives it the flexibility to move quickly on any growth opportunity.

• Setting up of a plant in Thailand for recycling various types of in-house and sourced plastic waste addresses growing concerns and directional need for the PET business.

• Investment in the fast growing beverage market in India is another step towards diversification. Packaged beverages & food products are one of the most fast growing categories in the consumer products space.

The results of this strategy are exhibited in the successful growth achieved by the Company over the years. The Company has achieved a CAGR of 19% in capacity in the period of 2005 to the post expansion period i.e. 2014-15.

Despite the challenging environment, the Companycontinues to identifyattractive avenues for growth and is well-poised to create more long-term value for the shareholders.

BUSINESS PROCESS EXCELLENCE

To sustain competitive advantage and to differentiate from our competitors, the Company has recognized the need for Business Process Improvement and Excellence. The activities in this regard are being taken under the "Business Process Excellence" (BPE) initiatives.

The basic objective of BPE is to:

1. Establish & standardize business processes;

2. Identify & execute improvement initiatives aimed at generating saving and/or delivering value to business partners (vendors & customers);

3. Leverage process & technologywithin the group and deployhorizontallyacross all locations.

PROJECTS

During FY2014-15, newmetallizers have been operationalized both in Thailand & Turkey respectively to manufacture higher optical density films and transparent barrier films. This would augment the portfolio of Metallized Films. An Offline Coater to produce specialty products has also been commissioned at the existing location at Bazpur during the year.

DIVESTMENT IN BOTTLE GRADE PET RESIN PLANT - TURKEY

In March 2015, the Company has divested 100% controlling interest of Polyplex Resins Sanayi Ve Ticaret Anonim SJrketi (PR) in favour of Indorama Ventures Limited (IVL). The PET Bottle Grade Resin line was the first such line in the Group which was being implemented at PR.

The Bottle Grade PET Resin Plant had an annual capacity of 210,000 tonnes and was a significant related diversification for the Company. This divestment would enable the Company to concentrate its resources and management attention towards its core business of plastic films. The transaction has also resulted in significant cash inflows and has helped reduce the financial leverage at consolidated balance sheet level.

PERFORMANCE DURING THE YEAR

All discussion here is in the context of the consolidated performance of the Company.

Sales & Operations:

The Company has a large international brsence with active sales in all major regional markets/ countries across the world. The Company has an extensive base of about 1698 end customers with low customer concentration. Its top 10 customers contributed 27% of total revenues in FY 2014-15 and 67% of the Company's revenues were from PET films (Thin & Thick) in FY 2014-15. Of the total sales of the group 69% is accounted for by the end-users.

SUSTAINABILITY

Polyplex is committed towards sustainability and aims to be a total packaging solution provider for the customers while providing the highest standards of health and safety to the workforce, and developing products with minimal environmental impact.

As an organization, the Company continually strives to:

• Improve production and operational efficiencies to have optimal consumption of resources like electricity, water and rawmaterials.

• Minimize the impact on the environment by reduction and better management of emissions, waste and effluents from operations.

• Improve safety and health standards by practicing better work procedures, continuously improving the working conditions, monitoring and controlling work place hazards, creating awareness through active involvement, participation and continuoustraining.

• Engage with all stakeholders in value chain to encourage and promote sustainable business practices.

Polyplex has undertaken following substantive environment related improvement initiatives:

• Embracing environment friendly Technology: One Polyester film line in Khatima, India has been converted to Twin screwtechnology which lead to substantial energy saving and waste reduction.

• Switchover from Furnace Oil to Husk feed for oil heating in Indian operations leads to reduction in green house gases.

• Regular monitoring of carbon footprint at all manufacturing locations.

• Special recycling unit in Thailand is in operation which provided sustainable solution for plain as well as processed (metallized) waste.

• Successful development of Green PET film with a significant proportion of bio sustainable inputs and/or usage of recyclate.

• Replaced PVC twist wrap in confectionary industry with green wrap PET film.

• Replaced aluminium foil with metallised barrier PET film in food packing along with cost reduction.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

As an industry that potentially has a high impact on the environment, Polyplex is conscious of its corporate responsibility towards the environment and society. Responsibility towards all stakeholders and external agencies is encouraged in order to foster a good corporate culture and social responsibility. Through R&D initiatives, Polyplex has pioneered the use of bio-based renewable raw material and energyforthe production of polyesterfilm.

At its plant location in Khatima, India, the Company runs a school since the past two decades with over 1600 students which provide equal educational opportunities to children from all sections of the society. In order to provide high quality education to children of the local community at Bazpur, the Company has set up "Polyplex Foundation", a society registered under the Societies Registration Act, 1860, to establish and run a private unaided CBSE affiliated school.

Under a P.P.P. (Public Private Partnership) model at Bazpur and Khatima, Polyplex has adopted two local schools, providing necessary infrastructure. Polyplex has also undertaken a slew of sports and education sponsorships, besides full scholarships to school-going children of deceased employees. Polyplex promotes inter-religious harmony through its even-handed support of local religious activities and celebrations.

Polyplex is closely integrated into local communities through combrhensive and sustained social programmes.

In line with the requirements of Companies Act, 2013, Company has also constituted a CSR Committee with dedicated focus on achieving the desired objectives. This Committee will focus on delivering a positive impact across social, economic and environmental parameters. A detailed report on CSR expenditure is provided in Directors' Report.

INNOVATION

Polyplex Innovation Center (PIC) has adopted a "Lean Innovation Model" which aims to create value for the customer through product development and innovative solutions.

The Company has a defined customer engagement process to align innovations with customers' requirements through:

• Commitment to Open Innovation: It works on the concept of co-creation in various innovation programmes with our extended partners which include customers, brand owners, packaging designers, suppliers and adhesive manufacturers. The Company has structured Customer engagement initiative around V+ (value plus),W2(win-win), P1 (Power of One) concepts.

• Initiatives resulting in Growth: Polyplex Innovation model is built up on creating new applications and new product technologies covering both existing and new growth segments.

• Product and Application Development (PAD) Programs: The purpose of this program is to continuously create differentiated products and applications for our customers. Innovations are mainly based on development of new functional surfaces and properties for PET and PP based products.

The Company has successfully adopted 3R's (Reduce, Reuse and Recycle) concept for sustainable packaging solutions.

PIC has developed in house chemical recycling process for recycling waste generated in production process which has added value towards environmental commitments. Polyplex sustainable products includes transparent chlorine free high barrier films, uncoated colored films, direct UV printable carton lamination films, shrink sleeve wrap and label films.

Polyplex specialty products include high barrier, high metal adhesion, transparent barrier, sterilizable, offline specially coated PET films and specialized films for print media suitable for direct digital printable and UV inks etc.

HUMAN RESOURCES

The Company continues to invest in the development of its leadership, managerial and technical capabilities and to improve the quality of worklife of its employees. The current manpower base is about 1800.

In order to systematically develop talent pipeline for leadership positions from within, mentoring process continued for identified future leaders at the group level. Another group of 15 young leaders, mostly inducted during last 12-24 months, were also included in this process. To provide further impetus, forthe last three years resources are being hired directly from brmier engineering colleges and management institutions.

In order to leverage synergy and horizontal deployment of best practices at the Group level several initiatives were taken. Some of them are as below:

• Integration of plant operations of Khatima and Bazpur;

• vertical and horizontal combrssion of the organization for improving the speed of execution and higher accountability;

• deployment of right resources for the right role for improving overall performance;

• rightsizing and right profiling for improving cost competitiveness;

• providing greater opportunities to resources who have the proven track record of performance and have potential to take higher responsibility and critical leadership role; and

• Improving effectiveness through direct communication to the direct manpower.

The scope of Process Based Organization (PBO) was expanded from Bazpur to Khatima, India. Systematic approach to people development at the operating level continued at the Group level. There was a marked improvement in attrition level across the Group level helping the organization retain the critical resources.

Implementation of IT enabled Human Resource Information System (HRIS) has helped in improving greater transparency, higher speed of execution, employee empowerment and elimination of non-value added activities. This will help create greater visibility and better administration of HR related issues at the group level.

Industrial relations (IR) have been peaceful at all the units.

INFORMATION TECHNOLOGY

During the year under review, IT enablement initiatives were undertaken for automation and optimization of manual processes. The Company developed and deployed tools for empowering marketing and technical service teams. The Company is also working on web based training and development portal for employees to improve their knowledge and skills in theareas relevant for different operations.

The Company has invested in ITAsset Inventory, Monitoring and Service Desk tools to improve ITsupport service processes. During the last year the Company also undertook upgrade of older network components and firewalls to contemporary standards. The Company is also actively utilizing hybrid cloud model to provide better infrastructure in global service applications in the area ofemail communication and human resources.

INTERNAL CONTROLSYSTEM AND THEIRADEQUACY

The Company believes that Internal Control is an essential element for the principle of Corporate Governance. It remains committed in ensuring an effective Internal Control environment that provides assurance that there is a structured system for:

• Ensuring Statutory Compliance framework and its effectiveness

• Reviewof business plans and goals

• Evaluating & managing risks

• Safeguarding company's assets againstunauthorized usages

• Prevention and detection offraud and error

• Compliance ofPolicies and Delegation ofauthorities

The Company has an overall framework for managing the risks in terms of the Enterprise Risk Management (ERM) policy. Interrelated control systems, covering all financial and operating functions, assure fulfillmentofthese objectives.

The internal control system is supplemented by an independent internal audit function which reports directly to the CEO. Continuous efforts through structured reviews at regular intervals are made to review the existing system to bring about further improvements. The Company continuously upgrades its internal control system by measures such as strengthening of IT infrastructure and use of external management assurance services. Further, company wide adherence to best practices is achieved through a combination of internal audits, management reviews and audit committee interventions.

FUTURE OUTLOOK & PLANNED INVESTMENTS

Exceptionally high margins in 2010/2011 had attracted a lot of new investments in the PET film business. Even for the next 24 months, additions to global capacity are expected to be higher than the growth in demand mainly in Asia, and hence the current situation of oversupply is expected to remain for another 2-3 years. New entrants from China have been increasingly dominating the market for PET film in the last 2-3 years, and may pose challenge to the global economy.

The Company remains confident that with its strengths of distributed manufacturing operations, a diversified product portfolio, consistent quality, access to international customers, efficient supply chain model, higher proportion of value added products and conservative balance sheet, it should be able to grow profitably and withstand volatility in industry environment. The Company is well poised to capture growth opportunities in all its business segments within the confines of business prudence.

RISKS

Risk Management is a central part of the Company's strategic management. It is a process by which business risks are identified, analyzed, engineered, reduced, eliminated or transferred. Effective risk management ensures continuity of the Company's operations and protection of the interests of its stakeholders. The risk can result from factors both external and internal to the Company.

Competition & Business Cycles

The industry cycle of PET film hinges on the sbrad between the PET film price and the prices of PTA and MEG which are major raw materials. Whenever the demand supply balance favors the suppliers, the PET film and raw material price sbrad usually widens, thereby encouraging the manufacturers to increase production by expanding their capacities. On the contrary, if PET film supply is larger than market demand, the film prices will drop, hence narrowing the sbrad between the film and raw material prices. This cyclical nature inevitably affects every producer's revenues and profits. Post 2010-11 aberration, a lot of capacities were added in the PET film industry. This has created an imbalance in the demand supply scenario and has put brssure on the selling prices, thereby contracting the margins. The situation of over supply is expected to remain for some more time. The Company's business model is designed to moderate volatility in earnings and build long-term competitiveness based on:

• State-of-art manufacturing assets with the ability to service key regional markets based on low delivered cost.

• Geographically distributed manufacturing enabling better delivery capabilities, which provides better access to the global markets and a more balanced sales profile across regions, customers and currencies.

Integrated manufacturing with co-location of PET resin production as well as downstream metallizing and offline coating lines.

Broad-basing of product lines with diversification into BOPP, CPP, Films for Digital Print, Blown PP and Thick & Specialty films, enabling the Company to offer a more complete package to the end user.

Portfolio of different substrates, off-line coating of films and specialty films, which have different demand-supply conditions, helps in moderating the fluctuations in overall margins and reduces the exposure to commodityfilms.

Increased focus on new product development through R&D or technology absorption besides creating a strong technical services team are likely to be additional differentiators between Polyplexand its competition.

Continuous and focused efforts are made for increasing the proportion of specialty/value added product revenues through investment in additional metallizers and coaters. A historical trend is given below:

Volatilityin CommodityPrices

Volatilityin CommodityPrices

The basic raw material for production of PET film is PET resin, which in turn is produced from Purified Terephthalic Acid (PTA) and Mono Ethylene Glycol (MEG).

Cost of resin is the single largest component of the total production cost of Polyester film and any adverse fluctuation in the resin cost can impact the Company's operating margins depending upon the ability of the Company to pass on the increase in costs to its customers. As selling prices are usually negotiated on a monthly/quarterly basis, in a balanced demand supply situation, the Company is able to adjust the selling prices following any changes in the PET resin cost and other operating costs.

During the FY2014-15, the thin PET film industry continued to witness a significant over supply situation, brought about by the additional supplies which came into the market following extraordinary high margin levels witnessed in FY 2010-11. There was brssure on the selling prices due to the oversupply situation. The PET film industry witnessed a steep fall in raw material prices in the second half of FY 2014-15 due to the fall in crude prices globally, which has been passed on to the customer.

Analysis of historical data shows high correlation between PTA/MEG and polyester film prices. The sbrad between two intermediates would vary depending upon the demand-supply situation. Also sudden and sharp movements in raw material prices may affect the correlation forsometime.

Variations in the raw material prices by and large tend to get passed on to the end-customers and the sbrad between the raw material and PET films normally move in a band. As can be seen from the above table, fall in PTA & MEG prices in the year 2014 resulted in fall in selling price of PET film. Thus, the sbrad between the raw material and PET films, especially over the last few years, has moved in a band. Similar dynamics are at play in the BOPP/CPP films and Thick PET films.

The Company monitors world and local input price trends carefully and determines its procurement plans accordingly. Moreover the raw material price movement is also common for all the participants of the industry and does not put Polyplex in a materially advantageous or disadvantageous position vis-a-vis its competitors.

The prices of the downstream products like silicone coated and extrusion coated films are less susceptible to changes in raw material prices and this reduces the overall portfolio risk.

Trade Defense Measures

International trade in PET film has been subject to trade defense measures for more than two decades through the imposition of anti-dumping dutiesand countervailing duties.

Anti-dumping duty (AD) can be imposed on imports if the ex-factory prices of such imported products are proved to be lower than the local selling prices of the similar products in the countries of the exporters. The important markets adopting this measure are the EU, US and Brazil against several countries. Countervailing duties (CVD) are tariffs levied on imported products to offset subsidies made to exporters of those products in the exporting country. Such tariff measures result in an increase in the delivered price of the imported products, usually rendering the targeted exporters uncompetitive. In both cases injury to domestic industry in the importing country has to be established.

In the last US Anti-dumping petition of 2007 against producers of PET film from Thailand, China, Brazil and UAE, duties were imposed against China, UAE and Brazil in the range of 3.5% to 76.7%, but exports from Thailand were found to be not causing any injury to the US domestic industry. This had led to non-imposition of any special duties on exports from Thailand to USA. In the recent sunset review conducted by the US Department of Commerce, AD duty on Brazil has been revoked, though duties on China & UAE would continue to brvail. As per the last administrative review, the AD duties on China and UAE are in the rangeof 11.49% to 76.72%.

As per the final results of the administrative review conducted by the US Department of Commerce for the review period 2011-12, exports from Polyplex India to US are subject to Anti Dumping rate of 0.78% and CVD rate of 7.6%. However, with the start up of thin PET film line in USA, Polyplex is able to service customers in USA through local production. The Anti Dumping duty on other Indian producers is in the range of 0% - 6.81% and CVD rate is in the range of 2.03% - 65.59%. Over the last few years, AD & CVD duties imposed by EU on imports from India have been eliminated.

Since March 2012, Brazil has imposed AD duties on imports of PET films from Turkey, UAE and Mexico in the range of USD 67.44/MT to USD 1013.98/MT, with duty on exports from Polyplex Turkey to Brazil being the lowest. However, as sales from Polyplex Turkey to Brazil are limited, the impact of AD duty is minimal. As per the recent anti dumping investigation by Brazil on imports of PET Films from China, Egypt and India, the injury to domestic industry has been determined and anti dumping duties have been imposed. The AD duty on Polyplex India is USD 255.5/MT. The duties imposed on China, Egypt & India are in the range of USD 222.15/MTto 946.36/MT. A new CVD case has also been initiated by the Brazilian government on imports from India.

In 2014, Indonesia initiated a Dumping investigation against imports of PET film from Thailand, India & China. As Thailand has exposure to Indonesian market, they have cooperated in the investigation and have submitted the required information to the Indonesian investigating authorities. As per the final outcome of the investigation, Polyplex Thailand has been imposed a duty of 2.2% which is the lowest amongst all the exporters.

In July 2014, an anti-circumvention inquiry was filed on imports of PET film into USA from Bahrain on the grounds that Bahrain is circumventing the antidumping order on PET Film from UAE. As per the final determination by the Department of Commerce, circumvention has not been established.

The Company undertakes all safeguards to insulate against the risk arising out of anti-dumping actions and other trade barriers imposed by the importing countries. A geographically well-diversified manufacturing and sales portfolio also helps mitigate the adverse fall-out of such an action, if any.

Liquidity & Solvency

Global activity strengthened during 2014 and is expected to improve further in 2015-16. The impulse has come mainly from advanced economies, although their recoveries remain uneven. With supportive monetary conditions and a slow fiscal consolidation, annual growth is projected to rise above recent trends in the United States and to be close to trend in the core Euro area economies. In the stressed Euro area economies, however, growth is projected to remain weak & fragile as high debt and financial fragmentation hold back domestic demand. Growth in emerging market economies is projected to pick up only modestly. These economies are adjusting to a more difficult external financial environment in which international investors are more sensitive to policy weakness and vulnerabilities given prospects for better growth and monetary policy normalization in some advanced economies.

Liquidity implies ability of the Company to meet its obligations and to finance its future investments. Higher debt- equity or lower debt service coverage could limit the investment capacity of the Company. Generally if the cost of debt is lower than the return on investments, by increasing the financial leverage, one can enhance the return on equity. However, since there is an obligation to make fixed interest and principal repayments on debts, an increase in leverage in the case of volatile operating cash flows could strain the cash availability with the company. Also, higher debt could limit the ability of the company to finance its further investments. In those cases, one needs to look at internal accruals and equity infusion.

Notwithstanding large capital outlay over the last two years, the Company has sufficient cash reserves, affording the debt equity ratio to be comfortably below 1.00. Cash and equivalents together with undrawn credit lines (excluding project financing) and liquid investments aggregated to more than Rs. 1,27,219 Lacs as at the end of the reporting period. The Company's liquidity position along with forecasted profitability is a key factor for investment decisions. Despite the significant expansions in last couple of years, the Company maintains adequate liquidity and ensures debt levels remain within prudent norms of leveraging.

Despite significant borrowings in last couple of years for the various projects, the net debt-equity ratio at the end of the FY 2014-15 is quite comfortable at 0.21.

The Company periodically undertakes "Stress" tests to evaluate the potential impact of an adverse economic and industry environment. Free cash flows along with large unutilized credit lines shall be quite adequate in any kind of stress situation.

Exchange Rate & Interest Rate Risk

FX risk arises on account of sudden/unanticipated changes in exchange rates. As the Company deals in multiple currencies due to its operations at different locations and high export orientation, there is a risk on account of currency mismatches. Since the currency markets are highly volatile, the Company's policy is to minimize the risk by adopting the natural hedge strategy. Natural hedge is created by choosing the right trade currency and loan currency. Thus, the Company fixes the currency of the liability in order to match with the currency of operational surplus. The remaining mismatched exposures are optimized by the Company through a careful process of identification, measurement, monitoring and hedging the net exposures by using simple instruments like forwards such that the maximum potential loss is within a defined risk limit. As there is a natural hedge available for all the long-term borrowings, the Company does not cover the exchange rate risk on these liabilities. Therefore, the foreign exchange translation gain/ loss on these liabilities, as reported in the financial statements, may not have a corresponding impact on the cash flows of the Company as the payments for these loans shall be met out of future receivables in the same currency. The FX risk is managed at each entity on a standalone basis to protect the varying stakeholders' interest in each location and since cash flows are not freely transferable between group entities.

The main currencies of borrowing for the Company are USD, EURO, INR & THB. As the Company is net USD surplus, the maximum borrowings are in USD, contributing 66% of the debt profile, followed byTHB borrowings which contribute 20% and balance of 10% in Euro and only 4% in INR. Any spike in USD apbrciation has a negative impact on our USD loan liability but with majority of our exports in USD, the impact on the Company is subdued.

During the FY2014-15, Euro has continuously declined. Structurally, being based in Turkey with reporting currency as Euro, this has made us more competitive in Europe as compared to USD imports but in terms of the impact on consolidation, there has been a substantial impact on Foreign Currency Translation Reserves (FCTR) of Rs. 19,080 Lacs due to significant Euro debrciation.

Interest rate risk is the risk borne by interest bearing debt and investments, due to variability in interest rates. In case of financing done at floating rates, as the interest rates changes, cost of borrowing also changes, thus impacting the cash flows. There are various reasons for interest rate changes like ecomonic growth, inflation expectations, unemployment etc. All these factors are external and uncontrollable. In order to have a more balanced loan portfolio and taking into account the cost benefit analysis, the Company has shifted some of its floating rate debt to fixed rate through interest rate swaps.

Credit Risk

Credit risk refers to the risk of non-payment by the debtors. This risk increases in case of unsecured or open payment terms. The average credit period of the Company during FY 2014-15 was 45 days as compared to 46 days in FY 2013-14. The risk is secured either through trade instruments or credit insurance. During the year, the Company has significantly improved its coverage under credit insurance. The Company has a well defined and robust internal credit management system to monitor unsecured sales. Over the years, the number of customers has increased to 1698 in FY 2014-15 with low concentration as evidenced by 27% of the total revenues in FY2014-15 being contributed by the top 10 customers of which about half is from large distributors with a diversified end customer base.

Though the global economy is on the path of global recovery a strong internal credit risk management policy has enabled us to manage credit risk prudently. In terms of recovery, globally the economies continues to follow a moderately accelerating trend. Slight improvements are expected both in advanced countries and in emerging countries.

Project Implementation Risk

Risks associated with implementation of new projects are inherent to the business. Any delay in implementation, cost overrun, inability to stabilize production from the new investment and failure to meet the target investment objectives may significantly affect the future profitability and financial position. The risks are sought to be mitigated by forming a dedicated project management team, corporate management oversight, management commitment and suitable protection clauses in contractual arrangements and appropriate insurance products. Although the Company takes into consideration various regulatory aspects at the project feasibility stage but subsequent changes during implementation phase may lead to project delays.

Market Risk

The major risk associated with any new products is the market risk. Since Polyplex has a global reach and an extensive marketing and distribution network, the Company does not foresee any major risk in developing markets for new products.

CountryRisk

The installed capacity of base films as also downstream units is quite evenly sbrad out among the four manufacturing country locations of India, Thailand, Turkey & USA. Therefore fortune for the parent Company in India is intricately interwoven with the success of the manufacturing operations in Thailand, Turkey & USA. Based on the Company's experience so far, as well as, that of a whole spectrum of foreign owned businesses brsent in Thailand, Turkey & USA for a long time, it would appear that the risks are not significant. Though some political problems have been faced in the past at Thailand and Turkey, it has had almost insignificant effect on business activities. In the event these problems escalate, there may be some impact for a short duration. However, no adverse long term impact is envisaged.

RegulatoryRisk

Regulatory Compliance is a key consideration for our Industry. In order to ensure the safety of food that is packaged and consumed, there are extensive food contact regulations that are put in place by various regulatory bodies like US Food & Drug Administration (FDA), EEC Directives etc. The Company confirms that its products are compliant to FDA & EEC directives for food packaging applications.

Environment & Sustainability Risk

Indian Packaging Industry is proneto certain environmentand sustainability risks.

An application has been filed before National Green Tribunal that the use of BOPP/PET based packaging material causes significant health and/or environmental impact. This application then seeks relief through a outright ban on usage of such packaging material among other measures.

The Industry Association as well as several other interested parties have submitted that BOPP/PET based packaging material is safe for food packaging and enhances the shelf-life of the food products packed in it. It is also convenient for handling as it occupies lesser space and has lower weight as compared to other packaging such as glass, tin, paper etc. The film is also recyclable. It does not have any hazardous chemical and is compliant with EEC directives and FDA regulations. Thus, the Company is confident that though the case has been filed, its products are superior and safe for packaging of food articles and consumable commodities.

The Industry is also subject to plastic waste management rules which restrict the manufacture and the use of plastic carry bags and for setting up of plastic waste management system by the municipal authorities. The concerned ministry has come out with draft revised rules which provide for certain stringent provisions related to usage of multi layer plastic packaging. Our industry association besides several other interested parties are in the process of providing their comments on the draft rules and rebrsent strongly on the merits of usage of plastic packaging in general.

Other Risks

Other key risks include natural disasters, machinery breakdowns, product and public liabilities. As these risks are largely insurable, the Company follows a risk mitigation philosophy by availing suitable insurance products to the extent it is commerciallyviable.

Other factors which may affect performance, earnings and liquidity are global occurrences like the 2008 financial crisis, ongoing European crisis, etc besides plant failures; legal cases and proceedings; developments or assertions by or against us relating to intellectual property rights; large claims from customers due to product quality deficiencies; disruptions in transportation, utility services, IT infrastructure and ERP systems; substitution of the Company's products by other products; employee work stoppage at plants; changes in government regulations on the use of plastics, labor laws, taxation etc.

Cautionary Statements about Forward Looking Statements

This report contains forward-looking statements which may be identified by their use of words like "plans," "expects," "will," "anticipates," "intends," "projects," "estimates" or other words of similar meaning. All statements that address expectations or projections about the future, including statements about the Company's strategy for growth, market position, expenditures and financial results are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. For some of the important factors that could cause the Company's actual results to differ materially from those projected in any such forward-looking statements, see the Risk Factors discussion set forth later in this section.