MANAGEMENT DISCUSSION AND ANALYSIS

Review of the economy 2015-16

The global macroeconomic landscape is passing uncertain times characterized by weak growth in global output, exacerbated by declining commodity prices, turbulent financial markets and volatile exchange rates. Even in these trying circumstances, India's growth story has remained largely positive on account of robust domestic absorption, moderated inflation, lower fiscal deficit and current account balance. The result was that India's GDP growth increased 7.6% in 2015-16 against 7.2 per cent in brvious fiscal, riding to a peak 7.9% in the fourth quarter of the year under review.

Opportunities and threats

Given the global slowdown as well as challenges within the Indian economy, it was creditable for the Company to achieve higher revenue growth and profits in 2015-16, the reasons for which have already been outlined in the Directors' Report.

With a stable central government at the helm, India is passing through a paradigm shift. The Central Government's growth-inducing policies augur well. The government is prioritising investments to usher infrastructural development, kickstart policy reform and enhance business ease. The Company expects to capitalise on this favourable scenario. The Company intends to address competition from organised and unorganised sectors as well as from international brands and domestic players, expected to enhance market share.

Outlook

In 2016-17, the Company expects to sustain the momentum of the brvious year. To achieve this objective, actions have been initiated to explore under-addressed markets, strengthen distribution network, improve logistics, introduce new product designs and upgrade the portfolio.

Risks and concerns

As a responsible corporate, it is our endeavour to minimise the business risks with the view to maximise returns. At the heart of La Opala's risk mitigation strategy is a combrhensive and integrated risk management framework that comprises prudential norms, structured reporting and control. This approach ensures that the risk management discipline is centrally initiated by the senior management but prudently decentralized across the Company, percolating to managers at various levels helping them mitigate risks at the transactional level. At La Opala, the risk management team meets periodically to review the key risks which could impact the Company like the increase in global competition, availability of foreign products at low costs, volatile oil prices, and stiff competition from the unorganised sector. Consequently the same team formulates relevant de-risking initiatives and ensures their effective implementation in an ever-evolving external environment. A separate risk management section appears in this report.

Internal control systems and their adequacy

The internal control system is a set of rules, procedures and organisational structures that, through a process of identifying, measuring, managing and monitoring the main risks, allows the sound and fair operation of the Company in line with br-established objectives. As such this process is aimed at pursuing the values of both procedural and substantial fairness, transparency and accountability, which are considered key factors for managing La Opala's business.

Financial performance

The financial statements of La Opala were brpared in compliance with the requirements of the Companies Act and the applicable Accounting Standards issued by the Institute of Chartered Accountants of India. During the year under review, income from operations amounted to Rs. 25,565.94 lac compared to Rs 22,866.61 lac in 2014-15. Profit before tax for the FY 2015-16 amounted to Rs 7,792.43 lac as compared to Rs 5,575.51 lac in the brvious year.

Industrial relations

Overall the industrial relations of the Company during the year were cordial. Your Directors wish to place on record their sincere apbrciation for the devoted services of all the employees and workers of the Company.

Cautionary statement

Statements in the Management's Discussion and Analysis Report describing the Company's projection, estimates, expectations or brdictions may be '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 would make a difference to the Company's operations include demand-supply conditions, raw material prices, change in governmental regulations, tax regimes, economic developments within the country and other factors such as litigation and labour negotiations.