MANAGEMENT DISCUSSION AND ANALYSIS

Forward looking statement

Statements in this Management Discussion and Analysis of Financial Condition and Results of Operations of the Company describing the Company's objectives, expectations or brdictions may be forward looking within the meaning of applicable securities laws and regulations. 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. The Company assumes no responsibility to publicly amend, modify or revise forward looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those exbrssed in the statement. Important factors that could influence the Company's operations include changes in government regulations, tax laws, economic developments within the country and such other factors globally.

The financial statements are brpared under historical cost convention, on accrual basis of accounting, and in accordance with the provisions of the Companies Act, 2013 (the Act) read with Companies (Accounts) Rules, 2014 as amended from time to time and comply with the Accounting Standards notified under Section 133 of the Act read with the Companies (Accounting Standards) Rules, 2006. The management of Allcargo Logistics Limited has used estimates and judgments relating to the financial statements on a prudent and reasonable basis, in order that the financial statements, reflect in a true and fair manner, the state of affairs and profit for the year.

The following discussions on our financial condition and result of operations should be read together with our audited consolidated financial statements and the notes to these statements included in the annual report. Unless otherwise specified or the context otherwise requires, all references herein to "we", "us", "our", "the Company", "Allcargo" are to Allcargo Logistics Limited and its subsidiaries and associates.

ECONOMIC OVERVIEW

The year 2015 witnessed a slowdown in global growth at 2.4% from 2.6% in 2014.

Deceleration of activity in key emerging and developing economies, collectively due to continued deceleration of economic activity, weakening commodity prices especially oil, global trade, and capital flows overshadowed a modest recovery in major high-income countries in 2015.

The economic rebalancing in China continued accompanied by slowdown in growth. Brazil and Russia went through severe adjustments due to external as well as domestic challenges.

Weak prospects for developing countries coincided with a sharp slowdown in global trade, a rise in financial market volatility, and a substantial decrease in capital inflows. In anticipation of a tighter U.S. monetary policy, currency brssures intensified and borrowing costs increased, particularly for a number of commodity exporters.

Going forward, global growth is expected to pick up, albeit at a slower pace than brviously projected and being closer to 3% in coming years. Global growth is projected to reach 2.9% in 2016 and 3.1% in 2017-18. Global inflation is expected to increase moderately in 2016 as commodity prices level off, but are expected to remain low by historical standards.

A modest upturn in global activity in 2016 and beyond is brdicated on a continued recovery in major high-income countries, a gradual slowdown and rebalancing in China, a stabilization of commodity prices, and an increase in global interest rates that is gradual and stays well contained.

But the projections are subject to substantial downside risks, including a much sharper slowdown in major emerging as well as developing economies or financial market turmoils.

The Indian corporate sector ended FY2016 with another year of subdued performance due to challenges both on the domestic and global front remaining unabated. Slow pace of improvement in structural challenges grappling the infrastructure sectors, global commodity meltdown and anemic trends across domestic consumption-driven sectors continued be the highlights of corporate performance. High-indebtedness of large corporate groups engaged particularly in the infrastructure & metals space has also been a cause of concern for rising NPA levels in the Indian banking sector

The Economic Survey put India's growth at 7.6% for FY2016 and expects to achieve 7-7.75% in FY17 given external and monsoon uncertainties. India can grow at 8% or higher in next two years, according to the Economic Survey.

The Economic Survey also argued for adhering to 3.5% fiscal deficit target in FY17. However, it also highlighted that FY17 will be challenging from fiscal point of view.Triggers for Indian economy in coming year will include most importantly a normal monsoon, lower oil prices, unchanged inflation, passage of GST, better bank balance sheets, improved export and supportive policy environment

India spends around 13-14% of its GDP on logistics and transportation as compared to less than 8-9% by the other developing countries. Indian logistics and freight market is expected to grow at a CAGR over 13% by 2020 to reach over US$ 300 billion, driven by the growth in manufacturing, retail, FMCG and e-commerce sectors.

The logistics sector is poised for accelerated growth, led by GDP revival, infrastructure ramp-up, volume growth in containerization, new terminals at ports leading to incremental growth in volumes, dedicated freight corridor (DFC), GST implementation, initiatives like "Make in India" and "Sagar Mala & Inland Waterways", port based coastal industrial centres, and new businesses segments like coastal shipping, contract logistics and e-commerce creating opportunities in long run.

Companies in India currently outsource an estimated 52% of logistics and 3PL rebrsents only 1% of logistics cost. In developing countries like India, an efficient logistics infrastructure can reduce the cost of transportation which in turn can contribute directly to the economic development. According to the survey conducted by the Transport Intelligence in 2013, India ranks as the 2nd most attractive logistics market in the future after China. Hence, India offers huge opportunities in development of logistics services, transport infrastructure and multi modal transportation.

(Source: World Bank report on "Global Economic Prospects, January 2016", Economic Survey 2016, Crisil, ICRA, ASSOCHAM, and Analyst Reports)

ABOUT ALLCARGO

Allcargo Logistics Ltd., part of The Avvashya Group, is the leading integrated logistics solutions provider in India. The company offers specialized logistics services across Multimodal Transport Operations, Container Freight Station Operations, Coastal Shipping services with 5 owned and operated ships and Project & Engineering Solutions. Benchmarked quality standards, standardized processes and operation excellence across all the services and facilities, have enabled Allcargo Logistics Ltd. to emerge as the market leader in all these segments.

Allcargo is today one of India's largest publicly owned logistics companies, listed on the BSE Limited and National Stock Exchange of India Limited.

Allcargo owns leading multinational companies in the logistics space globally such as ECU WORLDWIDE, which is world's largest LCL service provider operating from Belgium.

The Company currently operates with a combrhensive global network with 300 plus offices in 160 plus countries Allcargo Logistics Limited is today one of India's largest publicly owned logistics companies, listed on BSE Limited and National Stock Exchange of India Limited and a constituent of the BSE Mid Cap and CNX Nifty 500 indices .

CONSOLIDATED FINANCIAL OVERVIEW -

The consolidated performance of the Company for the financial year ended March 31, 2016, is as follows:

Total revenue from operations at Rs. 5,714 crore for the year ended March 31, 2016, as against Rs. 5,681 crore for the corresponding brvious period, an increase of 1%, mainly on account of increase revenues across all businesses of MTO, CFS and Project and Engineering

The cost of services rendered for the financial year ended March 31, 2016 were Rs. 3,812 crore as against Rs. 3,938 crore for the corresponding brvious period, an decrease of 3%.

The staff expenses for the financial year ended March 31, 2016 were Rs. 926 crore as against Rs. 857 crore for the corresponding brvious period, an increase of 8%.

The other expenses for the financial year ended March 31, 2016 were Rs. 428 crore as against Rs. 359 crore for the corresponding brvious period, an increase of 19%.

The EBIDTA (earnings before interest, debrciation and tax) was Rs. 548 crore for the year ended March 31, 2016, as against Rs. 528 crore for the corresponding brvious period, an increase of 4%.

RESOURCES AND LIQUIDITY

As on March 31, 2016, the consolidated networth stood at Rs. 2,206 crore and the consolidated debt was at Rs. 543 crore.

The cash and cash equivalents at the end of March 31, 2016 were Rs. 274 crore.

The net debt to equity ratio of the Company stood at 0.12 as on March 31, 2016.

The Company has been rated 'CRISIL AA-/ Positive' in high safety category in the Credit Perspective report by CRISIL, India's leading rating agency. The Company is amongst the highest rated logistics companies by CRISIL.

BUSINESS PERFORMANCE

Allcargo operates primarily in three segments, viz., Multimodal Transport Operations (MTO), Container Freight Stations (CFS) / Inland Container Depot (ICD) Operations and Project & Engineering Solutions (P&E).

MULTIMODAL TRANSPORT OPERATIONS (MTO)

• MTO segment involves NVOCC (Non Vessel Owning Common Carrier) operations related to LCL (Less than container load) consolidation and FCL (Full container load) forwarding activities in India and across the world through its wholly owned subsidiary ECU Worldwide

• Allcargo is the largest player in the global LCL consolidation market with a strong network across 160 plus countries and 300 plus offices covering over 4,000 port pairs across the world

• The business clocked total volumes of 4,59,746 TEUs for the year ended March 31, 2016 as against 4,22,200 TEUs for the corresponding brvious period, an increase of 9%

• The total revenue for the year ended March 31, 2016 was Rs. 4,762 crore as against Rs. 4,774 crore for the corresponding brvious period

• EBIT was Rs. 239 crore for the year ended March 31, 2016, as against Rs. 190 crore for the corresponding brvious period, an increase of 26%

CONTAINER FREIGHT STATIONS (CFS) / INLAND

CONTAINER DEPOT (ICD) OPERATIONS

• This segment operations are involved in import / export cargo stuffing, de-stuffing, customs clearance and other related ancillary services to both, importers and exporters

• The CFS and ICD facilities are located near JNPT, Chennai and Mundra ports and in Dadri and Kheda

• The total capacity of the CFSs and ICDs at the end of March 31, 2016 is 5,73,000 TEUs per annum

• The business clocked total volumes of 3,04,756 TEUs for the year ended March 31, 2016 as against 2,91,579 TEUs for the corresponding brvious period, an increase of 5%

• The total revenue for the year ended March 31, 2016 was Rs. 443 crore as against Rs. 403 crore for the corresponding brvious period, an increase of 10%

• EBIT was Rs. 137 crore for the year ended March 31, 2016, as against Rs. 109 crore the corresponding brvious period, an increase of 26%

PROJECT & ENGINEERING SOLUTIONS (P&E)

• Project & Engineering Solutions segment provides integrated end-to-end project, engineering and logistic services through a diverse fleet of owned / rented special equipment like hydraulic axles, cranes, trailers, barges, reach-stackers, forklifts and ships to carry bulk and ODC / OWC cargos as well as project engineering solutions across various sectors

• The total revenue for the year ended March 31, 2016, was Rs. 549 crore as against Rs. 530 crore for the corresponding brvious period, an increase of 4%

• EBIT was Rs. 64 crore for the year ended March 31, 2016, as against Rs. 73 crore for the corresponding brvious period.

ACHIEVEMENTS IN BUSINESSES DURING THE YEAR:

• Our chairman Mr. Shashi Kiran Shetty was awarded 'Lifetime Contribution to Freight' at the Global Freight Awards 2015

• Mr. Shetty was also awarded 'Honorary Doctorate' from Mangalore University, for his philanthropic contributions

the field of healthcare for the underprivileged in Mangalore through the CSR initiatives of Avashya Foundation the NGO of Allcargo Logistics

• Brand Excellence Award in Logistics & Supply Chain, World Marketing Congress

• LCL Consolidator of the Year award at the South East Cargo & Logistics Awards, 2015

• CFS of the Year, Freight Forwarder of the Year and WISTA Personality of the Year - Ms. Shantha Martin, CEO - ISC, Middle East, Africa & East Med at Gateway Maritime Awards

• Project Cargo Mover of the Year and Diversified Company of the Year at MALA Awards, 2015

• Best Integrated Logistics Company of the Year and Best CFS Owner of the Year at the Gujarat Star Awards 2015

• Ms. Shantha Martin, CEO - ISC, Middle East , Africa & East Med, awarded the 'Women in Logistics' Award by Supply Chain Management Professional magazine at the Logistics Service Provider Awards, 2015

• Ms. Shantha Martin, CEO - ISC ,Middle East, Africa (S & E), has been awarded the 'Business Leader Award' at the annual World Women Leadership Congress & Awards, 2015 (WWLCA).

RISKS AND CONCERNS -

The Company has adopted ISO 31000 for risk management framework. A detailed policy drawn up and dedicated risk workshops are conducted for each business vertical and key support functions wherein risks are identified, assessed, analysed and accepted / mitigated to an acceptable level within the risk appetite of the organization. The risk registers are also reviewed from time to time.

The Company faces the following Risks and Concerns:

Economic Risk

A part of business is substantially dependent on the brvailing global economic conditions. As witnessed in brvious years, global trade directly impacts our MTO business. Factors that may adversely affect the global economy and in turn India's economic growth, that could affect the CFS/ ICD, warehousing and project & engineering solutions businesses, include slowdown in the rate of infrastructure development, inflation, changes in tax, trade, fiscal and monetary policies, scarcity of credit etc. However, given the planned infrastructure investments in FY 2013-2017 will rise to a cumulative US$ 1 Trillion compared to US $ 542 billion in FY 2007- 2012, growth in global EXIM traffic and with increasing outsourcing of the logistics function by companies, we do not expect to be significantly affected by this risk.

Competition Risk

This risk arises from more players wanting a share in the same pie. Like in most other industries, opportunity brings with itself competition. We face different levels of competition in each segment, from domestic as well as multinational companies. However, Allcargo has established strong brand goodwill in the market and a strong foothold in the entire logistics value spectrum. We are the largest LCL Consolidator in the world, with 300 plus offices across 160 plus countries covering over 4,000 port pairs. Our wide geographical brsence and network across the globe helps us generate higher volumes. We are working on a blueprint to consolidate our position as the market leader and enter newer segments and offer our customers "a one-stop-shop" for logistics services. We have built a strong relationship with most of the leading carriers/liners and as a result are able to obtain competitive commercial terms and operational advantages. We also counter this risk with the quality of our infrastructure, our customer-centric approach and our ability to innovate customer specific solutions, focusing on pricing and aggressive marketing strategy, disciplined project executions, coupled with prudent financial and human resources management and better control over costs. Thus, we do not expect to be significantly affected by this risk.

Trade Risk

Our business can be affected by the rise and fall in the levels of imports and exports in the country. Given the projected growth in the Indian economy and expected recovery in global trade, rising spending in the infrastructure and manufacturing space and increasing per capita and disposable income, it is estimated that imports will continue to rise steadily. The Company is also focusing on its CFS/ICD business, a relatively high margin segment which is essentially dependent on imports of containerized cargo in India. With expected EXIM trade increase along with the growth in containerization, CFS business is expected to be good in coming years. With its foray into service of Projects & Engineering Solutions, the Company is further reducing its dependence on global EXIM trade. Thus, we believe we have adequate mitigation in place for trade risk.

Regulatory Risk

If we are unable to obtain required approvals and licenses in a timely manner, our business and operations may be adversely affected. We require certain approvals, licenses, registrations and permissions for operating our MTO and CFS/ICD business. We may encounter delays in obtaining these requisite approvals, or may not be able to obtain such approvals at all, which may have an adverse effect on our revenues. However, the Government has come up with a number of initiatives to boost the logistics sector and has planned massive investments in the infrastructure sector. As all industry brdictions suggest that this will be the trend in the future as well and given our own experience in obtaining such permissions, we do not expect this risk to affect us materially in the coming years.

Liability Risk

This risk refers to our liability arising from any damage to cargo, equipment, life and third parties which may adversely affect our business. The Company attempts to mitigate this risk through contractual obligations and insurance policies.

Execution Risk

The Company has undertaken number of projects in the last year and several more are in the pipeline. Project execution is largely dependent upon land purchase, project management skills and timely delivery by equipment suppliers. Any delay in project implementation can impact revenue and profit for that period. Our implementation schedules are in line with the plans. Emergency and contingency plans are in place to brvent or minimize business interruptions. Therefore, we do not expect this risk to affect us materially in the future. Concerns like soaring land prices, a complex tax structure, infrastructure bottle-necks, retaining talent and unbrcedented natural and man-made disasters and political/social turmoil which may affect our business, remain. However, these are threats faced by the entire industry. With superior methodologies and improved processes and systems, the Company is well positioned to lead a high growth path.

THREATS

• Competition from local and multinational players

• Execution risk

• Regulatory changes

• Attraction and retention of human capital

INTERNAL CONTROL SYSTEMS AND ADEQUACY

In view of the changes in the Companies Act, the Company has taken additional measures from the financial year 2014-15 to strengthen its internal control systems. Additional measures in this regard are fraud risk assessment, mandatory leave for employees, strengthening background verification process of new joiners, whistle blower policy and strengthening the process of risk management. The Company maintains a system of internal controls designed to provide a high degree of assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, the reliability of financial controls, and compliance with applicable laws and regulations.

The organization is well structured and the policy guidelines are well documented with br-defined authority. The Company has also implemented suitable controls to ensure that all resources are utilized optimally, financial transactions are reported with accuracy and there is strict adherence to applicable laws and regulations.

The Company has put in place adequate systems to ensure that assets are safeguarded against loss from unauthorized use or disposition and that transactions are authorized, recorded and reported. The Company also has an exhaustive budgetary control system to monitor all expenditures against approved budgets on an ongoing basis.

Recognizing the important role of internal scrutiny, the Company has an internal audit function which is empowered to examine the adequacy of, and compliance with, policies, plans and statutory requirements. It is also responsible for assessing and improving the effectiveness of risk management, control and governance process.

Periodical audit and verification of the systems enables the various business groups to plug any shortcomings in time. As stated earlier the Company has improved effectiveness of the risk management process wherein it evaluates the Company's risk management system and suggests improvement in strengthening risk mitigation measures for all key operations, controls and governance process. In addition, the top management and the Audit committee of the Board periodically review the findings and ensure corrective measures are taken.

HUMAN RESOURCES

The Company has Human Relations and Industrial Relations policies in force. These are reviewed and updated regularly  in line with the Company's strategic plans. The Human Relations team continually conducts training programs for the development of employees.

The Company aims to develop the potential of every individual associated with the Company as a part of its business goal. Respecting the experienced and mentoring the young talent has been the bedrock for the Company's successful growth. The Company's employees' age bracket rebrsents a healthy mix of experienced and willing-to-experience employees.

Human resources are the principal drivers of change. They push the levers that take futuristic businesses to the next level of excellence and achievement. The Company focuses on providing individual development and growth in a work culture that enables cross- pollination of ideas, ensures high performance and remains empowering.

OUTLOOK

The Indian economy is likely to expand by 7.7 - 7.75% in FY2017 and likely to reach 8% in FY2018.

Triggers for Indian economy in coming year will include most importantly a normal monsoon, lower oil prices, unchanged inflation, passage of GST, better bank balance sheets, improved export and supportive policy environment

Indian logistics and freight market is expected to grow at a CAGR over 13% by 2020 to reach over US$ 300 billion, driven by the growth in manufacturing, retail, FMCG and e-commerce sectors.

It is poised for accelerated growth, led by GDP revival, infrastructure ramp-up, volume growth in containerization, new terminals at ports leading to incremental growth in volumes, dedicated freight corridor (DFC), GST implementation, initiatives like "Make in India" and "Sagar Mala & Inland Waterways", port based coastal industrial centres, and new businesses segments like coastal shipping, contract logistics and e-commerce creating opportunities in long run.