MANAGEMENT DISCUSSION AND ANALYSIS REPORT

OVERVIEW OF THE ECONOMIC ENVIRONMENT

World Economy and Outlook

The most important development in the global economy happened during the last year was softening of the crude oil prices, which is leaving direct positive impact on the Indian Economy as well as Indian public. Most recently Greece episode has remained in limelight because of it's near to bankrupt economy and solution still looks temporary. The disturbance in gulf region because of extremists' activity has badly impacted domestic economies there. All these developments have its mixed impacts on Indian economy. Lower oil prices will help reduce inflation and external vulnerabilities, thereby reducing brssure on central banks to raise policy interest rates.

As per "Word Economy Outlook Update" released by International Monetary Fund in July 2015, global growth in 2014 was a modest 3.4%. Despite the slowdown, emerging markets and developing economies still accounted for three-fourths of global growth in 2014.

Overall, global growth is projected to be 3.3% and 3.8% in 2015 and 2016, respectively. Growth is projected to be stronger in 2015 relative to 2014 in advanced economies, but weaker in emerging markets, reflecting more subdued prospects for some large emerging market economies and oil exporters.

Indian Economy and Outlook

2014-15 has been a year marked by excitement and its share of challenges. The decisive political mandate accorded in the general elections set the stage for surging hopes for a rapid economic turnaround of the Indian Economy. While many macro-economic indicators have improved during the course of the year, the journey to realize the growth potential of the Economy is slow and yet to take momentum.

The IMF estimated that India's Economy will grow at 7.5% per annum over the next two years. This puts India's projected growth in 2016 ahead of the organization's estimates for China (which stand at 6.8% and 6.3% for 2015 and 2016, respectively), leaving India the fastest growing major emerging economy in the world. The IMF's reasoning is based primarily on high expectations for Indian Prime Minister, who has been in office for almost 13 months after winning May 2014 general election. The prime minister's first year in office is marked by modest attempts for economic reform, but has fallen short of the expectations of many observers. Most notably, Prime Minister has taken concrete steps to make manufacturing sector a greater proportion of India's GDP (primarily via his "Make in India" initiative).

With launch of the 'Make in India' initiative, the Prime Minister of India, aims to give global recognition to the Indian Economy and also place India on the World map as a manufacturing hub.

India has also set for itself an ambitious target of increasing the contribution of manufacturing output to 25% of gross domestic product (GDP) by 2025, from 16% currently.

Despite the positive expectations surrounding the Indian prime minister's economic reform initiatives and favourable external factors, the Indian Economy still suffers from negative factors. While the headline indicators point towards steady improvement, the recovery on the ground has been rather slow. Lower inflation has not resulted in significant improvement in demand conditions. The demand conditions have been quite challenging across sectors as borne out by the slow improvement in industrial production. Some of the other key underlying drivers like credit growth and fixed capital formation also highlight a very sluggish environment. The new Indian government, despite its overwhelming legislative mandate, has found it difficult to dismantle older regulations that make India an unfavourable or excessively risky investment destination.

INDUSTRY STRUCTURE AND DEVELOPMENT

Automobile & Auto Components Industry

The Indian automobiles Industry mainly consist of four different segments which are as follows:

• Two-wheelers which comprise of mopeds, scooters, motorcycles and electric two-wheelers.

• Passenger Vehicles which include passenger cars, utility vehicles and multi-purpose vehicles.

• Commercial Vehicles that are light and medium-heavy vehicles.

• Three Wheelers that are passenger carriers and goods carriers.

The automobile industry is one of the key drivers that boost the economic growth of the Country. Since the de-licensing of the Sector in 1991 and the subsequent opening up of 100 percent FDI through automatic route, Indian automobile sector has come a long way. Today, almost every global auto major has set up facilities in the country led by Japanese and Korean Companies.

Today Indian automobile Industry counts as under:

• Seventh-largest producer in the world with an average annual production of 17.5 Million vehicles.

• The Indian automobile market is estimated to become the 3rd largest in the world by 2016 and will account for more than 5% of global vehicle sales.

• India is the second-largest two-wheeler manufacturer, the largest motorcycle manufacturer and the fifth largest commercial vehicle manufacturer in the world.

The domestic auto components industry also consists of unorganized players, who are largely small and medium enterprises. However, it is the organized segment that contributes about three fourth of the industry's total revenues. More than 600 organized players are registered with the Auto Component Manufacturers Association.

The Indian auto components industry has experienced return of moderate growth over the last one-and-a-half years. The growth can be attributed to factors such as strong buoyancy in the end-user industry, recovery of the global economy, improved consumer sentiment and return of adequate liquidity in the financial system. The revival of the auto industry was initially driven by the fiscal stimulus programme of the government.

With the government's 'Make in India' initiative boosting manufacturing, commodity prices under control and growth in industrial activity visible - all being indicators of a positive outlook - the Indian auto sector expected for a better ride this fiscal. Buoyancy in the Industry and a return to the former 2011-12 highs expected only after stability and reforms drive in the economy.

Road Ahead

The rapidly globalising world is opening new avenues for the transportation industry, generating the need for more efficient, safe and reliable modes of transportation, which is consequently adding to the auto component industry's growing opportunities. According to a report by the Confederation of Indian Industry (CII), the Indian auto component industry is set to become the third largest in the world by 2025. Also, by that time, newer verticals and opportunities for component manufacturers will open up as the automobile market will shift towards electric, electronic and hybrid cars and newer technologies will have to be adopted via systematic research and development.

Indian auto component makers are well positioned to benefit from the globalisation of the sector as exports potential could be increased significantly in the days to come because of positive momentum in the Economy and 'Make in India' initiative.

India is probably among the most competitive country in the World for the Automotive Industry. It covers near to 100% of technology or components required to make a car.

LED Lighting and

Integrated Passenger Information System (IPIS)

Energy Efficiency has become one of the most important issues of the Century to curb the greenhouse gases and to tackle the global climate changes.

In Indian context, in spite of all efforts of fast tracking the power projects, the power crisis in the country is worsening by the day. The lighting load in the country is approximately 18% of the total connected load. One immediate solution for energy efficiency is adoption of LED lighting with a fast pace. Sensing the large opportunity which is set to open up over the next few years, new players are entering in the LED market. After the initial euphoria, it is expected that industry will be consolidated by serious and long term players on lines similar to what was seen in the CFL segment.

The momentum of LEDs is broad-based, covering both residential and commercial applications. All major technology groups - HID, linear fluorescent, compact fluorescent, incandescent/halogen are giving way to LEDs. LED solutions have strengthened their position in applications where they already had a foothold -such as LED Bulbs, downlights, commercial screw-in reflector lamps and street lights. Meanwhile, improvements in performance and reductions in manufacturing costs have penetrated market in a much faster way and opened up new applications for LEDs, from high-bay, high-lumen applications to the smaller MR16 replacement lamps illuminating retail displays.

A Disruptive Technology-How LEDs are Changing the Game

The ongoing transition to solid state lighting has disrupted the lighting market in two significant ways.

First, an industry long dominated by global giants like Philips, Osram, GE etc. is now seeing incredible fragmentation, with competition from thousands of new manufacturers. Threatened incumbents have tried to wall off access to their established market channels, such as their electrical wholesale distributors, retail partners, and manufacturer sales rebrsentatives. In response, upstart LED companies have increasingly taken their lamps and luminaires directly to the end-user, bypassing these traditional distribution channels. While it's too early to know how the distribution channels will ultimately change, it is possible the direct-to-market channel is growing at the expense of the stocking electrical wholesaler.

The second disruption is the shift from standardized lamps to customized lighting systems. LED technology enables an infinite variety of design possibilities in both function and form. However, achieving these possibilities and ensuring a high quality lighting solution, requires an in depth knowledge of both system design and lighting component technology. All system components, from the LED chip (the actual light source) to the driver to the luminaire's optics, must be fully integrated and coordinated. In this way, LEDs stand in stark contrast to the traditional lighting paradigm in which bulbs, ballasts, and fixtures could be sold separately from any number of manufacturers and then installed on site with little technical sophistication.

That business model, in which lamp and ballast manufacturers could capture value independent of how the complete lighting system was assembled, appears less tenable in an LED world. The design and coordination required to optimize the overall LED system performance means, to no small degree, that the fixture (luminaire) manufacturer is now the provider of the actual light source. Particularly in the commercial market, this places fixture manufacturers at the top of the value chain. As a result, many traditional lamp manufacturers are defining and marketing themselves as lighting solution providers, offering customers an overall lighting experience, rather than just manufacturing standard products.

The technological potential of LEDs, coupled with competitive brssure on manufacturers to differentiate themselves, appears poised to push exciting developments in lighting systems in the near future. Already, manufacturers are marketing sophisticated controls and people-centred functionality that promise a range of possible experiences. Luminaires will work more like computers than bulbs, offering non-energy benefits such as light output and color adjustment to circadian rhythms in order to enhance mood, sleep, and productivity. They may function as wi-fi access points, meters, or data analytics devices. In summary, the value-added features of well-designed LED systems go well beyond energy benefits. Lighting manufacturers-solution providers-will seek to develop and promote these features to differentiate themselves in the highly competitive lighting market.

"On above backdrop, we believe that Company like us who is having in-house capabilities for Design, Development and whole value chain of Manufacturing as well as better understanding about technology, coupled with deep knowledge of peculiarity of Indian market will be at advantageous position."

IPIS is a set of IT system, hardware, and services which provides real-time information about the arrival and departure and other information of transport mediums to the passengers. It offers other features such as scheduling information, entertainment, news broadcasts, and emergency communication services. These solutions require seamless integration between the moving transport medium, station, and the passengers. Traditional methods of delivering the scheduling information were manual. A passenger has to visit the station to know the exact arrival or departure time but new technologically advanced solutions offer information on the go to the passengers.

There is a real time connectivity of the on board system with backend server to control and monitor the real time information about the vehicles and schedule management and at the same time providing the real time information to the passengers at bus stops through LED Displays, on mobile & PC through web based application.

Integrated Passenger Information System is a computer based electronic system providing audio and visual information to passengers through multiple displays spanning over the entire station and coaches. It is widely used in Buses and other avenues like Metro, Railway etc. It may be used both physically within a transportation hub and remotely using a web browser or mobile device. IPIS covers various modes of transportation viz Trains, Metro Trains and Public Transport Vehicles like Buses, Railway Stations and Bus Stops etc. The information to the passenger is provided through audio announcement and Visual information through various types of displays.

IPIS for Automotive/BUS application: Automotive PIS includes on board control system like controller LED Displays, LED/ LCD Displays, Announcement System, Camera, GPS/ GPRS, Ticketing and on board diagnostic system.

IPIS for Railways: Computer based announcement system for announcing train information to passengers, electronic display boards and coach guidance display boards for displaying train information to passengers with the feature of networking and operation from a centralized place.

Way Ahead: Advent of smartphones and better connectivity are the primary factors among others which will drive the growth and advancement of the Passenger information system market. With the mobile applications installed on a smartphone connected with a network, the information can be accessed any time. Mobile applications in this market are going to be one of the key segments which have a promising future in terms of revenues. On the other hand, passengers are becoming more demanding and to enhance the passenger experiences, transport service providers started offering other features along with scheduling information. These features are mainly entertainment, in-transit connectivity, news, and emergency communication. The vendors in the PIS market are constantly trying to introduce better connectivity into their solutions which will help transport service operators to provide better services to the passengers.

PIS for Coaches: Passenger information system is an important aspect of passenger amenity inside the train. Information about train location, next halting station and late running status of train and alarm system help in enhancing passenger comfort especially during night hours. The GPS based Passenger Information System is a cost effective solution to provide this information to passengers on a moving train. In addition to the above this system is used for providing the entertainment and advertisement services for additional revenue generation.

OPPORTUNITIES & THREATS

Auto-Component Business

The Indian auto component Industry is one of India's sunrise industries with tremendous growth prospects. From a low-key supplier providing components to the domestic market alone, the Industry has emerged as one of the key auto components centres in Asia and today seen as a significant player in the global automotive supply chain. India is now a supplier of a large range of high-value and critical automobile components to global auto makers in every continent. Following are major growth drivers for the auto component industry:

• With the increasing middle class and disposable income, passenger vehicles expected to grow more.

• Two-wheelers will also grow with a growing working population and an expanding middle class are expected to remain key demand drivers. Increasing disposable incomes in the rural agri-sector is another driving force.

• The brsence of a large pool of skilled and semi-skilled workers and a strong educational system will support the Industry.

• A large number of products are available to consumers across various segments. With the entry of a number of foreign players, reduced overall product lifecycle and quicker product launches have become the order of the day.

• The availability of a variety of vehicle models meets diverse needs and brferences.

• Easy finance schemes, owing to which the auto finance has grown at a very fast pace, adding fuel to auto industry's growth.

• Favourable government policies like lower excise duties, automotive mission plans, the constitution of NATRiP (National Automotive Testing and R&D Infrastructure Project) etc. will further encourage the growth of the auto component sector.

An emerging trend is of consolidation of suppliers and Indian Original Equipment Manufacturers (OEMs) or automobile makers are actively looking to reduce suppliers over the next few years - more business for fewer players is the new trend.

On above backdrop, Company is looking for every possible and strategic fit opportunity, which entails to growth and continuously increasing its product portfolio as well as customer base. Starting of Plastic Molded Parts, Sheet Metal Parts and Wiring Harness shows Company's resolve to grow its product portfolio in auto components.

Presently, major business of the Company comes from two-wheeler segment. Company supplies its products to almost every two wheeler OEM in India, barring one or two. The biggest two customers of Company are HMSI and TVSM. Within two-wheelers, gearless scooter segment is witnessing an imbrssive growth.

Scooters are on a roll as it has been the only automotive segment to buck the economic downturn to grow by an imbrssive double digit growth. Scooters are finding favour with buyers owing to a unisex appeal, increasing female independence, ease of drivability and improved fuel efficiency. Notably, Activa (Honda Motorcycles & Scooters India) is now India's 2nd largest Two-Wheelers brand. Rural India is at the forefront of the rapid growth in scooter demand. Scooters are becoming more fuel efficient, which has enabled higher penetration in rural areas as well, especially in large and fast-growing northern states. With increasing women empowerment and better rural road infrastructure, states like UP, Madhya Pradesh, Rajasthan and Bihar have clocked scorching scooter sales growth. Perception of scooters being a safer Two-Wheelers and ability to address the entire family's transportation needs expected to facilitate the shift of demand from motorcycles to scooters.

The Company is one of the biggest suppliers of automotive lighting and rear view mirrors to scooter segment and sees better growth trajectory with the increased acceptance of scooters.

With such ample opportunities, Indian automobile & auto component industry also faces some challenges, which are typical of an emerging market. Foremost of these challenges are infrastructure - roads, ports and power. Off late land acquisition may also emerge as a stumbling block for industrial growth. Inflation though was a problem but has come down recently, as a relief to all.

LED Lighting and

Integrated Passenger Information System with LED Display (IPIS)

The LED market has emerged as one of the fastest growing industries in India. This industry has been majorly driven by factors such as falling prices of LED lights, increasing initiatives taken by the government and rising concerns with respect to energy conservation. Further, modernisation of Indian Railways, Transport Infrastructure Development and Metro Systems will give a big boost to the IPIS.

Hon'ble Prime Minister, Mr. Narendra Modi has recently launched the "National Programme for LED based Home and Street lighting" with the aim to replace incandescent bulbs (ICLs) with LED lights for residential and street lighting. Driven by the government's initiatives, the LED market is growing with a very fast pace, earlier and faster than expected.

The key driver of the increased usage of LED's over the next few years will be the government's push to replace street lighting (via municipalities) and residential lighting (via state discoms) to achieve energy efficiency and savings. The government expected to ban the sale of 100W, 60W and 40W ICL's in next few years and this along with a further fall in prices of LEDs would fuel a large scale switchover to LEDs. Commercial establishments (retail outlets/offices/shops) to increasingly opt for LED down lights to replace less efficient FTL's and CFL's; the price gap of LED's vs CFL's down lights has narrowed significantly which provides a good incentive to switch to LED lights.

Road Ahead

During next 4-5 years, use of LED's to be driven by replacement of streetlights, down lights and retrofit of LED lamps under the government's recent initiative called the "National Programme for LED based home and street lighting", launched by the Honourable Prime Minister, LED bulbs shall be used to replace existing ICLs in domestic households. Similarly, existing street lights have started to be replaced with cost effective LED Lights.

LED Bulbs for household lighting Incandescent Lamps are primarily used for domestic household lighting. Under the government's initiative, it is expected that ICL's in India top 100 cities would be replaced by LED Bulb to encourage energy efficiency and cost savings. As a step towards phasing out of ICL's and increasing the usage of LED's, ICL will be banned in due course. A total of 780mn ICL's were sold in CY13 (758mn in CY12) as per ELCOMA. Replacement of these ICL's by LED Bulbs which use 85% less energy would help save a total of 50bn units and a cost savings of Rs. 25 bn.

Energy Efficiency Services Ltd. (EESL) - a Joint Venture Company of PSUs under power ministry is nodal agency to implement the energy saving projects in the country. It is emerging as one of the most important facilitator to Govt., local bodies as well as LED manufacturer and other stakeholders.

Domain expert on LED - Fiem has extensive knowledge of LED technology from chips, optics, and thermal management to ingenious design, quality and reliability to make the right choice of components. On the strength of its R&D and Technology understanding, Company has added a host of LED products in its product portfolio. Company is well equipped to meet the challenges of LED technology and the ever increasing customer expectations. The complete range of LED products helps us in providing the much desired total lighting solution. FIEM's R&D centre ensures that highly efficient and top quality products are delivered.

Innovative design, affordable price, lasting energy savings, and no compromise on quality - it's a winning combination for FIEM.

The speed of market development and the length of the transition period as well as FIEM's ability to react promptly and flexibly to change in market requirements, will determine how successfully we pass through these phases.

Integrated Passenger Information System (IPIS) also provides huge opportunity in Indian Railways and State Transport Buses. Indian Railway planned an unbrcedented investment of Rs 1 lac crore for 2015-16 and Rs 8.56 lac crore for the period of 2015-20. The modernization programme which includes new lines, gauge conversion, doubling, tripling and electrifications covers platforms and passenger information / announcement system also. State transport authorities are installing IPIS system in its buses. Private institutions like school buses also use this system.

Management believes that these two additional businesses will drive growth of the Company in next phase. Company has done maximum backward integration by manufacturing almost all components of LED Luminaire in-house to maintain stringent quality standards and control the costs, so that the Company can offer high quality products at competitive prices. On the strength of the in-house manufacturing capabilities, Company is able to procure good business through tenders floated by the EESL. In the time to come, this business expected to grow with a fast pace.

Threats and Challenges

The Indian lighting industry is less energy efficient compared to other countries. Further less Government support compared to global competitors like China, who has become a global manufacturing hub for LED/ Electrical components through a lot of government support is also a disincentive. In addition to this, quality and testing standards are yet to be enforced. Limited testing capacity for LED lighting and heavy dependence on imports for electronic components and LED chips are other concerns.

OPERATIONAL REVIEW

During the year under review, the operations of the Company had remained steady and efficient. During the year the activities started for commission of Ahmedabad plant and capacity addition took place in Rai Plant for LED Luminaires and IPIS. The performance of the Company at operational front has remained among best in the Industry. On operational front, the principles of the Company remained to produce best quality product at least cost. The capacity addition at Tapukara Plant for LED luminaires is under progress and should be completed during the current year. Company is successfully participating in the tenders floated by EESL for LED Bulbs and LED street lights.

The new business of LED Luminaires is growing well and as of now following major tenders has been procured by the Company floated by Energy Efficiency Services Ltd. (EESL):

- In last Quarter of FY15, the EESL tender for supply of 7.74 Lac LED Bulbs of 7W to Andhra Government, total contract value Rs. 11.53 Crore [Order completed during FY2014-15].

- Award of business by EESL for Design, Manufacture, Supply, Testing, Installation, Commissioning CCMS and 7 year Warranty of LED Street Lights and other related works under South Delhi Municipal Corporation in Delhi. The contract value is Rs. 99.79 Crore and to be completed during the current financial year.

- In tender floated by EESL for Design, Manufacture, Supply and 3 years warranty of self-ballasted 9W LED Bulbs (Quantity 3.27 Crore) for Kerala and Andhra Pradesh, we stood L-1 for 70,00,000 (Seventy lac) Bulbs at a bid-price of Rs. 72.40 per Bulb. The supply of the LED Bulbs would be completed during the current financial year.

As a testimony to the operational performance, the Company got awards from its esteemed customers on the parameters of Quality, Cost, Development, Delivery and overall Management.

FINANCIAL REVIEW

On the financial performance side, the year under review has been another successful year for the Company with overall strong performance. The net sales of the Company grew by 14.75% in 2014-15 to Rs. 819.50 Crore as against Rs. 714.11 Crore in the brvious year.

On profitability side, the Profit after tax was Rs. 42.26 Crore in comparison to Rs. 37.40 Crore in 2013-14.The detailed financial highlights / summary are given in the Directors' Report. Company has been able to consistently perform better and is growing well despite slow growth in the auto industry during this period. This has been possible because of relentless efforts of the management of the Company and support from its valued OEM customers.

RISKS AND CONCERNS

Our Risk Management Policy use systematic approach for risk management by identifying, assess and manage the risks. We constantly review this approach and adopt it as warranted by new circumstances in light of the changing environment affecting us.

The Company regularly monitor risks to the business and adopt proactive remedial measures. These include areas such as market trends, new competition, changing customer brferences, disruptions in supplies, product development, talent management etc.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

The Company has a combrhensive system of internal control to safeguard the Company's assets against any loss from unauthorized use and ensure proper authorization of financial transactions. The Company has internal control systems commensurate with the size and nature of the business and has experienced personnel positioned adequately in the organization to ensure internal control processes and compliances.

The Company takes abundant care in designing, reviewing and monitoring regularly the working of internal control systems and their compliances for all important financial internal control processes. The Audit findings are reported on quarterly basis to the Audit & Risk Management Committee of the Board headed by a Nonexecutive Independent Director.

The Company maintains a system of internal controls designed to provide a high degree of assurance regarding the effectiveness and efficiency of operations, the reliability of financial statements and compliance with laws and regulations.

The Internal Auditor, an Independent firm of Chartered Accountants reviews the effectiveness and efficiency of financial internal control systems. The Audit & Risk Management Committee approves and reviews audit plans for the year. Audits are conducted on an ongoing basis and significant findings are brought to the notice of the Audit & Risk Management Committee of the Board following which corrective action is recommended for implementation. All these measures facilitate timely detection of any irregularities and early remedial steps.

HUMAN RESOURCES

Our people are integral to our success. We continue to develop our people to meet the requirements of our business and our employee engagement continues to be amongst the highest in the industry. One of the principal anchors of your Company's ability to cope with challenging business environment is its strong culture of customer centricity, innovation and people focus. Your Company has embarked on several initiatives to strengthen its Employee Relations. Your Company has a longstanding practice of developing talent from within by providing on-the-job learning opportunities and career development platforms to all including front line employees of the Organization. Your Company's commitment to the development of employees is best reflected in how individual development conversations and the people review programs are being institutionalized in the Organization. There is a constant endeavour to identify individual capability development needs and provide structured support and intervention to hone these capabilities. All the manufacturing locations are working on an ambitious Employee Relations agenda through various initiatives like Continuous Education Programme, providing vertical growth plans from operator to staff level and create an environment of inclusive participation by involving operators in decision-making process through Quality Circles and Total Preventive Maintenance programs.Company believe in social harmony and empowering women at workplace. Toward this approach Company employs maximum woman employees at assembly lines. Company imparts on-job training to develop their skills and to make them employable. Company goes beyond business needs and give all facilities to the women which are necessary to feel them safe. On job facilities are best in the Industry like uniform, lockers, restrooms, canteen and transportation.

The employee feel a sense of belongingness and throughout the year industrial relations has remained cordial across all locations. At the end of the financial year the direct employee strength at payroll were 1489.