MANAGEMENT DISCUSSION AND ANALYSIS:

Your Company's business comprises of three key verticals - Shelf Life Solutions, Aroma Ingredients and Performance Chemicals.

1. SHELF LIFE SOLUTIONS:

Camlin Fine Sciences Ltd. (CFS) is a leading producer and exporter of Shelf Life Solutions (SLS) viz. antioxidants TBHQ and BHA, having more than 45% of the market share. The Company is fully integrated with an assured supply of the key raw materials through its 100% subsidiary CFS Europe SpA, having its manufacturing facility in Italy.

On a global front, Financial Year (FY) 2015-16 was a challenging year for the antioxidants industry. The price of oil fell rapidly during the last 2 years, thereby causing the cost of WTI crude to fall, which did not recover until April 2016. This has resulted in drop in prices of petroleum products across different regions and has weakened the market sentiments. This has also consequently impacted the raw material prices for antioxidant market. In spite of this market volatility, the Company has maintained its market share in both TBHQ & BHA bulk business. The Company has shown stability w.r.t volumes in this financial year for the entire products portfolio besides capturing new product segments. However, the negative impact on values due to the drop in sales prices driven by drop in crude oil prices, resulted in the reduction of the sales value though there has been positive impact on material/ input costs due to fall in chemical prices.

During the FY 2015-16, CFS has focused on expanding the SLS business by making large investments in building technical capabilities, widening product portfolio capacities, increasing sales and marketing teams, enhancing development and testing of products by setting up Applications laboratory. Our strategy of moving into forward integration of antioxidant blends in now under active implementation at a global level. The markets for such antioxidant blends would cater to three main end-users - human food, pet food and animal nutrition. During the year under review, CFS built a product portfolio to address each of the above markets through our expert global team. The Company's understanding of its customer has made the basket of products very relevant to the market needs.

To maintain the Company's leadership position and with severe brssure on the selling price due to competition, in the FY 2015-16, CFS focussed on process improvements in its R & D Centre at Tarapur, India to optimize cost and capabilities. Our process development lab through its experienced team has shown successful results during the year by obtaining cost reduction.

Testing and Applications Laboratory which were commissioned in early 2015 at the Company's Head Office in Mumbai, has gathered momentum. The main areas of work for FY 2015-16 included new development of antioxidant and aroma blends, evaluation trials, analysis and commercial scale feasibility of new ingredients, blends and application products, process improvements for blends, technical and sales support for the food, animal feed and petfood industry for our offices/markets in different parts of the world. The laboratory provides the customers with a unique collaborative approach for product design and development.

With the world moving towards natural products, surveys indicate brference of natural antioxidants in certain markets. CFS introduced a range of natural antioxidants under the brand name 'NaSure' - plant based extracts like Rosemary extract, Green tea extract and Natural Tocopherols.

GLOBAL OPERATIONS

CFS do Brasil Indûstria, Comércio, Importaçâo e Exportaçâo de Aditivos Alimentfcios Ltda. (CFS do Brasil)

CFS do Brasil, strategically located in Indaiatuba, near Sâo Paulo, Brazilserves customers in Latin America. In 2015, CFS do Brasil focused on building its product portfolio, testing methods and other technical developments for the food, pet food and animal nutrition industries.

It now has a fully functional plant to serve the human and pet food industry. By first quarter of the FY 2017­18, the facility will be ready to produce for the animal nutrition industry. CFS sales team includes experts in each of these areas and are currently reaching out to these markets. The benefit of this investment made during the year, will be seen in the coming years.

For allits relevant markets and applications, the Company's products comply with Kosher and ISO 22000:2005 requirements.

CFS North America, LLC

CFS North America, LLC, (CFSNA) 100% owned subsidiary of CFS was incorporated in third quarter of FY 2015-16, which is headquartered in Urbandale, Iowa. During the year, CFSNA hired an expert team in the US including for technical, operations, sales and marketing functions. The Customer Application and Testing laboratory is under construction and will be completed in first quarter of FY 2016-17. The benefit of the large investment made in the US market will be seen from next year when CFSNA begins its operations.

CFS Antioxidantes De Mexico, S.A. de C.V.

In forth quarter of FY 2015-16, the Company started its operations in Central America with the incorporation of CFS Antioxidantes De Mexico, S.A. de C.V. (CFSM)

a 100 % subsidiary of CFS. This was launched with the aim of gaining brsence and reaching out to its customers in Mexico, Central America, Caribbean and Andean region.

This was further boosted with CFSM entering into a share purchase agreement to acquire 65% of Dresen Quimica S.A.P.I de C.V., ('Dresen') in Mexico. Dresen is a leading antioxidant blend Company located in Mexico, Central America, some Latin American countries with its 100% subsidiaries in Peru, Gautamala, Columbia, Dominican Republic and a branch office in Cuba. With this acquisition, CFS will get access to new markets/ customers as well as access to a portfolio of products, which are focused on animal nutrition markets. Dresen has several products other than antioxidants in its portfolio, which have a good potential in the animal nutrition area. CFS will take this product portfolio in the coming year to Brazil, North America, Europe, and Asia, to address the animal nutrition markets in those geographies.

CFS Europe S.p.A (CFSE)

CFS has also initiated the process to set-up an operation to address the EU and East European markets for Shelf Life Solutions. During the FY 2015­16, the Company hired a team of experts to address this market. The Company has initiated the process of identifying a suitable location in Italy for manufacturing antioxidant blends and other portfolio of products.

Also, CFSE has initiated the process to identify a location to house a technical applications and testing laboratory in Denmark. CFSE is expected to complete the construction of both the manufacturing facility and the laboratory by third quarter of FY 2016-17 and will begin its operations in the subsequent quarter.

CFS International Trading (Shanghai) Ltd.

The process of setting up of Company's 100% owned subsidiary in China to address the local market is in progress. CFS has started hiring the team in China and expects to commence the business from second quarter FY 2016-17.

II. AROMA INGREDIENTS

Vanillin and Ethyl Vanillin

The Company has gained focus on Vanillin & Ethyl Vanillin under the brand name Vanesse and Evanil respectively, with its venture into aroma segment in FY 2014. At its manufacturing plant in Ravenna, Italy, CFSE produces Catechol, the basic ingredient used to make vanillin and ethyl vanillin. As one the leading manufacturers and the only Indian manufacturer of these products from Catechol origin, CFS uses an environment friendly and clean process most trusted by the food and flavor industry. The Company makes all key ingredients in-house and has positioned itself as a quality global vanillin player.

The Company has state-of-the-art R&D facility in-house which works on technological improvement and ensures the highest standards of ingredient quality and food safety in our process offering complete traceability from Catechol to Vanillin [Vanesse]. Each batch is carefully tested by food flavourists and enables the Company to deliver customer's requirement with consistency and desired aromatic notes. Its catechol-guaiacol based vanillin is a brferred product in advanced markets of US/EU compared to that of Chinese supplier [made from toluene] due to quality or health hazard concerns.

The Company recently launched, Ethyl Vanillin, under the brand name 'Evanil' produced from Catechol-Guethol route. It is two to three times more potent than vanillin. It offers more concentrated flavor profile with added advantage to certain segments and applications.

During the year, process improvements have been initiated in Italy as well as in Tarapur, India to optimize cost and capacities. The full impact of these process improvements in Catechol downstream products will be seen in coming years.

This year would focus on development of Vanillin and Ethyl Vanillin flavor blends for bakery applications. Application trails are on with flavor blends in bakery and diary products.

Purpose of using Vanillin & Ethyl Vanillin - Vanillin & Ethyl Vanillin products are used to give food and beverages a flavour of vanilla, to enhance other flavours or to mask or smoothen unwanted off-flavours. Usage of Vanillin & Ethyl Vanillin depends upon labelling requirements, Cost in use, Process requirement (Solubility, Intensity, Temperature), personal taste and geographical differences.

III. PERFORMANCE CHEMICALS

The process improvement measures were initiated in CFSE to optimize cost and capacities. The full impact of these measures for Hydroquinone and Catechol production in Italy will be seen in FY 2016-17. The R&D team's constant focus is on the development of Dipheno downstream products by commercializing newly developed products, by enhancing the capacities with new and improved processes along with technological upgradations.

The Vapor phase methylation technology for converting Catechol to Guaiacol has been successfully implemented. The process is continuous, economical and environment friendly. Due to the uniqueness of the process, the Company has successfully made an application to register this process patent. The Company has doubled its Guaiacol capacity to 4000 TPA this year.

During this year, the Performance Chemicals Division has introduced new products such as 4-Methoxy Acetophenone (4-MAP) to catering to aromatics, dyes and pigment industry. The Company will focus on deeper market penetration, by adding distribution channels in newer geographies. The Company has already commissioned distribution hub in China and have plans to enter into other key markets like North and Latin America.

The Company has enhanced the capacity of Tertiary Butyl Catechol (TBC) and Hydroquinone Monomethyl Ether, used as polymerization inhibitor for the petrochemical industry. This is to serve the global customers. The Company has received product approvals and is poised to initiate its supplies to markets such as India, China, Europe and America.

Veratrole another important downstream product developed and commercialized by the Company has captured 70% market share in 2015-16. This product is an important intermediate for the pharmaceutical and agrochemical industry and well accepted in India and international market.

Asia Pacific region [APAC] leads the cosmetic industry with a market share of 35% in 2014 and is the region of focus for the cosmetics providers. 4-Methoxy Acetophenone (4-MAP) is an aromatic chemical compound and is used as a chemical intermediate in manufacturing of cosmetic additives like Avobenzone, resins & flavoring agents and in bulk pharmaceuticals has gained momentum due to this. There are very few manufacturers of this product in the world. Production has commenced in fourth quarter FY 2016 and the product trials are being conducted. Customer approvals are under process.

New Project at SEZ Dahej, Gujarat for Hydroquinone, Catechol and Vanillin manufacturing within the SEZ set up.

The Company has purchased land admeasuring 67,507.15 sq. mts. situated at Dahej SEZ, located in Vagra Talulka of western part of Bharuch District, Gujarat. The work for setting up a plant for manufacturing Catechol/Hydroquinone/Vanillin is in progress. Due its good connectivity via road, National Highway (NH-8) and railway - both connecting to major metros like New Delhi and Mumbai makes it beneficial for gaining logistical support too.

The mai n driver for this expansion project is to become a major Diphenol supplier in the world, with product portfolio having a growing demand globally for HQ, Catechol and Vanillin as well as its derivative/ down-stream products for expanding its Performance Chemicals portfolio.

With regards to its progress, the Company has applied for environment clearance on the project. It has appointed the Project management Consultant of international repute and the project is expected to be in commercial production from FY 2018-19 and is moving as per schedule.

RISKS AND CONCERNS:

In international markets, there are always associated risks, but also possibilities of potential gains

CFS maintains a strategic approach to risk management. Regardless of the Company 's stage of growth, CFS has the ability to identify and manage risk that stands out as a vital element of success. The Company approaches it professionaly and innovatively to reap its rewards and accelerate growth. The Company's expansion strategy includes expansion into various countries around the world. While the Company's effort is to limit its exposure by entering only countries where the political, social and economic environments are conducive to doing business, there can be no assurances that the respective business environments will always remain favorable. The Company is constantly reviewing the risk aspects that may impact it adversely. It is the de-risking ability of the Company which makes the difference.

The availability of key raw materials from international  sources at the right quantity and at right price is also a risk factor associated with the business of The Company However the Company has mitigated this risk with CFS Europe SpA., which facilitates backward integration. The main raw material supplies are thus available at the right quantity and at right price. Through proper planning and with due diligence and compliance of all aspect of transfer pricing, currency impacts within transfer pricing and its monitoring on regular basis is ensured. Besides, the risk of over dependence on few overseas suppliers for key raw material and its price sensitivity has been take care with this facility.

Further, on the international currencies front, volatility of exchange rate is a matter of concern for a Company because major sales are in the form of exports worldwide besides corresponding imports in foreign currency for key raw materials. However, the risk associated with currency fluctuation has been mitigated by effective forex management policy along with judicial use of natural hedge provided by exports against its imports in view of the Company being the net exporter on the currency front. The Company still believes in adopting a very conservative and cautious forex policy to avoid any unwarranted effects of currency volatility.

As regards inflationery brssures and its impacts on the cost of manufacturing, the Company has taken suitable cost control steps at various levels of operations. The costs are being monitored regularly to ensure that they would not affect the operating margins of the Company. Correspondingly, the steps taken by the Company for process re-engineering, process improvements, yield improvements, technological up-gradation and other cost saving measures have resulted in cost optimisation. Overall, these measures have been fructified in improving the magins not only for existing core products but also for newly developed down-stream products.

Lack of clarity on future Government policies continues to be an area of major concern for the industry. The full impact of this cannot be assessed until the proposed changes are actually introduced and implemented.

INFORMATION & TECHNOLOGY:

In line with the overall growth objective and strengthening of infrastructure base, the Company had invested in Information Technology (IT) viz. SAP Enterprising Resource Planning system for leveraging its business values. Through implementation of SAP the Company has improved its operational efficiencies, inventory minimization and cost optimization not only for its Indian operations but also in its overseas manufacturing operations at Italy & Brazil.

The Company views SAP as a strategic tool to enhance its operational efficiencies, through various functional integration.

INTERNAL CONTROL SYSTEMS AND THEIR  ADEQUACY:

The Company has adequate internal control procedures commensurate with its size and nature of business in India and also at its subsidiaries abroad. The Company has clearly laid down policies, guidelines and procedures that form a part of the internal control systems. The adequacy of Internal Control Systems, which encompasses the Company's business processes and financial reporting systems, is examined by the management as well as by its internal auditors at regular intervals. The internal auditors carry out audits at regular intervals in order to identify weaknesses and suggest improvements for better functioning. The observations and recommendations of the Internal Auditors are discussed by the Audit Committee, to ensure effective corrective action

Our Results of Operations on Consolidated basis is as follows:

Consolidated EBIDTA (before exceptional item) for the financial year ending on 31st March 2016 is at Rs. 9,606.34 Lacs (19.05 % of sales) in comparison with that of brvious financial year ending on 31st March 2015 at Rs. 9,254.91 Lacs (16.22 % of sales).

Consolidated PBT (before exceptional items) for the financial year ending on 31st March 2016 is at Rs. 5,456.57 Lacs (11 % of sales) in comparison with that of brvious financial year ending on 31st March 2015 at Rs. 5,247.83 Lacs (9.20 % of sales).

Consolidated Cash Accruals (before exceptiona item & tax) for the 12 months period ending on 31st March 2016 is at Rs. 7,162.09 Lacs (14.20 % of sales) in comparision with that of brvious financial year ending on 31st March 2015 at Rs. 6,001.70 Lacs (10.52 % of sales).

CORPORATE SOCIAL RESPONSIBILITY (CSR):

During the Financial Year 2015-16, the Company has spent Rs. 63.57 in Lacs towards CSR activities through various trusts and NGO's operating in the areas of promoting education, including special education and employment enhancing vocation skills especially among children, healthcare, the differently abled, promoting gender equality, empowering women and measures for reducing inequalities faced by socially and economically backward classes. Further, the Company understands the importance of CSR initiatives and has donated funds to sbrad educational awareness amongst children from tribal area school through contributions towards these activities.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

CFS believes in creating strong leadership and an inclusive environment where differences are valued and CFS team members can innovate to drive the business forward. It invests in its employees; nurturing their talent and helping them develop skills to match the demands of the business during each different growth phase.

It continuously seeks to inculcate within its employees, a strong sense of business ethics and social responsibility.

Relations with the employees at all levels remained cordial during the year. The Company has 307 permanent employees as on 31st March, 2016.

For & On behalf of the Board

Ashish S. Dandekar

Executive Director & Chief Financial Officer

Dattatraya R. Puranik

Managing Director