MANAGEMENT DISCUSSION AND ANALYSIS

The discussion hereunder covers financial results and subsidiaries development of Adani Ports and Spécial Economic Zone Limited (APSEZL) for the financial year 2015-16 and its business outlook for the future. This outlook is based on assessment of the current business environment and Government policies. The change in future economic and other developments are likely to cause variation in this outlook. Economic Outlook:

The global economy which was expected to be on a revival path at the start of 2015 was held back due to falling commodity prices coupled with the increasing financial turbulence in major economies (source: Un.org WESP). World economy is struggling to generate stronger growth and grew at 3.1% in 2015. IMF expects that world economy to grew at 3.2% in 2016 (IMF Projection April 2016). Emerging countries lacklustre economy growth of 4.0% put a brake on the global recovery. Advanced economies' growth, at 1.9% in 2015 has been slightly disappointing .

US economy stumbled due to weak export stemming from the strong dollar along with weaker domestic demand as well as decline in the investment but labour market indicators continued to improve.

In Japan, growth came out significantly lower than expected during the fourth quarter, reflecting in particular a sharp drop in private consumption.

Economic activity in other Asian advanced economies which are closely integrated with China such as Hong Kong and Taiwan weakened in 2015, owing in part to steep declines in exports and subdued domestic demand.

Growth in China was in contrast slightly stronger than brviously forecast, reflecting resilient domestic demand, especially consumption. Robust growth in the services sector offset recent weakness in manufacturing activity.

India has emerged as the fastest growing major economy in the world in 2015. The improvement in India's economic fundamentals has accelerated in 2015 with the combined impact of strong government reforms, RBI's inflation focus supported by benign global commodity prices.

Despite the uncertainties in the global economy, India's GDP growth gained momentum with a five years high growth rate at 7.6% in 2015-16 (Central Statistics office). The Economic Survey 2015-16 had forecasted that the Indian economy will be growing by more than 7% for the third successive year in 2016-17 and can start growing at 8% or more in next two years.

Industry Structure: Ports:

Indian Scenario:

India's goal of emerging as a modern economy depends on its ability to sustain economic growth of over 8% annually over the next decade. To do so, the Government of India has identified development and modernization of the country's economic infrastructure as a priority area. The development and growth of ports, in particular, is crucial as they play a vital role in the country's overall economic development.

Buoyed by the levels and changes of demand both in the domestic and global activity, cargo traffic at India's 12 major ports witnessed an increase of 25.03 MMT during the financial year 2015-16 as compared to financial year 2014-15.

Cargo traffic at India's 12 major ports stood at 606.37 MMT during the financial year 2015-16 as compared with 581.34 MMT handled during financial year 2014-15. During the first three quarters of 2015-16, cargo traffic handled at India's major ports recorded growth of 4.3% in the first quarter (April-June), 3.8% in the second quarter (July-September) and 1.4% in the third quarter (October- December). Volume of seaborne cargo is essentially in the nature of derived demand and is mainly shaped by the levels and changes in both the global and domestic activity. The growth for the first three quarters of 2015-16 stood at 3.2 % which accelerated to 4.3% for the period of April to March.

Mundra Port, the flagship port of APSEZL handled cargo volume of 109.02 MMT in financial year 15-16 and ranked 1st in terms of cargo handled amongst Indian commercial ports.

Special Economic Zone:

The Special Economic Zone Policy was framed in April, 2000 with an objective to increase the exports, attract Foreign Direct Investment and to accelerate the economic growth of the country. Your Company's Multi-product SEZ at Mundra is the largest notified SEZ in the country with notified area of 6456.3349 Hectares. Exports from Mundra SEZ upto March, 2016 was about H12,729 crores (cumulative). Mundra SEZ with its multi-modal connectivity including road, rail, sea port and airport is expected to attract more and more investments in the coming years.

Further, based on approvals from Government of India your company has set up a Free Trade Warehousing Zone (FTWZ) in an area of 168.41 Hectares and another multi-product SEZ over an area of 1856.5335 Hectares at Mundra.

As the above three SEZs are adjacent to each other, your company has also approached Government of India for clubbing of these SEZs into one multi-product SEZ with combined area of about 8481.28 Hectares. The proposal has since been approved by Government of India.

Performance Overview:

During the year under review the performance of your Company is encouraging. The Company has been leading across all the fronts and Mundra Port continues to be the largest commercial port in India by handling 109.02 MMT of cargo in financial year 2015-16 and total cargo handled across all Adani Ports is 151.51 MMT during the year under review.

Your Company maintained better than industry growth record and registered a 5% growth in cargo volumes in financial year 2015-16 as compared to financial year 2014-15. The company would continue to lead innovative practices, adoption of technology and setting examples of efficient port operations.

Performance Highlights:

Your Company operates 8 ports / terminals sbrad over 5 maritime states of India - Gujarat, Goa, Andhra Pradesh, Tamil Nadu and Odisha and developing 2 more. Your company operates 16 terminals having 40 berths to handle dry, liquid and container cargo and 2 single point mooring facilities.

Your Company's operational facilities has pan India brsence and is equipped with all the modern cargo handling facilities which are not only best in class but capable of handling biggest vessels calling at Indian ports in dry, liquid and container categories globally.

Your Company has entered into an agreement to operate the terminal at Kattupalli Port in the state of Tamil Nadu having 2 berths.

With this, your Company has been successful in establishing its brsence across majority of the Indian coastline.

The Company also provides other services, including infrastructure, leasing and logistics services at the Mundra Port through its surrounding infrastructure, including the Mundra SEZ, which the Company has developed and operates. Mundra SEZ is one of the largest operating port-based multi-product special economic zones in India.

Three broad categories of cargo handled at your ports are bulk, containers and crude oil. Your Company's port services include marine, handling intra-port transport, storage, other value-added and evacuation services for a diverse range of customers, primarily terminal operators, shipping lines and agents, exporters, importers and other port users. This helps your Company to diversify its income sources, eliminate revenue leakage, reduce financial risk and compete more effectively. Consequently, your Company's cargo and service mix has a significant effect on its results of operations.

Our key performance highlights for the year under review are as under:

Mundra

• APSEZ, Mundra announced inauguration of PCS (Port Community System) on February 1, 2016.

• Longest ever container vessel (365.9m) berthed at Mundra port AICTPL. She sailed out with a record draft of 16.2 meters surpassing the brvious maximum draft of 15.7 meters. The vessel also became the deepest laden container vessel handled at Indian Port.

• Two coastal container services have started at AMCT (IWCS & PML), Mundra.

• MV Martha Oldendorff, GRT - 1,06,884 was highest GRT vessel handled at Mundra Multi Purpose Terminal.

• Handled 10.95 MMT Crude for HMEL in financial year 2015-16. The HMEL handled more than 10 MMT of crude oil for the first time ever at their Mundra SPM.

• Highest No. of Vessels 118 handled at SPM terminal (IOCL, HMEL).

• Highest No. of Container rakes handled in the financial year 2015-16. Total 8136 container rakes handled (4261 inward rakes and 3877 outward rakes) against best of 7906 (4127 inward and 3779 outward rakes) container rakes in financial year 2014-15.

Tuna

•At Tuna, achieved and crossed the minimum guaranteed tonnage (MGT) volume in the first year of operation.

Dahej

•Achieved a new milestone by handling 10 rakes in a day.

• Highest coal dispatch (by Road) in March, 2016 -2,25,073MT (brvious best 1,80,724MT)

Hazira

•Hazira Port has done particularly well in import of rock phosphate (between Hazira / Kandla / Mundra and Tuna) for 2015-16. Gypsum imports have also increased.

•First Sulphur vessel handled at Hazira in the month of March, 2016.

Goa

Handled 1.81 MMT in financial year 2015 -16 which records a 210% growth on YoY basis. Total 51 Nos. of vessels have been handled in financial year 2015-16.

Kattupalli

• 115,227 TEUs handled during 2015-16. Grown 146% in Container and 114% in Break Bulk on year on year basis.

•Organized trade meet "KONNECT WITH KATTUPALLI" which received overwhelming response from customers & Stakeholders.

Logistics

•Hit the landmark figure of 100,000 MT coil movement by Rail in 2015-16 ex-Mundra. Coil warehouse annual volume was also a record at above 165,000 MT.

•Cargo and container tracking system has been developed and started to roll out. Web Service for exchange of data is under development.

New Ports:

Significant expansion plans of your Company have been completed and your Company is in process of implementing certain other expansion projects. Your Company is in process of developing Container Handing Terminal at Ennore Port, Tamil Nadu.

Your company has won the concession to develop and operate the deep water container port at Vizhinjam in Kerala. This port has the potential to emerge as an international port servicing the port requirements of southern India and emerging as a global transshipment hub on account of its close proximity to the international trade routes.

Besides, the company has commenced work on developing new container terminals at Mundra. The work on LNG and LPG terminals is under progress at Mundra and Dhamra.

Special Economic Zone:

As part of strategy for cluster based development, two separate clusters i.e (i) an Electronics Manufacturing Cluster (EMC) including solar energy equipment & its ancillary units and (ii) a Mega Food Park are being developed within the SEZ over an area of 259.70 Hectares and 23.10 Hectares respectively.

In addition to the 16 co-developers approved by Government of India for providing various infrastructure facilities, as at March 31, 2016, total 32 entities have obtained approval for setting up of their units in the SEZs. Some of them have already started operations & export activities. Some are under construction. These units have already invested about H1840 crores.

This will effectively contribute to the landmark "make in India" initiative of the Government of India.

Other Group Developments:

Adani Petronet (Dahej) Port Private Limited, a Joint Venture company with Petronet LNG Ltd., is the developer of Solid Cargo Port Terminal at Dahej in Gujarat. The cargo handling operations at the port is highly mechanized. The port is well connected with road and railway. The port handled 8.19 mmt of cargo during the year.

Adani Hazira Port Private Limited had commenced commercial operations in financial year 2013-14. Emerging as an important port for liquids and container handling, the port handled 12.27 mmt of cargo during the year.

The Dhamra Port Company Limited operates a deep draft, commercial port at Dhamra, Odisha. The port is equipped with state of the art handling equipment and technology which can caters the biggest dry bulk vessels calling to Indian Ports. The port handled 14.71 mmt of cargo during the year. The port is poised to become biggest and most efficient ports in East coast of India.

Adani Murmugao Port Terminal Private Limited had commenced its commercial operation during last year. The port handled 1.81 mmt of cargo during the year.

Adani   Vizag   Coal   Terminal   Private   Limited   had commenced its commercial operation during last year. The port handled 0.88 mmt of cargo during the year.

Adani Kandla Bulk Terminal Private Limited has commenced its commercial operation during last year. The port handled 3.73 mmt of cargo during the year.

Adani International Container Terminal Private Limited, a 50:50 Joint Venture between Mediterranean Shipping Company Group and the Company is engaged in developing, operating and maintaining Container Terminal-III at Mundra Port. The terminal handled 15.68 mmt of cargo during the year. The terminal is one of the most mechanized container terminal of India and boasts at handling the largest container vessel ever to visit Indian Ports.

Competition:

APSEZL is able to compete against state-run as well as private ports because of factors such as state-of-art port infrastructure facilities including deep draft direct berthing facilities, domain expertise in the port services industry, established customer relationships and ability to facilitate port based development, consistent high-quality service and our ability to flexibly meet our customers' requirements including flexibility in tariffs. Despite common hinterland in northwest India which is shared with these ports, APSEZL has been successful in attracting substantial cargo increase year after year and the trend is expected to continue in the future as well. With its state of art container handling, storage and evacuation infrastructure, APSEZ's Mundra and Hazira Ports have emerged as brferred 'Port of Call' to key global liners.

Risk, Opportunity and Threats:

ASPEZL has a formal risk assessment and management system which periodically identifies risk areas, evaluates their consequences, initiates risk mitigation strategies and implements corrective actions where required. The Audit Committee reviews the report on risk management on quarterly basis and recommends corrective actions for implementation. The risk assessment developed at APSEZ as per OHSAS 18001 standards are reviewed regularly or as and when any change in system/ process takes place or any incident takes place.

The Port Sector in India offers immense growth potential based on the anticipated growth in international trade and costal shipping in India. With increased vessel sizes, liners brfer ports with deep draft, longer quay, lengths, high mechanization and developed evacuation infrastructure. For an integrated ports development and operation like APSEZ, there are ample opportunities to grow organically as well as inorganically.

Management control, internal control and internai audit system and their adequacy:

The Company has put in place strong internal control systems and best in class processes commensurate with its size and scale of operations.

A well-established multidisciplinary Management Audit & Assurance Services consists of professionally qualified accountants, engineers and SAP experienced executives which carries out extensive audit throughout the year, across all functional areas and submits its reports to Management and Audit Committee about the compliance with internal controls and efficiency and effectiveness of operation and key processes and risks.

Some Key Features of the Company's Internal controls system are:

• Adequate documentation of Policies & Guidelines.

• Preparation & monitoring of Annual Budgets through monthly review for all operating & service functions.

• Management Audit department brpares Risk Based Internal Audit (RBIA) Scope with the frequency of audit being decided by risk ratings of areas / functions. Risk based scope is mutually accepted by various functional heads / process owners / CEO & CFO.

• The entire internal audit processes are web enabled and managed on-line by Audit Management System (AMS).

• The Company has a strong Compliance Management System which runs on an online monitoring system.

• Company has a well-defined Delegation of Power with authority limits for approving revenue & capex expenditure.

• Company uses ERP system to record data for accounting, consolidation and management information purposes and connects to different locations for efficient exchange of information.

• Apart from having all policies, procedures and internal audit mechanism in place, Company periodically engages outside experts to carry out an independent review of the effectiveness of various business processes.

• Internal Audit is carried out in accordance with auditing standards to review design effectiveness of internal control system & procedures to manage risks, operation of monitoring control, compliance with relevant policies & procedure and recommend improvement in processes and procedure.

The audit committee of the Board of directors regularly reviews the adequacy & effectiveness of internal audit environment and monitor implementation of internal audit recommendations including those relating to strengthening of company's risk management policies & systems.

Human Resource Development:

APSEZL being the largest private port developer and operator is a brmier workplace that attracts talent from all over the country. The Company provides a conducive work environment which motivates employees to put in their best efforts to achieve our ambitious targets and growth plans. Their talent and commitment fuel our vision to handle more than 300 MMT of volumes by the year 2020.

Human Resource Department is instrumental in building employees capabilities through structured talent acquisition and its development through technical and need based training. APSEZL enjoys harmonious employee relations which have been built over the years by taking various HR initiatives to enhance the employee morale.

Standalone Financial Performance with respect to operation performance:

Your Company has recorded total income to the tune of Rs.5,603.78 crore during the financial year 2015-16 compared to Rs.4,647.52 crore in the corresponding brvious financial year.

Net Block of fixed assets of the Company as on March 31, 2016 is Rs.8,519.62 crore as compared to Rs.8,461.92 crore in the corresponding period in the brvious year.

During the year, your Company generated earnings before interest, debrciation and tax (EBIDTA) of Rs.4,267.76 crore as compared to Rs.3,345.58 crore in the brvious year.

Net profit after tax is Rs.2,841.58 crore in the financial year 2015-16 as compared to Rs.2,183.14 crore in the brvious financial year.

Earnings per share stood at Rs.13.72 on face value of Rs.2 each.

Consolidated Financial Performance of the Company:

Your Company has recorded total income to the tune of Rs.7,940.55 crore during the financial year 2015-16 compared to Rs.6,837.62 crore in the corresponding brvious financial year.

During the year, your Company generated earnings before interest, debrciation and tax (EBIDTA) of Rs. Rs.5,335.34 crore compared to Rs.4,587.95 crore in the brvious year.

Net profit after tax is Rs.2,867.36 crore in the financial year 2015-16, as compared to Rs.2,314.33 crore in the brvious financial year.

Earnings per share stood at Rs.13.85 on face value of Rs. Rs.2 each.

Cautionary Statement:

Statements in the Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations and others may constitute "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results may differ from those exbrssed or implied. Several factors that could significantly impact the Company's operations include economic conditions affecting demand, supply and price conditions in the domestic and overseas markets, changes in the Government regulations, tax laws and other statutes, climatic conditions and such incidental factors over which the Company does not have any direct control.

The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.