a. Sugar Industry - Opportunities, Threats and Future Outlook:

Opportunities:

The long term outlook for sugar remains positive and promising on account of:

• Enhancement of Import Duty on raw sugar from 25% to 40%, will help in reduction of import of raw sugar and thereby pave way for reduction in sugar stock.

• Mandatory blending of Ethanol with petrol will boost the revenue of sugar mills and profitability.

• Growing energy consumption in India allowing the sugar industry to play a vital role.

• Environmental friendly power generated by Cogeneration Units equipped with high-brssure boilers and turbines that intelligently use the fuel to get optimum energy output.

• Expected flow of funds from Trading of Renewable Energy Certificate (REC).

• More emphasize on Bio-composting process and consequent efforts to convert organic and inorganic matter into bio-manure to ensure zero discharge from the distillery combining with brss mud.

• Growing demand for bio manure, which works as the perfect soil conditioner? Bio manure made from distillery and organic matter does not allow leaching of chemicals and hence can offer a solution to the problem of depletion of soil productivity.

Threats:

Sugar industry is at brsent confronted by the following threats:

• Mismatch between supply and demand of sugar. Supply far exceeding the demand on account of glut in sugar production.

• Continuous fall in sugar price as opposed to increased cost of production, resulting in loss..

• Dearth in availability of farm labour for harvesting, transportation, loading and unloading of sugar cane and sugar.

• The spurt in cane procurement prices is expected to remain volatile for a couple of years.

• Cyclical nature of industry and local climatic conditions over the crop affecting both the quantity and quality of cane available.

• Sugar weightage in WPI.

• Short crushing season.

• Shrinkage of sugarcane area under cultivation due to growing urbanisation and availability of many alternate cash crops.

Future Outlook:

The future outlook of sugar would depend on the following:

• Development of high breed varieties of sugarcane suitable for Indian climatic conditions and to achieve vertical growth in sugarcane productivity.

• Development of suitable sugarcane harvesting machine for Indian soil conditions and operable in fragmented land holdings.

• Swift adaptation of new cultivation method for mechanised harvesting.

• Agro-climatic conditions in major sugar-producing states.

• Permitting Green Energy producers to market directly to third parties.

b. REVIEW OF OPERATIONS:

i. SUGAR UNITS AT VUYYURU AND LAKSHMIPURAM:

The summary of cane crushed, sugar bagged, etc. of both the Sugar Units for the last two seasons and financial year wise are brsented herein below:

ii. INDUSTRIAL CHEMICALS / COGENERATION / OTHER UNITS:

Vuyyuru Distillery Unit produced 106.24 lakh litres during the year ended 31.03.2015 as against 78.08 lakh litres during the brvious financial year. As against this, the said Unit sold 108.56 lakh litres valued at Rs. 34.91 crores during the year under review as against 79.96 lakh litres valued at Rs. 25.65 crores during the brvious year.

The Bio-fertilizer unit at Vuyyuru sold about 1.33 lakh Qtls valued at Rs. 5.88 crores as against 1.63 lakh qtls valued at Rs. 6.17 crores during the brvious year.

Cogeneration Unit at Vuyyuru produced 35,518 MW of power during the financial year under review as against 31,373 MW in the brvious year, and the Lakshmipuram Unit produced 7,028 MW of power as against 7,189 MW in the brvious year. In all, total export of electrical energy was 14,546 MW resulting in a turnover of Rs. 5.63 crores as against 12,422 MW at a turnover of Rs. 4.48 crores (excluding the differential tariff realised for the earlier years amounting to Rs.2.67 crores) during the brvious year. The Calcium Lactate plant contributed Rs. 1.97 crores towards its turnover of the Company as against a turnover of Rs. 2.09 crores during the brvious year.

c. INTERNAL CONTROL SYSTEMS:

The Company has a well-established internal control system in place to ensure smooth functioning of operations. The control mechanism involves well-documented policies, authorisation guidelines commensurate with the level of responsibility and standard operating procedures. The Internal Auditor periodically reviews and makes continuous assessments of the adequacy and effectiveness of the internal control and systems. The Board, Audit Committee and the Management review the findings and recommendations of the Internal Auditor and take corrective action wherever necessary. The Company is committed in its endeavour to ensure an effective internal control environment that provides assurance on the effectiveness of operations, statutory compliance, and reliability of financial reporting and security of assets.

d. HUMAN RESOURCES:

The Company had 886 employees, including non-seasonal employees at the sugar units, as on 31.03.2015. The Company ensures high standards of safety for its employees and periodically conducts meetings to minimize operational hazards. The Company believes that people are the key to success and hence the human resources function pro-actively develops innovative and business focussed methods to attract, motivate, develop and retain talented, competitive manpower sources.

e. AWARDS:

During the year under review, your Company had received following Awards in respect of outstanding performance in Industrial Safety and Industrial Relations:

? WINNER - NATIONAL SAFETY AWARD for Year 2012 by Ministry of Labour, Government of India -Under Scheme I - Based on Lowest Average frequency Rate in Industry (Sugar Factory) - Vuyyuru Unit

? WINNER - NATIONAL SAFETY AWARD for Year 2012 by Ministry of Labour, Government of India -Under Scheme II - Based on accident-free year (Sugar Factory) - Vuyyuru Unit

? WINNER - NATIONAL SAFETY AWARD for Year 2012 by Ministry of Labour, Government of India - Under Scheme III - Based on Lowest Average frequency Rate in Industry (Sugar Factory) - Lakshmipuram Unit

? WINNER - NATIONAL SAFETY AWARD for Year 2012 by Ministry of Labour, Government of India -Under Scheme IV - Based on accident-free year (Sugar Factory) - Lakshmipuram Unit

? WINNER - NATIONAL SAFETY AWARD for Year 2012 by Ministry of Labour, Government of India - Under Scheme VII - Based on Lowest Average frequency Rate in Industry (Distillery) - Vuyyuru UnitWINNER -NATIONAL SAFETY AWARD for Year 2012 by Ministry of Labour, Government of India - Under Scheme VIII - Based on accident-free year (Distillery) - Vuyyuru Unit

? NATIONAL ENERGY CONSERVATION CERTIFICATE OF MERIT - by Ministry of Power, Government of India.

? SURAKSHA PURASKAR - NSCI SAFETY AWARD 2013 (Mfg. Sector) Bronze Trophy and Certificate - by National Safety Council of India, Mumbai (in recognition for developing & implementing very effective Management Systems & Procedures and achieving very good performance in OSH for the assessment period of three years 2010 - 2012).

f. OTHERS:

The Company has valid Pollution Control clearances in respect of both Air and Water for sugar units at Vuyyuru and Lakshmipuram and also for Distillery unit at Vuyyuru. The Company has taken necessary steps for renewal orders from APPCB in respect of Calcium Lactate and Bio-fertilizer and Mycorrhiza and Bio-Compost Plants. The Company also takes adequate steps to safeguard the environment.

g. CAUTIONARY NOTE:

It is explicitly stated that some of the statements in this Management Discussion and Analysis report may be "forward looking" within the meaning of applicable laws and regulations. It may so happen that the actual events or results may be different from what the Board of Directors / Management perceives in terms of the future performance and outlook due to factors having a bearing on them and which are unforeseeable.

6. FUTURE PLANS:

>  To identify new technologies wherever it is possible and makes use of the same for improved results.

>  Complete mechanisation of sugarcane cultivation and harvesting in order to reduce the excessive dependence on manpower and reduce cost.

>  In-depth study is in progress in Distillery division to adopt new technologies for improving the yield and reduce the discharge of spent wash.

>  Identifying value-added products from the by-products and to promote renewable energy from industrial waste.

7. PERSONNEL AND INDUSTRIAL RELATIONS:

The Employee relations scenario continued to be harmonious and congenial. Acknowledging this, your Company has been awarded for outstanding efforts in maintaining cordial Industrial Relations and Labour Welfare by Government of Andhra Pradesh