MANAGEMENT DISCUSSION AND ANALYSIS REPORT

I. Industry Structure and Development:

Industrial Growth:

On a cumulative basis in April'15 - March'16, IIP registered a growth of 2.66% as compared to brvious year growth of 2.88%.

ii. Indian Commercial Vehicle Industry:

The outlook on the CV industry has improved gradually since the second half of the financial year 2014-15 driven by improving viability for fleet operators, replacement-led demand (following two years of capacity deferral by fleet operators) and br-buying ahead of implementation of BS-IV emission norms and Anti-Lock Braking Systems (ABS). As a result, the M&HCV (Truck) segment has registered a growth of 31.9% during the financial year 2015-16 and would continue to benefit from these factors in the near-term.

The growth prospects could improve further if the impact of ongoing reforms in the infrastructure and mining sectors percolates down to ground level. Although demand for road logistics hasn't improved meaningfully over the past few quarters, the reduction in diesel prices has come as a relief for the industry, which was reeling under brssure of steadily rising operating costs and weak pricing power (amidst surplus capacity in the trucking system). The improvement in cash flows of fleet operators has also started showing up in improved collection efficiency for CV financiers, who expect that further deterioration in asset quality indicators is unlikely. Accordingly, we expect M&HCV (Truck) sales to register a growth of 13-15% during the financial year 2016-17.

Replacement of buses under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) phase II will drive demand for buses during the year. Sales of M&HCVs are expected to be higher by 19.9 per cent in the whole year. Table 2 shows the growth in production and sales of M&HCV from 2014-15 to 2015-16.

II. Business outlook and overview

The macroeconomic situation in India has improved significantly during the past couple of years. In addition, government's policy to boost the manufacturing and service sector and commitment to resolve mining and infrastructure projects provides a positive outlook for the year 2016-17. But the slowdown in advanced economies, including US, lower commodity prices and weaker currencies in some major trading partners, vis-a-vis the Indian rupee, are likely to hit merchandise exports and financial, telecom, business and other tradable services.

Growth: The economic growth outlook for the year 2016-17 is approximately at 7.4% as estimated by various rating agencies and Government and international bodies. India is one of the fastest growing large economies in the world and would likely remain so in the near term. The potential growth of the country can be raised further if it could successfully implement necessary reforms including unifying the tax regime, improving labor market regulations and opening further to foreign direct investment and trade.

Inflation & Monetary Context: Consumer price inflation, measured by the Consumer Price Index (CPI), on average is expected to be 4.9 per cent in 2016-17. This will be the second consecutive year when retail price inflation will remain below five per cent. A likely improvement in agricultural output is going to play a large role in keeping inflation under check. Food grains production is expected to rise year on year, by 4.8 per cent, as monsoon rains are likely to be above average this year following 2 years of drought.

The Indian Meteorological Department (IMD) and private Indian weather forecaster Skymet, both are expecting an above average monsoon, with the former projecting rainfall to be 106% and the latter estimating it to be 105% of the Long Period Average.

A few other factors are also expected to brvent consumer inflation from falling below the 2015-16 level. These include rise in international crude oil prices and likely debrciation of the Indian rupee. Since a large chunk of India's foreign trade is in US dollars, the debrciation of the domestic currency is likely to feed into inflation.

III. Opportunities & Threats

The Company provides safety and vehicle control solutions to the commercial vehicle segment of the automotive industry. In connection to this, the Anti-Lock Brake Systems (ABS) legislation for M3 and N3 vehicles got implemented from the third quarter of 2015-16, which resulted in increased business. Local market growth opportunities were through increase in content per vehicle in the form of introducing new systems / technologies like wiring harness, pole wheels and Lift axcle control system. The company has also expanded into new segments like off- highway, defense, luxury bus, car and trailers

In the Aftermarket side, further potential in retro fitment of advanced products like Air Disc Brakes, Electronically Controlled Air Suspension is being explored. Our focused efforts in Trailer segment have boosted the sales growth considerably and Trailer Anti-Lock Brake Systems (TABS) and Trailer Electronic Brake Systems (TEBS) are also continued to be explored in this segment. Focused initiatives are also being taken to venture in the space of telematics through the indigenously developed vehicle tracking systems.

The company has also commenced supplies of slack adjusters and double diaphragm spring brake actuators to global markets through the other WABCO sites.

As a measure of improving the safety in passengers transport, zero leak programs at public transports, school and college buses are being carried out. Distributor branches are increasing their brsence in B & C towns and that is resulting in availability of genuine parts in remote locations. Our authorized service center network is expanding and currently we have 200 service centers with Pan India brsence to cater to the customer requirements. These initiatives would result in improved service practices, availability of genuine parts and generate additional revenue for the Company.

Given the growth opportunities that are available in the commercial vehicle industry, we expect the activity levels of the competitors to be on the rise.

IV. Risks and concerns

The cyclical nature of the Indian commercial vehicle industry brsents its own risk to the business. The operating expenses are likely to rise with the expected increase in prices of key raw materials.

STEEL

In the first half of financial year 2015-16, Indian domestic prices have registered steep decline due to impact of lower priced steel imports especially from China, Japan, Korea and Common Wealth of Independent States (CIS) countries amid a not-so-strong demand scenario. Besides, slowdown of economic growth in China dampened demand for steel in the country, causing it to export surplus steel at cheaper prices to countries such as India, hurting revenues of local steel manufacturers. This has resulted in significant price drop in the domestic market. The procurement prices came down by about 8% by the end of 2015 compared to 2014 and the Company had tapped this benefit fully by reducing the component prices in line with the material content

To rescue steel industry, Government of India has hiked the import duty on key steel products in July 2015 & August 2015 resulting in a net increase of 5%. As it did not have the desired effect, during September 2015 the government imposed another 20 per cent provisional safeguard duty for 200 days on the import of hot-rolled flat products in coils wider than 600 mm. Again in December 2015 the government imposed anti-dumping duty ranging from 5 to 57 per cent on cold-rolled flat products of stainless steel for a period of five years. On top of this government announced MIP (minimum import price) of 173 steel products in February 2016 to curb dumping of cheap steel by countries like China, Russia, Japan and South Korea.

Following various interventions from the Government, leading domestic primary steel producers have raised product prices by 4 to 5% effective February 2016. We estimate that there could be a gradual but marginal price hike going forward.

Risk Management:

The Company has laid down procedures for risk assessment and mitigation actions. These procedures are periodically reviewed to ensure that executive management controls risk through means of a properly defined framework. Risks identified and mitigation measures are periodically communicated to the board of directors.

V. Internal control system and their adequacy

The Company has a proper and adequate systems of internal control to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition thereof. All transactions are authorized, recorded and reported correctly.

The internal controls are checked by internal auditors. The observations made by them, management action and time frame are reviewed by the audit committee of the Board of Directors. Concerns if any are reported to the Board.

VI. Operations review A. Manufacturing

"WIN 2.0" was a transformation initiative intended towards changing the mindset of employees at all levels, all functions and across locations and achieve global standards of performance. This initiative was widely imbibed in all employees and has already started yielding visible results in all areas of operations. Our key customers have also acknowledged our transformation and have recognized us with awards.

The Company had bagged brstigious supplier awards simultaneously from the top OEM Customers i.e. "Supplier of the year" award from TATA Motors, "Gold Award for Quality" from Ashok Leyland, Outstanding contribution to "New Product Development" from Volvo Eicher, "Best Supplier for Innovation" from Daimler India, and "Product up-gradation through Innovation" Award from Swaraj Mazda Isuzu.

During 2013-14, construction of the plant near Lucknow in the State of Uttar Pradesh was completed. Activities have since increased and this plant has become a manufacturing hub for the customers located in the northern and central part of India. Further, a warehouse was established in Indore during the year to cater to the needs of customers located in central India. During the year the Company has initiated "Lean Equipment Development center" for frugal, high quality, low cost capital investments in new projects. This centre also conceptualizes designs and builds manufacturing lines to be shipped to various WABCO global locations.

The Company's manufacturing facilities , building on its strong fundamentals of Total Quality Management (TQM), Total Productive Maintenance (TPM) and Lean Manufacturing has best-in-class practices for safety, work environment, water and energy conservation. These initiatives are deployed companywide to achieve significant improvement in productivity and reduction in manufacturing cost.

Focused lean initiatives were executed throughout all manufacturing locations, challenging site layouts for more compact & efficient floor space utilization. This initiative has helped in increased sales within the current floor space which is now fully utilized.

The Company received "Silver Trophy for Star Performer in Exports" from EEPC INDIA, "Award of Honor" for Ambattur plant and "Safety Apbrciation" award for Mahindra World City plant from National Safety Council and NABL accreditation of materials & metrology lab for Ambattur Plant, during the year.

B. Quality

The quality systems in the Company aim at achieving total customer satisfaction through its focus on improving product quality to world standards. This is achieved through total employee involvement and continuous improvement culture.

Rigorous usage of poka-yokes, utilization of statistical tools for process optimization and control also contribute towards  improving the product quality. Deploying global best practices like "8 steps of Quality Fundamental", "VDA 6.3" standards, helped us to reduce the defects significantly. 60% of our assembly lines are certified for 8 steps of Quality fundamentals, 24 assembly lines were upgraded for making them robust enough to brvent generation of defects. Also new warranty process to do level zero inspection at customer end helped in speedy analysis and resolution of failures.

The same rigor was introduced in supplier process to improve the child part quality. Front loading of quality deliverables in new projects to improve the new product quality. Standardization of the quality procedures is aligned with QS9000 / TS16949 requirements. The Company is certified for TS16949.

TQM is a way of life at the Company. 100% participation in employee involvement has been successful for the past 16 consecutive years. Employees have completed 240 Quality Control Circle projects and 88 Supervisory Improvement Team and Cross Functional team projects by applying statistical tools and Quick Response Six Sigma (QR6S) methodology during 2015-16. The average number of suggestions implemented per employee was 41 in 2015-16 which is close to international benchmark.

Quality Control circle, Cross functional teams of employees participated in external competitions conducted by industry bodies, Automotive Component Manufacturers Association (ACMA), Confederation of Indian Industry (CII), National Institution for Quality and Reliability (NIQR), Indian Machine Tool Manufacturers Association (IMTMA), Quality Circle Forum of India (QCFI) and had won various prizes. Significant among them is the National level first prize in IMTMA productivity Championship competition and winning first prize in "Single Minute Exchange of Die" competition conducted by ACMA third time in a row.

C. Cost management

The Company continues its rigorous focus on its costs through an effective cost deployment system. Value engineering and continuous change in design for easy application are the major cost reduction factors. Cost reduction workshops are conducted periodically to identify cost reduction opportunities on various product groups. Some of the strategies for cost reduction include material change, process change, source change etc. Commodity sourcing from prime producers helps in managing the cost effectively and efficiently.

Other significant cost reduction projects include:

• Usage of new generation cutting tools, thereby improving the productivity levels.

• Undertaking energy saving projects like introducing Adiabatic cooling systems for chillers &utilizing third party power to reduce energy cost.

• Replacing cartons with 100% returnable packing for delivery of materials to key customers.

• Truck load optimization, production optimization for voluminous parts at Pant Nagar, Lucknow.

• Low cost automation to improve the productivity.

D. Information Technology

Achievement of company goals and objectives is enabled with robust IT Infrastructure, data security, network connectivity and availability of applications at all time 24/7 and 365 days. All business processes and transactions of the Company are supported by company's ERP system which is now hosted on more advanced servers with enhanced security features. To comply with the regulatory requirements regarding Information Technology Act and Sox audits, the team conducts periodic review and evaluates all IT processes and is being brsented to the Board regularly. During the year, to strengthen the existing customer care system, the Company has set up a new online application that will capture all complaints & suggestions from customers which then gets addressed by respective regional heads with lesser turnaround time.

VII. Human Resource Development

The Company focuses on attracting and retaining the best talent and enjoys a good brand image across leading educational institutions and talent pool. The current average hiring speed of the lateral talent is within 80 days. The Company blends successfully mid-career recruitment with internally grown talent through a robust globally managed talent management process. Rewards and recognition system is in place to retain and provide fast track growth for high potential employees. Talent Retreat workshops are undertaken every year by the Leadership to identify such high potential employees and facilitate career moves within India and Global sites. Our Voluntary attrition rate is at 4.69%, while similar Industry attrition rates are at an average  of 11.6%.

Potential talents are sponsored to overseas and inland universities for developing their capabilities to handle new technologies and management practices. Customized management development programs have been developed in partnership with reputed educational institutions to hone the leadership skills of the senior executives. Next Gen Leadership programs were conducted to identify and nurture critical mass of young, talented individuals with the potential to occupy key positions in the company. "Let's Get Acquainted" is another unique initiative - a platform to develop a cohesive work environment between supervisor and subordinate which enables them to complement each other and enhance their individual capabilities.  As of 31st March 2016, the Company had 1515 employees on its rolls.

VIII. Environment & Safety

Safety and management is integrated with the overall safety and Environment (SHE) management system. The SHE management system which is already certified under ISO14001 & OHSAS18001 was re-certified with DNV covering 5 manufacturing sites and the test track. The first three months of the financial year were taken as safety months which was utilized to enhance safety systems and in the process creating safety awareness among the employees. The Director of Industrial Safety and health from the Government of Tamilnadu was gracious enough to visit the plant during the culmination of the safety months program and share his experience. He also motivated the employees by distributing prizes to the safety competition winners.

The Company has taken many initiatives on improving ergonomics in the shop floor. High and medium fatigue stations were identified and the ergonomics were improved upto 80%, thereby improving productivity and operator morale. During the year the Jamshedpur plant won 1st Prize in "Energy Efficiency In Supply Chain" organized By Tata Motors Jamshedpur.

IX. Community development and social responsibility

As a responsible corporate citizen, the Company engages in social responsibility and community development activities. This year the activities were conducted through internal engagement of employees and resources, driving activities which would help the needy sections of the society as specified in Schedule VII of the Companies Act, 2013 and the Company's CSR policy with specific focus towards areas surrounding the company's plant locations. The activities during the year were largely directed towards, promoting education, brventive healthcare, making available safe drinking water, environment protection, sanitation etc.

Chennai was hit by floods during December 2015. The community at large came together in solidarity towards the effected underprivileged and displayed tremendous compassion. The little flower convent for Deaf & Blind in Chennai was devastated during the flood which caused damage to property as well as basic support systems which acted as lifeline for the deaf and blind students. The students and the management were in a state of tremendous distress. Employees of your company contributed their one day salary to which an equal amount was contributed by the Company. The total amount which came to Rs.47 Lakhs was contributed towards the flood relief activities at the little flower convent so that they could normalize their activities. It was a rejoicing moment for the Company when it was informed that a student from the school secured second rank among the visually challenged candidates in the state of Tamilnadu for the year 2016 and that certain others have scored very high marks.

Your Company has taken various initiatives for community development during the year which are dealt in the CSR Report annexed to Directors Report.

XI. Cautionary statement

Statements in the management discussion and analysis report describing the Company's objectives, projections, estimates and expectations may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include, among others, economic conditions affecting demand / supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors.