MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management of Ellenbarrie Industrial Gases Ltd.(EIGL) brsents its analysis covering performance and forward looking statements based on certain assumptions and expectations of future event with a view to convey the management's perspective on the financial condition and operating performance at the end of the financial year 2015-16 :

I. Economic Overview & Outlook :

The trend of slowdown in global growth continued during the year. Global economy witnessed continued growth deceleration in most emerging and developing economies, resulting from low commodity prices, weaker capital inflows and subdued global trade. However, growth in India stayed fairly resilient. India was the fastest growing large economy with a stable currency that performed better than most other emerging market currencies. Domestic macro-economic conditions also remained stable. However, a second consecutive year of drought and a low increase in support prices have led to a sharply slower growing rural economy compared to earlier years.

Your Company's performance for the year 2015-16 has to be viewed in the context of aforesaid economic and market environment.

In terms of outlook for the next financial year, it is apt to quote from the Reserve Bank of India's Monetary Policy statement of June 07, 2016: "Domestic conditions for growth are improving gradually, mainly driven by consumption demand, which is expected to strengthen with a normal monsoon and the implementation of the Seventh Pay Commission award. Higher public sector capital expenditure, led by roads and railways, should crowd in private investment, offsetting somewhat the subdued appetite for fresh private investment due to financial stress. Yet, business confidence will be restrained to an extent on account of unrelenting global factors."

II. Operation and Sales Performance :

The positive shoots of macroeconomic recovery during FY 2015-16 had positive impact on the operations of the company. Customer base increased and cost base was optimized resulting in incremental benefits over brvious year. However, challenges like lower margin, price brssure and exchange risk emanating from foreign currency denominated borrowings remains to be addressed.

III. Financial Performance :

Negative PBT at Rs. 133 million for the year (brvious year Rs. 87 million) are analyzed and discussed as under :

b) Expenses :

Expenses overshoot growth in revenues owing to two major factors :

- Exchange fluctuation on foreign currency loans; and

- Debrciation on account of full year effect of the Hyderabad project commissioned in January 2015.

Out of exchange fluctuation Rs. 31 Million (brvious year Rs. 4 Million) being unrealized losses. Interest expenses have reduced following restructuring during brvious year and likely to further contained in the coming years following inflow of brference share capital proceeds in March 2016. EBITDA for the year more or less remained stagnant as last year.

IV. Strategy, Risks, Opportunities & Threats :

EIGL's continues to be building capacities by being competitive and to deliver products of international standards. To this end EIGL stresses on better understanding of customer needs, optimize its cost structure and strengthen its performance.

EIGL is exposed to following risk factors with possible mitigating strategies :

- Macroeconomic environment of India and industrial cycles such as regional demand supply imbalances, price swings and input cost variations. This can be addressed through timely readjustment of customer base, product profile and cost structure.

- Regulatory Environment: The Company is subject to several regulatory scrutinies in states it is brsent. The company has policies, systems and procedures in place to ensure compliances.

- Financing : Industrial gas business requires substantial investment being a capital intensive business; the company has raised borrowings in foreign currency which is subject to fluctuations. The company management has put in place a risk management policy to respond to volatility in foreign currencies. It is important to note that with Air Water Inc. being a majority shareholder has added to company's strength to address its funding needs. Air Water Inc. has subscribed, during the year, to redeemable brference shares to the extent of Rs. 315 Million which is likely to reduce borrowing costs in coming years apart from bringing a balance to the capital structure of the company.

V. Cautionary Statement :

Statements made in this report describing the Company's objectives, projections, estimates, expectations may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results could differ materially from those exbrssed or implied.