MANAGEMENT DISCUSSION & ANALYSIS

GLOBAL ECONOMY

According to United Nations World Economic Situation and Prospects 2015 (WESP) report, over the next two years the Global Economic Growth is forecasted to increase by 3.1% in 2015 and 3.3% in 2016 compared to 2.6% in 2014 where it expanded at a moderate and uneven pace. Even as the World Economy has started to wear-off the effects of Global Financial Crisis few years back the newer challenges like the Euro zone crisis and geopolitical conflicts in Ukraine have emerged. The developed economies like US has maintained annual growth rate above 2% in last year, Euro area has not be able to cope up fully with the aftermath of Financial Crisis as few of the Euro Member nations are still on the brink of recession. Growth rates in developing countries and economies in transition diverged more during 2014, as a sharp decel­eration occurred in many large emerging economies, particu­larly in Latin America and the Commonwealth of Independent States (CIS). In contrast, East Asia, including China, experi­enced only a mild slowdown, while India led South Asia to a moderate uptick.

INDIAN ECONOMY

GDP is an important economic variable that is used to gauge the health of a country's economy. In its latest World Economic Report, International Monetary Fund (IMF) said that India is set to become the world's fastest growing major economy by 2016 growing at 6.3% in 2015 and 6.5% in 2016. The policy initiatives taken by the new Government to boost up the Indian Economy is vis­ible through the improvement in economic parameters like GDP growth, lower Inflation, Current Account Deficit, foreign Exchange Reserve etc.

With all the parameter point towards a better tomorrow, the Foreign Portfolio Investors (FPIs) / Foreign Institutional Investors (Flis) are not wanting to miss this opportunity which is very visible by the fact that the total FPIs/ Flls Investments in Indian Stock Market is to the tune of Rs. 1,11,333 crores in Equities.

The macroeconomic situation in India has improved signifi­cantly during the current year. The steady acceleration in services and manufacturing growth in the face of subdued global demand conditions point to the strengthening of domestic demand. Most of the buoyancy in domestic demand can be traced to consumption. Investment activity, which is slowly picking up, needs to be grounded on a stronger footing. On the supply side, there are concerns about tenta­tive growth patterns in con­struction and mining activities that need to be addressed to. In the light of the Government's commitment to reforms, along with the improvements in the price and external sector, as­suming normal monsoons and better prospects in the world economy that could provide impetus to higher exports for Indian products and services, a growth of around 8.5 per cent is in the realm of possibility in 2015-16.

INDUSTRY STRUCTURE & DEVELOPMENT

Infrastructure plays a key role in India's overall development. The sector includes electricity, railways, roads, ports, airports, irrigation, and urban and rural water supply and sanitation. In the past Construction industry has seen good growth which was mainly driven by the overall healthy execution of Infrastructure projects. Being a key driver of economy, the government is focusing on time-bound project implemen­tation and creation of world class infrastructure in the country supported by buoyant Construction sector.

With the economic growth coming in, the need to develop enough physical infrastructure to sustain the growth became inevitable. To cater to this ever-growing need for new infrastructure the government of India has envisaged a total investment of Rs. 56 trillion over the 12th plan period with Private sector contributing -50% and balance by Government of India and various State Governments.

Currently the Construction industry is facing multiple headwinds like regulatory uncertainty and lack of clear policies among others which has created a disturbing environment for all the industry participants. This headwind has effects the performance of industry players and delayed the project execution due to land acquisition issues, non-availability of various clearances etc. The industry players are grappling with lower order-book, higher costs and fixed overheads and lower profitability which affect their debt servicing ability affecting the health of various financial institutions.

With Construction Industry being the second largest employer and a one of the key growth driver for economy, the current Government is focusing more to revive the industry. Few of the prominent step taken by the Government are as follows:

• The Reserve Bank of India (RBI) has notified 100% foreign direct investment (FDI) under automatic route in the construction development sector

• Relaxed rules for FDI in the construction sector by reducing minimum built-up area as well as capital requirement and liberalised the exit norms. The Cabinet has also approved the proposal to amend the FDI policy.

• India and the US have signed a memorandum of understanding (MoU) in order to establish Infrastructure Collaboration Platform which intend to facilitate US industry participation in Indian infrastructure projects to improve the bilateral commercial relationship and benefit both the Participants' economies.

The focused approach to revive the Construction Industry is visible in Government's effort to revive the Roads & Highways segment. Rolling out the Environment and Forest Clearances faster, Environment clearance through e-portal for infrastructure projects, Delegation of more powers to state governments for giving environment clearances, Cleared norms for setting up investment trusts for Real Estate and Infrastructure sectors, Changing or amending the Land Acquisition Act, Concrete roads instead of Bitumen roads, Introduction of Electronic Chip System are few of the steps taken by Government to provide with conducive operating environment to the sector.

HIGHWAY CONSTRUCTION, OPERATION & MAINTENANCE

India has the second largest road network of 3.3 million Kms consisting of (i) national highways (NHs), (ii) state highways (SHs), (iii) major district roads (MDRs) and (iv) rural roads (RRs) that include other district roads and village roads. The NHs with a length of approximately 93,000 km comprises only -1.9% of the road network but carry -40% of the road-based traffic. The SHs and the MDRs together constitute the secondary system of road transportation which contribute significantly to the development of the rural economy and industrial growth of the country. At the tertiary level are the Other District Roads (ODRs) and the Rural Roads (RRs). These, once adequately developed and maintained, hold the potential to provide rural connectivity vital for generating higher agricultural incomes and productive employment opportunities besides promoting access to economic and social ser­vices. Road activity has gradually increased over the years with the improvement in connectivity between cities, towns and villages in the country.

With automobiles and freight movement also growing at a rapid rate, the necessity for a road network good enough to carry the traffic is paramount. Understanding this need, the Government of India has set aside 20% of the investment of US$ 1 trillion reserved for infrastructure during the 12th Five-Year Plan (2012-17) to develop the country's roads.

The value of roads and bridges infrastructure in India is projected to grow at a compound annual growth rate (CAGR) of 17.4 per cent over FY12-17. The country's roads and bridges infrastructure, which was valued at US$ 6.9 bil­lion in 2009 is expected to touch U5$ 19.2 billion by 2017. The financial outlay for road transport and highways grew at a CAGR of 19.4 per cent in the period FY09-14.

As NHs comprises about 2% of the total road length in the country and yet carryover 40% of total traffic, the first and the foremost task mandated to the NHAI is the implementation of National Highway Development Program (NHDP) comprising of the Golden Quadrilateral (5,846 Kms), North-South & East-West Corridors (7,142 Kms), Port Connectivity (380 Kms), Phase III -upgradation and 4 laning of 4,035 km of National Highways on BOT basis, Phase IV - convert existing single lane highways into two lanes with paved shoulders, Phase V - six laning of 6,500 km of existing 4 lane highways (incl. 5,700 Kms of Golden Quadrilateral), Phase VI - 1,000 km of ex­brssways and Phase VII - 700 km of Ring Roads, Bypasses and flyovers and selected stretches. In addition to the projects under NHDP, the NHAI is also currently responsible for about 1,000 km of Highways connecting major Ports & also on National Highways 8A, 24, 6, 45 & 27.

Earlier the maintenance of road stretches imple­mented through public funds was being done separately through short term Operation and Maintenance Contracts funded from budgetary resources. User fee was being collected through different agencies on annual contract basis. With the growth in Highway Length and a slowdown in new development of Highways / bidding activities, the requirement for Operation and Maintenance of these road projects is gaining importance.

RAILWAYS/METROS

Indian Railways has one of the world's largest railway networks comprising -115,000 km of track over a route of -65,436 km and -7,172 stations. It has strongly emerged as the main vehicle for the country's socio economic develop­ment. It caters to the transportation needs of the country, while also bringing together the diverse geographies and assisting in promoting national integration. Furthermore, the railway network is also ideal for long-distance travel and movement of bulk commodities, apart from being an energy efficient and economic mode of conveyance and transport. The Government of India has focused on investing on railway infrastructure by making investor-friendly policies. It has moved quickly to enable foreign direct investment (FDI) in railways to improve infrastructure for freight and high­speed trains. At brsent, private sector compa­nies are also looking to invest in rail projects. The Railways Ministry has already proposed the de­velopment of 50 world-class stations in the PPP mode to improve and enhance rail infrastructure in the country and aims to award projects worth USD 1,000 billion through PPP route.

Following are some of the major investments and developments in India's railways sector:

• A MoU is signed between the Ministry of Railways and Life Insurance Corporation (LIC) under which LIC will make available to the Ministry of Railways/its entities a Financial Assistance with a limit of approximately USD 24 billion over the next five years for implementing Railway projects.

• The Ministry of Railways has sanctioned imple­mentation of Eastern Dedicated Freight Corridor (EDFC) and Western Dedicated Freight Corridor (WDFC)

• Plans to build seven high-speed rail corridors to provide faster rail connectivity across the country. A provision of USD17 million is made for High Speed project.

• The government has cleared a proposal to allow 100% FDI in railway infrastructure, barring operations, via the automatic route. FDI chan­neled through this route does not require prior government approvals.

Increase in the demand for passenger trains is supported by urbanization, improv­ing income standards, etc. There is also a rapid increase in demand for urban mass transportation systems in the country due to rapid development of the cities, demographic translations such as changing of land use with commercialization of residential areas and increasing suburbanization.

The Planning Commission's proposal for the 12th Five Year Plan for urban transport has recommended that all Indian cities with a population in excess of 2 million start planning rail transit projects, and cities with a population in excess of 3 million start constructing the metro rails. An estimated investment in Metro Rail Networks in India is expected to be USD 42 billion by 2020. Several metro rail projects are in progress to improve connectivity within cities; the Delhi Metro has emerged as an internation­ally acclaimed venture. This argues well for construction companies as the new project initiative creates multiple opportunities.

HOUSING INFRASTRUCTURE

India's urban population as a percentage of total population was around 32% in 2014 and is expected to rise to 40% by 2030 calling for rapid development of Housing Infrastructure. The Indian real estate sector is one of the most globally recognised sectors. It is among the larg­est employer after agriculture and is expected to touch USD 180 billion by 2020. It comprises four sub sectors - housing, retail, hospitality, and commercial.

The growth of this sector is well complemented by the rapid Urbanization, growth of the cor­porate environment and the demand for office space as well as urban and semi-urban accom­modations. The sector over a period of FY08 to FY20 will increase at a CAGR of 11%. The housing sector alone contributes 5-6% to the country's gross domestic product (GDP). Other sub-sector like Retail, hospitality and commercial real estate are also growing significantly, providing the much-needed infrastructure for India's growing needs.

URBAN INFRASTRUCTURE

About 377 million Indians comprising of about 31% of the country's population, live in urban areas according to Census 2011 and Projections are that by 2031, about 600 million Indians will reside in urban areas, an increase of over 230 million in just 20 years which will drive the demand for Urban Infrastructure. The invest­ment estimates for the eight sectors of urban infrastructure for the 20-year period from 2012 to 2031 amount to Rs 31 lakh crore at 2009-10 prices with Urban Roads constituting -56% followed by Urban Transport with 14.5%.

INDUSTRIAL & OTHER INFRASTRUCTURE

With the Industrial Development set to pick up, the Industrial Infrastructure sector is also looking attractive. The orders for the sector will start flowing in as the pace of new facilities picks up. The Industrial Development also calls for good logistics solutions like good rail, road and port connectivity to the region. Government is currently focusing on improving the connectivity of all the modes of transport along with the Inland Water Transport, the sector is bound to show good growth.

Inland Water Transport in India is comprised of rivers, canals, backwaters and creeks. The total navigable length is 14,500 km, out of which about 5,200 km of the river and 4,000 km of canals can be used by mechanised crafts. Freight transportation by waterways is highly under-utilised in India compared to other large countries and geographic areas. To take the burden off the Road and Rail transport, the Government is coming out with a combrhen­sive policy on Development of Inland Waterways which will open up a new sector for

CIVIL ENGINEERING PROJECTS

Our Company is engaged in the execution of various Civil Engineering Projects. The Company pro­vides integrated Engineering, Procurement and Construction (EPC) services for Civil Construction and Infrastructure sector projects.

1. HIGHWAY CONSTRUCTION

MBL has executed and commenced a number of praiseworthy projects in the states of West Bengal, Madhya Pradesh, Maharashtra, Assam, Uttar Pradesh, Delhi, Rajasthan, Karnataka, Haryana, Orissa, Andhra Pradesh, Bihar and Uttarakhand.

2. HIGHWAY OPERATIONS & MAINTENANCE

With the second largest road network of 3.3 million Km, there is a huge opportunity for Road Operation & Maintenance. The Company has a distinction of being awarded the first ever combr­hensive maintenance of Ring Road & Outer Ring Road in Delhi, thus having an early mover advantage into this segment.

3. HIGHWAY-BOT PROJECTS

The Company has successfully completed the execution of the BOT project of 114 km Seoni- Balaghat- Gondia State Highway in the state of Madhya Pradesh. MBL is currently executing four other BOT projects.

• Seoni - Katangi Road Project (100% owned SPV Company, MBL Highway Development Company Limited) in the State of Madhya Pradesh awarded by MPRDC Ltd.

• Waraseoni - Lalbarra Road Project (100% owned SPV Company, MBL (MP) Toll Road Company Limited) in the state of Madhya Pradesh awarded by MPRDC Ltd.

• Bikaner-Suratgarh Toll Road Project in the state of Rajasthan awarded by PWD Rajasthan.

• Garra - Waraseoni Road Project (100% owned by SPV Company, MBL (MP) Road Nirman Company Limited) in the state od Madhya Pradesh awarded by MPRDC Ltd.

4. HOUSING INFRASTRUCTURE

MBL has successfully completed quite a few Housing Projects for Public Sector Enterprise. A few of the projects are Housing Project at Rajiv Gandhi Thermal Power Project, Khedar-Hissar, Haryana and a housing project for NBCC at Khekra, UP. The Company is currently executing 13 Housing/ Building Projects of Rs. 554 Crores PAN India.

5. RAILWAY INFRASTRUCTURE

With the current Government's focus on smoothening and strengthening the Railways Infrastructure, Indian Railways has lined up major Infrastructure projects along with two Dedicated Freight Corridor projects. Metro Railways which provide rapid Urban Transport is being taken up by many cities all over the country thus providing opportunities for the sector.

Currently, MBL is executing two Railway Over Bridges at Sonepat and a Delhi Metro Rail Corporation (DMRC) Depot at New Delhi. During the year MBL has completed the construction of two lane ROB at Sonepat Railway Level Crossing No. 27B at Km 42/17-19 on Delhi Sonepat Ambala Railway Section, Sonepat Gohana road at RD 77 in Sonepat Dist, Haryana.

6. INDUSTRIAL INFRASTRUCTURE

MBL is also engaged in Industrial Infrastructure Development projects across the country.

7. CIVIL ENGINEERING PROJECTS OF CONSTRUCTION OF PORTS, HARBOUR/ MARINE STRUCTURE, WATER SUPPLY / SANITATION, BRIDGES, VIADUCTS AND ELEVATED STRUCTURES

Inland Water Transport (IWT) offers a cost effective, environment friendly and fuel efficient mode, specially for bulk cargo, hazardous goods and over dimensional cargo - so vital for industrial development. Currently, inland waterways in India are functioning in an organised manner only in a few areas, such as Goa, Assam, West Bengal and Mumbai, apart from Ganga, Brahamaputra  and Champakara and Udyogmandal canals. Development of inland waterways can improve vastly the capacity for the transportation of goods.

MBL is looking to enter into civil engineering projects for construction of ports, harbour/ marine structures, water supply/ sanitation, bridges, viaducts and elevated structures and has signed an MoU with Piacentini for the same.

8. OTHER INFRASTRUCTURE PROJECTS

The Company also has brsence in urban infrastructure development, Flyovers, Residential & Commercial Complexes, mining, ports, harbours / marines structures, water supply / sanitation etc. MBL has ready mix concrete and bitumen divisions to ensure adequate and timely supply of high quality RMC and bitumen mixes. MBL also has quarrying / mining division to ensure adequate and timely supply of bulk raw material of stone aggregates. During the year under review the company has received order of "Restoration of Marhaura Branch Canal and its distribution system" under restoration work of Western Gandak Canal System, Bihar, amounting to Rs. 234.44 Crores.

OTHER SIGNIFICANT HIGHLIGHTS

• During 2014-15, the company successfully completed Qualified Institutional Placement (QIP) of Rs. 117.35 crores.

• MBL has the following firsts to its credit:

- MBL was among the first batch of contractors to be awarded the contracts of brstigious North South East West Corridor by NHAI and was the first to complete the project.

- MBL was also amongst the first batch of contractors to be awarded the contract for maintenance of National Highways by NHAI

- MBL was awarded the first ever contract for combrhensive maintenance of Inner & Outer Ring Road of NCT, New Delhi.

• MBL has over a decade's experience in executing infrastructure projects (espe­cially of Highways) as Prime Contractor and has established its ability to deliver quality jobs within budget and schedule.

• Orders in hand amounting to Rs. 377084.50 Lakhs as at 31 st March, 2015.

• Major clients comprises of NHAI, MPRDC, SAIL, CPWD, DMRC, PWD (NCT New Delhi, Haryana, Rajasthan, Assam, UP, Uttarakhand, West Bengal), RCD (Bihar), HUDA, MCD, M.P. Housing Board, NBCC, RITES, NRDA, WBHDC and Hooghly River Bridge Commissioner (HRBC) etc.

• MBL is executing more than 25 projects simul­taneously at different sites exhibiting its project execution capabilities

• Acumen in sourcing and maintaining supply chain for raw material and achieving benefits of backward integration.

• MBL has been brqualified by NHAI for proj­ects having Total Project Cost (TPC) up to Rs. 67910.00 lakhs for the year 2015-16 for Public Private Partnership in National Highway Projects.

• Strong control on its costs and timelines through:

- Focus on backward integration - ownership of RMC, Bitumen, Quarrying / Mining plants.

- Ownership of a large fleet of construction equipments.

- Cost escalation clauses built into majority of its contracts.

- Proven execution bandwidth with a Pan India brsence - projects ongoing in more than 10 states.

OUR PROJECT EXECUTION CAPABILITIES

The Company has developed reputation for undertaking challenging infrastructure and construction projects and completing them in timely manner. We intend to continue to focus on performance and project execution in order to maximize client satisfaction. We leverage technologies, designs and project management tools to increase productivity and maximize asset utilization in capital-intensive activities. Our ability to effectively manage projects will be crucial to our continued success as a recognized infrastructure Company. We believe that we stand distinguished from our peers because of our management strength and in-house development, construction, operation and maintenance capabilities.

II. OPPORTUNITIES, THREATS, RISKS AND CONCERN

With the stable Government in place and Infrastructure Sector high on its agenda, the Indian Construction Industry is poised for growth in medium to long term. To achieve the targeted Economic Growth, the government has to spend on the capacity building and infrastructure improvements which will provide huge growth potential for construction industry. India's invest­ment in infrastructure is estimated to double to about USD 1 trillion during the 12th plan (10% of GDP during 12th plan) compared to the brvi­ous plan. Indian government has also planned to build 100 smart cities. The government has allocated USD 1.2 billion for this project in its 2014-15 budget. This plan would need more PPP's for better and fast execution.

Due to low entry barriers, the competition is intense in the construction industry. There are many small and large regional and national play­ers who are competing with each others. There has not been very high project awarding which has affected the order-book of many of the play­ers in the industry thereby affecting their opera­tional and financial health. The balance sheet of many of the players is stretched due high debt on the books and difficult operating environment thereby affecting their ability to service the debt. This along with lower bargaining power due to various factors has kept the sector profitability under brssure. There are a few macro risks like increasing commodity risk, higher interest rates, funding constraints etc. which can impact the sector.

To minimize the risks your company has taken few initiatives like diversified & integrated busi­ness model, strong balance sheet, large fleet of owned machineries along with strong manage­ment and organizational skills.

III. OUTLOOK

With the thrust from the Government to the construction industry through various initiatives for revival of Infrastructure sector, your company is seeing immense opportunities in its core competency area. Your company is br-qualified for a number of projects which are expected to be awarded by NHAI along with MoRTH.

The year gone by has once again reinforced the strength of management to steer the Company through troubled waters. In FY 2014-15 there was growth on all operational and financial parameters. The Company has potential and will outperform in the coming years with the im­provement in the economy and macro-economic factors. With strong and stable Government at the Centre, the business outlook of construction industry has changed in a positive direction. The Company is expecting good inflow of fresh orders in the FY 2015-16.

Challenges in the sector have thrown immense opportunities to experienced players like MBL. The adaptability to meet the challenges and encash the opportunities available through a well balanced business plan supported by Strong Balance Sheet along with increased spending in the infrastructure segment in India will help your company to reap the benefit of the opportunities by evaluating various options for venturing into other infrastructure activities and maximize shareholders' value.

IV. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an adequate system of internal controls to ensure that transactions are properly authorised, recorded, and reported, apart from safeguarding its assets. The internal control system is supplemented by well-documented policies, guidelines and procedures and reviews carried out by the Company's internal audit function, which submits reports periodically to the Management and the Audit Committee of the Board. The company has also installed an extensive CCTV Surveillance system to cover all the project sites of the Company. All these measures are continuously reviewed by the management and as and when necessary improvements are affected.

V. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.

SALES & OTHER INCOME

The gross revenue during the year was Rs. 1,95,128.86 Lakhs and Profit after tax of Rs. 8,015.76 Lakhs. Sales growth was primarily driven by increased level of orders in hand and efficient execution of projects-in-hand. Other income constitutes mainly income from Interest on fixed deposits, etc.

INTEREST & FINANCE CHARGES

The net interest and finance charges increased during the year due to higher interest rates and increased availment of working capital facilities for operations of the Company.

PROFIT BEFORE TAX

Your Company has registered PBT of Rs. 11,678.78 Lakhs as against Rs. 10,066.07 Lakhs last year

PROFIT AFTERTAX

Your Company has registered PAT of Rs. 8,015.76 Lakhs as against Rs. 7,513.51 Lakhs last year.

INVESTMENTS

During the year, the Company has invested Rs. 2977.00 Lakhs in MBL Projects Limited, towards its commitment for execution of BOT project.

VI. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT, INCLUDING - NUMBER OF PEOPLE EMPLOYED.

The total employee strength of the Group, as on 31.03.2015 was 1453. The company recognizes the importance of human values and ensures that proper encouragement both moral and financial is extended to employees to motivate them. The senior management team consists of experienced professionals with diverse skills. This is across all cadres and geographic locations.

HEALTH, SAFETY & ENVIRONMENT (HSE)

The company has framed a HSE policy. The key objective of HSE policy is to empower employees to attain a healthy and safe work place with emphasis on zero injury and environmental protection. The Company is giving regular training to its employees, is conducting regular audits, and has taken ISO 9001, ISO 14001 and OHSAS 18001 to ensure proper working of its HSE policy. The HSE Policy enunciated by the Management lays emphasis on Health, Safety & Environment through a structured approach and well-defined Systems and procedures have been established for implementing the requisites at all stages of construction.

The safety and health of employees, partners, service providers and the public, the wellbeing of stakeholders and the minimisation of impact on the natural environment are a priority at MBL. Health, Safety and Environment (HSE) are key focus areas, and integrated into our business opera­tions at every level.

The HSE policies laid down ensure that site operations meet legal and Company requirements and that operations cause minimal visual impact or nuisance to the public. Efforts to achieve safety awareness and eliminate unsafe practices are made through employee involvement.

CAUTIONARY STATEMENT

The Statements in the 'Management Discussion and Analysis Report' with regard to projec­tions, estimates and expectations have been made in good faith. The achievement of results is subject to risks, uncertainties and even less than accurate assumptions. Market data and information are gathered from various published and unpublished reports; their accuracy, reliability and completeness cannot be assured.