MANAGEMENT DISCUSSION AND ANALYSIS

1. ECONOMY

The Indian economy (GDP) grew at 7.3% in FY 2014­15 as against 6.9% in FY 2013-14 as per the Central Statistical Office (2011-12 prices). In FY 2014-15 the manufacturing sector grew by 7.1% as compared to 5.3% in the brvious year. Improvement in manufacturing is attributable to improved efficiency, lower input costs and a fall in global commodity prices. The construction sector recorded a growth of 4.8% against 2.5% in the brvious year. However, growth in the mining sector more than halved with sector expanding at just 2.4% as against 5.4% in the brvious year. Sectoral data shows that agriculture,which has a direct impact on rural demand, hit rock bottom last year growing at just 0.2% as compared to 3.7% in the brvious year.

Growth estimates for 2015-16 for Indian GDP by our finance ministry as well as international organizations such as UN, IMF & World Bank is expected to be in the range of 7.5 to 8%, which will be one of the highest growth rates in the world.

Some of the headwinds in the brdicted economic growth for FY 2015-16 could be in the form of delays in structural policy reforms and challenges on ground level execution thereof of the policies & government initiatives. In addition, delays in important legislative changes like GST, the Land Bill, delays in mining sector reforms, insufficient monsoons and global influencing factors like increase in interest rates by US FED leading to capital outflows, are likely to slow down the economy.

Lower manufacturing, infrastructure & mining are the key factors holding back India's economic growth potential. To unlock faster economic growth, our government has made aggressive plans to build infrastructure, boost manufacturing by "Make in India" and develop smart cities amongst other things. These initiatives are expected to start yielding positive results from second half of the current year and lead to a positive momentum towards higher GDP growth levels.

2. MARKET OVERVIEW

India is third largest lubricant market in the world after the US and China and currently one of the fastest growing lubricant markets globally.

Broadly, the Indian market can be segmented into three major categories, automotive, industrial including marine applications and process oils /white oils.

The market has a very competitive landscape with more than 15 national level players catering to the market needs. It is marked by the brsence of the nationalized oil companies (NOCs), who deal in all segments, global marketers (mainly in the automotive & industrial) and a few domestic players who primarily dominate the process/white oils space. For the market that we operate in namely the automotive and industrial lubricants segments, NOCs are the biggest lubricant suppliers in volume terms followed by the MNC brands (including your Company).

Your company has a leading brsence as one of the top players in the open market (Bazaar channel) through the distributor channel and also a good, growing brsence for direct supplies to OEMs & B2B customers.

a. Automotive Segment

The lubricants market in India has been dominated largely by the automobile lubricants segment which comprises of applications for Commercial Vehicles, Cars, Tractors and Two wheelers. Diesel Engine Oils (DEO) account for over 60% of the automobile segment followed by Motor Cycle Oils (MCO) and Passenger Car Motor Oils (PCMO). The large vehicle population in existence and growing sales of new automobiles year after year augurs well to increase the demand for lubricants.

Last year, the automobile industry clocked a growth of 7.2% with improvement across segments as compared to 2013-14, where growth had slowed down to 3.4%.

For the past few years the automobile lubricants industry has been facing several challenges. Demand in the DEO segment has been affected by lower movement of vehicles for transportation, bleak mining sector and stalled infra projects. However, we have seen some pick up in MCO and car segment. Need for personal mobility & higher penetration in rural India, growing personal disposable incomes, double income households, changing demographics, changing lifestyle,improvement in road infrastructure and support from the government is driving demand for cars and two-wheelers.

With the signs of pick up in economy, new commercial vehicle sales have seen a good uptick in the last few quarters and this is bringing confidence to lubricant industry for a positive industry growth.

b. Industrial Segment

Industrial lubricants include hydraulic fluids, metal working fluids, greases and industrial gear oils. Industrial lubricants are used in a wide variety of applications in various industries including construction industry, manufacturing, auto components, textile, power generation, mining, food processing, light heavy engineering, marine operations and metal working.

Industrial lubricant demand is dependent on industrial production (IIP) and overall growth trends in the economy.

3. GOLIL - THE YEAR IN BRIEF

Your company manufactures and markets a complete range of lubricants and oils which are used by automobiles as well as by the industrial sectors. In 2014-15, the Lubricant Industry witnessed a marginal growth of 1 to 3% in overall volumes as it continued to operate in a challenging environment. Lower sales and movement of commercial/mining related equipment led to reduced consumption levels. Commercial Vehicle's lube consumption continued to be negative. However, consumption of lubricants for two wheelers and cars/utility vehicles has seen single digit growth. With its focussed segment wise strategies, suitably backed by differentiated customer value propositions like 'longer drain' for the diesel engine oil fleet users, superior services, brand /distribution building initiatives, your Company has been able to deliver overall volume growth at more than double the industry growth rate. Your company also grew its volumes by forging new tie-ups with OEMs , the key ones being with Mahindra & Mahindra and Schwing Stetter, both market leaders in their respective areas of tractors & concrete mixing equipments in India. We also increased our base with Direct Industrial customers & Infrastructure, Mining, Fleet customers, which will lead to higher sales once the economy improves. These achievements have enabled your company to continue its past trend of outperforming the industry and achieving higher growth levels than competition during the year.

Notwithstanding the significant drop in commercial vehicle led lube consumption, your company retained its overall estimated market share of around 7% in the bazaar market, which comprises of independent shops & garages.

During the year, your company continued to invest in its brand building initiatives across segments. Based on an internal market research extensively covering a large base of consumers, mechanics and retailers across 18 centers, 'Gulf' oil brand has emerged amongst the Top 5 lubricant brands in terms of brand awareness, purchase consideration and on other key brand parameters as well. In the recent years, your company's association with Motor Sports, the India Premier League (IPL) with Chennai Super Kings & M S Dhoni has yielded a positive build up in its brand equity scores. Your company continued to invest in initiatives and innovative communication creatives leveraging these brand related associations.

Key growth and brand building initiatives during 2014-15:

• Launch of range of lubricants for Mahindra and Swaraj tractors

• Rapid expansion of Bike Stops (Branded independent workshops for the motorcycle segment)

• Tie-up with Schwing Stetter for lubricants

• Tie-up with Whitmore USA for specialized greases for mining applications

• Gulf sponsorship of Zeeignition awards for automobile excellence (cars & bikes)

• Bike festival of India with MS Dhoni & Rhiti Sports

• Launch of focussed Distribution reach initiatives for rural markets

• Launch of a specialised lubricant for the fast growing scooter segment

• Continued association with Chennai Super Kings in IPL

• Launch of digital campaigns across social media for the motorcycle & car segments

• Celebration event in India for Aston Martin Racing and Drag bike racing global sponsorships

Your company augmented the manufacturing capacity of its existing plant in Silvassa from 75000KL to 90000KL with the addition of state-of-the-art automatic filling lines, blow moulding facilities and also revamped base oil/raw materal/finished goods storage, handling and other infrastructure facilities in line with this enhanced capacity.

Your Company is ISO 9001(QMS), ISO 14001(EMS), TS 16949:2009 & ISO (OHSAS) 18001 compliant which provides added comfort to our business partners and regulatory bodies

To set up its second plant with an initial capacity of around 40,000 KL p.a., your company has acquired land near Chennai. Chennai is fast becoming a major Auto Hub with the brsence of several OEMs. Construction work is likely to commence on receipt of necessary approvals. Your company expects to improve its strategic brsence in South India and also derive cost benefits from this new plant.

4. OUTLOOK FOR THE CURRENT YEAR, OPPORTUNITIES AND THREATS

Automobile Industry, mainly driven by improvements in Commercial Vehicle segment, is expected to make a partial recovery from its low base in the last 2 years.

Policy reforms, Government initiatives like Make in India program and Mining Sector reforms are expected to unlock higher GDP growth in the current year, early signs may be visible from the third quarter of the year. This increased economic activity is expected to result in growth of lubricant demand in both Commercial & Consumer Mobility Vehicles. Accordingly the overall lubricant demand is expected to be marginally better in the current year. An improvement in Commercial Vehicle segment, mainly on account of increased truck, construction equipment movement, is expected to lead to better volumes for the overall lubricants business; Commercial Vehicle Oils are a major portion of the product mix for the overall Indian lubricant Industry and also for your company. Your company will continue to focus on improving its share in consumer lubricant space of PCMOs and MCOs.

Volume growth in lubricant industry is expected to be slightly better than last year's 1-3% growth. The automobile industry growth is pegged at 6-8 % (as per SIAM) with a positive turnaround brdicted for the Heavy Commercial Vehicles (HCVs), which should augur well for the lubricant industry as a whole. Your company expects to continue its trend of outperforming the industry by at least two times, and also further its brsence in B2B/OEM segment. Additional opportunities to increase the market share by extending the distribution base and network, especially in the rural areas, are also being tapped. New Synthetic lubricant products and mineral based products for specific market segments like Scooter and Passenger cars have been launched or are in the advance stages of being launched.

Your Company will continue to further strengthen its strategies around segment-wise focus, innovative investments in the brand and initiatives to increase distribution reach and retain/ acquire OEMs & other B2B customer bases.

Aggressive pricing or discount strategies from the market leaders or other competitors, including new entrants to the market, could adversely affect the Company. Intense competition is expected to continue in the lubricant market, brsenting the Company with various challenges in its ability to maintain growth rates and profit margins. Company is fully geared up to meet these competitive challenges with well defined strategies and to continue its journey on the high growth path, as demonstrated in the past years. Forex volatility and fluctuation in base oil prices, impacted by global oil prices can also impact the industry and the company.

5. RISK MANAGEMENT AND CONCERNS

Businesses operate in a dynamic environment. Changes in government policies, legislation, information technology, customer brferences, competitor's initiatives, financial markets, etc. contribute to this ever changing environment, a situation that demands a mechanism to proactively assess risks and design controls to mitigate those risks. Risk Management framework in the organization provides a systematic platform to identify, assess and manage potential risks and opportunities. It provides a way for managers to make informed management decisions. Effective Risk Management ensures sustenance of the organization and everyone associated with the Organization.

Your Company has put in place a combrhensive Risk Management Policy, which is framed around a common as well as industry specific understanding of various type of Risks - Corporate Risk (Strategic and Residual Risk), Operational Risk (specific Business and Functional risks including Economic, Market Risks), Financial, Human resources, Legal and Compliance Risks, etc. Your Company has documented key identified risks in all of these areas and also put in place an effective Mitigation plan for the same. To ensure a widesbrad understanding, Board members and all operational / business unit heads and managers are made familiar with, and all staff aware of, the principles of Risk Management Policy and framework.

During the year, some of the key risk mitigation actions taken by your company include diversifying product portfolio keeping specific market requirements such as new Scooter Oil, Synthetic MCO oil, etc, creating a separate business vertical within the organization to systematically approach and get new OEMs and maintain existing OEMs in a more structured way as OEMs are identified as key to future continued success, putting a forex hedging policy in place as per advise of forex experts and continuous review mechanism on fortnightly basis, implementation of legal compliance software with exhaustive coverage of laws for timely and proper legal compliance under various Acts, laws, rules and regulations applicable to your company, putting up a Whistle Blower Mechanism in place etc.

Your Company has also embarked on an "Operational Excellence" program internally driven by EY India to enhance organizational capabilities and improve efficiencies. Company has also received OHSAS 18001, to further enhance plant safety standards.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company's internal control system assists in ensuring that the Board and Management are able to fulfil the business objectives. An effective internal control framework contributes to safeguarding the shareholders' investment and company's assets. The objective of your company's internal control framework is to ensure that internal controls are established, properly documented, maintained and adhered to in each functional department for ensuring efficient use and protection of the Company's resources, accuracy in financial reporting and compliance with the statutes and also within the framework of "internal financial controls" within the meaning in the explanation of Section 134(5) (e) of the Companies Act, 2013. The Company's internal control system, well supported by SAP ERP implemented a few years ago, is driven by well defined policies and procedures across its multifarious business activities.

The Company has an Internal Audit Function which provides the Audit Committee and the Board of Directors an independent, objective and reasonable assurance of the adequacy, efficiency and effectiveness of the Organization's risk management, internal control and corporate governance processes. The Audit Committee/Board approved annual audit plan brpared in consultation with business heads and inputs obtained from the company's statutory auditors ensures coverage of significant areas of operations with a risk based approach in order to conduct the audit in an efficient and timely manner. Process reviews for critical functions at all locations are performed in accordance with the Annual audit plan, approved by Audit Committee. The function also assesses opportunities for improvement in business processes, systems and controls; provides recommendations, designed to add value to the organization in consultation with the Senior Management.

The Audit Committee of the Board of Directors regularly meets to review the significant audit findings, action taken thereon, adequacy of internal controls, and also the implementation of various combrhensive policies for compliance and governance. During the year, the Audit Committee met four times to review the reports submitted by the Internal Audit Department. The

Audit Committee also regularly meets the Company's Statutory Auditors to ascertain their views on the business, adequacy of the internal control systems in the Company and their observations on the financial reports.

7. HUMAN RESOURCES, AWARDS AND RECOGNITION

Human Resources

Human Resources plays significant role in executing our strategy and plans. Your Company employed 449 permanent employees on its rolls as on March 31, 2015. The Company gives utmost attention to the development of its employees. In FY 2014-15, the Company had organized various skill development programmes which were the outcome of the scientific process of Individual Development Plan (IDP) as part of the employee appraisal process. The continuous improvement in the training process with incorporation of the inputs & feedback from employees help to enrich the contents of the training programmes. During the year, the total number of man-days of training across the functions was 1120.

Attracting and retaining the talent is key focus for the organization and there are various initiatives such as campus relations program, Reward and Recognition program, incentive programs etc. Driving the performance culture helped the company to get the desired results. Subsequent to the year end the Company has also launched the Long Term Incentive plan (ESOP - Employee Stock Options) to retain and motivate the critical talent at Senior Management levels. Your Company has already granted 606,990 Stock Options on May 26, 2015 to the eligible employees of the Company, pursuant to the said Scheme.

We value the loyal and dedicated association with our employees. During the financial year, 36 employees were awarded long service awards.

Industrial Relations at its Silvassa plant has been smooth throughout the year.

Safety & Health - Performance & Initiatives

As part of the company's commitment to safety and health, we have been trying to achieve zero injuries to our employees & all stake holders associated with our operations. The specific drivers for safety within the organization consist of - engagement at all levels, robust safety processes, safe working behaviors & governance. The specific initiatives at non plant locations including safety practices communication to all employees through "Safety First" programme, safety audits, training on first aid, use of fire extinguishers, mock safety drills helped to achieve the desired results. Company has now been accredited with OHSAS 18001, a certification for its safety at our plant location.

Prevention of Sexual Harassment at work place

The company has adopted a well designed policy for Prevention of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 (POSH). Awareness programmes were conducted for the employees about the policy and its implementation. During the year 2014-15, the Company have received no complaints of sexual harassment.

8. FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

During the year, your Company has been able to grow net Revenue by 12.2% whereas its EBITDA has gone up by 21%. Revenue growth of 12.2% is higher than volume growth signifying that the Company has been able to improve its overall realisations as compared to brvious year due to a combination of better product mix and price increases/reduction in discounts.

Revenue Growth

Company's material cost has been at around 61%, employee cost at around 4.5% and other expenses at around 21%, leading to an operating margin (before debrciation) of around 13.6%.

Profit After Tax for the year has been Rs. 77.40 Crores resulting in an Earnings Per Share (EPS) of Rs. 15.62.

Disposal of Revenue

The year 2014-15 has witnessed one of the steepest fall in crude oil prices starting from quarter 3 and this resulted in fall in Base oil prices which is a significant raw material for lubricants. The competitive scenario intensified with sharper cuts in the pricing/higher discounting and your Company also had to respond to these new market dynamics. Therefore, revenue growth has been moderated towards the end of the year and fall in input costs could not be fully translated into margins enhancement.

The management is confident that your company will continue to grow ahead of market and competition with its strong brand equity, distribution initiatives, focussed approach and technological process. The key brand values of "Quality Endurance and Passion" are well endowed in its products and people to take the Company to greater heights in the coming years.