Management Discussion and Analysis

1. Economic Outlook

India's struggling economy is likely to grow even more slowly this fiscal year than thedecade low of 5 percent struck last year, as investment will stay weak due to inadequatereforms and uncertainty ahead of a looming election.The parlous state of Asia's thirdlargest economy was reflected in the rupee's 18 percent plunge against the dollar to alltime lows since May, when signals emerged that the U.S. Federal Reserve was consideringwinding down an easy money strategy that had benefitted emerging markets like India.Burdened with a record high current account deficit, the rupee has suffered a far steeperfall than other emerging market currencies, and investors doubt whether Prime MinisterManmohan Singh's minority government will take bold enough steps needed to remedy theeconomy with an election due within nine months.

India's growth slowed to 5 percent in the 2012/13 fiscal year that ended in March, itsworst performance since it grew by 3.9 percent in 2002/03. However, some economists aremore optimistic. They are hopeful that upbeat farm output prospects on the back ofplentiful rainfall this year, benefits of a weak rupee for exports, a pick-up ininvestments following approvals to several large projects in recent months and improvementin the global economy, will combine to deliver more favorable outcome than anticipated.

According to the 'India 2020 - Economy Outlook' launched by Dun & Bradstreet inassociation with Life Insurance Company (LIC), the Indian economy is expected to recoverfrom the current phase of slowdown by FY’14 and is expected to gather pace by FY'15.

2. Indian Logistics Industry

Logistics cost in India is estimated to be 13% of GDP, which is much higher than thedeveloped economies like USA which spends around 10% of its GDP as logistics cost andJapan which spends 11% of its GDP for the same. The reason for this high spending isattributed to poor infrastructure facilities, lack of implementation of IT in logisticsand unnecessary check points at the National highways which wastefully increases thetransportation costs. India can save upto US$ 7.13 Billion each year in the event of areduction in logistics cost by 1%.

Indian logistics industry is approx. 3% of the global logistics and is highlyfragmented so far. Logistics industry comprises of three major segments - transportation,storage and value added services. Based on the analysis of various sub-segments in theIndian context on various comparative factors, Companies in the storage and the valueadded service segments are well-placed to capitalize on growing Indian economy.

Growth Drivers

The evolving business landscape and increasing competition across industries, iscreating the need for more efficient and reliable logistics services than what existstoday. The growth drivers for the Industry can be summarized as follows –

GDP growth and rise of 3PL services – Most companies acrossindustries like automotive, electronics, FMCG and pharmaceutical sectors are increasinglyopting to outsource their logistics requirements to specialized 3PLs. This has created ademand for a range of logistics services which will benefit the productivity andefficiency of the customers supply chains.

Investments in infrastructure – Given the current thrust oninfrastructure investments, the growth and efficiency of Logistics Service Providers aswell as their customers will be positively impacted. The government has plannedinvestments in infrastructure development amounting Rs. 20,00,000 Crore in the next 5years. This will prove to be a major benefit for the logistics industry.

Qualified work force – There has been a sudden transformation in thescale and scope of activities within the logistics sector. This growth rate needs to besupported with a parallel growth of skilled and trained manpower. Attracting and retainingtalent is a major problem faced by Companies in the logistics business. There is a need toincorporate a high degree of professionalism in the functioning and approach of theCompanies in this business.

GST Implementation to Accelerate India’s growth on Logistics front– Goods & Services Tax (GST) to be implemented in FY13 would do away withmultiple taxations and other complexities that the logistics providers have to deal within different states of India. This will boost investments in large warehouses with latesttechnologies thereby gaining economies of scale. This in turn will increase theattractiveness of integrated logistics companies, which can provide end-to-end logisticssolutions.

Emergence of new Storage Models – Several players in India such asMultimodal Logistics Park (MMLP), Mega Food Parks (MFP) and Free Trade Warehousing Zones(FTWZ), have announced next generation storage models. These large scale projects areexpected to significantly improve the quality of warehousing and storage space in theCountry, while allowing the Customers to reduce costs through economies of scale,government incentives offered and optimal usage of multiple modes of transportation.

3. Risks and Concerns

Adequate measures have been adopted by your Company to combat various risks, includingbusiness risks (competition, consumer preferences, technology changes), financial risks(cost, credit, liquidity, foreign exchange), operational risks (system, process, people)and regulatory and compliance risks.

Your Company has a well-established risk management framework which covers aspects offinancial and operational controls. Risks are identified through formal Risk managementdiscussions with the active involvement of functional managers and senior managementpersonnel at both operational and corporate level.

4. Internal Control Systems and their adequacy

Your Company has appropriate internal control system for business processes, withregards to efficiency of operations, financial reporting, compliance with applicable lawsand regulations.

Clearly defined roles and responsibilities down the line for all managerial positionshave been institutionalised. All operating parameters are monitored and controlled. TheCompany has also put in place a well - defined organisation structure, clear authoritylevels and detailed internal guidelines for conducting business transactions.

5. Material developments in Human Resources

People are one of your Company's biggest strength. Your Company has been able tofine-tune talent with modern technologies and ever changing corporate environment. YourCompany firmly believes that people make the organisation and that a sense of belongingwould inculcate the spirit of dedication and loyalty amongst them. Your Company recruitsprofessionals of high academic achievement, experience and behavioural competencies acrossoperations, supply chain consulting and marketing functions.

6. Cautionary Statement

Certain statements made in the Management Discussion and Analysis Report relating tothe Company's objectives, projections, outlook, expectations, estimates and other issuesmay constitute "forward looking statements" within the meaning of applicablelaws and regulations. Actual results may differ from such expectations, projections, andso on, whether express or implied. Several factors could make a significant difference tothe Company's operations. Important development that could affect your Company'soperations include climatic conditions, macro-economic conditions affecting demand andsupply, government regulations, taxation, natural calamities and so on, over which theCompany does not have any direct control.