Industry Structure and Developments (Pipes):

Piping Industry in India has been growing at CAGR of 15% plus since last many yearsbarring the last year when the growth was low due to poor economic conditions. In spite ofthat your Company has done quite well by delivering 20% volume growth, highest in theIndustry.

Looking to the announcements made by the new Government regarding the housing andconstruction sectors and the different new products launched by Astral during the last 3years, we are sure that the coming years will offer good growth prospects for our industryin general and for Astral in particular. Plastic Piping Industry in India has a marketsize of appx. Rs.21,500 Crores and Metal Industry is about Rs.6000 Crores. Sincereplacement of metal by plastic has been taking place rapidly, Plastic Industry isexpected to grow at an accelerated pace in the coming years. Further analysis shows thatthe Plumbing Industry is largely dominated by organized players accounting for 65% of themarket. Your Company has a significant volume of its sales from the Plumbing segment.

There are many positive factors which are going to drive the growth of Piping Industryin the coming years. Important among them are:

• Implementation of GST from 2016 will support the organized sector.

• Replacement of metal by plastic.

• With the growth in the demand for quality construction, builders areincreasingly moving towards the branded pipes (Pricing gap between branded & unbrandedpipes is very low).

• Demand from Tier I/II cities and rural segment is expected to pickup as no bigunsold inventory of houses is left in these areas as compared to metros, if the rainfallwill be in order.

• Low cost housing is picking up as the Govt. is supporting the concept.

• Proposal of the Govt. to develop 100 Smart Cities.

• PM Mr. Narendra Modi's vision of "House to Each by 2022".

Your Company has extended its reach to all the four zones of the country by setting upmanufacturing facilities in the North /South /West and a Depo in the East.

In short, we are confident about the growth of your Company in the years ahead and yourCompany is ready with the required capacity, infrastructure, distribution network, productrange etc.

Industry Structure and Developments (Adhesive & Sealants):

The size of Adhesives, Sealants and Building Chemicals market is appx. Rs.10,000/-Crores which is very large and is predominantly controlled by very few well establishedmanufactures. Hence, the growth for your Company in these areas is imminent.

The per capita consumption of adhesives is 9.4 Kg in Germany, 9.1 Kg in US compared to1.5 Kg in China and just 0.20 Kg in India. This shows that India offers good potential forgrowth in the consumption of adhesives which is a positive feature of this industry.

Similarly, while the value of per capita consumption of adhesives is Rs.750 fordeveloped countries it is just Rs.50/- for India.

Indian and Chinese adhesive industry is growing at 15% CAGR. With the newer innovativeand faster construction techniques, the growth of the adhesive industry will go up in thefuture, With steady increase in urbanization and modern constructions, the demand foradhesives and building construction chemicals is expected to grow much faster.

Opportunities and Threats:

We see good opportunity for growth in the construction sector of the Indian economy.India's GDP is expected to grow at 8 to 9%. Therefore, growth of the construction sectorshould also be commensurate with and supportive of the overall GDP growth.

As per the Vision 2022 document released by KPMG, India has at present a shortage of 59million houses and it needs additional 51 million houses by 2022 which is a very hugeopportunity not only for the housing sector but also indirectly for the piping industry.

Besides the above, India needs large areas of commercial space for modern Retailing.This will give further fillip to the construction activity in this area.

Favorable demographics, higher disposable income leading to better lifestyle, conceptof nuclear families and a rising middle class will also drive the growth in the demand forhousing.

Government of India is supporting irrigation to increase agricultural output whichimplies higher demand for pipes from the agricultural sector. Your Company has recentlystarted manufacturing Agri Pipes which will contribute significantly to the growth of yourCompany.

Many countries are likely to come forward to support the vision of our Prime MinisterMr. Narendra Modi to build "Smart Cities". This in turn will open up newopportunities for growth to the Piping and Adhesive industry. Your Company is poised toutilize the opportunity quickly as it is ready with the required manufacturing capacityand infrastructure.

Implementation of GST is going to be beneficial to the organized sector and yourCompany will be no exception. Leakage of tax revenue in the unorganized sector will beplugged with this new law coming into force and a level playing field will be opened forall players. Your Company's new products are picking up and contribution of these newproducts is going up. With the introduction of Blaze Master, a new avenue will open up inthe piping segment. Your Company is expecting a reasonably good amount of revenue fromBlaze Master.

Outlook:

The history of piping Industry in India has witnessed higher growth and will continueto be so because of the following reasons.

• Replacement of conventional piping systems like galvanized Iron and Cast Ironpiping systems with plastic is going on and will continue in the near term.

• Growth in construction, particularly in rural & Tier-II and III cities isgoing to supported by demographic change, aspirations of better lifestyle, nuclear familyconcept and continuous rise of the middle class.

• Increase in the demand for branded agriculture and plumbing pipes because ofincrease in income levels.

While the Piping Industry has been growing at 12-15% CAGR during the last 10 years,your Company's growth has been much higher than that of the Industry (CAGR 30% +)

New Government is committed to rapid economic growth of the country. Some of theinitiatives taken by the government like "SMART CITIES", "REIT","FDI - in real-estate" etc will have a favorable impact on the demand for theproducts of piping and adhesive industries.

As far as your Company is concerned, a single most important advantage it enjoys isthat it is the only Company which can offer to the developers all their pipingrequirements for various projects. Astral offers one-stop solution for various pipingrequirements such as Plumbing (Hot & Cold), Drainage, Underground, Rain waterharvesting, Sewage, Industrial, Fire Sprinklers, Agri Pipes etc.

Your Company is the only NSF approved Company in the plumbing industry, giving it anedge over its competitors.

With the association of Mr. Salman Khan as Brand Ambassador, your Company's Brandstrength is steadily going up. The distribution network of your Company is continuouslyexpanding. Your Company has, at present, 700+ distributors and 20000+ dealers.

With recent two acquisitions Viz. Resinova (Kanpur, India) and Seal it (Bond It - UK),your Company supplies full range of products in the Adhesives, Sealants and BuildingChemicals segment. As already mentioned earlier, market opportunities are many in thissegment and therefore, we see a very positive out look for growth in the years ahead.

Looking to the size of the Piping Industry of more than 275 (INR bn) and plastic pipingof 215 (INR bn) and 100 (INR bn) for Adhesives, Sealants & Building Chemicals we see avery bright future for your Company. In both size and scale this industry is growingsignificantly and with the new demand in housing, infra, hotels, airports, malls, 100Smart Cities and lot of commercial construction, your Company will have a very good growthopportunity in the years ahead.

Your Company has recently entered the agri piping sector which also has a very goodmarket in India and future potential. We are just beginning a journey in the segment wherethe existing market size is placed around Rs.7000 crores. Which is further growing.Looking to the Astral's strong brand awareness in India and its coming branding eventswith Mr. Salman Khan, your Company is quite confident that it will be able to muster areasonable market share from this segment in the days ahead. The initial response forthese products is very encouraging and we are confident of growth in coming years in thissegment also.

Your Company has recently commenced the production and sales from its South-based plant(Hosur- Tamil Nadu) which will help the Company to expand its Southern market in India.Last year, we started with PVC products and now we have installed machines for CPVCproducts. With the availability of additional power, we will be able to startmanufacturing CPVC pipes in the coming months which will enable your Company to capturehigher market share because of the logistic advantage of the new plant.

Business of the Kenya joint venture of your Company has started picking up. Last yearsales have grown by 67%. In the current year it is expected to further grow at a rapidpace especially with the introduction of local manufacturing of fittings. We foresee asizeable growth in Kenyan market because of duty saving.

Foreign Exchange Risk:

Being significantly dependent on imports and loans in foreign currency, your Company isexposed to the risk of fluctuations in exchange rate of foreign currency. Appropriatedecisions are taken for hedging the exposure from time to time based on the marketscenario. However, the volatility is increasing day by day which has elevated the risk.But after Mr. Raghuram Rajan took over as the RBI Governor, the risk due to Exchange ratefluctuations has decreased substantially.

Raw Material Prices:

Since a signifi cant part of the raw material is imported, any increase in the importprice or fl uctuations in the foreign currency rate may affect the margins of yourCompany. Further, the price of raw material is to some extent, linked to the Internationalcrude price, which may affect the price of raw material. But your Company has beensuccessfully managing this risk for the past several years. Whenever the revision in rawmaterial prices is on the higher side, it is passed on to the customers. Lubrizol isputting up CPVC compound facility in Dahej which will reduce this risk for your Company toalmost negligible level because your Company will be sourcing CPVC in local currency. Weexpect that Lubrizol will start supplying products to us from local manufacturing plantfrom the next f nancial year.

Internal Control and their adequacy:

Your Company has adequate Internal Control Systems and Procedures commensurate with thesize of the Company and its nature of business. The independent Internal Auditorscontinuously review the adequacy and effectiveness of the internal control systemsvis-a-vis on - going operations of the Company, which provides reasonable assurance ofadequacy and effectiveness of control, governance and risk management procedures to theAudit Committee. The recommendations of Internal Auditors and the Audit Committee arefollowed up effectively for implementation.

Financial Performance:

An overview of the f nancial performance is given in the Directors' Report. The AuditCommittee constituted by the Board of Directors periodically reviews the f nancialperformance and reporting systems.

Human Resources:

Your Company continues to maintain constructive relationship with its employees with apositive environment so as to improve efficiency. Your Company places great value on thecommitment, competence and vigor shown by its employees in all aspects of business. YourCompany conf rms its commitment to take initiative to further align its HR policies inorder to meet the growing needs of the business.

Your Company has employee focus in the sense that it provides fulf llment, stretch andopportunity for development of its employees at all levels. It is because of theconsiderable skill and motivation of the employees, that your Company is able to deliverperformance satisfaction. Your Board would like to express its sincere appreciation andgratitude to all employees on behalf of the stakeholders of your Company, who benef t fromtheir hard work.

Cautionary Statement:

Some of the statements in this Management Discussion and Analysis, describing theCompany's objectives, projections, estimates and expectations may be 'forward lookingstatements' within the meaning of applicable Laws and Regulations.

Actual results might differ substantially from those expressed or implied. Importantdevelopments that could affect the Company's operations include changes in economicconditions affecting demand, supply and price movements in the domestic and overseasmarkets in which your Company operates, changes in the Government regulations, Tax Lawsand other Statutes or other incidental factors.

The Company assumes no responsibility in respect of forward looking statements whichmay be amended or modifed in future.

For, Astral Poly Technik Limited For, Astral Poly Technik Limited
(Sandeep P. Engineer) (Jagruti S. Engineer)
Managing Director Whole Time Director
Date : 28th May, 2015
Place : Ahmedabad