ECONOMY OVERVIEW:

The global economy is in a slowdown mode amidst deepening credit crunch and upsetting developmental targets of economies across the world. In the prevailing scenario, infrastructure remains a top priority for addressing developmental gaps as it is considered omnipotent with potentials of lifting economies out of the financial turmoil. The governments around the world are pumping money to generate demands for goods and services by creating jobs through higher spending into physical and social infrastructure. Likewise, the Indian government on its part is not lagging behind on this score and has taken concrete steps to revive the sector.

India's GDP growth for the third quarter of FY2015-16 was recorded at 7.3%, as compared to 6.6% in the same period last fiscal. Wholesale price index-based inflation rate contracted for the 16th straight month in February to 0.91%, driven down by low oil prices and softening vegetable prices. Consumer price index-based (CPI-based) inflation softened to 5.18% in February from 5.69% a month ago. The current scenario have convinced the RBI to reduce the interest rates in the country to lowest level in five years i.e. at 6.5% also with the view of lowering it down further if inflation stays on the current trend. Growth will continue to be driven by private consumption, which has benefited from lower energy prices and higher real incomes. With the revival of sentiment and pickup in industrial activity, a recovery of private investment is expected to further strengthen growth.

Source: Ministry of Commerce & Industry

The Indian economy is expected to be one of the fastest growing economies in the coming years. Total infrastructure spending is expected to be about 10.0% of Gross Domestic Product (GDP) during the 12th Five-Year Plan (2012-17), up from 7.6% during the previous plan (2007-12). Increased impetus to develop infrastructure in the country is attracting both domestic and international players. Private sector is emerging as a key player across various infrastructure segments, ranging from roads and communications to power and airports.

India's urban population as a percentage of total population is around 32.7% in 2015 and is expected to rise to 40.0% by 2030. Better wages and better standard of living is expected to result in an increase in urban population in India to above 600 million by 2031 from 429 million in 2015.

Government initiatives such as various urban development policies and programs (e.g., JNNURM) are expected to contribute to enhanced urbanisation. Urbanisation and growing household incomes are driving demand for residential real estate and growth in the retail sector.

CONSTRUCTION & INFRASTRUCTURE SECTOR:

The construction industry is a major contributor towards India's GDP, both directly and indirectly. The construction sectors contribution to GDP in India has stayed fairly constant at around 7-8% for the last five years. It employs 33 million people, and any improvements in the construction sector affect a number of associated industries such as cement, steel, technology, skill- enhancement, etc. Apart from the Smart Cities project, the Government's 'Housing for All by 2022' will be a major game changer for the industry. Increased impetus to the creation of affordable housing mission, along with quicker approvals and other supportive policy changes will soon result in an increase in construction activity. According to ASSOCHAM Study, increase in demand of Indian construction sector can lead to an increase in overall output of the economy by 2.4 times.

According to a study by Timetric's Construction Intelligence Centre (CIC), increasing investments in residential construction and transport infrastructure will drive growth in India's construction industry over the forecast period (2016-2020). It forecasts the industry to rise from a value of USD 428.1 billion in 2015 to USD 563.4 billion in 2020. Due to industrialisation, urbanisation, a rise in disposable income and population growth; the demand for construction services is set to rise.

Infrastructure construction will continue to expand, driven by public and private sector investments in public transport infrastructure. Consequently, infrastructure construction is anticipated to be the industry's fastest-growing market and to reach to value INR 9.5 trillion (USD 140.1 billion) in 2020.

Our company is at the cusp of taking advantage of this surge in investment in Infrastructure. With our execution capabilities across varied sectors we have the experience to cater to varied infrastructure requirements of India. We have the flexibility to adapt to evolving economic landscape and are aspiring to outperform.

PORT INFRASTRUCTURE:

Maritime transport is a critical infrastructure for the social and economic development of a country. The Ports handle over 95% of the country's total international trade volume and around 70% of total trade value, thus, rising trade is contributing significantly to cargo traffic.

India has a coastline which is more than 7,517 km long, interspersed with more than 200 ports. Strong growth potential, favorable investment climate, and sops provided by state governments have encouraged domestic and foreign private players to enter the Indian ports sector.

Special Economic Zones are being developed in close proximity to several ports - comprising coal-based power plants, steel plants and oil refineries. All the green-field ports are being developed at shores with natural deep drafts and the existing ports are investing on improving their draft depth. Higher draft depth is required to accommodate large sized vessels.

Strong growth potential, favorable investment climate, and sops provided by state governments have encouraged domestic and foreign private players to enter the Indian ports sector in-addition to the development of ports and terminals. By March 2015, around 99 Public Private Partnership (PPP) projects are operational with a total cost of around USD 8,813.8 million and capacity of 683.3 million tonnes per annum.

In FY2015, total cargo handled at Indian ports increased by 8.2% to 1,052.0 million tonnes from 972.6 million tonnes during FY2014. By FY2017, cargo capacity in India is expected to increase to 2,493.1 million tonnes from 1,806.8 million in FY2015. By FY2017, Cargo traffic at major ports in India is expected to rise to 943.1 million tonnes from 606.4 million tonnes in FY2016. Cargo traffic at non-major ports in India is expected to grow to 815.2 million tonnes from 470.7 million tonnes in FY2015.

National Maritime Agenda 2010-2020

• To create a port capacity of around 3,200 million tonnes to handle the expected traffic of about 2,500 million tonnes by 2020

• Proposed investment by 2020 is expected to be INR 1.09 lakh crore for major ports and INR 1.68 lakh crore for non-major ports

• To implement full mechanisation of cargo handling and movement at ports, thereby bringing Indian ports on a par with the best international ports in terms of performance and capacity

• Major ports have been working towards implementing 'Landlord port' concept duly limiting their role to maintenance of channels and basic infrastructure leaving the development operation management of terminal and cargo handling facilities to the private sector

• To develop two major ports (one each on East and West coast) to promote trade as well as two hub ports (one each on the West coast and the East coast) - Mumbai (JNPT), Kochi, Chennai, and Visakhapatnam

Sagarmala Project:

The prime objective of the Sagarmala project is to enhance port infrastructure, including modernization & setting up of new ports to transport goods quickly, efficiently and cost-effectively.

The Sagarmala Project is likely to see an investment to the tune of INR 70,000 crore in coming years. While most of this investment is expected to be made by government, some projects including development of islands and tourism facilities would be taken up in public-private partnership (PPP) mode. The projects mainly include increasing the capacity of existing major ports and adding new ports. Under the initiative that also includes connecting ports with inland waterways; the Government will set up 14 coastal economic zones and a special economic zone at Jawaharlal Nehru Port Trust (JNPT) in Mumbai.

We have been early entrants in the Port space with our proven execution across multiple projects within India at various locations such as Mumbai, Gujarat & Cochin. We believe we can benefit from the Infrastructure construction opportunities being generated in the port sector.

REAL ESTATE:

Over the last few years our company has increased its focus to leverage real estate EPC capabilities to Real Estate development. In this context we become increasingly integrated with the Real Estate sector. The recent RBI policies and the continued strength exhibited by the Indian Economy will be positively impacting the Real estate sector. We believe the transmission of lower rates for Housing sector will further catapult the demand and brighten the prospects for the sector.

India being the third largest developing economy in the Asia enjoys a unique position. The Government with its focus on business and growth for the nation is keen to undertake reforms critical for reviving growth. As India gears itself towards sustained growth; the real estate sector's significance becomes an area of key importance.

Market size of real estate in India (USD billion)

Source: Ibef.org

Today's cities face significant challenges such as increasing population, lack ofphysical and social infrastructure, environmental and regulatory requirements, declining tax bases and budgets, and increased costs. Long standing urban challenges include housing, especially for low income populations, infrastructure provision, and the delivery of a variety of services including water, sanitation, education and health. With a view to modernizing India and accelerating the process of urbanization, Government of India, has envisioned the creation of 100 'smart cities' in the next five years.

The changing physical, economic, and technological environment across the globe necessitates smart cities, which help to enhance livability, workability, and sustainability. These powerful drivers are converging to make smart cities a growing trend all over the world and they are:

Growing Urbanisation

• Rising Stress

• Inadequate Infrastructure

• Increasing Economic Competition

• Rising Expectations

• Growing Environmental Challenges

• Rapidly Improving Technology

The real estate market is estimated to grow to USD 180 billion by 2020 from USD 93.8 billion in 2014, driven by demand mainly from residential sector.

Real Estate Regulatory Bill now a law

Passing of the long-pending Real Estate Regulatory Bill, which was widely discussed, is an unequivocal victory for the Indian real estate sector.

The real estate industry has welcomed the major reform that promises to bring in much-needed transparency and accountability. It will create a much-needed consumer right protection umbrella for buyers of real estate, thereby increasing consumer confidence as well as creating lasting developer brands strong on quality and timely delivery of their projects.

Norms on size of projects had been relaxed from 1,000 sq. m to 500 sq. m and further reduction in size can be brought under the purview of the regulator by state governments.

This law will reduce volatility seen in this sector and bridge the trust deficit between both stakeholders - builders and buyers.

We as an organization since inception have focused on all the parameters which are currently part of Real Estate Regulatory Bill. We have always adhered to strict project cash flow discipline. We have a reputation of completing our projects on promised schedules, or even before; and continuously endeavor to achieve the same.

REITs

Over the last year, the government notified significant regulations regarding REITs, which we believe should make it conducive for large unlisted commercial landlords to list their portfolios. The government has accepted the industry's long standing demand of DDT exemption on income distributed from the SPV. REITs, once fully operationalized, will have a significant effect on the industry by

1. Allowing for capital recycling thus reducing dilution risks at parent-co level.

2. Ability to undertake higher level of capex.

3. Improved institutional funding (long term capital from income asset owners) into the sector.

4. Allowing for lower financing costs as REITs are allowed to borrow offshore.

Other Government Initiatives

There are a string of measures that the Government has undertaken which will benefit the overall health of the economy thereby having a rub-off effect on our sector. Few initiatives are as below -

• Allocation of INR 22,407 Crore for housing and urban development in Budget 2015-16.

• Under the housing scheme, 6 crore houses are to be built in which 4 crore in rural areas and 2 crore in urban area by 2022. Government has initiated the development of Delhi Mumbai Industrial Corridor with the investment of USD 195.6 million.

• The government has allowed 100% FDI for townships and settlements development projects.

• Provision for reduction in minimum capitalization for FDI investment from USD 10 million to USD 5 million which would help in boosting urbanization.

Investment Destination

Total private equity (PE) investments from foreign funds in Indian real estate increased 33%, from USD 1,676 million (approx. INR 11,306 crore) in 2014 to USD 2,220 million (INR 14,974 crore) in 2015. Mumbai accounted for about 35% of the total foreign investments last year. This was due to high property prices and high investment potential. Mumbai was followed by Delhi NCR, which accounted for about 25% of the investments.

The three large cities; Mumbai, Bengaluru and Delhi-NCR continue to attract the highest investments in India and account for about 75% of investments made by Private equity.

With a healthy balance sheet and experience of decades to back us, we are well placed to capture the incremental opportunities in the Housing space including infrastructure.

MUMBAI REAL ESTATE:

Our core sector is the Mumbai Real estate market. We are directly co-related to the health of the Mumbai market which is a reflection of the larger Indian economy.

The year 2016 has begun on a mixed note for Indian Real Estate; while there are still concerns on slower sales and subdued demand there are also indicators of positive regulatory changes that may boost investor and buyer sentiment.

Land is a very scarce resource in Mumbai. Land in the city is either mill land (most of which is already bought and developed) or factory land or slum-encroached/ redevelopment land (and developing either of the two involves complicated procedures). The government does not have any land to offer.

The Mumbai Metropolitan Region (MMR) is spread over an area of 4,355 sq km, comprising 458 sq. km of Mumbai City and the rest covering regions in the Thane, Palghar and Raigad districts.

As per Knight Frank investment report, the performance of the various micro-markets in the MMR will vary according to their respective demand drivers, i.e. their occupation profiles, connectivity with employment hubs, physical and social infrastructure development and cost of real estate.

Zone - wise split of under - construction units

Currently, Our Company has ongoing projects in Ghatkopar, Mulund, Sion & Dahisar which majorly falls under Central Suburbs category.

Mumbai Metropolation Region (MMR)

MMR residential market launches, absorption and price trends

• According to Knight Frank report, in H1 2016

> Infrastructure thrust, the improving office market and stable house prices will aid the housing market revival.

> The central and state governments are pushing critical transit-oriented infrastructure projects in the MMR and aim at completion by 2019.

> The Mumbai Trans Harbour Link has secured the environment clearance, and MMRDA has started the bidding process in May 2016.

> Mumbai's coastal road has secured the forest and CRZ clearances. The bidding process will begin in June 2016.

> The metro rail for the Dahisar to DN Nagar, Dahisar East to Andheri East, and Cuffe Parade to SEEPZ corridors has been expedited. Construction is to begin this year.

These government initiatives are likely to boost the real estate prospects in these micro markets.

Commercial Real Estate

The demand trends for corporate real estate picked up in Mumbai in the last quarter of FY2016, noting a healthy mix of front and back-office space transactions by corporate occupiers. Improving market sentiments and healthy pre-commitment levels in underconstruction developments were the primary drivers for quarterly improvement in office space demand. FY2016 started with a good note as the office absorption doubled in Mumbai, from 0.49 million sq. ft. in Q4 2015 to 0.93 million sq. ft. in Q1 2016. The demand going forward will largely be driven by sectors like IT-ITeS and BFSI. Developers will continue to focus on project completions, resulting in substantial new supply in the coming quarter in areas such as the western suburbs and Navi Mumbai.

Operational Review

Man Infraconstruction Ltd. (Man Infra) is an integrated EPC (Engineering, Procurement and Construction) company with four decades of experience and execution capabilities in Port, Residential / Commercial and Industrial & Road construction segments. The Company increased its focus as a Real Estate developer since 2013. The current portfolio of the Group includes 4 ongoing and 2 upcoming projects in Mumbai with an approximate saleable area of 5 million sq. ft. The Company has significant experience in construction management and has inherent skills and resources to develop and deliver Real estate projects.

During the year, Man Infra focused on execution of its existing order book and expediting its Real Estate Development Projects. The total outstanding EPC order book stood at Rs. 172 crore as on March 31, 2016. Out of the total order book, 89% was contributed by the Residential segment, 5% by Infrastructure segment and 6% by Commercial and Industrial segment. During the year, Man Infra completed construction work of its prestigious port infrastructure work order at Port Pipavav, Gujarat within the scheduled timeframe. The Company is further exploring construction opportunities in the port infrastructure space with the Government's renewed thrust on developing the Maritime Sector.

On the Real Estate front, Man Infra's subsidiary Man Vastucon LLP (wherein Man Infra holds 99.9%) acquired Development Rights from the landowner to develop a Residential project having an approximate saleable area of 2.6 million sq. ft. in Dahisar, Thane. Strategically located on the Western express highway, the Company plans to launch this project in FY 2017.

Man Group completed its second Real Estate Project 'Aaradhya Saphalya' in May 2016; well within the scheduled timeframe. The construction work on another 3 Residential Redevelopment projects has commenced in FY 2016. The Group is planning to redevelop a sizeable MHADA project in Ghatkopar East, Mumbai. This project is in Approval Stage and is expected to be launched in FY 2017.

Man Group's mega Real Estate project "Atmosphere" having an approximate saleable area if 1.8 million sq. ft., which is being developed in a joint venture with The Wadhwa Group and Chandak Developers has progressed well with more than 50% of inventory being sold in Phase 1. The construction of the project which is being executed by Man Infra has been progressing well and is currently considered as Mulund's fastest developing project.

The Company's financial performance for the year 2015-16 remained subdued, as, while the revenue for 'Atmosphere' project has not yet been recognized; the revenue recognition for two smaller redevelopment projects started in Q4FY16. The Company is expecting to start recognizing revenue in its 3 ongoing Real Estate projects in FY2017; translating into a strong growth going forward. In addition to this, the 2 upcoming projects in Ghatkopar and Dahisar will fuel the Company's growth once the projects start recognizing revenue. As on March 31, 2016, the holding company Man Infra continues to remain debt free with a cash & cash equivalent of Rs. 177 crore.

Manaj Tollway Private Limited (MTPL), which was executing a 41 km Road project on DBFOT basis and where Man Infra holds 63% stake had issued a letter to Public Works Department, Government of Maharashtra (PWD) in March 2015 for terminating the Concession Agreement due to their inability to provide necessary Land for implementation of the Project. Further, MTPL claimed costs incurred and compensation in line with the terms of the Concession Agreement from the authorities. The management is constantly reviewing the progress of this and is confident that it would be able to recover a substantial amount of compensation within a reasonable timeframe.

Man Group continued to lay foundation for future growth by focusing on quality execution, timely delivery and sustained momentum in business development. The Company will endeavor to add prudent EPC and Real Estate projects in its portfolio accelerating the growth of the Company's EPC as well as Real Estate development business.

Financial Performance - Consolidated

• Total Income stood at Rs. 26,286.04 lakhs for FY16.

• Profit after tax and minority interest stood at Rs. 1,326.38 lakhs in FY16 as compared to Rs. 4,741.01 lakhs in FY15.

• The Company achieved a PAT margin of 5.05% in FY16

• The Company had a Cash & Cash Equivalent of Rs. 21,560.82 lakhs at the end of FY16

Financial Performance - Standalone

• Total Income stood at Rs. 26,328.36 lakhs for FY16.

• Profit after tax stood at Rs. 3,756.28 lakhs in FY16 as compared to Rs. 5,051.80 lakhs in FY15.

• The Company achieved a PAT margin of 14.27% in FY16

• The Company had a Cash & Cash Equivalent of Rs. 17,728.49 lakhs at the end of FY16

Risk Management

The Company works in an environment which is affected by various factors, some of which are controllable while some are outside the control of the Company. At Man Infra, we have developed a robust risk management framework that reduces the volatility due to unfavorable internal and external events, facilitates risk assessment and mitigation procedure, lays down reporting procedure and enables timely reviews by the management. The following section discusses some of these risks and steps taken by Man Infra to mitigate such risks.

1. Economic Risk

a. Risk: An unexpected development in any of the macroeconomic variables that may adversely impact the Company's profitability or viability. Both Infrastructure and Real estate are cyclical industry and they get impacted more by the changes in macroeconomic variables like interest rate, GDP Growth, purchasing power, inflation, among others.

b. Mitigation Plan: Man Infra continues to be conservative and follows well defined internal prudential norms. The Company has attempted to hedge against the inherent risks of Real Estate business by following joint development model. It maintains a low debt equity ratio, high liquidity and strong clientele with broadly timely payment track-record which helps in minimizing the impact of any downturn in economy.

2. Execution Risk

a. Risk: Real Estate and construction projects are subject to various execution risks like regulatory hurdles, delay in receipt of approvals, availability of labour and raw material, etc. Any such delay may result in cost overruns and impact the Company's operations unfavorably.

b. Mitigation Plan: Man Infra has put in place processes that include milestone based time & quality checks that help to ensure adherence to quality, cost and delivery as per the plan. The Company deploys a well-defined standard operating procedure - from project planning to delivery - and adheres to internal checks and balances with regard to every project. Extensive diligence is carried out before entering into partnerships for joint development.

3. Liquidity Risk

a. Risk: The Real estate business has significant initial outflow with staggered and long-term inflows. Delays in project cycle; inadequate funding resources may have an impact on the liquidity position of the Company.

b. Mitigation Plan: Man Infra has a sound liquidity position with approximately Rs. 177 crore in cash and cash equivalents as on 31st March, 2016. The Company maintains financial discipline with regards to the investment and subsequent cash flow generation from a project. Moreover, the Company has also been taking adequate measures to manage working capital cycles like monitoring and closely following up with debtors. For the EPC business, the Company also receives mobilization advances, which aids liquidity management.

4. Input Price Risk

a. Risk: The Group's Real estate operations as well as EPC contracts are subject to cost overruns due to increase in material cost or labour cost. The Company's earnings may be affected from the volatility in the price of input.

b. Mitigation Plan: For EPC projects, Man Infra has a price escalation clause where the increase in the input cost is directly passed to the client. For development projects, Man Infra takes this risk into account at the time of launch. Also, the Company usually sells the projects in a phased manner which aids in covering the rise in cost of construction in subsequent sale.

5. Competition

a. Risk: All Companies face the risk of competition, across all industries. This is not an exception for construction industry as well. In order to stay competitive in the market, Companies resort to various tactics to achieve a sustainable and a profitable growth.

b. M itigation: The Company's endeavor is to offer high-value product for quality conscious customers. The Company constantly focuses on deploying latest technologies for projects and cost effective measures to enhance operational efficiency resulting in timely delivery. Man Infra also strives to offer distinctive features in its projects to stand out from competition.

6. Sales Volume

a. Risk: The performance of the Company may be affected if there is substantial difference between the estimated and actual sales volume of the Real Estate development projects.

b. Mitigation: The volume of sales in the Real Estate business depends on the nature and location of the project, design & layout and the reputation of the developer. Man Infra launches its projects depending on the prevailing market conditions. It strives to build a worthy reputation in the industry by delivering superior quality product and maintaining long-binding relationships with all its clients and stakeholders.

Human Resources

The Company believes that its capability to preserve and continue its growth depends largely on its strength of developing, motivating and retaining talent. It firmly believes that highly motivated and empowered employees are its best assets to maintain a competitive edge in the market. The management is committed to continuously upgrading skills and competency at all levels with the aid of extensive training. The Company has obtained certifications for both Safety - OHSAS 18001, and Environment ISO 14001 underlining its commitment to employees' safe working conditions and social awareness. Man Group has a team of more than 400 employees as on 31st March, 2016.

The Company's employees possess requisite qualifications and technical expertise to execute projects across the Real Estate and construction services domain. The Company's HR will continue to focus on maintaining excellent work culture, employee development and competitive compensation to ensure a motivated and empowered workforce.

Internal Control Systems

The Company has an adequate internal control system to safeguard all assets and ensure their efficient productivity. The Company practices quality management system for design, planning and construction that complies with International quality standards. The Company has a suitable internal control system for the business processes, operations, financial reporting, compliance with applicable laws and regulations. The Internal Audit firm conducts periodical audits to ensure adequacy of internal control systems and adherence to management policies. Wherever deemed necessary, internal control systems are also reassessed and corrective action is taken, if required.

Cautionary Statement

This management discussion and analysis may contain forward looking statements that reflects your Company's performance with respect to future events. The actual results may differ materially from those anticipated in the forward looking statements as a result of many factors.