Indian Economy

Indian economy, in the recent past, faced testing times with issues like lower growth,high levels of inflation and widening current account deficit; escalated by anunsupportive external environment. However, on the back of strong policies, it iscurrently placed on a cyclical upturn, The growth rate of the economy, measured by thegrowth in GDP at constant (2011-12) market prices, improved from 6.9% in 2013-14 to 7.3%in 201415, according to the provisional estimates released by the Central StatisticsOffice, This rebound raises hopes of a steady economic recovery and further growth inforthcoming quarters. India is one of the very few countries for which IMF and World Bankhave raised their growth assessment.

NS: New Series, PE: Provisional Estimate

Source: Ministry of Statistics & Programme Implementation, Government of India

The year 2014-15 has witnessed key policy reforms, aimed at aiding growth revival, Thegrowth agenda of the Government has been tethered to the revival of manufacturing,unleashed in the "Make in India", initiative, accompanied by liberalization offoreign direct investment, a large array of investment facilitation measures and steps toimprove saving.

There has been a durable decline in inflation-both wholesale and consumer prices- inthe recent months, The current scenario of price stability and related expectations seemsto have convinced the RBI, focused on a glide disinflationary path, on gradual monetaryeasing to support growth, Headline WPI inflation moderated to 2.1% in 2014-15(April-March) from 6% in 2013-14 due to lower food and fuel inflation, signaling a sharpdecline in inflationary pressures in the economy,

Source : RBI

The performance of key industrial sectors based on the Index of Industrial Production(IIP) reveals the reversal in trends of industrial production in 2014-15, which had sloweddown since 2011-12. In April 2015, industrial production expanded 4.1% compared to 3.7% inthe same month last year and 2.5% in the preceding month, The RBI had, in two successiveannouncements, reduced the repo rate by 50 basis points (to 7.50%) in the last quarter ofthe financial year 2014-15, Subsequently, on 2nd June, 2015, RBI has further brought downthe repo rate to 7.25% in an attempt to boost investment.

The Government's reform-focused agenda — aimed at reinvigorating investment flowsand reviving consumption — is expected to support growth in the real estate andconstruction sector too, The Centre has relaxed curbs on FDI in the housing sector,permitted the set-up of Real Estate Investment Trusts (REITs) and InfrastructureInvestment Trusts (InvITs), promoted faster infrastructure creation and decided to develop100 SMART Cities' and new industrial clusters. India's GDP Growth is expected to edge upfurther to 8.2% in FY2016, helped by a supportive monetary policy in 2015, as inflationcontinues to trend lower and by a pickup in capital expenditure.

Indian Construction Sector

The Indian construction sector is the 2nd largest employer and contributor to economicactivity, after agriculture sector. As per provisional estimates of India's GDP, theconstruction industry registered a growth of 4.8% in 2014-15 as against 2.5% in 2013-14.

NS: New Series, PE: Provisional Estimate

Source: Ministry of Statistics & Programme Implementation, Government of India

50% of the demand for construction activity in India comes from the infrastructuresector; the rest comes from residential and commercial development, industrial activities,etc, The new Government tends to put its primary focus on infrastructure development andmay continue with the estimated USD 1 trillion spend on infrastructure till 2017 as per12th Five Year Plan, The proposed smart cities, enhanced metro rail connectivity, riverinterconnection, cleaning of rivers and increased focus on the road sector is expected togive a boost to infra development in India.

Present levels of urban infrastructure are inadequate to meet the demands of theexisting urban population, There is need for regeneration of urban areas in existingcities and the creation of new, inclusive smart cities to meet the demands of increasingpopulation and migration from rural to urban areas. Needless to say, the Indianconstruction sector is poised for immense growth over medium to long-term.

Infrastructure

India's Infrastructure Sector has suffered in past 2-3 years due to dull macroeconomicconditions and delay in key policy related decisions. Political blockage, heavy interestburden and working capital crisis added to the woes of infrastructure companies. However,the new Government has put infrastructure creation at the top of its agenda as it seeks tokick-start the investment cycle that stalled in the face of an economic downturn in thepast two years.

Hon'ble Finance Minister Shri. Arun Jaitley, in his budget for the year 2015-16underlined the Government's commitment to reviving the investment cycle to spur growth byincreasing public expenditure in capital formation. In addition, many significant stepshave been taken to improve the availability of funds for infrastructure.

Highlights of the Union Budget 2015-16 are as follows:

• Investment in infrastructure will go up by Rs. 70,000 crore a year in 2015-16over year 2014-15.

• The planned allocation for the Ministry of Road and Highways has increasedsignificantly by Rs. 14,031 crore to Rs. 42,913 crore for the year 2015-16.

• National Investment and Infrastructure Fund (NIIF) will be established with anannual flow of Rs. 20,000 crore to it.

• Government will permit tax free infrastructure bonds for projects in rail, roadand irrigation sectors.

• An additional sum of Rs. 40,000 crore for investment in roads and railways willbe made available through conversion of existing excise duty on petrol and diesel to theextent of Rs. 4 per litre into Road cess.

• Government would also consider this plug-and-play mode for other infrastructureprojects as roads, ports, railway lines and airports.

• Government will ensure 'House for all Rs. by 2022, under which the Governmentwill build two crore houses in rural India and four crore houses in urban India.

Real Estate

During the past few years, the Indian real estate sector had to confront tough times;difficult economic and business environment and high inflation that affected allstakeholders - investors, developers and buyers. As a result, significant unsold inventoryand execution delays were prevalent in almost all real estate classes. The year 2014 was amixed year for the Real Estate Sector as though the sector registered subdued sales; itwas quite fruitful in terms of business sentiment, mostly due to the formation of newGovernment as it boosted the investor and business confidence in the Indian economy. Thepolicy makers have taken several initiatives to revive the real estate sector and improveinvestor and buyer confidence.

A number of regulatory changes and policy measures have been initiated and are likelyto bear a positive impact on the Indian real estate sector. Some of them includerelaxation of FDI rules, establishment & rationalization of REITs, redefiningaffordable housing, Housing for all by 2022, tax incentive on home loans, Smart Cityprojects and setting up of National Industrial Corridor Authority.

FDI inflow in construction development sector has been depleting in the last couple ofyears. According to statistics available with Department of Industrial Policy andPromotion (DIPP), FDI flows into the sector for the period April 2014 - March 2015 stoodat USD 758 million compared to USD 1,226 million during same period last year. To helpattract foreign funds in construction of townships, hospitals and hotels, the Governmenthas relaxed the FDI policy for this sector by easing exit norms and reducing built- uparea and capital needs. India allows 100% FDI in the sector through the automatic route.

Source: Department of Industrial Policy and Promotion (DIPP)

The new policy has done away with the three-year lock-in period for repatriation ofinvestment. The investor can exit on completion of the project or after development oftrunk infrastructure, that is, roads, water supply, street lighting, drainage andsewerage. Under the new policy, the minimum floor area requirement has been reduced to20,000 square meters from 50,000 square meters earlier. It also brought down the minimumcapital requirement to USD 5 million from USD 10 million. To boost the development ofaffordable homes, Government has exempted the conditions of minimum floor area as well ascapital requirement if an investee/ joint venture companies commit at least 30% of thetotal project cost for low-cost housing. All these measures are likely to result inenhanced inflows into the construction development sector and creation of much needed lowcost affordable housing in the country and development of smart cities.

In a clear indication of renewed interest among investors in Indian real estate, thetotal private equity (PE) investments in the sector in 2014 more than doubled to Rs.15,410 crore from Rs. 7,360 crore in 2013. A report by real estate consultancy, Cushman& Wakefield said this is the highest since 2008 when the figure was Rs. 17,440 crore.The total number of deals in 2014 rose to 73 from 40 in 2013 and average deal size rose by15% to Rs. 210 crore. Location-wise, Delhi-NCR property market witnessed the highest PEinvestment of Rs. 5,910 crore during 2014, followed by Mumbai at Rs. 4,680 crore.

Source: Cushman &Wakefeld Reports

With increasing capital requirements of the Indian real estate sector and inanticipation of improving macro-economic conditions, PE funds are likely to invest evenmore funds in the next few years. This will be driven by Government measures to attractfurther investments and Real estate investment trusts (REITs) coming into play this year.With the easing of regulatory bottlenecks and several positive signs emerging on thehorizon, the sector is likely to witness renewed momentum and grow much faster this year.

Residential Real Estate

The major drivers supporting real estate sector include urbanisation, rising incomelevel, young population and growing number of nuclear families and strong expected growthin the manufacturing and service sector. Considering the increasing population and rapidurbanization in India, the demand for housing units is likely to continue increasing inthe future as well. In line with the endeavour to have housing for all by 2022, theGovernment has set a target of constructing 6 crore affordable houses across urban andrural areas and has allocated Rs. 22,047 crore towards housing and urban development. Thisis expected to provide a boost to the low cost housing segment.

According to a Report by property consultant JLL India, Housing sales fell to 1.75 lakhunits in the primary markets of seven major cities in 2014 as compared to nearly 2 lakhunits in the previous year. These seven cities are Delhi-NCR, Mumbai, Chennai, Kolkata,Bengaluru, Hyderabad and Pune. The year 2015 is expected to be positive for home buyersbenefiting from reduced borrowing rates, increased developer-focus on affordable homes,largely stable prices, and better job and income prospects. Housing sales are estimated torise this year to 1.92 lakh units in India's top seven cities on expectations of a cut ininterest rate and stable prices, according to property consultant JLL India.

Ports

The Indian coastline is dotted with 12 major ports and about 60 operational non-majorports. According to the Ministry of Shipping, the Indian shipping and ports sector is thecarrier of around 90% of India's trade by volume and 70% by value. The Indian port sectoris gaining momentum with the Government's reforms in areas like land acquisitions, forestand security clearances. The Government has realized the potential of this sector and hastaken initiatives such as 100% FDI for port development projects, income tax incentives,streamlining of security clearance procedures and close monitoring of developmentalprojects in the major ports. The Indian ports sector received foreign direct investment(FDI) worth USD 1,637.30 million (Rs. 6730.91 crore) between April 2000 and March 2015,according to the Department of Industrial Policy and Promotion (DIPP), Ministry ofCommerce and Industry.

The Centre has also proposed the corporatisation of the public sector ports under theCompanies Act. This move will definitely provide the scope for modernization of the majorports, apart from bringing in operational efficiency. The Government's port-leddevelopment Sagarmala project has further enhanced the growth prospects of this sector.

Growth prospects

The capacity of Ports in India was 1423.10 Million Tonnes (MT) as on 31st December,2014 of which 823.63 MT was contributed by the 12 Major Ports. The Shipping Ministry'sambitious plan of Maritime Agenda 2020 projects Indian portsRs. capacity augmentation to3,130 MT by 2019-20 for handling cargo of 2.5 billion tonnes. The capacity of major portsis estimated to reach 1,460 MT by 2019-20.

P : Projected as per Maritime Agenda 2020

Source: Indian Ports Association (IPA), Maritime Agenda 2020

The 12state-owned ports handled a combined 581.34 MT ofcargo traffic in 2014-15registering a growth of 4.65%, according to Indian Ports Association (IPA). These portshad recorded 555.48 MT of cargo movement in 2013-14, only marginally up by 1.78% from theprevious fiscal. It is estimated that these major ports will handle 1,215 MT of cargo by2019-20.

The Plan Outlay of the Ministry of Shipping is Rs. 4,546.53 crore for the year 2015-16including Rs. 932.79 crore as GBS. This includes development of Indian Shipping, Ports,Inland Waterways and Shipbuilding Industry. Out of this total Planned Outlay, PortProjects have been allocated Rs. 2,503.24 crore for the year 201516 including Rs. 189.50crore as GBS.

A: Actual, RE: Revised, B: Budgeted

Source: Union Budget 2015-16, Govt. of India

The present Government has made its priority to push the port sector and get theclearances on fast track. Many private players have shown their interest to invest in theIndian port sector. All this will result in a healthy growth of the sector in near future.

Roads & Highways

India's vast road network of about 4.9 million kilometers (km) - the second largest inthe world - can be broadly categorized into National Highways, Expressways, StateHighways, District roads and Rural roads, This network transports over 60% of all goods inthe country and 85% of total passenger traffic, India's growing economy has witnessed arise in demand for transport infrastructure and services. Due to the key infrastructuralvalue of roads and its importance in connecting various parts of the country, building anextensive road network has always been an important agenda for the Government. Despitethis, the Road sector in India continues to face multiple challenges in the form ofexecution impediments, financing constraints, delayed land acquisition, receipt ofapprovals & environment clearances and stressed financial position of the developers.

However, the NDA Government has shown intent to revive the Roads & Highways Sector.The total Plan outlay for road transport and highways in 2015-16 increased by 126% or byRs. 47,720 crore compared to Rs. 37,881 crore allocated in 2014-15. The budget figureincludes both Central Plan outlay and States and Union TerritoriesRs. Plan outlayallocated by the Centre. For 2015-16, the increased provisions have been made for thedevelopment of national highways, including projects relating to expressways andsix-laning of crowded stretches of Golden Quadrilateral and two- laning of highways worksunder National Highways Development Project. The budget raised additional excise duty onpetrol and diesel to Rs. 6 per litre from Rs. 2 per litre, which is levied as road cess.This raises available funds for roads and railways to Rs. 431 billion in 2015-16 from Rs.232 billion in 2014-15.

Source: Union Budget Documents, Govt. of India

There has been a pick-up in the ordering activity by NHAI in 201415. During the year,NHAI awarded a total of 3,000 kilometres of contracts compared to last year's achievementof 1,436 kilometres. Out of this, 700 kilometres were awarded under BOT mode and theremaining 2,400 kilometres under EPC mode. According to NHAI, it may award projects of5,300 kilometres in 2015-16, out of which, 2,800 kilometres will be under EPC mode, 1,000under BOT mode and remaining 1,500 kilometres under hybrid mode.

Source: NHAI

The Government has set an ambitious target of building 30 kilometres of roads per dayfrom 2016-17. At present, the road construction pace is 3 kilometres per day. Efforts arebeing made to slash construction delays and fast track many stuck projects to increase theconstruction pace by 10-fold in the next two years. This will lead to completion of moreprojects which were stacked up in the previous years.

Operational Review

Man Infraconstruction Ltd. (Man Infra) is an integrated EPC (Engineering, Procurementand Construction) Company with strong focus on Port, Residential / Commercial andIndustrial & Road construction segments. The Company's management has four decades ofexperience in civil construction activities. Man Infra has increased its focus as a RealEstate developer since 2013. The Company has significant experience in constructionmanagement and has inherent skills and resources to develop and deliver Real estateprojects.

The Company delivered a healthy performance with an impressive growth in bottom linefor the financial year 2014-15. It remained cautious in bidding for EPC projects andmaintained its policy of not adding projects to the order book where the risk-return wasunfavorable, The Company focused on execution of its existing order book and expeditingits Real Estate Development Projects. The total outstanding EPC order book stood at Rs.286 crore as on March 31, 2015. Out of the total order book, 55% was contributed by theResidential segment, 37% by Infrastructure segment and 8% by Commercial and Industrialsegment.

During the year, Manaj Tollway Private Limited, which was executing a 41 km Roadproject on DBFOT basis and where Man Infra holds 63% stake has issued a letter to PublicWorks Department, Government of Maharashtra (PWD) for terminating the Concession Agreementdue to their inability to provide necessary Land for implementation of the Project. Inthis regard, Manaj Tollway Private Limited has claimed costs incurred and compensation inline with the terms of the Concession Agreement from the authorities.

On the Real Estate front, Man Group launched its mega Real estate project,'AtmosphereRs. in Mulund, in joint venture with a leading developer with an approximatesaleable area of 1.8 million sq. ft. in Q3 FY2015, The project received tremendousresponse from the market with over 40% area of Phase I being booked in the first few daysof launch, Also, the Company completed its first Residential development project inGhatkopar, Mumbai in March 2015, The Company delivered a superior quality product beforethe scheduled delivery date enhancing customer satisfaction.

Man Group continued to lay foundation for future growth and success through sustainedmomentum in business development. During the year, the Group added 4 Residentialredevelopment projects to its portfolio in Mumbai, The Group has also entered intoDevelopment Agreement with few societies for redeveloping a sizeable MHADA project inGhatkopar East, Mumbai, The Company is expecting to launch all these projects after allthe necessary approvals are received translating into a strong launch pipeline for FY2016.

Your Company will endeavor to add prudent Real Estate projects in its portfolioaccelerating the growth of the Company's EPC as well as Real Estate development business.

Financial Performance - Consolidated

• Total Income stood at Rs. 34,488.00 lakhs for FY15.

• EBITDA increased by 64% to Rs. 2,485.42 lakhs in FY15 as compared to Rs.1,512.02 lakhs in FY14.

• Profit after tax and minority interest increased by 64% to Rs. 4,741.01 lakhs inFY15 as compared to Rs. 2,890.35 lakhs in FY14.

• The Company achieved a PAT margin of 13,75% in FY15,

• The Company had a Cash & Cash Equivalent of Rs. 21,753.32 lakhs at the endof FY15.

Risk Management

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

1. Economic Risk

a. Risk: An unexpected development in any of the macroeconomic variables may adverselyimpact the Company's profitability or viability, Both Infrastructure and Real estate arecyclical industries and they get impacted more by the changes in macroeconomic variableslike interest rate, GDP Growth, purchasing power, inflation, amongothers,

b. Mitigation Plan: Man Infra continues to be conservative and follows well definedinternal prudential norms, The Company has attempted to hedge against the inherent risksof Real Estate business by following joint development model. It maintains a low debtequity ratio, high liquidity and strong clientele with broadly timely payment track-recordwhich 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 riskslike regulatory hurdles, delay in receipt of approvals, availability of labour and rawmaterial, etc. Any such delay may result in cost overruns and impact the Company'soperations unfavorably.

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

3. Liquidity Risk

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

b. Mitigation Plan: Man Infra has a sound liquidity position with approximately Rs.217.53 crore in cash and equivalents on the book as on March 31, 2015. The Companymaintains financial discipline with regards to the investment and subsequent cash flowgeneration from a project. Moreover, the Company has also been taking adequate measures tomanage working capital cycles like monitoring and closely following up with debtors. Forthe EPC business, the Company also receives mobilisation advances, which aids liquiditymanagement.

4. Input Price Risk

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

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

5. Competition

a. Risk: All Companies face the risk of competition, across all industries. In order tostay competitive in the market, Companies resort to various tactics to achieve asustainable and a profitable growth.

b. Mitigation: The Company's endeavor is to offer high-value product for qualityconscious customers. The Company constantly focuses on deploying latest technologies forprojects and cost effective measures to enhance operational efficiency resulting in timelydelivery. Man Infra also strives to offer distinctive features in its projects to standout from competition.

6. Sales Volume

a. Risk: The performance of the Company may be affected if there is substantialdifference between the estimated and actual sales volume of the Real Estate developmentprojects.

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

Human Resources

The Company believes that its capability to preserve and continue its growth dependslargely on its strength of developing, motivating and retaining talent. It firmly believesthat highly motivated and empowered employees are its best assets to maintain acompetitive edge in the market. The management is committed to continuously upgradingskills and competency at all levels with the aid of extensive training. The Company hasobtained certifications for both Safety - OHSAS 18001, and Environment ISO 14001underlining its commitment to employees' safe working conditions and social awareness. ManGroup has a team of more than 500 employees as on 31st March, 2015.

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

Internal Control Systems

The Company has an adequate internal control system to safeguard all assets and ensuretheir efficient productivity. The Company practices quality management system for design,planning and construction that complies with international quality standards. The Companyhas a suitable internal control system for the business processes, operations, financialreporting, compliance with applicable laws and regulations. The Internal Audit firmconducts periodical audits to ensure adequacy of internal control systems and adherence tomanagement policies. Wherever deemed necessary, internal control systems are alsoreassessed and corrective action is taken, if required.

Cautionary Statement

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