Agarwal Industrial Corporation Ltd Management Discussions.

Please note that disclosures given in this Annexure - Management Discussion and Analysis (MD&A) are meant to ensure that there is transparency in Companys financial performance. They enable our investors to evaluate the company and make informed investment decisions. Financial statements alone are not sufficient to judge a companys current performance and predict the future performance. The ordinary investor needs narrative explanations to have a better understanding of the performance and the environment in which the firm operates. MD&A fulfills this objective. It gives the investor an opportunity to look at the company through the eyes of management by providing both a short and long-term analysis of the business of the company.

Some statements in this discussion describing the projections, estimates, expectations or outlook may be forward looking. Actual results may, however, differ materially from those stated, on account of various factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which your Company conducts its business, exchange rates and interest rates fluctuations, impact of competition, demand and supply constraints, etc.

INDUSTRY SCENARIO

India Bitumen Market Outlook - 2026

The India bitumen market was valued at $2.8 billion in 2018, and is projected to reach $3.6 billion by 2026, growing at a CAGR of 2.8% from 2019 to 2026.

Bitumen is a black to dark brown sticky material, composed principally of high molecular weight hydrocarbons. It is a semisolid hydrocarbon product of crude oil distillation, which is produced by removing the lighter fractions (such as liquid petroleum gas, petrol, and diesel) from heavy crude oil during the refining process. The physical properties of bitumen include adhesion, resistance to water, hardness, ductility, and higher softening point.

The growth of India bitumen market is majorly driven by increase in road and building construction activities. Construction of various national highways, expressways, and airport runways boosts the demand for bitumen across the country. Bitumen is processed into asphalt for road construction. In addition, rise in investments by the government for the development of national highways and expressways, which include projects relating two-laning of highways, the National Highways Development Project, six-laning of crowded stretches of the Golden Quadrilateral, a special program for the development of road connectivity in naxal affected areas, development of Vijayawada-Ranchi road, and for providing last mile connectivity, is anticipated to drive the growth of the market. Furthermore, bitumen is widely used in the construction industry for roofs, owing to its physical properties such as adhesion, resistance to water, hardness, ductility, and higher softening point. Therefore, growth in the construction industry due to growth in population across the cities and demand for new houses led to increase in demand for bitumen across the country. In addition, government initiatives such as Pradhan Mantri Awas Yojana (PMAY) that includes construction of houses for poor people living in both rural and urban areas is likely to increase the demand for bitumen; thereby, driving the growth of the India bitumen market.

However, human health & environmental issues associated with bitumen, fluctuating international crude oil prices, and increase in use of alternative of bitumen such as concrete in roadway construction applications are expected to restrain the growth of the market. Moreover, development of bio-based bitumen and EME (Enrobes a Module Eleve) binder is anticipated to provide lucrative opportunities for further development of the market.

The India bitumen market size is segmented on the basis of type, end-use industry, and region. Depending on type, the market is classified into paving grade bitumen, oxidized bitumen, polymer modified bitumen, and bitumen emulsions. By end-use industry, it is classified into road construction, waterproofing, and others. Region wise, it is analyzed across North India, East India, Northeast India, South India, and West India.

The major key players operating in the India bitumen market include Indian Oil Corporation Ltd., Hindustan Petroleum Corporation Limited, Bharat Petroleum Corporation Ltd., Oil & Natural Gas Corporation Ltd., Total India, Tiki Tar Industries India Ltd., Agarwal Industries Corporation Ltd. (our Company), Juno Bitumix Pvt Ltd., Universal Bituminous Industries Pvt. Ltd., and Swastik Tar Industries. Other players operating in this market include Hincol, Jalnidhi Bitumen Specialities Pvt. Ltd., OOMS Polymer Modified Bitumen Pvt Ltd., Sapco, and UFTI. These major key players are adopting different strategies such as joint venture, agreement, and business expansion to stay competitive in the Indian market.

North India accounted for the major India bitumen market share in 2018, owing to major road network development initiatives undertaken by the Government of India (GoI) in the North India Region, which include national highways projects in Uttar Pradesh and Punjab. In addition, maintenance and repair of rural roads constructed under Pradhan Mantri Gram Sadak Yojana (PMGSY) in Haryana, Rajasthan, Uttarakhand, and Himachal Pradesh is anticipated to increase the demand for bitumen across these

states; thereby, driving the growth of the bitumen market across North India.

India Bitumen Market, By Type

Paving Grade Bitumen is projected as the most lucrative segment. Paving grade bitumen segment accounted for the major share in 2018, owing to growth in road construction development activities across the country. Government projects such as Bharatmala, various national highway projects, and construction of various economic corridors in different states fuel the demand for bitumen emulsion across the country. In addition, initiatives launched by Government of India for construction of roads in rural areas such as Pradhan Mantri Gram Sadak Yojana (PMGSY) and upgradation, maintenance, and repair work of existing rural roads, national highways, and expressways are likely to boost the demand for bitumen across India; thereby, driving the India bitumen market growth.

India Bitumen Market By End-Use Industry

Road Construction is projected as the most lucrative segment. Depending on end-use industry, the road construction segment accounted for the major market share in 2018. The road construction segment includes national highway, state highway, rural roads, and airport runways. Government has initiated various road projects that include construction of various national and state highways, expressways, and airports to boost the infrastructural activities. In addition, to connect the rural areas of the country to the cities the government has launched initiatives like Pradhan Mantri Gram Sadak Yojana that provide good all-weather roads. This factor is anticipated to drive the growth of the market.

Key Benefits for India Bitumen Market:

• The India bitumen market analysis covers in-depth information of major industry participants.

• Porters five forces analysis helps analyze the potential of buyers & suppliers and the competitive scenario of the industry for strategy building.

• Major countries have been mapped according to their individual revenue contribution to the regional market.

• The report provides an in-depth analysis of the India bitumen market forecast for the period 2019-2026.

• The report outlines the current India bitumen market trend and future estimations of the market from 2018 to 2026 to understand the prevailing opportunities and potential investment pockets.

• The key drivers, restraints, and India bitumen market opportunity and their detailed impact analysis is elucidated in the study. India Bitumen Key Market Segments:

By Type

• Paving Grade Bitumen

• Oxidized Bitumen

• Polymer Modified Bitumen

• Bitumen Emulsion

• Others

By End-Use Industry

• Road Construction

o National Highways o State Highways

o Rural Road

o Airport Runways

• Waterproofing

• Others

By Region

• North India

o Uttar Pradesh o Rajasthan o Punjab o Haryana o Rest of North India

• East India o Bihar

o Jharkhand o West Bengal o Odisha

o Andaman & Nicobar

• Northeast India

o Arunachal Pradesh o Assam o Tripura o Meghalaya o Rest of East India

• South India

o Tamil Nadu o Karnataka o Andhra Pradesh o Telangana o Kerala

o Rest of South India

• West India

o Maharashtra o Gujarat o Madhya Pradesh o Chhattisgarh o Rest of West India (Source: Allied Market Research)

PROMINENT MARKET TRENDS

Increasing Demand Due to Increasing Road Construction Activities

• The majority of bitumen consumed is processed into asphalt for road construction. Asphalt is a mixture of rock aggregates and bitumen. Bitumen serves as a binding agent and thus, is responsible for the stability of asphalt. Depending on the type of bitumen or composition of the mixture used, asphalt roads can be made suitable for regions with different climatic conditions or various levels of operational demands. Asphalt is also used for airport runways, parking decks, and working areas in ports.

• Roadways is one of the key sectors that determines a countrys economic growth. Roads, airport runways, and parking decks are essential services that drive the economic activity by channelizing trade and mobility. Massive investments are required that help in modernization and maintenance of these systems.

• Globally, the infrastructure sector is experiencing stable growth, as a result of increasing government spending to promote local infrastructure. In keeping pace with the growing economic activity and shifting demographic trends, spending on infrastructure activities is largely driven by developing economies in comparison to developed economies

• In developing economies in Asia-Pacific, infrastructure activities are expected to increase significantly, especially in the transportation sector, owing to increasing urbanization and shifting focus toward the developing secondary sector in these countries. Furthermore, increasing economic prosperity is driving the infrastructure financing toward consumer sectors, including transportation and manufacturing, which provide and distribute raw materials for consumer goods.

• As these sectors have potential to fetch larger investments in near future, the governments of developing economies (such as China and India, among others) are taking initiatives by floating tenders reflecting opportunities in building infrastructure, essential for the growth of a specific sector. Furthermore, the emergence of megacities in both, emerging and developed markets, which reflects the shifting economic and demographic trends, may create enormous need for new infrastructure.

• All the aforementioned factors are expected to drive the global market during the forecast period.

The Asia-Pacific Region is Expected to Dominate the Market

• The Asia-Pacific region is expected to experience robust bitumen growth, owing to the industrial and infrastructural activities in countries, like China and India.

• The government has also approved the construction of urban and inter-city rail projects worth USD 127.26 billion (CNY 860 billion) in several cities, including Shanghai and Wuhan.

• Similarly, India is expected to have a requirement of investment worth USD 777.73 billion in infrastructure by 2022, to have sustainable development in the country.

• Such factors are projected to drive the market in the Asia-Pacific region.

OUR OPERATIONS - BUSINES EGMENTS

MANUFACTURING OF BITUMEN & BITUMIMOUS PRODUCTS

The Company is a leading manufacturers and importers of Bitumen & Bituminous products and our plants are located at Belgaum, Hyderabad, Taloja, Baroda and Cochin (Companys WOS).We manufacture and trade quality products like Paving grade Bitumen. Industrial Grade Bitumen, Bitumen Emulsions, Modified Bitumen, Bitumen Coat, Bitumen Paints, Bitumen Insulation material etc which are known for their quality and standard. Our profound background of being in the logistics business (transportation of Bitumen & LPG) has been a key factor to foray into this segment. Your Company has excellent professional relations with all major road contractors in India due to Companys ethical, transparent and good governance policies. Companys plants are located at Belgaum, Taloja, Hyderabad and Baroda

BULK BITUMEN STORAGE FACILITIES

Your Company has excellent Bulk Bitumen Storage facilities to effectively handle and market bitumen imports at Karwar, Belgaum, Haldia, West Bengal, Dighi, Maharashtra and Hazira, Gujarat.

BULK BITUMEN TRANSPOTATION

We are the pioneers of logistics in Bitumen, which is predominantly used in road construction business. It can be procured either in bulk or in packed form. In either case the product has to be dispatched to the construction site or to the storage facilities of our industrial consumers. The bulk bitumen is transported via specially designed tankers that are insulated and have pumping

facility for loading and unloading the bitumen. Most of our Bitumen tankers are under contract with major oil companies in India like HPCL, BPCL and IOCL and by other major consumers of the product.

BULK LPG TRANSPOTATION

We are amongst the leading transporters of LPG in India, which is the most widely used fuel for domestic as well as industrial purposes. While we already own a large fleet of tankers, we also hire tankers on long term contracts to cater to the demand from customers LPG is mainly sourced from domestic refineries and via bulk imports. Bulk LPG is mainly transported from the source to the industrial user or to their bottling plants through specially designed tankers LPG, being highly inflammable, require tankers that take care of all safety aspects while loading, transporting and unloading. Most of the LPG tankers are under contract with major oil companies like HPCL, BPCL and IOCL.

POWER GENERATION THROUGH WIND MILLS

Wind Mills

The Company has diversified into Non-Conventional energy generation by installing wind mills at Rajasthan and Maharashtra, keeping in view of the likely shortage of energy resources in future. Your Company has one Windmill at Dhulia, Maharashtra and two in Jaisalmer, Rajasthan.

AUTHORIZED SERVICE CENTRE OF ASHOK LEYLAND

We own a large fleet of tankers which necessarily calls for regular periodic checks and maintenance. As also, our entire fleet of tankers come from the Ashok Leyland stable. Both these factors influenced our decision to set up an authorized service center, for Ashok Leyland vehicles, within the company. Not only does this ensure a timely turnaround of the fleet serviced but is an economically beneficial proposition for the company. We have our own workshop and maintenance facilities at strategic locations like Mumbai, Baroda and Jodhpur.

(Source : Mordor Intelligence)

FINANCIAL PERFORMANCE AND OPERATIONS

Major indicators of your Companys financial performance for the year ended March 31,2020 are presented in the accompanying Audited Financial Statements. These financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015 as amended by the Companies (Indian Accounting Standards) (Amendments) Rules, 2016. The Company has adopted Ind AS from April 01, 2017 for the first time and accordingly these financial results are Ind AS 101 (First Time Adoption of Indian Accounting Standards) compliant.

RESULTS OF OPERATIONS

The total Revenue of the Company for the Financial Year ended March 31, 2020, was 75,544.57 Lakhs as compared previous years total Revenue of 52,943.64 Lakhs thus indicating an impressive increase of 42.69% over the previous year. Further, Profit before Tax and Profit after Tax were 2,023.50 Lakhs and 1,476.28 Lakhs respectively during the year under review as against 1993.19 Lakhs and 1,321.37 Lakhs in the corresponding previous year.

DIVIDEND

Your Directors have recommended a dividend of 1.50 per equity share of the face value of 10/- each fully paid up for the financial year ended March 31, 2020. The dividend distribution is subject to approval of the members of the Company at the ensuing Annual General Meeting. in view of the changes made under the income-tax Act, 1961, by the Finance Act, 2020, dividends paid or distributed by the Company shall be taxable in the hands of the Shareholders. Your Company shall, accordingly, make the payment of the Final Dividend after deduction of tax at source.

SHARE CAPITAL

During the year under review, there was no change in the Share capital of the Company.

AMOUNT TO BE CARRIED TO OTHER EQUITY

The Company has transferred 1,248.03 Lakhs to the Other Equity for the F.Y March 31,2020 after appropriating 184.66 Lakhs towards dividend paid for the F.Y ended March 31, 2019 and 37.96 Lakhs towards dividend tax paid thereon.

CAPITAL EXPENDITURE

As at March 31, 2020, the Capital Expenditure during the year under review amounted to 768.98 Lakhs including Work in Progress (WIP) amounted to 414.71 Lakhs.

SEGMENTWISE / PRODUCTWISE PERFORMANCE

For Segment wise/ Product wise performance of the Company, please refer to Financial Statements of the Company. CONSOLIDATED FINANCIAL STATEMENTS

The Audited Consolidated Financial Results for the F.Y ended March 31, 2020 which incorporate audited financial results of Agarwal Industrial Corporation Limited ("The Parent") and its subsidiaries, Bituminex Cochin Private Limited and AICL Overseas FZ LLC (the holding company and its subsidiaries constitute "the Group") which comprise the consolidated Balance Sheet as at March 31,2020, and the consolidated Statement of Profit and Loss, the Consolidated Cash Flow Statement and the Consolidated Statement of Changes in Equity for the year then ended and, notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information. (hereinafter referred to as "the consolidated financial statements").

OUR STRENGTHS

> Promoters with profound Industry Experience of over 36 years.

> Well diversified Company: Manufacturing & Trading of Bitumen and other value added products; Transportation of Bulk Bitumen & LPG: Power Generation through Wind Mills.

> Bulk Bitumen Storage facilities near ports for effective and optimum handling of bitumen imports.

> Consistently Dividend Paying Company

> Bitumen manufacturing is our finest forward integration and is an extension of our parent Business i.e. Bitumen Bulk Transportation.

> Strong Suppliers & Client relationship continuing for past many years.

> Comprehensive consolidated financial Strength through Wholly Owned Subsidiary Companies incorporated in UAE under the name "AICL OVERSEAS" in Ras AI Khaimah Economic Zone (RAKEZ) in United Arab Emirates (UAE) for undertaking various ship/vessel /ocean related activities and already existing Wholly Owned Subsidiary Company named Bituminex Cochin Private Limited.

> Cost Advantages through bulk imports.

> Being amongst the largest fleet operators of specialized Bitumen and LPG Tankers in the country adds to customer comfort and ensures supply reliability.

> Market share gain over the years, spurred by superior product quality and increased customer satisfaction though no identified identical business peer.

> Majority of our manufacturing facilities are ISO Certified.

> All major capex till date from capital infusion and internal accruals so far thus improving bottom line through saving financial costs.

> Benefits of Listed Company - Capital appreciation, liquidity and transparency of operations..

> Geographically well located Company in different parts of the country.

For details, please refer to relevant sections of Directors Report.

OUR CHALLENGES

• Imports - Shipments at Right time, Right Pricing, Quality Material.

• Pricing - Competition with other players in the Industry.

• Continuous development of Infrastructure Sector.

• Timely payment to our clients from the related government authorities.

• Cost reduction/cost minimization through consistent guidance and motivational efforts. at all levels of operations

OUR OPPORTUNITIES

> Directly related to Infrastructure projects which are under Govts priority agenda.

> Endless opportunities for expansion of Bitumen Products as road construction within the ambit of infrastructural growth.

> Tremendous scope for developing Value Added Products with potential of higher margins.

> Huge deficit in bitumen indigenous supply and demand leaving tremendous scope for imports

> Huge deficit in power demand and power supply leaving tremendous scope for expansion of Wind Power Mills

> Having own manufacturing plants and bulk imports minimize dependency on oil companies.

OUR THREATS

There are no major business / industry threats before us as ours is a well diversified and fundamentally strong Company with clear vision for future growth and prosperity and is under priority infrastructure sector. However, there are some factors which are beyond the control of the Company viz impact due to fluctuations in the economy caused by changes in global and domestic economies, competition in the industry, changes in government policies and regulations, fluctuations in interest rates etc which are common to all sectors, so we are no exception. Nevertheless, your Company ensures all safeguards to combat any such eventuality. to the best of its ability and vast industry experience.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has in place an adequate system of internal controls, with documented procedures covering all corporate functions. Systems of internal controls are designed to provide reasonable assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, the reliability of financial controls, and compliance with applicable laws and regulations. The Audit Committee of the Board oversees the adequacy of the internal control environment through regular reviews of the audit findings and monitoring implementations of internal audit recommendations through the compliance reports submitted to them.

MANPOWER

Your Company is committed to attract, develop and retain high quality talent. We promote culture of higher commitment and entrepreneurial approach across all over management positions to foster organizations growth. During the year under report, your company maintained harmonious and cordial industrial relations with its staff and employees.

PROTECTION OF WOMEN AT WORK PLACE

The Company has formulated a policy on Protection of Womens Rights at Workplace as per the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition &Redressal) Act, 2013.

There were no cases of sexual harassment received by the Company in 2019-20 & between the end of the financial year and the date of this Report.

SAFETY, HEALTH AND DEVELOPMENT

Safety, health and development of human resources is our paramount objective and your Company actively pursues measures to sustain and improve the same on regular basis.

MANAGEMENT INFORMATION SYSTEMS ( MIS )

Effective Management Information Systems are core to any successful business and your Company is supported and empowered by installing updated and advanced MISs to be in forefront of this competitive industry.