Empee Distilleries Ltd Management Discussions.

i. Industry Over view :

The overall IMFL market saw a healthy traction in volumes with a medium level growth as compared to FY 2015-16. The IMFL market segment is driven by growing consumer base, rising rural incomes and consumption, conversion from illicit to IMFL with increasing awareness about health and quality, conducive regulatory policies and aided by growth in population. The market at present is dominated by strong national brands at low price points. The IMFL market is undergoing a transformation with newer entrants, challenging the traditional labels and more so in the higher price points. There are high potential niche opportunities that are emerging in the space. Premiumization is the buzz word to promote premium brands in the industry.

Your Company has decided to re-orient its IMFL strategy in line with the premiumization trend in the industry and hence introduced new premium brands namely blue crystal vodka which would generate good margins, while it continues to sell more on regular / economy products

ii. New Brands :

The company which introduced new premium brands namely blue-crystal vodka in Tamilnadu in 2016 did better performance. The Company is constantly planning to expand its business by way of introduction of new brands, and export sales to South East Asia, Middle East markets especially Singapore where there is significant presence of Tamil population.

iii. Segment wise or product-wise performance :

During the year ended 31.03.2017, the Company produced 42,85,502 cases of IMFL as against the production of 47,48,459 . The sales was 34,07,827 cases of IMFL for the year ended 31.03.2017 as against 47,76,596 cases sold in the previous period ended 31.03.2016 . Due to various uncontrollable difficulties (listed in the Directors Report) the Production and Sales were low for the period ended 31/03/2017.

During the year under review, the power division at Aranthangi, Tamilnadu could not produce power due to imposition of restrictive measures by TNEB.

iv. Financial performance and Outlook :

The financial performance and outlook is furnished in the Directors Report.

v. Risks and concerns :

The liquor industry in India is highly Government regulated in terms of constraints on manufacturing, storage as well as distribution, duties, inter-state movements from Tamilnadu etc. All these factors will affect the Company in the coming years. The rising input cost of bottles, caps, labels, transport charges etc, will also impact the profitability of the company.

v. Risks and concerns :

The liquor industry in India is highly Government regulated in terms of constraints on manufacturing, storage as well as distribution, duties, inter-state movements from Tamilnadu etc. All these factors will affect the Company in the coming years. The rising input cost of bottles, caps, labels, transport charges etc, will also impact the profitability of the company.

vi. Internal control systems and their adequacy :

The company has an internal control system commensurate with the size and business operations of the Company. Authorization guidelines and internal procedures, are in place. Independent external/internal auditors are periodically reviewing and making continuous assessment of the adequacy and effectiveness of the internal control and systems. The Audit Committee and the Board review the findings of the Internal Auditors Report to enable the Company to take immediate appropriate action wherever necessary.

Cautionary Statement :

Statements in the Management discussion and analysis report outlining the Company s estimates, perceptions and expectations may be forward looking statements within the meaning of applicable laws and regulations. The Actual results may differ materially from those expressed hereinabove due to certain factors which may be beyond the control of the Company.