Euro Multivision Ltd Management Discussions.

EXECUTIVE SUMMARY

The year 2017-18 was another historic year for the solar power sector. More solar PV capacities were installed globally than any other power generation technology. Solar alone saw more new capacity deployed than fossil fuels and nuclear combined. Solar added almost twice as much capacity as its renewable peer, wind power. A total of 99.1 GW of grid-connected solar was installed in 2017. Thats almost a 30% year-on-year growth over the 76.6 GW added in 2016. In 2017, almost as much solar was installed in one year as the world had installed in total capacity in 2012 (100.9 GW). This led to a total global solar power capacity of over 400 GW in 2017, after solar exceeded the 300 GW mark in 2016 and the 200 GW level in 2015

The boost in solar is to a large extent a result of its spectacular cost development. In February 2018, a 300 MW tender in Saudi Arabia was won at a new world record low solar power price of 2.34 US cents/kWh. Due to technical improvements, solar power cost and price will continue to quickly improve.

Global solar market demand in 2017 was driven by China. For the first time, China Installed more than half of the worlds solar capacity in one year - to be exact, 53.3%. But the low cost of solar has been attracting many countries to look seriously Into this unique, flexible and distributed clean power technology. While In 2016, only seven countries installed over 1 GW, in 2017, the number has increased to nine.

Europe has left its several-year long downward trend in 2017, adding 9.2 GW, a 30% increase compared to the 7 GW installed the year before. The European growth is primarily a result of Turkeys gigantic growth. When looking at the 28 members of the European Union, there was hardly any growth at all: the EU-28 added 5.91 GW in 2017, compared to 5.89 GW in 2016. This result still stems from the UKs ‘solar exit in 2016, which again halved new installations in 2017. Even though 21 of the 28 EU markets added more solar than the year before, the overall market performance was still sluggish.

GLOBAL SOLAR MARKET PROSPECTS 2018 - 2022

In mid-May, all solar analysts were expecting further market growth in 2018, even in their conservative scenarios. This changed abruptly after Chinas National Energy Administration (NEA) pulled the brake in early June, announcing strong subsidy cuts to slow down domestic solar demand that had been much larger than originally planned in 2016 and 2017. While several solar experts were quick to revise their forecasts from strong growth in 2018 to no growth at all, we still see a high probability for further global solar market expansion in 2018.

Medium Scenario expects about 3.5% market growth to 102.6 GW new PV capacity additions in 2018, despite the

recent subsidy cut announcement from China to restructure its solar incentive programmes.

Low Scenario, which models major markets to withdraw their solar support, assumes a drop in demand as low as 72.6 GW, thats basically the 2016 level. This outcome is very improbable, when taking into account preliminary installation numbers for the first quarter in leading markets.

High Scenario, forecasting up to 129.2 GW of newly installed PV in 2018, appears extremely optimistic. It is too early to say how the market will develop in the coming months - in China and the rest of the world.

• Developed countries should continue working together with emerging countries and use the know-how of the Solar industry to unlock the untapped potential, and make sure Solar will play its full part in contributing to socioeconomic development around the world

• Developed countries decision makers should make sure, in consultation with the solar industry, that public money flowing into financing facilities is used in the most effective way possible: fostering industrial synergies and cooperation between local and international companies

CHINA AND CHINESE SOLAR TARGETS

The Chinese solar market showed exceptional growth in 2017. According to the "13th five-Year Plan for Solar Energy Development" issued by the National Energy Administration (NEA) at the end of 2016, the installed capacity of photovoltaic power generation was planned to reach 105 GW by 2020. However, by the end of 2017, the above target has been exceeded - China had installed 130.8 GW at that time.

In order to control the pace of development and avoid excessive growth of the domestic PV market, subsidy policies were adjusted in June 2018, when the "2018 Solar PV Generation Notice" was published. The feed-in tariff for utility- scale plants was reduced by 0.5 RMB. Further installation of large-scale projects was stopped for the reminder of the year. The FIT for the feed-in part of distributed PV plants (<30 MW) with a self-consumption component was cut by 0.5 RMB, while full feed-in DG systems now receive the same reimbursement levels as utility scale solar power plants. No changes were announced for the Poverty Alleviation Programme.

SOLAR MARKET IN CHINA 2017

In 2017, China new installed photovoltaic grid connected capacity reached 53.06 GW, 54% year-on year growth. The cumulative photovoltaic installation capacity reached 130.25 GW, an increase of 69% over the same period of last year. Among them, the cumulative utility plants scale is 100.59 GW, the distributed plants are 29.66 GW, the annual photovoltaic power generation amounted to 118.2 billion kWh, accounting for 1.8% of Chinas total annual power generation. In the first quarter of 2018, China installed 9.65 GW, a 22% year-on-year growth. While utility scale PV capacity reached 1.97 GW, which was a drop of 64% year-on-year, the volume of distributed PV installations, comprising systems up to 30 MW, increased by 217% to 7.69 GW year-on-year. Photovoltaic power generation improved by 64% to 35.1 billion kWh.

CHALLENGES

The challenges lying ahead of the Chinese photovoltaic players are late FIT payments, curtailment, missing transmission, and uncertainties regarding the new subsidy policy guidelines. The Chinese government is working on addressing all these issues.

INDIA

The year 2017 has been a record year for solar photovoltaics in India. Cumulative installed capacity exceeded 19 GW, with net yearly additions of 9.63 GW - a staggering +127% market growth from last years 4.25 GW. The Indian market took Japans place as the third largest market worldwide and is on trajectory to become the second largest, perhaps already in 2018. The Indian Governments strong commitment to solar has its effects on other power sources: In 2017, solar was the largest source of new power generation capacity additions, constituting a 45% share. After the steep year-over-year 2017 growth, India is expected to take a breath in 2018. The current project pipeline is lower, after fewer tenders were issued in the past year. Moreover, the first months of 2018, were governed by uncertainty stemming from a discussion on a 70% safeguard tax on imported solar cells, although this seems off the table for now.

In November 2017, Indias Ministry of New and Renewable Energy (MNRE) laid out its roadmap for future tenders to boost demand and make sure its 2022 National Solar Mission goals are met. MNRE planned to tender 20 GW in FY 2017/18 and 30 GW each in FY 2018/19 and FY 2090/20. This explains the extraordinary high tender activity over the first months of 2018.

INDIAN SOLAR/RE TARGETS

A profound transformation of the energy sector in mind, the Indian government has set out ambitious renewable energy targets in which solar plays a paramount role. In 2015, India announced a RE target of 175 GW by 2022, a net growth of 150 GW from the installed RE capacity at that time. Solar installed capacity was planned to total 100 GW by 2022, while wind power was supposed to contribute 60 GW. Rooftop PV is targeted to contribute 40% to the solar total. While several experts have had doubts if these targets can be reached, in early June 2018, Indias minister of power and renewables even announced to up the 2022 RE goal by 52 GW to 227 GW.

DRIVERS FOR SOLAR GROWTH

A number of policy measures have been set in place by MNRE to support the achievement of Indias 2022 solar goals. An amendment to the National Tariff Policy includes provisions for Renewable Generation Obligations (RGO) and Renewable Purchase Obligations (RPO). The policy requires state-owned power distribution companies to purchase 8% of their energy from solar by 2022, and mandates thermal power plant operators to have a certain amount of renewable components in new installed capacity. Besides these quota obligations, several economic incentives such as generation-based incentives, viability gap funding, capital and interest subsidies, concessional finance and fiscal incentives have been set in place. India is supporting large-scale solar through the development of industrial solar parks, which has resulted in PV projects that belong to the largest in the world. A key tool to push solar in India are competitive tenders, which have pushed tariffs down to 0.031 €/kWh. In order to match increased generation capacity with adequate network expansion and to establish smart grids that integrate renewable energy into the national grid, the government has planned a growth of network infrastructure with the support of the Green Energy Corridor project. Through the project, financial and technical assistance is provided to the power grid corporation and state transmission utilities. Under the Sustainable Rooftop Implementation for Solar Transfiguration of India (SRISTI), the residential, commercial, industrial and institutional sectors are provided financial assistance for their rooftop installations. This subsidy scheme, allocating more financial resources and covering more customers than the previous version, is expected to play a central role in the achievement of the target of 40 GW of rooftop solar capacity by 2022. A "rent a roof" policy is also being planned by the government, allowing developers to take rooftops on rent, freeing households from responsibilities of installation and maintenance of the system.

POSITIVE FORECASTS

ANTI-DUMPING & SAFEGUARD DUTIES

Despite a significant move taken by the Indian government, to promote the power of solar in tackling climate change globally, where, India took center stage by leading the bunch of nations from across the globe during the International Solar Alliance (ISA) founding ceremony, India, too, is dealing with various bottlenecks on domestic front in promoting solar via its ‘Make in India initiative. One of the major issues that Indian solar manufacturing industry currently facing ‘anti-dumping and safeguard duties.

To back domestic solar manufacturing industry and restrict dumping of solar equipments from overseas, the Indian Solar Manufacturers Association (ISMA), in July last year, had filed the plea for investigation of import of solar cells and modules from countries such as China, Taiwan and Malaysia. Also, the Directorate General of Anti-Dumping (DGAD) had started investigation on the matter. However, in March this year, the DGAD had terminated the anti-dumping probe on the back of plea withdrawn by the ISMA itself.

Whereas, the Indian solar manufacturers are still mulling over refiling a fresh plea on solar imports with the DGADs office demanding extension of the years of investigation to include from April 2016 to December 2017.

Earlier, the period of investigation was up to June 30, 2017 and the data available for the analysis was for three years from April 2013 to March 2016. The reason quoted by the Indian manufacturers for the extension of time period of the probe was that, the dumping has been surged drastically in the second half of 2017.

On the flip side, to provide some relief to solar manufacturers 70 percent safeguard duty had also been proposed by the Office of the Directorate General (DG) of Safeguards in January, on the separate petition filed by the manufacturers, on imports of solar cells for 200 days term period corresponding to the probe. However, a writ petition was filed in the Madras High Court against the levy of 70 percent safeguard duty by a domestic project developer, which later on was dismissed by the Court.

Moreover, the Madras High Courts decision had paved the way for the levy of safeguard duty on solar imports. Now, in a next step, the Directorate General of Safeguards will resume its investigation and likely to complete it soon.

Post completion of probe, the DG Safeguard Office will send its report to the Ministry of Commerce, and then the ball will be in the Ministrys court to levy or not to levy 70 percent duty for 200 days on solar imports recommended in the preliminary finding.

Later on, whatever will be the outcomes of both the probes but this state of uncertainty created a chaos among the solar industry.

CHALLENGES

While the Indian market expansion follows an exponential trajectory, lagging behind schedule can be explained by a number of factors beyond financing:

• First, the goals are very ambitious. India started from scratch and had to move quickly on many fronts to establish infrastructure and energy policy frameworks.

• Local content and trade protection measures have been looming over solar expansion and created large uncertainties across the market.

• Many Indian utilities have been having financial difficulties. Solar has not been high on their agenda, unless pushed through obligations to purchase renewable electricity.

• Rooftop solar, especially in the residential sector, needs more policy support to tap its huge growth potential. Policy harmonization across states and clearing ambiguity related to net metering or other support policies is necessary for further rooftop development. Otherwise the 40 GW rooftop target will not be reached by 2022.

OPTICAL DISCS

Optical discs in general have experienced a decline in unit sales for the last several years with only the new Blu-ray format increasing in sales.

This overall decline in optical disks distribution is the result of fast and convenient on-line distribution. Many consumers with broad band internet access find obtaining content on-line much more convenient than purchasing physical media. This is due to the continual decrease in the costs of on-line bandwidth, improvements in content compression, the proliferation of mobile viewing devices with smaller screens (and thus lower resolution requirements) as well as increased levels of cloud storage to support download and streaming markets.

RISKS, OPPORTUNITIES AND THREATS

Euro Multivision Limited aims to address risks, opportunities and threats posed by the business environment by developing appropriate risk mitigation measures. Our responses to these elements are discussed in the following section:

a) Technology Risks

We are in technological businesses whether it is manufacturing of Solar PV cells or Optical Discs, where a key challenge is to ensure that the manufacturing facilities are equipped with technologies that can produce value added products, which are competitive in the market.

b) Forex Risks

Through its nature of business, the company operates in several currencies. Volatility in currency markets can adversely affect the outcome of commercial transactions and cause uncertainties. We have foreign exchange policies in place to protect the margins against rapid and significant foreign exchange movements.

c) Risks pertaining to legal actions by the Banks

The banks have taken action under the provisions of SARFAESI Act, which had been contested by the company in BIFR and also in Debt Recovery Tribunal. The matter is subjudice as yet.

d) Threats

• Substantial decline in price of Solar Photovoltaic Cells and erosion in demand.

• Non-utilization of our available manufacturing capacity.

• Reduction in, or elimination of, subsidies and economic incentives for on-grid solar energy applications.

• The solar industry is dominated by European countries and any downturn in these markets cause impact on the industry growth.

• The solar market is growing and competition is resulting decline in market share and margins.

• 60% raw material cost is silicon wafer and its manufacturing is dominated by large / limited players.

• Continued dumping of PV Cells at cheap prices, however, Domestic Content may void the impact of dumping

• Technological Advancement and Improvement in Cell Efficiency has huge impact product marketability.

• New Optical Storage media options and their affordability is a huge threat for CDR and DVD R products.