Marg Ltd Management Discussions.

MARG Limited is an ultimate holding company of MARG Group which operates in diversified business operations under different verticals. The Company operates predominantly in Ports, Residential Projects and has presence in other business like Resources, Urban infrastructures etc. The Development Business is focused primarily on the development of affordable residential projects and certain strategically located commercial projects. The Company also offers commercial spaces.

The residential real estate sector is going through a critical transition phase post demonetization as transaction activity has slowed down considerably. While demonetization has had a negative impact in the short term, it will eventually help improve governance standards in real estate and provide a level playing field for organized developers.

ECONOMIC ENVIRONMENT

There is a gradual revival being seen in the construction sector. Road laying is picking up pace and so is other construction activity. While investments are still subdued due to excess capacity across sectors, it is expected that a prolonged period of controlled inflation, a stable government policy and steadily improving per-capita income would improve consumption and lead to a more sustained growth in the range of 7.0-8.5%.

CONSTRUCTION INDUSTRY OVERVIEW

The government announced a big boost for affordable housing, which is expected to be the next big growth area. Under the Smart Cities program, a total of 100 cities will see the program positively impacting the lives of nearly 9.95 crore people with high-quality core infrastructure and a more sustainable quality of life. There have been some positive green shoots for realty in the last 2 years on the funding side and the regulatory side. Mutual funds have been allowed to invest in REITs (Real Estate Investment Trusts) and InvITs, (Infrastructure Investment Trusts) which will give investors securitized access to realty assets.

The Indian real estate industry has seen significant changes due to the challenges posed by ongoing structural reforms. These challenges were further aggravated because of liquidity concerns. Indian real estate industry is currently undergoing a massive transformation due to landmark reforms like Real Estate (Regulation and Development) Act (RERA) 2017 and GST (Goods and Services tax) implementation. Although these initiatives are helping in accelerated sector organization, they have also led to increased uncertainty in the short term.

Business Verticals Overview, Business Segment Review and Outlook

EPC VERTICAL

The EPC division of the Company has an order book of Rs. 2522.79 Crores. Further local and international bids are being planned leveraging the experience gained through execution of Marine, Infrastructure and Industrial EPC. To achieve Customer Delight through innovative, cost effective and value added consulting, Design & Detailed Engineering Services contract and EPC services. The Company is developing finding means for achieving the same.

Dredging at Ariyankuppam river and sea mouth at Pondicherry and Construction of fish landing center at Nagore, Indoor stadium at Karaikal also successfully completed.The company has been awarded the project of Construction of Multi-storey Flats under SFS at Vrindavan Yojana, Lucknow, Uttar Pradesh by UP Housing Developments Board and the same has been handed over to the respective authority.

Some of the other projects like Construction of 2 * 250 MW Power plant CW & SW Package at Bhavnagar, Construction of FRENA Laboratories at Kolkata, Construction of integrated campus at HAL Bangalore and Construction of Dredging and fish Harbor at Mahi, Construction of Head Quarters Building for BPR&D and NCRB at Mahipalpur was awarded by NBCC, Construction of Technical and Administrative Accommodation at strategic Communication Node Palam was awarded by Military Engineers Services, Pravasi Bharatiya Kendra at Plot No.15A, 15B & 15D chanakyapuri, New Delhi was awarded by NBCC, Construction of Multi-storey Residential Building (G+11) Srishti Apartment Phase-I at Jankipuram, Sector-J (Extension), Lucknow, Uttar Pradesh, Construction on of Multi-storey Smriti Apartment at janakipuram Extension Scheme, Sector-J, Lucknow, Uttar Pradesh, Construction of Multi-storey Flats at Vrindavan Yojana-4, Lucknow, Uttar Pradesh by UP Housing Development Board, the HSCC work of Construction of Test Research laboratory (Animal Facility Building) including internal services like plumbing, electrical, fire fighting, fire detection/fire alarm, HVAc etc. at Sector-8, Dwarka, New Delhi in final stage and all the related work is going on in full swing.

MARG is in the process of pipelining additional EPC contracts - bidding for mega contracts in the specialized areas like marine, industrial projects, urban infrastructure and solar & alternate energy sector. Further the EPC divisions of MARG will increase the turnover in the forthcoming years.

MARG EPC has been appreciated for safety practices, a notable achievement as the present accident frequency across all project sites is very less compared to other companies projects.

PORT

Karaikal Port - a deep draft, all weather port and MARG Limited holds substantial stake in the company. The Port is now in the Tenth successful year of operations.

BUSINESS DEVELOPMENT UPDATES

The major customers of Karaikal Port for handling coal imports like AMR Logistics, Apoorva Logistics, Bulk Trans Logistics, Chettinad Cement, Dalmia Cement, Ramco Cements, IL&FS, Ultratech Cements, and The India Cements for handling their coal imports. Karaikal Port added new cargos to the portfolio like Wood pulp and other cargo to bring additional cargo to the port.

SEZ

MARG is developing two special economic zones in the field of Engineering Services and Multi Services spread over 612 acres as part of MARG Swarnabhoomi - The Land of New Thinking. This Project is developed by New Chennai Township Private Limited, a wholly owned subsidiary. MARG Swarnabhoomi is located on the scenic East Coast Road, midway between Chennai and Puducherry.

Engineering Services SEZ is promoted at MARG Swarnabhoomi with the objective of attracting clients in various segments like Auto Components, Fasteners, Valves, Pumps, Power components, Electronic components, Electronic meters, Renewable Energy, etc. M/s Grundfos Pumps, M/s P.H. Hydraulics and Pneumatics, M/s Eswari Electricals, M/s Kwik patch Ltd and M/s Twin Disc (Far East) Pte Ltd are operating in Engineering services SEZ. M/s Zwilling, a German based Kitchenware manufacturer has signed lease deed and started setting up their premises in MARG Swarnabhoomi. M/s Tecpro Energy Systems has registered lease deed and is in advanced stages of setting up their premises in MARG Swarnabhoomi.

The Multi Services SEZ is promoted in MARG Swarnabhoomi to attract clients in various segments like IT/ITES, Knowledge Hub, BPO, KPO, Animation, Medical Tourism, R&D, Publishing etc. The Company has added few clients in the respective year M/s Groom India Salon & Spa Private Ltd and Enterprise Touch etc.

REAL ESTATE DEVELOPMENT

MARGs residential development arm - MARG ProperTies is moving forward as lot of infrastructure growth is happening in Tamilnadu and the company has a strong presence in Chennai where there is a huge demand for residential space. To cater to the housing demand and leverage the economic growth drivers, the company has a strong project pipeline and land bank near the suburban micro-markets. The companys project portfolio is primarily skewed towards mid and low income segment which forms the bulk of the residential demand.

"With 2018 - 19 being the year of landmark decisions for the Indian real estate industry, the sector saw concerted efforts by the Government to bring in transparency as well as boost consumer sentiment in the sector, especially in the residential market is positive with an expectancy of steady growth, stability and revival in the market."

The Government of India along with the governments of the respective states has taken several initiatives to encourage the development in the sector. The Smart City Project, where there is a plan to build 100 smart cities, is a prime opportunity for the real estate companies.

The Ministry of Housing and Urban Poverty Elevation has sanctioned the construction of 84,460 more affordable houses for urban poor in five states, under the Pradhan Mantri Awas Yojana (Urban) scheme with a total investment of Rs 3,073 crore (US$ 460 million).

The real estate sector is one of the most globally recognized sectors. In India, real estate is the second largest employer after agriculture and is slated to grow at 30 per cent over the next decade. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

It is also expected that this sector will incur more non-resident Indian (NRI) investments in both the short term and the long term. The Indian real estate market is expected to touch US$ 180 billion by 2020. The housing sector alone contributes 5-6 per cent to the countrys Gross Domestic Product (GDP).In the period FY 20082020, the market size of this sector is expected to increase at a Compound Annual Growth Rate (CAGR) of 11.2 per cent.

The impact of demonetization was expected to be shattering for the economy; however, the reality on the ground is quite encouraging; indicative of the fact that the economy is already on its way to fully absorb the impact of the policy

The implementation of Goods and Services Tax (GST) on real estate will directly impact under-construction project is 18% that will be applicable on two-thirds of the value of the property. The controversy over a rise in burden on projects nearing completion was settling down.

The growing flow of FDI into Indian real estate is encouraging increased transparency. Developers, in order to attract funding, have revamped their accounting and management systems to meet due diligence standards

Marg Properties has an increasingly well-informed consumer base and bearing in mind the aspect of globalization, have shifted gears and accepted fresh challenges and the growing needs for managing multiple projects across cities, are also investing in centralized processes to source material and organize manpower and hiring qualified professionals in areas like project management, architecture and engineering. It is actively involved in the hand over of all the pending units and the company is working closely with Home Buyer associations to address their concerns and to facilitate smooth Handover. It is also accelerated to complete and hand over of nearly 1000 apartment within the FY 19-20.

The following Government initiatives will also engorging us to launch and complete our existing project and launch new projects including Plotted layouts.

• The Cabinet Committee on Economic Affairs (CCEA) has approved various measures to revive the construction sector, putting in place a mechanism to release funds stuck in arbitration awards to revive stalled projects.

• Brihanmumbai Municipal Corporation (BMC) has introduced a single-window clearance for construction which will cut the time taken for getting approvals for a building project and lead to correction in prices of residential property, thereby giving a fillip to Mumbai realty.

• Indias Prime Minister Mr. Narendra Modi approved the launch of Housing for All by 2022. Under the Sardar Patel Urban Housing Mission, 30 million houses will be built in India by 2022, mostly for the economically weaker sections and low-income groups, through public-private-partnership (PPP) and interest subsidy.

MARG ProperTies believes that it is well positioned to benefit from the opportunities that will emerge as the economic situation improves further. So, the outlook for 2019-20 is cautiously optimistic.

As the South & West Chennai is getting developed rapidly, MARG ProperTies projects which are located in these areas are benefitted more.

The capital of Tamil Nadu is largely an end-user driven market, making it less prone to speculation. North Chennai is predominantly industrial, while central Chennai is the most developed part of the city with established commercial and residential markets. South and west Chennai, previously predominantly residential areas, are fast turning into commercial zones, hosting a large number of IT and financial services companies.

Outer Ring Road has emerged as the best upcoming investment market with large townships. Outer Ring Road Phase II and Metro Rail Phase II will become operational late this year. The Guindy- Alandur cluster is expected to emerge stronger in the medium term with infrastructure push.

Nodes such as Perungudi, Sholinganallur, Siruseri, along with GST Road, have created enormous employment opportunities in south Chennai. "The focus of the state government in providing excellent road connectivity along these nodes has helped in the development of this region," says Kanchana Krishnan, Director - Chennai, Knight Frank India.

MARG ProperTies is consistently unique in its marketing and customer service approach.

The Chennai real estate market has tepid response owing to slowing economy. Factors such as slowing economic growth, increase in raw material prices and weak rupee among others have contributed towards building a negative sentiment among home buyers. MARG properties also witnessed a slowdown in the projects and sales drop highly because of above mentioned economic downturn.

The investment-growth cycle is yet to kick-in, given the weak global outlook and low capacity utilization levels across industries. Persisting corporate sector stress and risk aversion in the Indian banking system has meant that the rate cuts by the RBI have not translated into the much needed reduction in interest rates for both businesses and consumers, which can spur both demand and confidence. Given the capital intensive nature of the business, the real estate industry in India has also been affected by this situation. Real estate is a critical sector for Indias economy due to its large potential for employment generation, capital attraction and revenue generation for the Government. It is one of the fastest growing sectors contributing about 6-8% to Indias GDP and also a key business segment of your Company. After witnessing fluctuating business cycles in the last decade, the real estate sector witnessed a slowdown due to moderate end user demand, rising inventory and high finance costs. Despite the subdued performance in recent years, Indias demographics and urbanization trends present an optimistic future for the residential market. Under Housing for All by 2022 significant business opportunities are going to open up for construction and real estate industry. The government is exploring possibility of granting an infrastructure status to affordable housing to attract higher investment.

MARG ProperTies believes that it is well positioned to benefit from the opportunities that will emerge as the economic situation improves further.

HUMAN RESOURCE DEVELOPMENT

MARG considers its employees as its most important asset and has created a work environment that ensures their continued wellbeing. It strongly aligns the organisations growth with the growth of every individual who is functional in taking the organisation closer to its goals. It aims at attracting, nurturing and retaining the best industry talent and invests substantial time and energy in maintaining and engaging human resource culture. New employees are trained to make them accustomed to the MARGs culture, while continuing employees are given ample opportunities to explore their talent and capabilities. The Company will continue to expand itself by virtue of its core intellect that resides with human resource. The Company had about 128 employees on its rolls as on 31st March 2019.

CAUTIONARY STATEMENT

Statements in the Directors Report and Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward-looking statements within the meaning of applicable laws and regulations. Actual results could differ substantially or materially from those expressed or implied. Important factors that could make a difference to the

Companys operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in government regulations, policies, tax laws and other incidental factors. Further, the Company retains the flexibility to respond to fast-changing market conditions and business imperatives. Therefore, the Company may need to change any of the plans and projections that may have been outlined in this report, depending on market conditions.

For and on behalf of the Board of Directors

G R K Reddy

Chairman & Managing Director

Place: Chennai

Date: 30th October, 2019