Nirlon Ltd Management Discussions.

1. Overview

During the Year under review, the Company continued to successfully license and manage the four (4) completed phases of Nirlon Knowledge Park (NKP), comprising approx. 29.90 lakh sq. ft. of constructed area, which corresponds to approx.18.78 lakh sq. ft. of licensable area. This licensable area was approx. 92% occupied as on June 30, 2021.

As mentioned in the Companys previous Annual Reports, the Company, after a comprehensive evaluation, is redeveloping Phase 0 into the proposed Phase 5. The same will be completed in the F.Y 2021-22, and is being developed under the 2015 IT Policy of the Government of Maharashtra (GOM) (which allows higher Floor Space Index (FSI) for IT Parks, subject to payment of premiums), and is estimated to comprise approx.11.59 lakh sq. ft. of licensable area corresponding to approx.17.83 lakh sq. ft. of constructed area.

The new Management Services Agreement (MSA), a Related Party Transaction between the Company and Nirlon Management Services Pvt. Ltd. (NMSPL) was approved by Members in the 61st AGM held on September 29, 2020, and given effect to from October 1, 2020. The Company is receiving the services under the MSA executed with NMSPL (summarized in Annexure 5A to the Directors Report) since October 1, 2020.

2. Operations Summary: Industrial Park / Information Technology Park - Goregaon, Mumbai:

a. Development of Phase 5 (re-development of Phase 0):

Construction of Phase 5 commenced in May 2017 after receipt of the required permissions. As mentioned in the Directors Report and various regulatory filings, Phase 5 received its Occupation Certificate (OC) on June 18, 2021. The Company has signed an Agreement to License (ATL) with its prospective Licensee, J.P Morgan Services India Pvt. Ltd. (JPM) to License the entire 11,59,442.99 sq.ft. of licensable area in the Phase 5 ( re-development of Phase 0) development. The Company is currently working with JPM, so that JPM can take Handover of the same. Subject to Covid 19 and/or monsoon related delays, Handover is estimated in Oct-December 2021 quarter. Licensee Fees from Phase 5 are contracted to begin 5 months from Handover of the premises to JPM.

Phase 5 is also expected to be completed within budget (approx.).

b. Occupancy & License Fee Renewals / Escalations:

During the Year under review, despite the Covid 19 pandemic, the Company has been successful in ensuring that more than 90% of licensable area in Phases 1 - 4 of NKP has remained licensed to corporate occupants. Accordingly, license fees for all four phases are regularly received by the Company. The Company also made every effort to ensure that the operations of Licensees remained uninterrupted during the pandemic and lockdowns.

Escalations of license fees (approx. 15% every three years) took effect as contracted during the Year under review. Renewals of expiring licenses with existing Licensees, as well as fresh licenses were also successfully executed during the year. These renewals / fresh licenses / escalations ensured the Companys financial performance continued to be strong. Further, the Company is making every effort to license the currently vacant space at the earliest, and has seen reasonable traction in this regard.

c. Loan Repayments:

As mentioned in the Directors Report, at the request of the Company, the Lender, HDFC Limited, has granted a moratorium on principal payment effective from May 15, 2017. Hence, the Company is required to repay only the interest amount on these outstanding securitized loans till June 2022. The principal moratorium has resulted in incremental cash flows being available to the Company to finance a larger part of the Phase 5 (re-development of Phase 0) construction from its internal accruals. The outstanding loan amounts from HDFC Ltd. as on March 31, 2021 aggregated Rs 979.86 Crore (as per IGAAP), on which the Company is presently paying a rate of interest @ 8 % p.a. to HDFC Limited (a reduction of 1.35 % p.a. as compared to rate of interest as on March 31,2020).

d. Profitability and Cash Flow:

Despite lower occupancy than the previous year, as a result of renewals, fresh licenses and contracted escalations coming into effect on schedule, license fee income from Phases 1 - 4 registered a small increase in the Year under review.

The Companys profitability after accounting for taxes and income from exceptional items during the Year under review increased from Rs 109.48 Crore to Rs 127.40 Crore (as per Ind AS) when compared to the previous year. This is partially due to the increased license fee income from Phases 1 - 4 and reduced depreciation. Also, during the F.Y. ended March 31, 2021, pursuant to the amendment

in Ind AS-23 "Borrowing Cost", the Company has considered the specific borrowings obtained for completed phases as a part of general borrowings. Accordingly, the finance cost amounting to 49.45 Crore for the F.Y 2020-21 related to such borrowings has been capitalized as a part of Capital Work In Progress. This has resulted in an increase in profit. The Company continued to generate strong and improved free cash flows during the Year under review after accounting for all expenses including payment of interest to its lender.

In the context of the available free cash flows from Phases 1-4, the progress made on the Phase 5 development, the payment of the majority of Phase 5 costs and the binding ATL with JPM to License the entire Phase 5 development, after suitable deliberation, the Board of Directors have decided to recommend dividend of Rs 8.00 per share (@ 80%) for the Year under review ( as against 0.75 per share in F.Y 2019-20). e. Priorities

Key priorities for the Company during the F.Y. 2021 - 2022 are as follows:

i. To fully vaccinate against Covid 19 all its employees, staff, contractors, vendors etc. including their families/households at the earliest possible date. This initiative is expected to be largely completed in September 2021.

ii. To continue to engage its Licensees in regular discussions as regards vaccination of their NKP/Nirlon House workforce, and to provide every support towards achieving this end.

iii. To make every effort to keep its Licensees, employees and everyone who works at its locations as safe as possible from Covid 19 by implementing/installing further mitigation measures/infrastructure /equipment, and strictly continuing to follow processes and awareness measures already implemented to prevent the transmission of the virus;

iv. To provide the best possible financial support and medical equipment/medicines to those affected by the Covid 19 pandemic through its CSR initiatives;

v. To Handover the Phase 5 development to the potential Licensee, JPM, as contracted at an early date, such that License fees from Phase 5 commence 5 months from Handover as contracted.

vi. To make every effort to license the currently vacant space at the earliest.

vii. To ensure the continued satisfaction of its licensees by maintaining and operating NKP to

the highest possible standards, such that the existing four phases remain as fully occupied as possible;

viii. To ensure the ongoing scheduled servicing of its loans; and

ix. To continue to proactively evaluate the impact of Covid 19 on the commercial office space market and the IT/ Financial Services/Banking Industries, in so far as the same could have an impact on the Companys business, and to implement mitigation strategies for the same. This evaluation includes the possible impact of the Work From Home (WFH) and flexible work space trends.

3. Risks and Concerns:

i. Covid 19

The continuing overriding economic concern globally for the F.Y. 2021-2022 continues to be the broad and far reaching fallout of the Covid 19 Pandemic, which has had an almost universally disruptive effect on every aspect of commercial and business activity. The inevitable commercial consequence is prolonged economic uncertainty, at least for the remainder of the F.Y 2021-22.

On a more positive note however, as increasing numbers of people are vaccinated and the chain of virus transmission is increasingly weakened/broken, an increasing, if tenuous, move towards normality is evident. Increasingly aware, proactive and better prepared local Governments/Municipalities and health care infrastructure, (Mumbai increasingly being one of those in the forefront of this trend) are also major contributors in locations where these improving conditions are evident. These positive trends brings with them greater certainty in all aspects of life including business and economics. Other risks and concerns discussed in this section however, remain subordinate to the reality of a still ongoing pandemic, and will be more relevant once this phase has passed, or its severity has lessened, and a degree of normality returns. However, as the main issues are likely to remain relevant to a large degree, they are discussed below, albeit with the Covid 19 caveat.

ii. Macro-Economic Environment Within India

It is relevant to mention, that the scientific, medically driven, proactive and well prepared response to the pandemic of Mumbais Municipal Corporation, the State Government and other Government Agencies has brought the City much credibility and relief at a difficult time.

As mentioned during earlier years in this analysis, continued demand for commercial real estate in Mumbai is dependent on the City continuing to be an investment destination of choice for Indian as well as multinational corporates. Mumbais pre- eminence has been challenged over the past decade and a half by other destinations in India which have offered a business / investment friendly climate, with lower living costs, salaries and real estate prices. Successive State Government initiatives to simplify the regulatory frame work are welcome and much needed. The successful implementation of these initiatives, combined with improving governance and transport infrastructure, should help Mumbai move toward consolidating its pre-eminent position as a preferred business / investment destination in India. The traditional strengths of Mumbai, including its Financial Services Industry, business ethos and a large, cosmopolitan, and educated work force remain very relevant, and should also continue to enhance the Citys desirability as a dynamic and competitive international investment destination.

At the Central Government level too, investors and entrepreneurs look forward to the continuance of stable, pro investment and business supportive policies, which incrementally build on existing legislation and / or introduce fresh initiatives targeted to accelerate investment, job creation and economic growth.

From a real estate perspective, constructive amendments to the FDI policy and the encouraging emergence of Indian Real Estate Investment Trusts (REITs) are welcome, and should continue to lead to the broadening and deepening of the real estate capital markets in India.

iii. Globally

As always, the health of the global economy will also continue to increasingly have a bearing on real estate demand in India, and consequently Mumbai. The inflow of investments into India, and specifically Indian real estate will, inter alia, be driven by economic conditions in the developed world.

In this context, the present debate on rising inflation and the potential need to tighten monetary policy, including the possible rise in interest rates, will be very relevant for real estate markets around the world including India.

iv. Demand for Commercial Real Estate in Suburban Mumbai

Demand for commercial real estate in suburban Mumbai continues to be driven by the Information Technology (IT), Banking and Financial sectors and, of late, other sectors like Pharma, etc. This trend is likely to continue for the foreseeable future.

Additionally, though demand is strong, the business model for these sectors continues to require inexpensive commercial real estate, available in Mumbai beyond Borivali in the West and Mulund in the East, and in other cities in India like Pune and Bangalore. These markets could keep commercial rates under pressure in the Companys micro market.

However, the demand for good quality and well planned commercial developments on par with NKP in your Companys micro market is estimated to remain steady. The micro market, and specifically NKP itself, is well located on the Western Express Highway and is in close proximity to the commuter rail network, the proposed Mumbai Metro and the airport.

4. Material developments in Human Resources / Industrial Relations, including number of people employed by the Company

Effective from October 1, 2020, the Company reappointed NMSPL as a provider of lease and property management services, marketing related services, project management services and general management services to the Company. The appointment of NMSPL (a related party transaction) is for a further period of 3.5 years after the expiry of the old contract on September 30, 2020, as per Item No. 5 in the Notice for the 61st AGM held on September 29, 2020.

As per statutory requirements, the Company has three (3) permanent employees, being the KMPs, as on March 31,2021.

5. Details of Significant Changes (i.e. change of 25% or more as compared to the immediately previous financial year) in the following key Financial Ratios:

i. Debtors Turnover : No significant change

ii. Inventory Turnover: N.A.

iii. Interest Coverage Ratio : No significant change

iv. Current Ratio: (45.16 %)

This is because of a reduction in current assets, mainly a reduction in cash and bank balances, as surplus cash was used to repay the buyers credit loan during the Year.

Also current liabilities have increased, mainly because certain licensees deposits have been reclassified from non-current to current during the F.Y. 2020-21, once the concerned License is less than 12 months from expiry/end of the lock in period.

v. Debt Equity Ratio: - No significant change

vi. Operating Profit Margin : No significant change

vII. Net Profit Margin (before Tax) : No significant change

6. Details of any change in Return on Net Worth as compared to the immediately previous financial year along with a detailed explanation thereof:

Change in Return on Net Worth: (8.07%)

7. Disclosure of Accounting Treatment & Internal Financial Controls:

In the preparation of the annual Financial Statements for the F.Y. ended March 31, 2021, the applicable Accounting Standards have been followed along with proper explanations relating to material departures, if any.

The Directors have laid down proper internal financial controls to be the followed by the Company, and such financial controls are adequate and have been operating effectively.

Cautionary Statement

Statements in the Annual Report including the Directors Report and its annexures describing the Companys objectives, projections, estimates, expectations, etc. may contain forward looking statements based on currently held beliefs and assumptions of the Management of the Company, which are expressed in good faith, and are, in their opinion, reasonable. Such statements involve uncertainties and other factors which may cause the actual results, financial condition, performance or achievements of the Company or industry results, to differ materially from the results, financial condition, performance or achievements expressed or implied by such statements. By their nature, forward-looking statements inherently involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Such statements are not guarantees of future performance and actual results may differ from those specified in such statements as a result of various such factors and assumptions. No assurance is being provided that the assumptions underlying such forward looking statements are free from errors.