RCL Retail Ltd Management Discussions.

The purpose of this discussion is to provide an understanding of financial statements and a composite summery of performance of our business.

Economy:

India continued to be the fastest-growing major economy in the world. As per the advance estimates released by the Central Statistical Organization ("CSO"), in FY 2016-17, Indias GDP grew at 7.1%, slowing down from 7.9% growth in the previous year. Macro-economic fundamentals of the economy remained healthy-with moderation of inflation, fiscal deficit and current account deficit. In November 2016, the country witnessed demonetization of higher denomination currency notes that created a temporary impact on consumer demand. However, by the end of the financial year, the economy got back to normal, as suggested by the high-frequency economic indicators.

Introduction

The Indian retail industry has emerged as one of the most dynamic and fast-growing industries due to the entry of several new players in the recent times along with rising income levels, growing aspirations, favourable demographics and easy credit availability. It constitutes over 10% of the countrys Gross Domestic Product (GDP) and around 8% of the employment and is valued at USD 672 billion. Globally, India is fifth-largest global destination in the retail space and is growing at a rate of 12% per annum.

Opportunities:

According to research reports it is believed that retail industry in India is on growth trajectory, since per capita GDP in India is close to $2,000, post which the market is expected to grow 2-3x in the next decade. This trend has been established in many other emerging markets reaching per capita GDP around $2,000. Key industry drivers are Indias favourable demographics, rising middle class with increasing share of discretionary spends and a rise of shopping area and e-commerce. Another key driver for boost of organised retail is implementation of GST, which will drive a shift of business from unorganised to organised. GST Implementation and growth of the retail industry would also boost technological usage in supply chain, distribution network, driving further sector growth. The Government of India has taken various initiatives to improve the retail industry in India.

• The Government of India may change the Foreign Direct Investment (FDI) rules in food processing, in a bid to permit e-commerce companies and foreign retailers to sell Made in India consumer products.

• Government of India has allowed 100 per cent Foreign Direct Investment (FDI) in online retail of goods and services through the automatic route, thereby providing clarity on the existing businesses of e-commerce companies operating in India.

Risks and Threats

Factors like interest rates, inflation, growth in economic activity, rationalisation of tax structure, job creation and consumer sentiment continues to be the biggest source of threat as well as opportunity for the Company. Any slowdown in the economic activity in the Country, significant job losses or high rates of inflation can severely impact the consumption and therefore growth of the Company.

Other external factors, including a steep rise in interest rates or drastic changes in the policy or regulatory environment can pose financial challenge for the Company.

Outlook

E-commerce is expanding steadily in the country. Customers have the ever increasing choice of products at the lowest rates. E-commerce is probably creating the biggest revolution in the retail industry, and this trend would continue in the years to come. Retailers should leverage the digital retail channels (e-commerce), which would enable them to spend less money on real estate while reaching out to more customers in tier-2 and tier-3 cities.

Both organized and unorganized retail companies have to work together to ensure better prospects for the overall retail industry, while generating new benefits for their customers. Nevertheless, the long-term outlook for the industry is positive, supported by rising incomes, favorable demographics, entry of foreign players, and increasing urbanization.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has a proper adequate internal control system to ensure that all the assets are safe guarded and protected against the loss from unauthorized used or disposition and that transactions are authorized, recorded and reported correctly.

The internal control is supplemented by an extensive internal audit, periodical review by the management and documented policies, guidelines and procedures. The internal control is designed to ensure that the financial and other records are reliable for preparing financial statements and other data and for maintaining accountability of assets.