Tavernier Resources Ltd Management Discussions.

Overview

This Management Discussion & Analysis Report presents the key performance highlights of the year 2017-18 pertaining to the Companys business. The Report has been prepared in compliance with the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. This review should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in this Annual Report. The Companys financial statement have been prepared in accordance with Indian Accounting Standards (Ind AS), complying with the requirements of the Companies Act, 2013 and the guidelines issued by Securities and Exchange Board of India (SEBI). The Management accepts responsibility for the integrity and objectivity of the Financial Statements. However, investors and readers are cautioned that this discussion contains certain forward looking Statement that involve risks and uncertainties.

Industry Structure and Developments Indian Economy

India has emerged as the fastest growing major economy in the world as per the Central Statistics Organization (CSO) and International Monetary Fund (IMF) and it is expected to be one of the top three economic powers of the world over the next 10-15 years, backed by its strong democracy and partnerships. Indias GDP is estimated to have increased 6.6 percent in 2017-18 and is expected to grow 7.3 percent in 2018-19.

Indias gross domestic product (GDP) at constant prices grew by 7.2 per cent in September-December 2017 quarter as per the Central Statistics Organization (CSO). Corporate earnings in India are expected to grow by 15-20 per cent in FY2018-19 supported by recovery in capital expenditure, according to JM Financial.

The tax collection figures between April 2017 - February 2018 show an increase in net direct taxes by 19.5 per cent year-on-year and an increase in net direct taxes by 22.2 per cent year-on-year.

India has retained its position as the third largest startup base in the world with over 4,750 technology startups, with about 1,400 new start-ups being founded in 2016, according to a report by NASSCOM.

Indias labourforce is expected to touch 160-170 million by 2020, based on rate of population growth, increased labour force participation, and higher education enrolment, among other factors, according to a study byASSOCHAM and ThoughtArbitrage Research Institute.

Indias foreign exchange reserves were US$ 422.53 billion in the week up to March 23,2018, according to data from the RBI.

With the improvement in the economic scenario, there have been various investments in various sectors of the economy. The M&Aactivity in India increased 53.3 per cent to US$ 77.6 billion in 2017 while private equity (PE) deals reached US$ 24.4 billion. Apart from this, there are important recent developments in Indian economy.

Indian Government is continuously striving hard to achieve the following:

• eradication of poverty and unemployment;

• uplifting the rural economy and strengthening of the agriculture sector;

• healthcare forthe economically less privileged;

• infrastructure creation and improvement in the quality of education of the country;

• doubling the farmers income in the coming years;

• creation of livelihood and infrastructure in rural areas;

• Improving the rail and road sectors.

Numerous foreign companies are setting up their facilities in India on account of various government initiatives like Make in India and Digital India. Mr. Narendra Modi, Prime Minister of India, has launched the Make in India initiative with an aim to boost the manufacturing sector of Indian economy, to increase the purchasing power of an average Indian consumer, which would further boost demand, and hence spur development, in addition to benefiting investors. The Government of India, under the Make in India initiative, is trying to give boost to the contribution made by the manufacturing sector and aims to take it up to 25 per cent of the GDP from the current 17 per cent. Besides, the Government has also come up with Digital India initiative, which focuses on three core components: creation of digital infrastructure, delivering services digitally and to increase the digital literacy. Apart from this, the Government has undertaken recent initiatives and developments.

Indias gross domestic product (GDP) is expected to reach US$ 6 trillion by FY27 and achieve upper-middle income status on the back of digitization, globalization, favourable demographics and reforms.

India is also focusing on renewable sources to generate energy. It is planning to achieve 40 per cent of its energy from non-fossil sources by 2030 which is currently 30 per cent and also have plans to increase its renewable energy capacity from 57 GW to 175 GW by 2022.

India is expected to be the third largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behaviour and expenditure pattern, according to a Boston Consulting Group (BCG) report; and is estimated to surpass USA to become the second largest economy in terms of purchasing power parity (PPP) by the year 2040, according to a report by PricewaterhouseCoopers.

Goods and Service Tax (GST)

Introduction of Goods and Service Tax (GST) and emphasis on cash-less transactions has provided a fillip to organized retail sector in India. GST was implemented from July 01,2017 as the nation moved to "one nation-one tax" number of indirect taxpayers in the country witnessed growth of 50 per cent to 9.8 million unique GST registrants, as of December, 2017.

Indias internal trade in goods and services (excluding non-GST goods and services) at 60 percent is even higherthan that estimated in last years economic survey. The current GST tax base (excluding exports) is around 6.5 to 7 million, broadly similar to the estimates of Revenue Neutral Rate Committee and GST Council. Based on the average collections from GST, the implied weighted average collection rate (incidence) is 15.6 per cent. This is similar to the estimate of 15-16 per cent made by the RNR committee. Non-agricultural workforce in the formal sector in India is considerably greater than previously held beliefs about the size of formal sector non-farm payroll. Estimates, on the basis of enterprise-based definition of employment, imply that nearly 53 per cent of non-agricultural workforce is in the formal sector.

Gems and Jewellery

The Gems and Jewellery sector plays a significant role in the Indian economy, contributing around 7 per cent of the countrys GDPand 15.71 per cent to Indias total merchandise exports. It also employs over 4.64 million workers. One of the fastest growing sectors, it is extremely export oriented and labour intensive.

Based on its potential for growth and value addition, the Government of India has declared the Gems and Jewellery sector as a focus area for export promotion. The Government has recently undertaken various measures to promote investments and to upgrade technology and skills to promote Brand India in the international market.

India is deemed to be the hub of the global jewellery market because of its low costs and availability of high-skilled labour. India is the worlds largest cutting and polishing centre for diamonds, with the cutting and polishing industry

being well supported by government policies. Moreover, India exports 75 per cent of the worlds polished diamonds, as per statistics from the Gems and Jewellery Export promotion Council (GJEPC). Indias Gems and Jewellery sector has been contributing in a big way to the countrys foreign exchange earnings (FEEs). The Government of India has viewed the sector as a thrust area for export promotion. The Indian government presently allows 100 per cent Foreign Direct Investment (FDI) in the sector through the automatic route.

Gold demand in India rose to 737.5 tonnes between 2017. Indias gems and jewellery exports stood at US$ 32.71 billion in FY2018. During the same period, exports of cut and polished diamonds stood at US$ 23.73 billion, thereby contributing about 72.55 per cent of the total gems and jewellery exports in value terms. Exports of gold coins and medallions stood at US$ 1,917.09 million and silver jewellery export stood at US$ 3,385.65 million during FY 2018.

The gems and jewellery market in India is home to more than 300,000 players, with the majority being small players. Its market size is about US$ 75 billion as of 2017 and is expected to reach US$ 100 billion by 2025. It contributes 29 per cent to the global jewellery consumption.

India is one of the largest exporters of gems and jewellery and the industry is considered to play a vital role in the Indian economy as it contributes a major chunk to the total foreign reserves of the country. UAE, US, Russia, Singapore, Hong Kong, Latin America and China are the biggest importers of Indian jewellery. The Goods and Services Tax (GST) and monsoon will steer Indias gold demand going forward.

The Gems and Jewellery sector is witnessing changes in consumer preferences due to adoption of western lifestyle. Consumers are demanding new designs and varieties in jewellery, and branded jewelers are able to fulfill their changing demands better than the local unorganized players. Moreover, increase in per capita income has led to an increase in sales of jewellery, as jewellery is a status symbol in India.

The cumulative Foreign Direct Investment (FDI) inflows in diamond and gold ornaments in the period April 2000 - December 2017 were US$ 1,111.52 million, according to Department of Industrial Policy and Promotion (DIPP).

Some of the key investments in this industry are listed below:

• An international diamond exchange will besetupinSuratbyOctober2020atacostof Rs2,400crore (US$372million).

• Companies such as PC Jewellers, PNG Jewellers, Popley and Sons, are planning to introduce a virtual-reality (VR) experience for their customers. The customer will have to wear a VR headset, through which they can select any jewellery, see the jewellery from different angles and zoom on it to view intricate designs.

The Government of India would notify a new limit for reporting about transactions in gold and other precious metals and stones to authorities, to avoid the parking of black money in bullion.

The Bureau of Indian Standards (BIS) has revised the standard on gold hallmarking in India from January 2018. The gold jewellery hallmark will now carry a BIS mark, purity in carat and fitness as well as the units identification and the jewellers identification mark. The move is aimed at ensuring a quality check on gold jewellery.

The Government of India has planned to set up a Common Facility Center (CFC) atThrissur, Kerala.

The Gems and Jewellery Export Promotion Council (GJEPC) signed a Memorandum of Understanding (MoU) with

Maharashtra Industrial Development Corporation (MIDC) to build Indias largest jewellery park at Ghansoli in Navi- Mumbai on a 25 acres land with about more than 5000jewellery units of various sizes ranging from 500-10,000 square feet. The overall investment of Rs 13,500 crore (US$ 2.09 billion).

In the coming years, growth in Gems and Jewellery sector would be largely contributed by the development of large retailers/brands. Established brands are guiding the organised market and are opening opportunities to grow. Increasing penetration of organized players provides variety in terms of products and designs. Online sales are expected to account for 1-2 per cent of the fine jewellery segment by 2021-22. Also, the relaxation of restrictions of gold import is likely to provide a fillip to the industry. The improvement in availability along with the reintroduction of low cost gold metal loans and likely stabilization of gold prices at lower levels is expected to drive volume growth for jewellers over short to medium term. The demand for jewellery is expected to be significantly supported by the recent positive developments in the industry.

Trading in Shares and Derivatives

The derivatives market in India, like its counterparts abroad, is increasingly gaining significance. During the financial year 2017-18, the securities market in India and global as well, has performed decently. However, day-to-day fluctuations in stock market price are an usual scenario which indicates that the said sector is not stable. Since your Company is not actively engaged in dealing or trading in securities, derivatives and other financial intermediaries, the management has not taken any efforts to cover this sector.

Real Estate

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 real estate sector comprises four sub sectors - housing, retail, hospitality, and commercial. The growth of this sector is well complemented by the growth of the corporate environment and the demand for office space as well as urban and semi-urban accommodations. The construction industry ranks third among the 14 major sectors in terms of direct, indirect and induced effects in all sectors of the economy.

As your Company is not profoundly engaged in real estate business, the management did not take utmost efforts to concentrate on this sector.

Opportunities and Threats

The consumer landscape has been continuously evolving and one has to keep pace with the changing trends in order to win consumer confidence. The Gems and Jewellery sector, Securities market sector and Real estate sector in India offers a significant growth opportunity to be tapped and appropriate strategies need to be formulated to capture this opportunity. The Company is capturing these opportunities by adopting various business techniques and strategies to attract the contemporary consumers. The Companys core business is leveraging its experience in the field of gems and jewellery segment rather than dealing or trading in securities market and real estate activities and building its business based on the gems and jewels theme across categories. Unorganised sector, threat from China, predominance of the US market, exchange rate/currency risk, high level of inventories, decreasing diamond reserves, competition from other luxury goods, beneficiation in mining countries, global economic slowdown, synthetic diamonds, issue of conflict diamonds and more are some of the threats to the companys prospects.

Segment-Wise Performance

As per Memorandum of Association, the Company has following as its main business activities:-

? Gems and Jewellery

? Trading in Shares and Derivatives

? Real Estate

However the Company operates into one segment only i.e., Gems and Jewellery and has generated net sales of Rs. 1,436.33 Lakhs. Hence, segment-wise performance information is not required and accordingly not provided.

Outlook

An improvement in the macro-economic fundamentals is expected to ramp up demand by improving the overall consumer sentiment. The Company expects demand to pick up as and when the disposable income in the hands of consumers increases due to pick up in economic activity and various government initiatives. The company has a good mix of business activities to service the demands of consumers. We are well poised to effectively capture the growth opportunities in the coming years.

The management is optimistic of substantial growth in Companys business in the coming years.

Risks and Concerns

Business risks exist for any enterprise having national and international exposure. Tavernier Resources Limited also faces certain risks, the key ones being - a longer than anticipated delay in economic revival, decreased sales volume, competition, unfavorable exchange rate fluctuations, emergence of inflationary conditions, unexpected changes in regulatory framework and the overall economic climate and government regulations. The Company is well aware of these risks and challenges and has put in place mechanisms to ensure that they are managed and mitigated with adequate timely actions.

Internal Control Systems and their Adequacy

The company has set up an internal control system that functions at various levels of the organization. The system ensures compliance with the respective laws & regulations, efficiency of operations, optimum utilization of resources, disclosure and adequate reporting of financial transactions, proper administration at all levels of the organization.

The Audit Committee of the company periodically reviews and ensures adequacy of the internal control system prevalent at each level of the organization and passes on its recommendation to the management.

Discussion on Financial Performance With Respect to Operational Performance

During the financial year 2017-18 under review, the Net Sales of diamonds/precious stones augmented from Rs. 225.71 Lakhs in F.Y. 2016-17 to Rs. 1,436.33 Lakhs in F.Y. 2017-18, whereas the Company has earned Profit of Rs. 87.12 Lakhs as against that of Rs. 28.25 Lakhs in the previous financial year.

Material developments in Human Resources / Industrial Relations front, including number of people employed.

The Company appreciates that the performance level cannot be reached and sustained without the right quality of people.

With this belief, the Company has laid significant emphasis on its Human Resources practices. These are concerted efforts to ensure that the most appropriate people are recruited into the organization.