MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Company's performance during the year ended 31st March, 2015 and the Management's view on future outlook are detailed below:

A. INDUSTRY STRUCTURE AND DEVELOPMENT

Your Company has five operating Divisions with Cement being the major revenue contributor. The Industry Structure and Developments in respect of each of the Divisions are briefly discussed below:

Cement

The Indian Cement industry has been facing major challenges in recent times. There are many challenges associated with cement production. Of these, energy and resource conservation, the cost of producing Portland cement, and other emissions are the most significant. The industry is currently in a turnaround phase, trying to achieve global standards in production, safety, and energy-efficiency. India has a lot of potential for development in the infrastructure and construction sector and the cement sector is expected to largely benefit from it.

Some of the recent major government initiatives such as development of 100 smart cities are expected to provide a major boost to the sector. However cement industry is faced with a scenario of constantly rising input costs- principally for coal and power which are consumed in bulk. The demand -supply mismatch where significant additions to the production capacities resulted in supply outpacing the demand is a cause of concern. As a result, the industry is not able to increase selling prices commensurate with the input costs. The cement industry is badly affected by this phenomenon.

Ready-Mix Concrete (RMC)

The business of ready mix concrete has been gaining popularity among cement manufacturers in recent years. This not only provides a readymade and captive market, but also ensures the consistency in quality of supply. Many builders have been opting for RMC from the cement manufacturers directly. However, this market has its own limitations. The relatively low shelf life of RMC - 3 to 5 hours imposes severe restrictions on the distance between the end user and plant site. In spite of this handicap, RMC industry is likely to witness a steady growth in the next few years.

Boards

Your Company is the only manufacturer of Cement Bonded Particle Boards (CBPB) in the country, marketed under the brand name Bison Panel. Bison Panels are normally used for construction of brfab structures and have been extensively used in the infrastructure and housing sectors. These boards are water resistant, termite resistant, fire resistant and are well accepted by the market as seen from the production and sales in the last three years. Bison panels are used for walls, partitions and false ceilings. Being a building material, the fortunes of the Boards Industry is closely linked to the construction activity. The value addition product launched under brand name 'Bison Plank' useful in sidings, decking, flooring, fencing and railings etc is still to reach its market acceptance.

Prefab

Your Company is a pioneer in the manufacture and supply of brfab shelters which have found acceptance by both public and private sector undertakings. Earlier, your company was a major supplier to defence, police and para military establishments. There are roaring enquiries from Nepal and other countries on erection of brfabricated structures. Competition from the smaller players in the unorganized sector offering brfab structures at lower prices have rendered the DGS&D rate contracts unviable for the company. While concentrating on the large project housing segment, your company is on the lookout for appropriate technology for brfab structures to compete with the traditional construction industry.

Hydel Energy (Small Hydro)

In India, hydro power projects with a station capacity of up to 25 Megawatt (MW) each fall under the category of Small Hydro Power (SHP). India has an estimated SHP potential of about 20,000 MW. Your company is categorized under small hydro segment. With a total capacity of 15.75 MW in an industry with a potential of 15,000 MW in the Small Hydro Power Sector, your company is a small player in this field.

B. OPPORTUNITIES AND THREATS

The increased infrastructure spending by the Governments both at the Centre and the States offers an opportunity to all manufacturers of core materials like cement used in infrastructure sectors. A significant part of the gap between the demand and the supply caused by the additions to capacities is expected to be bridged in the coming years. This in turn brightens the prospects of improved realizations as well as profitability.

Rising input costs, and possible bottlenecks in supply of key bulk materials like coal pose a challenge to be overcome.

In the Boards Division, the growing market awareness of the product offers tremendous opportunity. However the emergence of alternative and new products to the board division constitutes a constant threat and the resultant competition continues to be a matter requiring constant attention.

Your Company is a relatively small player in the Hydel Energy and RMC segments. As of now these divisions do not constitute a significant part of the company's overall activity.

D. OUTLOOK

As already stated earlier, the outlook for the cement industry for the immediate future looks promising, in view of the increased spending in infrastructure sector. For cement units in Telangana and Andhra Pradesh, the outlook looks even more promising in view of the advent of the new capital of Andhra Pradesh and the projects for housing announced by the State Governments.

E. RISKS AND CONCERNS.

Your Company does not perceive any serious risks and concerns apart from the normal business risks connected with the industries in which it operates.

F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY.

The Company has proper and adequate systems for internal controls in place. The Internal Auditors of the company conduct the internal audit across all plant locations of the company. Statutory Auditors of the company independently examine the adequacy of the internal control procedures commensurate with the size of the company. Both these Auditors attend the audit committee meetings and exbrss their opinion on issues of concern. The Management continuously reviews the internal control systems and procedures to ensure orderly and efficient conduct of business. Emphasis on internal controls brvails across functions and processes covering the entire gamut of activities including finance, supply chain, sales, distribution, marketing etc

G. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE.

This aspect has been covered in the analysis of the Segment-wise performance in the brvious paragraphs.

H. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF

PEOPLE EMPLOYED.

The senior management team has been strengthened with the recruitment of additional personnel to provide leadership below the executive director level. The Company has cordial relations with employees and staff. As on 31st March 2015, the company has 663 employees working in its factories and various offices.

I. CAUTIONARY STATEMENT

Some of the statements made in this Report are forward looking, based on the perceptions and views of the management. The projections or expectations are subject to market uncertainties and vicissitudes. Shareholders and investors are advised to form their own opinion, and management assumes no responsibilities for the variances if any in the actual scenario emerging.

Your Company is conscious that it is an integral part of the society at large, and it has a responsibility to contribute to the general welfare of the society to which it belongs. Right from its inception, your company has been actively engaged in efforts to improve the quality of life in the contiguous localities. The focus of your Company has mainly been in the fields of education and training, and the health needs of the society surrounding its plant locations.

Inspite of the resource crunch, the ongoing CSR activities are being sustained and improved. The activities are briefly summarized below:

EDUCATION

NCL has established Elementary and High School to cater to the educational needs of nearby tribal villagers up to a radius of 8 km.

The education provided is absolutely free to tribal children without charging any fees. In addition, the company also extends subsidized transportation to the tribal children to facilitate their attending the classes. 319 out of the school strength of around 600 are tribal children.

The school is equipped with digital smart classes to impart teaching with latest teaching aids. The school has teaching strength of 26.

Children from the school including tribal children got admission in brstigious institutions like I.I.I.T and Indian Institute of Science & Technology, Kolkata.

There is a demand for setting up a Junior College to provide facilities for further education, which is being considered by the Company.

The total expenditure for the Education and related activity during the year 2014-2015 was Rs.44.47 Lakhs.

HEALTHCARE

The Company has set up a regular well equipped five bed hospital, manned by qualified and experienced medical and nursing staff. This caters to the healthcare needs of the nearby villages and also residents within a radius of 8 kilometers around the plant site.

On an average around 1300 local villagers avail free Out Patient facility every month. Wherever possible, free medicines are provided by the company to the patients.

Specialists from various faculties visit the hospital every week to provide medicare to the patients. In addition, specialist doctors from super specialty hospitals from Hyderabad visit the hospital once in a month.

In addition, your Company organizes several medical and health camps each year in surrounding villages to provide health care and to improve the awareness of health and sanitation among villagers. During the year under review, your company conducted 40 such camps including dental, pulse polio, diabetic screen, DEC tablets distribution, E.N.T. etc. NCL is also conducting blood donation camps on special occasions like annual day, world health day etc. NCL engaged child specialist and gynecologists on retainer basis to visit the health center to provide free consultation for the benefit of villagers. Best Doctor award in Nalgonda district given to NCL Health Center on the occasion of Republic day and World T.B. day. Ambulance Services is also provided by the Company to the local community.

ENVIRONMENT

A plantation drive was undertaken in and around NCL plant locations to convert areas in to green zones. Besides providing clean drinking water to staff quarters located in plant areas, a separate Sewage Treatment Plant (STP) was set up near the plant area located at Mattapalli village and Poantasahib to treat the sewage water coming out from staff quarters and use the recycled water to plantation areas to grow it as lush greenery and to balance ecology and environment. Purified drinking water is supplied to remote areas in nearby villages / thandas.