MANAGEMENT DISCUSSION AND ANALYSIS

FORWARD LOOKING STATEMENT

The report may contain forward looking statements, which describe company’s objectives, projections, estimates, expectations or brdictions within the applicable Securities, Laws and Regulations. The Company’s actual results, performance or achievements could thus differ materially from those projected in any such forward looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.

INDUSTRY OVERVIEW

The year 2015 has been a year when the Modi-led government unleashed a slew of initiatives that were directed at changing the landscape and ushering in a much-awaited revival of the infrastructure sector. Various initiatives have been taken to get the stressed roads sector to emerge again as a formidable sub-sector in infrastructure. These include greater emphasis on EPC projects and introduction of the hybrid annuity model for pursuing PPP projects. Also, there have been measures such as an easier exit policy, funding top-up to financially stressed developers and concession period elongation option for delayed projects.

For FY16, NHAI has awarded projects amounting to Rs 541 bn/4171 kms. The NHAI awarded EPC contracts worth Rs 358 bn/3017 kms, awarded BOT contracts worth Rs 108 bn/803 kms and awarded Hybrid Annuity contracts worth Rs 74 bn/351 kms. The government has set the target for construction of roads at 15,000 kms in 2016-17 from 6,300 kms in 2015-16. The award target has been increased to 25,000 kms from the brvious 10,000 kms. This is two-and-a-half time more than the target that was set in 2015-16. It has also set an all-time high target of constructing 41 kms of roads per day in 2016-17, up from the brsent rate of 17 kms/day.

BUDGET 2016-17 AIMS AT BIGGER BOOST TO ROAD AND HIGHWAYS

The government has announced a slew of measures to boost infrastructure and investment in the country, with a focus on roads and highways. The Union Budget 2016 has earmarked Rs 97,000 Crore for the roads and highways sector. Also, the target has been laid out to approve 10,000 kms of national highways in 2016-17. In addition, nearly 50,000 kms of State highways will also be taken up for up-gradation as National Highways. Further, the government has announced steps to re-vitalise PPPs which include:

Public Utility (Resolution of Disputes) Bill to be introduced during 2016-17 to streamline institutional arrangements for resolution of disputes in infrastructure related construction contracts, PPP and public utility contracts;

 Guidelines for renegotiation of PPP Concession Agreements to be issued; and ? New credit rating system for infrastructure projects to be introduced.

COMPANY OVERVIEW

Ashoka Buildcon Limited continues to be one of the leading infrastructure development Companies having a brsence in Eleven States. Your Company has strong in house integrated road infrastructure execution capabilities. Your Company develops and builds infrastructure facilities on: Design, Build, Finance, Operate and Transfer (DBFOT)basis in Highways sector; and Engineering, Procurement and Construction (EPC) basis in Highways and Power Sectors.

SUCCESSFUL PROJECT EXECUTION

Your Company has a proven track record of successful completion of Projects under both DBFOT and EPC basis. Your Company has successfully executed ~ 1,275 (EPC) + ~ 3,765 (DBFOT) Lane kms till date and currently executing another ~ 1,436 Lane kms.

Currently Projects on Design, Build, Finance, Operate and Transfer (DBFOT) Basis are under construction in the States of Tamil Nadu, Karnataka, Odisha and West Bengal.

KEY EVENTS DURING THE YEAR

? The Company has executed Road Projects worth Rs. 954.96 Crore and Power Transmission and Distribution Projects worth Rs. 819.13 Crore.

? During the year, ABL through its subsidiaries and SBI Macquarie, Consolidated 100% economic interest in the Jaora Nayagaon Road Project and now fully controls and operates the said project.

? During the year, one of its Subsidiary’s Associate Company viz. PNG Tollway Limited has given Notice of Termination for its BOT Concession Agreement with NHAI due to Event of Default of NHAI. The said Subsidiary Ashoka Concessions Limited holds 26% and 74% is held by the L&T group. The affairs of the Company are managed by L&T group. The SPV awaits the award of Termination and other claims on NHAI.

? Macquarie SBI Infrastructure Investments Pte. Limited (MSIIPL) and SBI Macquarie Infrastructure Trust (SMIT) invested balance Rs. 16 Crore during the year in Company’s subsidiary viz. Ashoka Concessions Limited, thereby completing the investment of Rs. 800 Crore as per the Shareholders Agreement.

ORDER BOOK

The Company’s Order Book as at March 31, 2016 stands at Rs. 4,111 Crore comprising of Rs. 3,291 Crore in Road sector.

INNOVATION, QUALITY AND ENVIRONMENT

The Company continues its focus on newer, innovative construction practices as well as ensuring high quality in its entire works. Your Company is also conscious of the threat posed by global warming to our planet and therefore takes its responsibility towards the environment seriously. In this regard, your Company has the following accreditations:

? Integrated Management System comprising of Certification of ISO 9001: 2008, ISO 14001: 2008 and OHSAS 18001: 2007;

? Environmental Management System ISO 14001: 2004;

? Occupational Health and Safety Management System 18001: 2007;

? Quality Management System ISO 9001 : 2008; and

? Green House Gases ISO 14064.1:2006 & ISO 14064.2:2006

RESOURCES AND LIQUIDITY

The Company raised Rs. 500 Crore through its maiden QIP Issue during the financial year by allotment 28,441,411 Equity Shares of Rs. 5/- each at a brmium of Rs. 170.80 and has ensured that funds are available to meet operational and strategic needs like capital investments and has tried to arbitrage on interest costs by accessing funds across various products and maturity profiles. The CRISIL rating of the Company is continued to be AA- and for short term A1+.

CHALLENGES RISKS & CONCERNS

? Industry/ policy risk: The Company’s business is highly dependent on road and bridge projects in India undertaken or awarded by governmental authorities and other entities funded by governments. Any change in government policies resulting in a decrease in the amount of road and bridge projects undertaken or a decrease in private sector participation in road and bridge projects adversely affects our business and results of operations. Our business may be affected by changes in interest rates, changes in Government policy, taxation, exchange rates and controls, social and civil unrest and political, economic or other developments in or affecting India.

? Project risk: Infrastructure projects involve agreements that are long-term in nature (as much as three years in EPC contracts and around 25 years in Design, Build, Finance, Operate and Transfer (DBFOT) road projects) All long term projects have inherent risks associated with them and involve variables that may not necessarily be within our control. These include inflation, interest rates movements, liquidity, commodity and oil prices, governance, construction delays, material shortages, unanticipated cost increases, cost overruns, inability to negotiate satisfactory arrangements with joint venture partners, and disagreements with our joint venture partners.

We are increasingly bidding for large-scale infrastructure projects. There are various risks associated with the execution of large-scale projects. Managing large-scale integrated projects may also increase the potential relative size of cost overruns and negatively affect our operating margins. In addition, we may need to execute large-scale projects through joint ventures with other companies, which expose us to the risk of default by our Joint Venture Partners.

? Traffic risk: The Company’s business depends substantially on accuracy of traffic estimates. Any material decrease in actual traffic volume and our forecast could have material adverse effect on cash flows, results of operation and financial condition.

? Input and labour cost risk: Cost of Input materials such as Bitumen depends upon the International Market for Oil. As Bitumen is a major raw material, any Change in the Oil prices affects the overall cost of the projects. The availability of labour for execution of projects is also a major risk factor.

HUMAN RESOURCES DEVELOPMENT

We believe that our continued success will depend on our ability to attract and retain key personnel with relevant skills and experience. The attrition rate among our top management has been negligible. The Company has robust process of human resource development. Ashoka Buildcon Limited, along with Subsidiaries, has 2565 employees at various levels. We have a HR Policy in place and encouraging working environment. The Company has continued to focus on various aspects like employee training, welfare and safety thereby maintaining a constructive relationship with employees.

FINANCIAL OVERVIEW OF THE CONSOLIDATED ACCOUNTS

1. The consolidated income for the year is Rs. 2,681.29 Crore as against Rs. 2,348.75 Crore in FY15.

a) The increase in income has been mainly on account of revenue from toll projects, which increased from Rs. 432.78 Crore in FY15 to Rs. 690.60 Crore in the current year, YoY growth of 60%. This increase has been on account of full year toll collection revenue from Sambalpur and Dhankuni Projects, higher traffic growth and increase in toll rates.

b) Construction revenue for the year is Rs. 1,712.11 Crore as against Rs 1,754.98 Crore in FY15. The decline has been due to delay in commencement of projects because of land possession challenges.

c) Income from sales activities increased from Rs 127.58 Crore to Rs. 194.82 Crore. This increase has been mainly on account of sale of land, share of revenue under joint development and sale of TDR. The other constituent of sale revenue is RMC sale which has marginally reduced from Rs. 99.04 Crore brvious year to Rs. 98.00 Crore in current year. d) Further, other income has increased from Rs. 29.03 Crore to Rs. 66.80 Crore mainly on account of increase in interest income, profit on redemption of Preference shares, provision written back and increase in miscellaneous income.

2. EBITDA, before exceptional items, increased to Rs. 810.26 Crore in FY16 from Rs. 502.99 Crore for FY15.

3. PAT (after adjustment of minority interest) has reduced from Rs. 81.48 Crore in FY15 to Rs. 58.45 Crore in FY16.

a. Debrciation cost has increased by 64% to Rs. 249.14 Crore in FY16 from Rs. 151.70 Crore in FY15, mainly on account debrciation on new projects (Sambalpur and Dhankuni) where expenses were charged for full year and on reassessment of useful life projects

b. Interest cost has increased by 65% to Rs. 447.78 Crore in FY16 from Rs 272.10 Crore in FY15, mainly on account of interest on project loans of the new projects as stated above.

c. FY16 PAT include write-off of investment of Rs. 57.02 Crore in PNG Tollway Limited, one of the Associate Companies, classified under exceptional item. The investment, advances and receivables provided/ written-off totals Rs 144.31 Crore out of which Rs 87.29 Crore were already considered under share of loss from associate up to the quarter ended December 31, 2015.

4. As at 31st March 2016, the Net Worth (including share of minority interest) stood at Rs. 2,368.29 Crore as against Rs. 1,861.67 Crore in brvious year. The Company did a QIP of Rs. 500 Crore in FY16.

5. The Gross Debt at 31st March 2016 stood at Rs. 4,277.69 Crore resulting in Debt/Equity ratio of 1.81: 1 which is well within acceptable standards of the industry