Management Discussion and Analysis

The Management Discussion and Analysis (MD&A) should be read in conjunction with the Audited Financial Statement of Welspun Enterprises Limited (Formerly known as Welspun Projects Limited) ("WEL' or the "the Company"), and the notes thereto for the year ended March 31, 2015. This MD&A covers WEL's financial position and operations for the year ended March 31,2015. Amounts are stated in Indian Rupees unless otherwise indicated.

Forward-Looking Statements

This report contains forward looking statements, which may be identified by their use of words like 'plans', 'expects', 'will', 'anticipates', 'believes', 'intends', 'projects', 'estimates', or other words of similar meaning. All statements that address expectations or projections about the future, including but not limited to statements about the Company's strategy for growth, product development, market position, expenditures, and financial results, are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statement, on the basis of any subsequent developments, information or events.

Business Overview

Welspun Enterprises Limited (WEL), part of the Welspun Group, is an operating Company as well as a holding company.The year of 2014-15 was a year of consolidation for the company. During the year, the company divested its DRI business; Welspun Maxsteel Limited. The company had identified this business as non-core and therefore exited the same. As part of further consolidation, pursuant to Scheme of Arrangement and Amalgamation made effective from May 11, 2015, the erstwhile Welspun Enterprises Limited, Welspun Infratech Limited, Welspun Plastics Private Limited and Welspun Infra Projects Private Limited were merged into the Company. This consolidation will enable the Company to better leverage the combined strengths of the entities, synergies arising out of consolidation of business such as, enhancement of net worth of the combined business to capitalise on future growth potential, optimal utilisation of resources, reducing operating and compliance cost and achieving operational and management efficiency. It will aid the Company to target opportunities which need large free cash and strong balance sheet. The merger has helped to consolidate and simplify corporate structure of WEL and its subsidiaries.

Macro-Economic Environment

In 2014, global economic recovery remained tepid and divergent across economies, with most emerging market economies experiencing slowdown. While advanced economies remained susceptible to the risk of deflation, inflationary brssures subsided in key emerging economies giving leeway for easing monetary policy. Global commodity prices continue to decline. Financial markets were buoyant but volatile in pricing in policy developments in major economies.

In the few years the Indian economy has experienced some moderation after a high growth trajectory achieved in early 2000s. Slow demand, financial crises in developed nations and domestic economy slowdown appeared to be some of the major setbacks for the country. However prudent regulatory and fiscal policies have helped in slow pickup in growth.

Moreover, India continues to be a favourable investment and trade destination globally. India's share in the global GDP climbed from 4% in 2000s to 6% in 2012 (Source : World Trade Report 2014). In the last decade, net capital inflows in the country grew at a CAGR of 14.4% reaching nearly USD 50 billion in 2013. India has ranked among the top 20 biggest exporters in 2013 and has ranked 19th biggest exporter in 2013, improving from 26th rank in 2008. In the last decade, the contribution of India's exports to its GDP has grown from 11.1% in 2003-04 to 17% in 2013-14.

The macroeconomic environment is expected to improve in 2015-16, with fiscal policy gearing to an investment-led growth strategy and monetary policy using available room for accommodation. The Reserve Bank's consumer confidence survey points to growing consumer optimism since June 2014, reflecting purchasing power gains arising from lower inflation as well as improved perception of income, spending and employment growth. Large declines in commodity prices and the benign inflation outlook for the near-term should provide a boost to growth. (Source: RBI)

Industry and Company overview

The Company's key activity is in the infrastructure business. Apart from that, the company holds equity investments in Welspun Energy Limited (renewable energy) and Welspun Natural Resources Private Limited (Oil and gas exploration).

Infrastructure

India has the second largest road network in the world at 4.7 million km. This network transports more than 60 per cent of all goods in the country and 85 per cent of India's total passenger traffic. Road activity has gradually increased over the years with the improvement in connectivity between cities, towns and villages in the country. With automobiles and freight movement also growing at a rapid rate, the necessity for a road network good enough to carry the traffic is paramount.

Understanding this need, the Government of India has set aside 20 per cent of the investment of US$ 1 trillion reserved for infrastructure during the 12th Five-Year Plan (2012-17) to develop the country's roads. The value of roads and bridges infrastructure in India is projected to grow at a compound annual growth rate (CAGR) of 17.4 per cent over FY12-17 to touch US$ 19.2 billion by 2017. The financial outlay for road transport and highways grew at a CAGR of 19.4 per cent in the period FY09-14, which is ample proof of the government's emphasis on roads. Around the same period, build-operate-transfer (BOT) projects have achieved a CAGR of 17.1 per cent over FY06-13.

The Indian government plans to develop a total of 66,117 km of roads under different programmes such as National Highways Development Project (NHDP), Special Accelerated Road Development Programme in North East (SARDP-NE), and has set an objective of building 30 km of road a day from 2016. Also, about two-thirds of NHDP road projects (ex-phase IV) have not been awarded as yet, thus offering a massive opportunity to private players in future.

An interesting opportunity which could come up in the near future in roads is hybrid annuity projects. This is an innovative model being discussed by the Government to reduce risk of private players and focus on early completion. The government is expected to provide support for 40% of the construction cost while the remaining 60% is expected to be arranged by the concessionaire. The government is expected to bear the traffic risk, by providing for any shortfall compared to the projected figures. There is expected to be a bonus on early completion as well as penalty on late completion of the project to incentivise speedy completion.

Apart from roads, water sector also provides a significant opportunity for private players. Per capita water availability in India fell from 1,820 cubic metre in 2001 to 1,544 cubic metre in 2012. It is estimated that if the current pattern of demand continues, about half of the demand for water in the country will be unmet by 2030. This suggests that India is moving quickly from a "water-stressed" to a "water-scarce" country. Hence there is considerable emphasis from the government for water supply, water treatment as well as sanitation projects. This also suggests significant opportunity in laying, operating and maintaining cross-country transmission pipelines.

WEL has developed and operates PPP projects in various sectors like roads, water, and urban infrastructure. In the highway sector alone, the Company has successfully completed six BOT (Toll) Road projects with a total length of over 500 km. Going forward, the Company will continue to focus with caution on project development activities. Key focus areas will be infrastructure development in niche areas such as water transmission and processing, roads as well as O&M of existing assets.

Oil and Gas Exploration Industry

According to the OPEC World Oil Outlook report, global oil consumption is projected to reach 111 MMb/d by 2040 from 90 MMb/day in 2013. While OECD consumption is projected to fall in the period from 2013 to 2040, non-OECD consumption is expected to more than offset this decline. China, India and the Middle East are expected to be the largest contributors to the growth in oil consumption.

The global outlook for gas appears to be bright over the coming decades, as demand is expected to increase by 50% in the period from 2013-2035 reaching 169 trillion cubic feet in 2035. New sources of gas, both conventional and unconventional, are expected to bring greater diversity to global supply. Changes in the list of major LNG suppliers will result in creation of new linkages between regional gas markets, notably between those of North America and the Asia-Pacific, narrowing to a degree the wide regional gas price differentials that exist today.

India is the 4th largest consumer of energy in the world after USA, China and Russia accounting for around 4.6% of world energy consumption. In this, share of Natural Gas in Indian Energy basket to increase from 10% to 20% by 2025. Despite the increase in domestic gas production, dependency on imported gas is expected to increase substantially. LNG, which currently constitutes 30% of the natural gas consumption in the country, is expected to have a share of more than 50% by 2025. Backed by new oil fields, domestic oil output is anticipated to grow to 1 MMBPD by FY16. With India developing gas-fired power stations, consumption is up more than 160 per cent since 1995 and is likely to expand at a CAGR of 21 per cent during FY08-17. (Source : EIA)

The oil and gas sector has been identified as one of the six core industries in India. It is of strategic importance and plays a pivotal role in influencing decisions across other important spheres of the economy. In 1997-98, the New Exploration Licensing Policy (NELP) was envisioned to deal with the ever-growing gap between demand and supply of gas in India. As per a recent report, the oil and gas industry in India is anticipated to be worth US$ 140 billion in 2015. With India's economic growth closely linked to energy demand, the need for oil and gas is projected to grow further, rendering the sector a fertile ground for investment.

Welspun Natural Resources Private Limited (WNRPL) rebrsents Welspun Group's interests in the oil and gas exploration business. The Company owns 35% stake in Adani Welspun Exploration Limited, a joint venture with the Adani group. WNRPL has interest in various oil & gas exploration blocks in India and abroad, either directly or through its subsidiaries or JVs. Drilling is underway in these blocks.

As a growth strategy, the Company is looking at potential opportunities in operating oil fields. With the recent oil price fall, O&G producers with high debt levels and low hedges could be under distress. This provides opportunity to acquire stake in producing assets with positive cash flows and future growth potential, at reasonable valuations. The focus geographies would be USA and Canada which have a stable regulatory regime in the O&G space.

Renewable Energy/ Power

The power sector in India is undergoing a significant change that is redefining the overall industry outlook. The Planning Commission's 12th Plan expects total domestic energy production to reach 669.6 million tonnes of oil equivalent (MTOE) by 2016-17 and 844 MTOE by 2021-22. As of April 2014, total thermal installed capacity stood at 168.4 Gigawatt (GW), while hydro and renewable energy installed capacity totalled 40.5 GW and 31.7 GW, respectively.

The Government of India has identified the power sector as a key sector of focus to promote sustained industrial growth. The Indian power sector has an investment potential of Rs. 15 trillion (US$ 237.35 billion) in the next 4-5 years with immediate goal of the government to produce two trillion units (kilowatt hours) of energy by 2019. This will mean doubling the current production capacity in order to achieve provide 24x7 electricity for residential, industrial, commercial and agriculture use.

There is a strong emphasis on developing renewable energy sources to meet the expected increase in demand. Jawaharlal Nehru National Solar Mission (JNNSM) was launched in 2009 with a target for Grid Connected Solar Projects of 20,000 MW by 2022. In the last two to three years, the sector has witnessed rapid development with installed solar capacity increasing rapidly from 18 MW to about 3800 MW during 2010 - 15. The price of solar energy has come down significantly from Rs.17.90 per unit in 2010 to under Rs.7 per unit, thereby reducing the need of grants and subsidies for solar power. With technology advancement, solar power is expected to reach grid parity by 2017-18. These developments have prompted the Indian government to increase its target of Grid Connected Solar to 100,000 MW (100GW) by 2022 from the brsent target of 20,000 MW. In addition to this, the government is also targeting 60GW of wind capacity by 2022.

The Company holds a significant minority stake (~20%) in Welspun Energy Private Limited (WEPL), which is in the development of renewable energy projects. WEPL is one of the leading renewable energy companies in India, with brsence in the solar and wind energy sectors. It has one of the largest operational capacities in solar energy in the country of close to 400 MW. It also has operational wind capacity of 50 MW. The Company plans to grow its portfolio to more than 5,000 MW of clean energy by 2019.

HUMAN RESOURCES POLICY

Human resource is the biggest asset of the Company and it remains one of the core focus areas of the Company. The Management of the Company lays special emphasis on the welfare of its employees and training, welfare and safety measures are undertaken on a regular basis. The Company has a well qualified and experienced team of professionals with a dedicated human resource department, which is competent to deliver when needed. The Company aims to provide a congenial work environment that respects individuals and encourages professional growth, innovation and superior performance.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Management of the Company maintains adequate internal control system which is designed to provide reasonable assurance that assets are safeguarded and transactions are rightly executed and recorded in accordance with management authorization and accounting policies.

All the records are adequately maintained for brparation of financial statements and other financial information. Apart from internal controls, the Company also audits the efficiency and security of its operations, its information technologies and data, in accordance with the global standards. The Audit Committee reviews internal audit reports as well as the internal control systems and financial disclosures.

DISCUSSION OF FINANCIAL PERFORMANCE

This discussion on Financial Analysis is for consolidated financials of the Company. Pursuant to Scheme of Arrangement and Amalgamation made effective from May 11, 2015, the erstwhile Welspun Enterprises Ltd., Welspun Infratech Limited, Welspun Plastics Private Limited and Welspun Infra Projects Private Limited were merged into the Company. Hence, the FY15

numbers are not comparable to the FY14 numbers. During the year, the company divested its DRI business- Welspun

Maxsteel Ltd on 31st October 2014. The continuing financials shown below is without the DRI business.

The total revenue from operations in the continuing business post divestment from the DRI business stood at Rs. 3,039 million in FY15; Reported EBITDA at Rs. 777 million and profit before tax and before exceptional items at Rs. 40 million.

The total networth of the Company stands at Rs. 15,149 million at the end of FY15. Gross debt attributable to Welspun stands at Rs. 2,759 million. Total cash and cash equivalents (including ICDs) stands at Rs. 7,859 million. Therefore, the Company has a Net Cash position of Rs. 5,100 million at the end of the year.

Impact of Business Re-organisation on the Financials

Erstwhile Welspun Enterprises Ltd. was formed by the demerger of the non-pipe businesses of Welspun Corp Ltd through a scheme of demerger which came in to effect in January 2014. On account of the demerger, Welspun Enterprises had a gross debt of approx. Rs. 17 bn and cash balance of approx. Rs. 10 bn resulting in a net debt of approx. Rs.7 bn. Since then, the Company has continuously worked on reducing debt, divesting loss making businesses and strengthening balance sheet through consolidation efforts.

As a first step, the Company sold its ~40% stake in Leighton Welspun Contractors Pvt. Ltd. in February 2014. As a result of this transaction, the net debt of the company was reduced by around Rs. 5 bn.

In October 2014, the Company divested its DRI business - Welspun Maxsteel Ltd. This further reduced the net debt of the Company by around Rs.8 bn.

The Company has made further investment of Rs. 1.5 bn in O&G business during this period. Finally, Welspun Enterprises Ltd., Welspun Infratech Ltd., Welspun Plastics Private Ltd. and Welspun Infra Projects Private Ltd. have been merged with Welspun Projects Ltd., through the Scheme of Amalgamation and Arrangement made effective from May 11, 2015.

The resultant company has a stronger balance sheet with cash and cash equivalents of approx Rs. 8 bn and net worth of around Rs. 15 bn. This sets the foundation for strong future growth by targeting opportunities which require free cash and need strong net worth.