BF Investment Ltd Management Discussions

The Board takes pleasure in presenting your Companys fifth Annual Report for the year 2013-14 along with the compliance report on corporate governance. This Chapter on Management Discussion and Analysis forms a part of the compliance report on Corporate Governance.

Economic Performance :

India, Asias 3rd largest economy has been struggling to recover from a stagflation - type situation where economic growth has been stuck below 5 % for past several quarters while prices continue to rise at a fast pace. Elevated prices and a slowing economy have pressured household budgets and company profits alike hitting consumer demand as well as corporate profits.

Hail and heavy rains in the recent past have damaged crops which would result in a spike in food prices. Also an uncertain outlook for this summers monsoon due to El Nino weather pattern is a major cause of concern.

Hopes of an economic revival have attracted substantially large capital inflows, trigerring a rally in the countrys financial markets. The BSE index is already the best performing equity index in Asia this year. The Indian Rupee too, had recently hit an eleven month high to the dollar.

Economic Outlook :

A decisive mandate in the recently concluded elections will speed up the resolution of policy bottlenecks, hasten pending reforms, improve the private sector sentiment and lay the foundation for Indias entry into a phase of healthier growth.

Investment would recover as projects cleared by government get implemented. Firming external demand would boost exports, while rise in rural income coupled with decline in inflation can boost consumption. Implementing the proposed inflation targeting framework will help anchor price expectations and would improve business sentiment. Implementing the pending tax reforms and changing the spending mix away from energy subsidies towards better targeted social and economic infrastructure investment will lead to a better consolidation of the fiscal deficit which has already narrowed.

Reforming labour regulations and improving education and training systems would also promote growth and help create better quality jobs.

Business Overview

The Company continues to hold various investments in Kalyani Group companies and expects to earn reasonable returns on the same. The performance of your Company largely depends on the performance of the entities in which it holds investments. Your Company, therefore, closely monitors the working of all these entities.

Internal Control and Internal Audit System.

The Company has adequate internal audit and control system commensurate with its size and nature of business. The audit and control are as per the prevailing Laws and Company Policies. The Audit Committee appointed by the Board selectively reviews its adequacy, addresses the significant findings, and follow up needs on such issues are given top priority and implemented suitably.

CAUTIONARY STATEMENT

Statements in this management discussion and analysis describing the Companys objectives, projections, estimates and expectations may be forward looking statements within the meaning of applicable laws and regulations. The statements may also be on source based information. Actual results might differ substantially or materially from those expressed or implied. Important developments that could affect the Companys operations include a downtrend in the industry-global or domestic or both, significant changes in political and economic environment in India, tax laws, litigations, labour relations and interest costs.