Chairman's Communiqué

Dear Shareholders,

It hardly needs to be stated that India remains one of the most attractive economies in a slow-growth world. The government's focus on creating more infrastructure, attracting foreign direct investment (FDI), encouraging domestic entrepreneurship and driving rural income will augur well for the economy, going forward. Inflation, fiscal deficit and the current account deficit has also declined, rendering macro-stability for India at a time of global turbulence.

Goods and Services Tax (GST) benefit For Greenply the implementation of GST will address complexities and inefficiencies of the current indirect tax framework and result in greater market share. Currently, plywood dealers pay excise (12.5%) and VAT (12.5% in most states and 5% in the other states). However, they are not eligible to get any credit for excise duty paid, which in case of GST (one point tax) would be cenvatable (both central and state GST). Hence, it would result in reducing the tax burden eventually in the hands of the end consumer. Within the building material space, GST is likely to benefit the plywood sector the most, with over 75% of the industry being dominated by the unorganised industry. At present, the price differential between the organised and unorganised plywood varies between 15% and 20% in the premium plywood space. This, in turn, would improve the competitiveness of organised players and help it gain further market share. We have assumed that the unorganised player would continue to evade taxes post GST implementation, which may not be the case since the threshold for GST is likely to be much lower than the current threshold limit of Rs 1.50 crore for Excise Duty. In all probabilities, the cost for the unorganised player is also expected to move up due to likely non-avoidance of taxes, which is further likely to bring down the differential between a branded and an unbranded product. Besides, small manufacturers, who currently escape the excise net by maintaining a turnover below Rs. 15 million, are expected to fall into the GST ambit.

Encouraging performance We have delivered a stable performance during the year; and we expect to do even better, going forward. Both plywood and MDF segments have seen stronger growth and have contributed significantly to the top-line. Our continuing endeavour has been towards enriching our product mix; and this has enabled us to improve our gross margins. We will continue to invest in building our brand and maintaining a strong market share.

Strategy for sustainability We are promoting large scale clonal plantations of fast growing, short-rotation plywood species on marginal and degraded farm lands (that can be replenished) to meet our raw material requirements for the long-term. Such a strategy will not only reduce our dependence on overseas timber, but also bring down the logistics costs incurred in the procurement of local timber. In addition, we have commenced the clonal propagation of Melia Dubia, in collaboration with Rain Forest Research Institute. It serves as an excellent raw material for plywood production on account of its higher yield; it takes only six to seven years for it to get ready for harvest. It benefits the Company as well as the farm owners as they get better financial returns in a short gestation period.

Shareholder value Our strong fiscal position and efficient cost structure enable us to become a sustainable value creator for shareholders. We delivered a competitive total return to our shareholders both in the short and long-term. We completed a stock split of one equity share of a face value of Rs. 5 into 5 equity shares of a face value of Re. 1 each. We are making our shares more affordable to small investors; and enabling greater marketability and liquidity in the market. We also proposed a dividend of Re. 0.60 per share for 2015-16.

Over the last three decades, we have built a robust business model; and maintained a strong leadership position across product categories and markets. Going forward, rising disposable income, growing urbanisation and focus on aesthetics and urbane lifestyles will drive the off take of our products. We have had a fabulous journey so far. Since the very beginning, we have consistently set and met the highest standards in corporate governance and brand management. This has been possible owing to the dedication and commitment of our people. However, I must assure you that our best days are still ahead of us. I am grateful to all of you - our shareholders, employees, partners, customers, bankers and other associates - for your good wishes in all these years. I am confident that you will continue to support our vision, going forward.

Warm regards,

S. P. Mittal
Executive Chairman
(DIN: 00237242)