DIRECTORS' REPORT

To

The Members,

The Directors have pleasure in presenting before you the Annual Report of the Company together with the Audited Statements of Accounts for the year ended 31st March, 2015.

REVIEW OF OPERATIONS :

During the year 20l4-l5, the growth in operating income and profitability of construction companies remained muted which implies that execution is yet to pick up in a meaningful manner. This can be partly attributed to stretched financial position of many construction companies which has constrained resources for speeding up execution. The improvement in liquidity profile and credit metrics of construction companies will take some more time and will be subject to improvement in working condition.

The construction/infrastructure sector is likely to get major boost from the Government's focus on development of infrastructure in India. With the political stability, sharper focus on infrastructure development and improvement in economy, new projects announcements by both the public and private sector are likely to pickup in FYI6. The Budget 20l5 has taken a pro-growth stance and it does appear that the government is keen to expedite the growth process by directly contributing to investment. In the Budget the government announced increase in investment in infrastructure by Rs.70,000 crores for 2015-16 and the allocation in the roads sector has been increased by Rs. 14,000 crores and that in railways by Rs.10,000 crores. Therefore that the recovery in the construction sector is certain but expected to be gradual linked to policy measures of the government.

During the year under review the company turnover has been declined to Rs. 1601.14 crores from Rs. 1812.53 crores in the previous year. The turnover is declined during the year 20l4-l5 mainly due to slow progress of the road projects in the north-east sector and held up irrigation projects in the Telangana State for technical/political reasons and land acquisitions issues. The EBITDA margins have decreased to 13.20% as compared to 15.00% in the previous year and PAT margin have decreased to l.37% as against 2.62% in the previous year. The decrease in profit margins is due to fixed overheads such as financial cost, work expenses and other expenses vis-a-vis lower level of revenue.

Future Outlook :

The Company outstanding order book as on 3lst March 20l5 is of Rs.6,200 crores and so far during the current year company has short listed as lowest bidder for new road orders valued about Rs. 4,875 crores. The total order bookincluding new works is about Rs. ll,075 crores. The strong order book coupled with the future tenders the company planning to bid will give major boost to the company in terms of revenue and profitability in the coming time.

DIVIDEND:

Despite the Difficult economic conditions your directors are pleased to recommend a dividend of Rs.l.00 per equity share (l0%) of the face value of Rs.l0/- for the period ended 3lst March, 20l5.

The dividend, subject to approval at the AGM on 28th day of September, 2015, will be paid to the shareholders; whose names appear on the Register of Members on 22nd September, 20l5.

It is proposed to transfer Rs.500.00 Lakhs to the General Reserves of the Company from the current year profits.

SHARE CAPITAL

The paid up Equity Share Capital of the Company has been increased from Rs. 30.22 Crs to Rs. 33.83 Crs pursuant to allotment of 36,04,000 equity shares of the company to Foreign Institutional Investors (deemed FPI) by way of Preferential Issue.

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY:

There are no material changes and commitments affecting Financial position of the company between the end of the financial year to which these statements relate and the date this Board's Report.

There is no change in the nature of business of the Company during the year under review.

BOARD MEETINGS:

The Board of Directors met 8 times in the Financial Year 2014-15 on 05th Day of May 2014, 29th Day of May 2014, 26th Day of July 2014, 14th of August 2014, 03rd of September 2014, 07th of November 2014, 30th December 2014, 14th of February 20l5.

DIRECTORS AND KEY MANAGERIAL PERSONNEL :

During the year under review, the Company has re-appointed Mr. T. V Sandeep Kumar Reddy as Managing Director of the Company for a further period of five years w.e.f 01.10.2014 and Shri. V L. Moorthy, Shri. G. Siva kumar Reddy and Shri. CH. Hari Vittal Rao as Independent Directors for a term of 5 years (Second term) by way of special resolution as per the provisions of Section l49 of the Companies Act, 20l3.

The Company has received necessary declaration from each Independent Director of the Company under Section 149(7) of the Companies Act, 2013 that the Independent Directors of the Company meet with the criteria of their Independence laid down in Section l49(6).

COMPOSITION OF AUDIT COMMITTEE:

The Audit Committee of the Board of Directors is as follows:

Mr. Ch Hari Vittal Rao - Chairman Dr. V. L. Moorthy - Member Mr. G Siva Kumar Reddy - Member

POLICY LAID DOWN BY THE NOMINATION AND REMUNERATION COMMITTEE FOR REMUNERATION OF DIRECTORS, KMP & OTHER EMPLOYEES:

The Remuneration policy of the Company is performance driven and is structured to motivate Employees. recognize their merits and achievements and promote excellence in their performance. The Nomination, Remuneration and Evaluation Policy of the company is enclosed at Annexure-I of this report.

Manner in Which Formal Annual Evaluation has been made by the Board of its Own Performance and that of its Committees and Individual Directors:

Pursuant to the provisions of the Companies Act 20l3 and Clause 49 of the Listing Agreement, the Board has carried out evaluation of (i) its own performance, (ii) the directors individually and (iii) working of its Committees. The manner in which the evaluation was carried out as detailed below:

(a) Nomination & Remuneration Committee: Pursuant to the provisions of the Companies Act 20l3 and Clause 49 of the Listing agreement, the Nomination and Remuneration Committee at its meeting held on l4.02.20l5 formulated the criteria for evaluation of directors and evaluated every director. A structured questionnaire was prepared after taking into consideration various parameters such as attendance and participation in meetings, monitoring corporate governance practices, independence of judgment, safeguarding the interests of the company etc., and accordingly the evaluation was made. The Members of the Committee evaluated the individual directors.

The Nomination and Remuneration Committee decided that since the performance of the directors has been excellent, it is decided to continue with the term of the directors, the Managing Director and the Executive Director.

(b) Separate Meeting of Independent Directors: The Independent directors of the Company at its meeting held on 14.02.2015 (a) reviewed the performance of the non-independent directors and Board, (b) reviewed the performance of the Chairperson of the Company and (c) assessed the quality, quantity and timeliness of flow of information between the company management and the Board. All the Independent Directors except Dr. V.L. Moorthy as on 14.02.2015 attended the meeting.

A structured questionnaire was prepared after taking into consideration various parameters such as attendance and participation in meetings, monitoring corporate governance practices, independence of judgment, safeguarding the interests of the company etc., and accordingly, the evaluation was made. The Members of the Committee evaluated the non-Independent directors.

The Independent Directors decided that since the performance of the Non-Independent Directors (including Managing Director and Whole time Director) is excellent, the term of their appointment be continued.

The Independent Directors after review of the performance of the Chairperson decided that the Chairperson has good experience, knowledge and understanding of the Board's functioning and his performance is excellent. The Independent Directors decided that the information flow between the Company's Management and the Board is excellent.

(c) Evaluation by Board: The Board has carried out the annual performance evaluation of its own performance, the Directors individually (excluding the director being evaluated) as well as the evaluation of the working of its Committees. A structured questionnaire was prepared after taking into consideration various aspects of the Board's functioning such as adequacy of the composition of the Board and its Committees, effectiveness in developing Corporate governance structure to fulfill its responsibilities, execution and performance of specific duties etc. The Board decided that the performance of individual directors, its own performance and working of the committees is excellent.

DIRECTOR'S RESPONSIBILITY STATEMENT:

In pursuance of section 134 (5) of the Companies Act, 2013, the Directors hereby confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) the directors, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively

SUBSIDIARIES COMPANIES, ASSOCIATES AND JOINT VENTURES:

The Company has six subsidiary companies (including step down subsidiaries) as on 31st March, 2015 as per the Companies Act, 2013.

As per the provisions of Section 129 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, a separate statement containing the salient features of the financial statements of the subsidiary Companies/ Associate Companies/Joint Ventures is prepared in Form AOC-1 are given in Annexure- II.

The Company will make available the Annual Accounts of the subsidiary companies and the related information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept opened for inspection by any member at the Registered office of the Company and that of the respective subsidiary companies.

The company has adopted the policy for determining 'material' subsidiaries and the same has been placed on the website of the company at <http://www.gayatri.co.in/Investors/Corporate> Governance/Policies.

EXTRACT OF ANNUAL RETURN:

As required pursuant to section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in MGT 9 as a part of this Annual Report in- Annexure III.

CONSOLIDATED FINANCIAL STATEMENTS

The Consolidated Financial Statements of the Company prepared in accordance with relevant Accounting Standards (AS) viz. AS 21, AS 23 and AS 27 issued by the Institute of Chartered Accountants of India form part of this Annual Report.

STATUTORY AUDITORS AND THEIR REPORT:

The Auditors, M/s. M O S & Associates LLP Chartered Accountants, Hyderabad retire at the ensuing Annual General Meeting and, being eligible; offer themselves for reappointment for a period of one year from the conclusion of this Annual General Meeting [AGM] till the conclusion of next AGM. Your Board of Directors have recommended their reappointment based on the recommendation of the Audit Committee to the members for their approval at the forthcoming Annual general meeting for a term of one year till the conclusion of the next AGM.

The Auditors Report to the members of the Company on the financial statements for the Financial Statements for the financial Year ended 31st March 2015 forming part of this report does not contain any Qualifications(s) or adverse observations.

SECRETARIAL AUDIT:

As per the provisions of the Section 204(1) of the Companies Act, 2013, the Company has appointed Mr. Y. Koteswara Rao, Practising Company Secretary to conduct Secretarial Audit of the records and documents of the Company The Secretarial Audit Report for the Financial Year ended 31st March, 2015 in Form No MR-3 is annexed to the Directors Report - Annexure - IV and forms part of this Report. The Secretarial Auditors' Report to the Members of the Company for the Financial Year ended March 31, 2015 does not contain any qualification(s) or adverse observations

DISCLOSURES:

a) Deposits

Company has not accepted any deposits covered under Chapter V of the Companies Act, 2013

b) Conservation of energy

The Company's main line of activity is civil construction which is not power intensive. However the Company is taking all efforts to conserve the usage of power.

(i) Use of alternate sources of energy is not applicable to the Company.

(ii) Capital investment on energy conservation equipment for its main line of activity is not applicable to the Company.

c) R & D Technology absorption

The Company main line of activity is civil construction and hence R &D and technogy absorption is not applicable to the Company.

d) Foreign exchange earnings - NIL

DETAILS OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS:

The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business including adherence to the Company's policies and internal financial controls laid down by the Company.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. Also, pursuant to Clause 32 of the Listing Agreement, the particulars of Loans/Advances given to Subsidiaries have been disclosed in the notes to the Financial Statements.

MANAGEMENT DISCUSSION & ANALYSIS:

Management Discussion and Analysis Report is annexed which forms part of this Report as Annexure -V

RISK MANAGEMENT POLICY:

The Company has been addressing various risks impacting the Company and developed risk policy and procedures to inform Board members about the risk assessment and minimization procedures.

WHISTLE BLOWER POLICY/VIGIL MECHANISM:

Pursuant to Section 177 of the Companies Act, 2013 and the Rules framed there under and pursuant to the provisions of Clause 49 of the Listing Agreement entered into with the Stock Exchanges, the Company has established a mechanism through which all the stakeholders can report the suspected frauds and genuine grievances to the appropriate authority. The Whistle Blower Policy which has been approved by the Board of Directors of the Company has been hosted on the website of the Company at <http://www.gayatri.co.in/Investors/Corporate> Governance/Policies.

DISCLOSURE AS PER SECTION 22 OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

Pursuant to the requirements of Section 22 of Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 read with Rules thereunder, the Company has not received any complaint of sexual harassment during the year under review.

CORPORATE SOCIAL RESPONSIBILITY POLICY:

The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure-VI of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 20l4.The policy is available on the website of the Company at <http://www.gayatri.co.in/Investors/Corporate> Governance/Policies.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant & material orders passed by the Regulators / Courts which would impanct the going concern status of the Company and its future operations.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

All related party transactions that were entered during the financial year were in the ordinary course of the business of the Company and were on arm's length basis. There were no materially significant related party transactions entered by the Company during the year with Promoters, Directors, Key Managerial Personnel or other persons which may have a potential conflict with the interest of the Company. The policy on dealing with Related Party Transactions are disseminated on the website of the company at <http://www.gayatri.co.in/Investors/> Corporate Governance/Policies.

FIXED DEPOSITS

Your Company has not accepted or renewed any deposit from public during the year under review.

COST AUDIT:

M/s N.S.V. KRISHNA RAO & Co. Cost Auditors were appointed as cost auditor to audit the cost records of the Company for the F.Y 2014-15 and re-appointed for the Financial Year 2015-16.

PARTICULARS OF EMPLOYEES:

Details in respect of remuneration paid to employees as required under Section 197 (12) of the Companies Act, 2013 , read with Rule 5(2) & (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended forms part of this report. In terms of Section 136 of the Companies Act, 2013 the same is open for inspection at the Registered Office of the Company. Copies of this statement may be obtained by the members by writing to the Company Secretary at the Registered Office of the Company

The ratio of the remuneration of each Director to the median employee's remuneration and other details in terms of Section l97(l2) of the Companies Act, 20l3 read with Rule 5(l) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 20l4, are enclosed in Annexure - VII and forms part of this Report.

LISTING WITH STOCK EXCHANGES:

The Company confirms that it has paid the Annual Listing Fees for the year 20l5-20l6 to NSE and BSE where the Company's Shares are listed.

CORPORATE GOVERNANCE AND SHAREHOLDERS INFORMATION:

Your Company has taken adequate steps to adhere to all the stipulations laid down in Clause 49 of the Listing Agreement. A report on Corporate Governance is included as a part of this Annual Report (Annexure -VIII). Certificate from the Practicing Company Secretary of the company confirming the compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is attached to this report.

ACKNOWLEDGEMENT:

Your Directors would like to acknowledge and place on record their sincere appreciation to all stakeholders - clients, financial institutions, Banks, Central and State Governments, the Companies' valued investors and all other business partners for their continued co-operation and excellent support received during the year.

Yours Directors recognize and appreciate the efforts and hard work of all the employees of the Company and their continued contribution to its progress.

For and on behalf of the Board

(T. INDIRA SUBBARAMI REDDY)

Chairperson

(T.V.SANDEEP KUMAR REDDY)

Managing Director

 (P. SREEDHAR BABU)

Chief Financial Officer

( I.V. LAKSHMI)

Company Secretary &Compliance Officer

 Place : Hyderabad

Date : 3rd September, 2015