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Essar Oil Limited Essar Oil Limited BOARD OF DIRECTORS (As on 30th August, 2007) Shashi
Essar Oil Limited
Essar Oil Limited
BOARD OF DIRECTORS (As on 30th August, 2007)
Shashi Ruia
Ravi Ruia
Prashant Ruia
Anshuman Ruia
Awadhesh N. Sinha
Hari L. Mundra
Suresh Mathur
Dilip J. Thakkar
Chairman
Vice Chairman
Dy. Managing Director & Director (Finance)
Wholetime Director
K.
N. Venkatasubramanian
Dr. G. Goswami
N.S. Kannan
Sanjeev Ghai
V.
K. Sinha
Nominee of IDBI Ltd.
Nominee of ICICI Bank Ltd.
Nominee of IFCI Ltd.
Nominee of LIC of India
COMPANY SECRETARY
Sheikh S Shaffi
BANKERS
ICICI Bank Ltd.
IDBI Bank Ltd.
State Bank of India
Punjab National Bank
Indian Overseas Bank
Oriental Bank of Commerce
Syndicate Bank
Indian Bank
State Bank of Patiala
Bank of Baroda
HDFC Bank Ltd.
Central Bank of India
Allahabad Bank
State Bank of Saurashtra
TRANSFER AGENTS
AUDITORS
M/s. Deloitte Haskins & Sells, Mumbai
REGISTERED OFFICE
Khambhalia Post, Post Box No. 24
Dist.: Jamnagar - 361 305, Gujarat
Tel.: 02833 - 241444
Fax: 02833-241616 / 241414
E-mail : eolinvestors@essar.com
M/s. Sharepro Services (India) Pvt. Ltd.
Unit: Essar Oil Limited
Satam Estate, 3rd Floor
Above Bank of Baroda
Cardinal Gracious Road
Chakala, Andheri (East)
Mumbai - 400 099
Tel.: 022-28215168
Fax: 022-28375646
Email: sharepro@vsnl.com
Website:http://www.shareproservices.com
CORPORATE OFFICE
Essar House
Post Box No. 7945
11, Keshavrao Khadye Marg,
Mahalaxmi, Mumbai - 400 034
Tel.: 022-66601100 Fax : 022-24954281
Website : http://www.essar.com
SHARES LISTED AT
Bombay Stock Exchange Ltd.
1st Floor, Rotunda Bldg., P.J. Towers
Dalal Street, Mumbai - 400 023
National Stock Exchange of India Ltd.
Exchange Plaza, 5th Floor, Plot No. C/1
G Block, Bandra-Kurla Complex
Bandra (E), Mumbai - 400 051
2
NOTICE NOTICE is hereby given that the Seventeenth Annual General Meeting of the members of
NOTICE
NOTICE is hereby given that the Seventeenth Annual
General Meeting of the members of ESSAR OIL LIMITED
will be held at the Registered Office of the Company at
Khambhalia Post, (40 th Km. stone on Jamnagar-Okha
Highway) Dist.: Jamnagar - 361305, Gujarat on Saturday,
the 29 th September, 2007 at 11:30 a.m. to transact, with or
without modifications, as may be permissible, the following
business:
ORDINARY BUSINESS:
1. To receive, consider, approve and adopt the Balance
Sheet as at 31 st March, 2007, the Profit & Loss Account
for the financial year ended on that date and the reports
of the Board of Directors and Auditors thereon.
2. To appoint a Director in place of Shri Ravikant N Ruia
who retires from office by rotation and being eligible, offers
himself for reappointment.
3. To appoint a Director in place of Shri Awadhesh N Sinha
who retires from office by rotation and being eligible offers
himself for reappointment.
compulsorily convertible/redeemable Foreign Currency
Convertible Bonds (FCCBs) and / or Global Depository
Receipts (GDRs) and / or American Depository Receipts
(ADRs) and / or Fully / Partially Convertible Bonds / Loans
and / or any other instruments / securities in the nature of
Shares and / or warrants, naked or otherwise, convertible
into Shares or otherwise, either in registered or bearer
forms, and / or any such security convertible into equity
shares with face value of Rs.10/- each or otherwise
(hereinafter referred to as ‘financial instruments’) or any
combination of the financial instruments in the
International Market, aggregating to an amount not
exceeding USD750,000,000/- (United States Dollars
seven hundred fifty million only) to Essar Energy Holdings
Limited (formerly Prime Finance Company Limited),
Mauritius, the existing Promoters and/or its associates /
nominees / group companies/ persons acting in concert,
whether or not they are members of the Company, on
preferential issue basis, to the extent and in the manner
as may be decided by the Board in this behalf.”
“RESOLVED FURTHER THAT :
4. To appoint M/s. Deloitte Haskins & Sells, Chartered
Accountants, Mumbai, as Auditors to hold office from the
conclusion of this Annual General Meeting until the
conclusion of the next Annual General Meeting and to
authorise the Board of Directors to fix their remuneration.
i. The equity shares issued upon conversion of financial
instruments, so issued and allotted shall rank pari-
passu with the existing equity shares of the Company;
SPECIAL BUSINESS:
5.
To consider and, if thought fit, to pass the following
resolution as a Special Resolution:
“RESOLVED THAT in accordance with the provisions of
sections 81, 81(1A) and other applicable provisions, if any,
of the Companies Act, 1956 and enabling provisions of
the Memorandum and Articles of Association of the
Company, the Listing Agreements entered into by the
Company with the Stock Exchanges, where the shares of
the Company are listed and in accordance with the
guidelines issued by the Government of India (GOI), the
Reserve Bank of India (RBI), the Securities and Exchange
Board of India (SEBI) and / or any other competent
authorities and clarifications thereof, issued from time to
time, and subject to such approvals, permissions,
consents and sanctions as may be necessary from the
GOI, RBI, SEBI and/or any other competent authorities
and subject to such conditions and modifications as may
be prescribed or imposed by any of them while granting
such approvals, permissions, consents and sanctions,
which may be agreed to by the Board of Directors of the
Company (hereinafter referred to as “the Board” which
term shall include any committee constituted / to be
constituted by the Board for exercising the powers
conferred on the Board by this resolution), the consent of
the Company be and is hereby accorded to the Board to
create, offer, issue and allot, in one or more tranches,
outside India, with or without premium, denominated in
any foreign currency, such number of optionally/
ii. For the purpose of giving effect to this resolution, the
Board be and is hereby authorised to do all such acts,
deeds, matters and things as the Board may, in its
absolute discretion, consider necessary, proper,
expedient, desirable or appropriate for making the said
issue as aforesaid and to settle any question, query,
doubt or difficulty that may arise in this regard including
the power to allot under subscribed portion, if any, in
such manner and to such persons(s) as the Board,
may deem fit and proper in its absolute discretion to
be most beneficial to the Company.”
6.
To consider and if thought fit to pass the following
resolution as an Ordinary Resolution:
“RESOLVED THAT pursuant to the provisions of Section
293(1)(a) and all other applicable provisions, if any, of
the Companies Act, 1956 and in partial modification of
the earlier resolutions passed at the Extraordinary General
Meeting of the Company held on 4 th October, 1994, the
Ninth Annual General Meeting of the Company held on
2 nd July, 1998 and at the Extraordinary General Meeting
of the Company held on 17 th September, 2003, consent
of the Company be and is hereby accorded to the Board
of Directors of the Company, including any committee
thereof, for creating mortgages and/or charges,
hypothecation, pledge and/or any other encumbrances
on such terms and conditions and at such time(s) and in
such form and manner as it may think fit, on all or any of
the movable or immovable properties of the Company,
wheresoever situated, both present and future or the
whole or substantially the whole of any one or more of
1
Essar Oil Limited the Company’s undertaking(s) in favour of all or any of the financial
Essar Oil Limited
the Company’s undertaking(s) in favour of all or any of
the financial institutions, banks, lenders, financiers,
trustees, investing agencies, bodies corporate,
corporations, foreign institutional investors, any other
person(s)/entities, or any combination of the above to
secure rupee loans, foreign currency loans, debentures,
bonds, convertible loans, fully/partly paid convertible / non-
convertible bonds, any other securities / instruments,
financial assistances or any other debt instruments (by
private placement basis or otherwise) of an equivalent
aggregate amount not exceeding Rs.25,000 Crore
(Rupees twenty five thousand crore only) in Indian Rupees
and / or in Foreign Currency together with interest thereon
at the respective agreed rates, compound interest,
additional interest, liquidated damages, commitment
charges, premia on pre-payment or on redemption,
Debenture/Security trustees remuneration, costs,
charges, expenses and all other monies payable by the
Company to the aforesaid parties or any of them under
the agreements entered into / to be entered into by the
Company in respect of the said loans, debentures, bonds,
financial assistances and / or other instruments”.
“RESOLVED FURTHER THAT the mortgages and / or
charges, hypothecation, pledge and/or any other
encumbrances to be created by the Company as aforesaid
may rank pari passu with the mortgages and/or charges,
hypothecation, pledge and/or any other encumbrances
already created and/or to be created in future by the
Company or in such other manner and ranking as may
be thought expedient by the Board of Directors and as
may be agreed to between the concerned parties.”
time to time, from any one or more of the Company’s
bankers and/or financial or investment institutions and/or
from anyone or more other persons, firms, entities, bodies
corporate, companies, whether by way of cash credit,
advance or deposits, loans or bill discounting or otherwise
and whether unsecured or secured, and if secured by
mortgage, charge, hypothecation or lien or pledge or any
other encumbrances of the Company’s assets and
properties whether movable or stock-in-trade (including
raw materials, stores, spare parts and components in
stock or in transit) including uncalled capital and work-in-
progress and all or any of the undertakings of the
Company notwithstanding that the moneys to be borrowed
together with moneys already borrowed by the Company
(apart from temporary loans obtained from the Company’s
bankers in the ordinary course of business) will or may
exceed the aggregate of the paid-up capital of the
Company and its free reserves, that is to say, reserves
not set apart for any specific purpose but, so however,
that the total amount upto which the moneys may be
borrowed by the Board of Directors and outstanding at
any time shall not exceed the sum of Rs. 25,000 Crore
(Rupees Twenty Five Thousand Crore only) over and
above the aggregate of the paid up share capital of the
Company and its free reserves.”
By Order of the Board of Directors
Mumbai
30 th August, 2007
Registered Office:
SHEIKH S. SHAFFI
Company Secretary
“RESOLVED FURTHER THAT the Board of Directors of
the Company be and is hereby authorised to finalise with
any or all of the aforesaid parties, the documents,
agreements, undertakings, bonds and writings for creating
the mortgages / charges / hypothecation / pledge and/or
any other encumbrances and accepting or making any
alterations, changes, variations to or in the terms and
conditions, and to do all such acts, deeds, matters and
things and to execute all such documents, agreements,
undertakings, bonds and writings as it may consider
necessary, proper, desirable, appropriate or expedient for
the purpose of giving effect to this resolution and to resolve
any question, query, doubt or difficulty relating thereto or
otherwise considered by the Board of Directors to be in
the best interest of the Company.”
Khambhalia Post, P. O. Box 24,
Dist.: Jamnagar-361 305, Gujarat
NOTES:
1. A member entitled to attend and vote at the meeting
is entitled to appoint a proxy to attend and vote instead
of himself and the proxy need not be a member of the
Company. The proxy, in order to be effective, must be
deposited at the Registered Office of the Company
not less than 48 hours before the commencement of
the meeting, i.e. before 11:30 a.m. of 27 th September,
2007.
2. The Register of Members and Share Transfer Books of
the Company will remain closed from Friday, the 28 th day
of September, 2007 to Saturday, the 29 th day of
September, 2007 (both days inclusive).
7.
To consider and if thought fit to pass the following
resolution as an Ordinary Resolution:
“RESOLVED THAT pursuant to the provisions of Section
293(1)(d) and other applicable provisions, if any, of the
Companies Act, 1956 and Articles 96 and 99 of the Articles
of Association of the Company and in partial modification
of the earlier resolutions passed at the Extraordinary
General Meetings of the Company held on 4 th October,
1994 and 17 th September, 2003, the Company hereby
accords its consent to the Board of Directors for borrowing
or continuing to borrow any sum or sums of money, from
3. All documents referred to in the accompanying Notice are
open for inspection at the Registered Office of the
Company on all working days, except Saturdays, Sundays
and Bank holidays, between 11:00 a.m. and 1:00 p.m.
upto the date of the Annual General Meeting.
4. Members / proxies should bring the attendance slip duly
filled in for attending the meeting.
5. Members desiring any information with regard to Accounts/
Reports are requested to write to the Company at least
2
ten days before the date of the meeting, so as to enable the management to
ten days before the date of the meeting, so as to enable
the management to keep the information ready.
ANNEXURE TO NOTICE
Explanatory Statements pursuant to section 173(2) of the
Companies Act, 1956
6. Directors retiring by rotation:
Item No. 5
Shri Ravikant N Ruia, Vice Chairman, belongs to the
generation of industrialists who has played a significant
role in strengthening India’s industrial renaissance. An
engineer by training, his entrepreneurial abilities have
enabled the Essar Group to be one of the leading corporate
The Company is implementing a 10.5 million metric tonne
per annum Oil Refinery at Vadinar, District Jamnagar in State
of Gujarat. Trial runs of certain units of the Refinery have
commenced and the Refinery at full capacity (“Base Refinery”)
is expected to be commissioned shortly.
houses of India, with a current asset base of over USD10
billion. The Group’s interests span the core sector industries
of Steel, Energy, Power, Communications, Shipping &
Logistics and Construction. He is 58 years old.
The other companies in which Shri R N Ruia is a Director
are: Consolidated Fabrics Ltd., Copper Canyon Holdings
Ltd., Energy II, Essar Global Ltd., Essar Infrastructure
Holdings Ltd., Essar Investments Ltd., Essar Power Ltd.,
Essar Shipping Ltd., Essar Steel Ltd., Essar Steel
Caribbean Ltd., Essar Steel Caribbean Holdings Ltd., Essar
Steel (Hazira) Ltd., Essar Steel Sharjah FZE, Energy
Transportation Ltd., Grand Pinnacle Investments Ltd.,
Grand Richmond Investments Ltd., Vodafone Essar Ltd.,
India Securities Ltd., International Fabrics Ltd., Primus
Group Invest Ltd., Zeni Group Invest Ltd., Essar Minerals
St. Lucia Ltd. He does not hold any shares in the Company.
Shri R N Ruia retires by rotation at the Annual General
Meeting and offers himself for reappointment.
It is proposed to expand the refining capacity of the Refinery
to 16 MMTPA. The expansion of refinery would enable the
Company to process heavy and sour crudes while improving
the product slate substantially. Simultaneously, the refinery
is also being upgraded to meet the Euro III and Euro IV
product specifications proposed to be implemented from
2010. The Gross Refining Margins of the refinery will improve
significantly upon completion of the expansion and
upgradation project. The proposed expansion project entails
an expenditure of USD 1180 million, which is proposed to be
funded through a mix of equity, internal accruals and debt.
In terms of approval received from the members at the 15 th
Annual General Meeting held on 30 th September, 2005, USD
78 million have been brought in through issue of Global
Depository Shares (GDSs). Now for funding the expansion
of the Refinery, meeting any shortfall in funding / escalation
in the cost of the expansion and for other general corporate
requirements, infusion of additional equity of upto USD 750
million is envisaged.
Shri Awadhesh N Sinha was the Managing Director &
CEO of the Company for a period of three years from 31 st
January, 2004 to 30 th January, 2007. Since then he is on
the Board as Non Executive Director. He has done MSc
and MBA in Marketing. He is 69 years old and has over 47
years experience in the oil and gas industry. In his career
he has been associated with IOC for over 30 years where
he headed various positions and rose to the level of
Executive Director and a Board member of IOBL - a
subsidiary of IOC. He has also served as Chief Executive
(Marketing) with Essar Oil and President (Business
Development) of Reliance Petroleum. Before joining Essar
Oil as Managing Director & CEO he was with ONGC. The
other companies in which Shri A N Sinha is a Director are:
Essar Pipelines Ltd. and Petronet India Ltd. He is a member
of Banking & Finance Committee, Investors’ Relations
Committee and Committee of Directors (Capital Issues) of
the Board. He does not hold any shares in the Company.
Accordingly, the Company proposes to offer outside India
such number of FCCBs and/or GDRs and/or ADRs and/or
Convertible Bonds and/or any other financial instruments
convertible into equity shares of face value of Rs.10/- each
or otherwise in one or more tranches to Promoter Company
viz; Essar Energy Holdings Limited and/or its associates/
nominees/Group companies/persons acting in concert on
preferential issue/allotment basis for an amount not exceeding
USD750 million (United States Dollars seven hundred fifty
million only). In terms of The Foreign Exchange Management
(Transfer or issue of security by a person resident outside
India) Regulation, 2000 [FEM(TISPRO) Regulations], the
Relevant Date for the determination of applicable price for
the issue of equity shares upon conversion of any financial
instruments is 30 th August, 2007.
Shri A N Sinha, retires by rotation at the Annual General
Meeting and offers himself for reappointment.
In terms of Section 81(1A) of the Companies Act, 1956,
consent of the members is required by passing Special
Resolution in General Meeting for allotment of further equity
shares to any person other than the existing share holders.
Shri Hari L Mundra, Dy. Managing Director & Director
(Finance) retires by rotation at the Annual General Meeting
and does not offer himself for reappointment.
At the time of conversion of convertible securities into equity
shares, the Company will ensure compliance with conditions
of continuous listing of the listing agreement entered into with
Stock Exchanges.
7. The Explanatory Statements pursuant to section 173(2) of
the Companies Act, 1956 relating to the Special Business
mentioned in Item Nos. 5 to 7 of the accompanying Notice
are annexed.
Consent of the members is therefore sought to authorise the
Board of Directors to create, offer, issue and allot FCCBs
and/or ADRs and/or GDRs and/or other convertible financial
3
Essar Oil Limited instruments and upon conversion, issue and allot equity shares, in the manner
Essar Oil Limited
instruments and upon conversion, issue and allot equity
shares, in the manner setout in Item No. 5 of the Notice.
The Directors accordingly recommend the resolution at Item
no. 5 for your approval.
Shri S N Ruia, Shri R N Ruia, Shri P S Ruia and Shri A S
Ruia, Directors of the Company, may be treated as concerned
or interested in the resolution 5. None of the other Directors
is concerned or interested in the resolution.
Item Nos. 6 and 7
In terms of Section 293(1)(a) of the Companies Act, 1956,
the members’ approval is required to create mortgages and/
or charges, hypothecation, pledge or any other encumbrances
on the assets of the Company. The resolution setout at item
no. 6 of the Notice will enable the Company to create
mortgage in favour of one or more of the lenders and / or
financiers and / or trustees to the issue of secured debt
instruments in respect of borrowings for an amount not
exceeding Rs.25,000 Crore. Further, section 293(1)(d) of the
Companies Act, 1956 stipulates that approval of the members
is required for borrowings in excess of paid-up share capital
and free reserves of the Company.
Presently, the Board of Directors can borrow an amount not
exceeding Rs.20,000 crore over and above the paid up capital
and free reserves and create security in the form of mortgages
and/or charges, hypothecation, pledge or any other
encumbrances on the assets of the Company upto Rs.20,000
Crs.
The Directors accordingly recommend the resolutions at item
nos. 6 and 7 for your approval.
None of the Directors of the Company is in any way concerned
or interested in the resolutions.
By Order of the Board of Directors
The amount already borrowed and the funds to be borrowed
in future, is expected to exceed the above limit. To meet the
various operational requirements of the Company including
part financing cost of the expansion and upgradation of the
Mumbai
30 th August, 2007
Registered Office:
SHEIKH S. SHAFFI
Company Secretary
Refinery, meeting various working capital requirements and
Marketing and Exploration & Production activities, it is
necessary to increase the limit up to Rs.25,000 crore.
Khambhalia Post, P. O. Box 24,
Dist. Jamnagar-361 305, Gujarat
4
 
 
 

DIRECTORS’ REPORT

 

To the Members of Essar Oil Limited Your Directors have pleasure in presenting the Seventeenth Annual Report together with the audited accounts of the Company for the financial year ended March 31, 2007. FINANCIAL RESULTS

provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and (iv) that the Directors have prepared the accounts for the financial year ended 31 st March, 2007 on a ‘going concern’ basis. CORPORATE GOVERNANCE

 

(Rs. in crore)

 

2006-2007

2005-2006

In

terms of clause 49 of Listing Agreement with the Stock Exchanges, a

Gross Income Gross Profit / (Loss) Less: Depreciation Profit / (Loss) before Income Tax Less: Provision for Income Tax /Foreign Tax / Deferred Tax Liability / Fringe Benefit Tax Net Profit / (Loss) Add: Balance brought forward from previous year Add: Transfer from Foreign Project Reserve Total amount available for appropriations Less: Appropriations

484.37

699.22

certificate from Auditors of the Company on compliance of conditions of

(50.04)

(87.39)

Corporate Governance is annexed to the Directors’ Report as Annexure C.

4.51

4.66

A

report on Corporate Governance as provided in clause 49 of the listing

(54.55)

(92.05)

agreement is included in the Annual Report.

 
 

PARTICULARS OF EMPLOYEES

12.94

1.63

Information as per section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, is given in the Annexure forming part of this Report. However, as per the provisions of section 219(1)(b)(iv) of the said Act, the Report and Accounts are being sent to all shareholders of the Company excluding the statement

(67.49)

(93.68)

7.71

39.51

82.89

18.50

 

of

particulars of employees u/s 217(2A) of the said Act. Any shareholder

(20.27)

7.71

interested in obtaining a copy of this statement may write to the Company Secretary, for the same, at the Registered Office of the Company.

 

(a)

Foreign Projects Reserve

ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE The particulars as prescribed under section 217(2)(e) of the Act read with the Companies (Disclosures of Particulars in the Report of Board of Directors) Rules, 1988 are setout in Annexure A to this Report. Particulars relating to Foreign Exchange outgo and earnings appear in Note No. B(11) of Schedule XVII to the Annual Accounts. FIXED DEPOSITS Your Company has not accepted any deposits from public under section 58A

(b)

Debenture Redemption Reserve

(c)

Transfer to General Reserve

(d)

Proposed Dividend

Balance to be carried to Balance Sheet (20.27)

INCREASE IN THE SHARE CAPITAL During the year, the paid up capital of the Company increased from 108,35,77,314 equity shares of Rs.10/- each to 113,95,30,638 equity shares of Rs.10/- each upon issue of 5,59,53,324 equity shares of Rs.10/- each to the overseas depository for Global Depository Shares (GDSs) on allotment of GDSs aggregating to USD78 million to Promoters on preferential issue basis pursuant to approval granted by the shareholders at the 15 th Annual General Meeting held on 30 th September, 2005. The issue proceeds have been utilised for the implementation of the Refinery Project.

7.71

of

the Companies Act, 1956 during the financial year under report.

 

SUBSIDIARY COMPANY

 

As required under section 212 of the Companies Act, 1956, the audited statements of accounts along with the report of the Board of Directors and the Auditors’ Report thereon of the subsidiary company, Vadinar Power Company Limited, for the financial year ended 31 st March, 2007 are included

INFORMATION ON STATUS OF COMPANY’S AFFAIRS

 

in

the Annual Report.

Information on operational and financial performance, status of construction activities at project site, etc. is given in the Management Discussion and Analysis which is setout as Annexure B to the Directors’ Report and has been prepared in compliance with the terms of clause 49 of the Listing Agreement with Stock Exchanges.

DIRECTORS

CONSOLIDATED FINANCIAL STATEMENTS The Consolidated Financial Statements of the Company and its subsidiary, Vadinar Power Company Limited, prepared in accordance with Accounting Standard AS-21 on Consolidated Financial Statements form part of the Annual Report.

AUDITORS AND AUDITORS’ REPORT M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai, Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting. M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai, have informed the Company that, if appointed, their appointment will be within the limits prescribed under section 224(1B) of the Companies Act, 1956. Accordingly, the members’ approval is being sought to their appointment as the Auditors of the Company at the ensuing Annual General Meeting. The observations of the Auditors in the Audit Report are explained wherever necessary in the appropriate notes to accounts and are self explanatory. ACKNOWLEDGEMENT The Board wishes to express appreciation and place on record its gratitude for the faith reposed in and co-operation extended to the Company by the Government of India, State Governments, various Government Agencies / Departments, Financial Institutions, Banks, Customers, Suppliers and Investors of the Company. Your Directors place on record their appreciation

Shri Awadesh N. Sinha was functioning as Managing Director and CEO upto 30 th January, 2007 and thereafter he is continuing as Non Executive Director on the Board. During the year Shri V. K. Sinha was appointed as Nominee Director of Life Insurance Corporation of India. Shri Ravikant N Ruia and Shri A. N. Sinha retire by rotation at the ensuing Annual General Meeting and offer themselves for re-appointment. Shri Hari L. Mundra retires at the Annual General Meeting and does not offer himself for reappointment.

DIRECTORS’ RESPONSIBILITY STATEMENT

 

Pursuant to the provisions of section 217(2AA) of the Companies Act, 1956, it is hereby confirmed:

(i)

that in the preparation of the accounts for the financial year ended 31 st March, 2007, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii)

that the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that were 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 of the Company for that period;

of

the dedicated and sincere services rendered by the employees of the

Company.

 

For and on behalf of the Board of Directors

(iii)

that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the

Mumbai 30 th August, 2007

HARI L MUNDRA Dy. Managing Director & Director (Finance)

P S RUIA Director

 

5

Essar Oil Limited Annexure A to the Directors’ Report STATEMENT OF PARTICULARS UNDER THE COMPANIES
Essar Oil Limited
Annexure A to the Directors’ Report
STATEMENT OF PARTICULARS UNDER THE COMPANIES
(DISCLOSURE OF PARTICULARS IN THE REPORT OF
BOARD OF DIRECTORS) RULES, 1988
FORM A
A)
Power and Fuel Consumption:
2006-2007 *
1
Electricity
(a)
Purchased
Unit (‘000 KWH)
27,122.00
Rate /Unit
6.99
Total Amount ( Rs in Lakh)
1,896.00
A.
CONSERVATION OF ENERGY
(b)
Own Generation
(i)
Through Diesel Generator
Unit ( ‘000 KWH)
KWH per litre of diesel oil
Cost / Unit ( Rs./KWH)
N.A.
a)
Energy Conservation measures taken: -
Your Company maintains its thrust on fuel conservation right from the
design and commissioning stage. Including commissioning fuel, total
(ii)
fuel & loss during the year was 4.95%, which is an achievement. State
of the art technology has been adapted for accurate measurement
Through Steam Turbine/Generator
Unit ( ‘000 KWH)
KWH per litre of Fuel Oil/ Gas
Cost / Unit ( Rs./KWH)
72,326.00
1.24
e.g. Radar-gauges for crude oil & heavy product storage tanks and
4.86
(c)
mass flow meters for product dispatches. Dedicated energy group has
Electricity Consumed
( a+b) (‘ 000 KWH)
99,448.00
been set-up at the refinery for close monitoring and improvement of
energy performance. Energy conservation measures are under
2
Coal (specify quality and where used)
N.A.
constant focus of the management and all efforts are being made to
3
become a pace-setter refinery through continuous improvement.
Energy conservation features have been incorporated in the design of
Furnace Oil/ other Liq fuels-Purchased
Quantity ( MT)
Amount ( Rs. In Lakhs)
Average Rate ( Rs./MT)
16,665.00
2,947.23
17,685.15
plant itself. Some of the important features of the Refinery are:
4
Others/From Internal Generation Fuel
(i)
Low level heat recovery (Crude column overhead Vs. Crude)
7,782.16
1,285.85
Use of compressors for crude column overhead gases & operation
Fuel Gas
Unit ( MTs)
Amount ( Rs. In Lakhs)
Average Rate ( Rs./MT)
16,523.00
of crude column at low pressure.
(ii)
Use of low pressure steam for Vacuum column Ejectors.
64,065.70
8,789.81
Use of Vacuum Hydro-circulating system in the Dryer of DHDS.
Liquid Fuel-FO
Unit ( MTs)
Amount ( Rs. In Lakhs)
Average Rate ( Rs./MT)
13,720.00
b)
Additional Investments and Proposals, if any, being implemented
5
Total Liquid Fuel - Purchased+Own Generation (MT) 80,730.70
for energy conservation:
B
Consumption Per Unit of Production:
Unit
2006-2007 *
(i)
Actual Production (MTs)-
1,662,500.00
Certain units of refinery have been commissioned recently. Energy
(ii)
Consumption per MT of Production
conservation efforts are given high priority. Elaborate energy accounting
-
Electricity (Purchased+Generated)
KWH/MT
59.82
-
system is in place which is reviewed periodically. Once all the facilities
Liquid Fuel (FO/LSHS/NAPHTHA)
(Purchased + Internal Generation)
MT/MT
0.05
are commissioned, energy conservation study for bench-marking in
-
Fuel Gas
MT/MT
0.00
the performance will be undertaken by a reputed international agency.
c)
Impact of the measures at (a) and (b) above for reduction of energy
* Note : Certain units of Refinery commissioned trial production during
the year starting from November, 2006 and hence there are no
corresponding figures for the previous financial year 2005-2006.
consumption and consequent Impact on the cost of production
of goods:
FORM B
TECHNOLOGY ABSORPTION
Impact will be assessed once the refinery is operated at full throughput
The Company is making investment in Research and Development and
planning to carryout the following activities in coming year:
with associated secondary processing facilities.
Future plan of action
d)
Total energy consumption and energy consumption per unit of
production as per Form ‘A’ is attached hereto:
B.
TECHNOLOGY ABSORPTION
Studies on fuel oil blending properties evaluation for various cutter
stock combinations.
To establish new laboratory facilities/equipment for Visbreaker
vacuum residue and Fuel oil stability testing
The Refinery has adapted the following technologies for deriving the
latest technological advances:
Crude/Vacuum Distillation Unit
: ABB Lummus Crest, Netherlands
To set up TBP testing apparatus for characterization of various crudes/
Crude blends in the Laboratory
New product development like Carbon Black Feed Stocks, Rubber
Processing Oils, etc.
Visbreaker Unit
:
Axens, France
Expenditure on R & D
A. Capital
: Rs. 525 Lacs
Catalytic Reforming Unit
:
Axens, France
B. Recurring
: Rs. 50 Lacs
Diesel Hydro-desulphurization
C. Total
: Rs. 575 Lacs
Unit
: Axens, France
Fluidized Catalytic Cracking Unit
:
Stone & Webstar, USA
D. Total expenditure as percentage
of total turnover
: Negligible
6
 
 

Annexure B to the Directors’ Report

 
 

MANAGEMENT DISCUSSION AND ANALYSIS

Industry Outlook

change in the basis of pricing of petrol and diesel from import parity to trade parity and reduction in customs duty from 10% to 7.5% on these products. This has, however, failed to make any significant impact on the under recoveries in the domestic marketing of transportation fuels.

Marketing

As the global demand for energy continues to grow, oil is expected to remain the main determinant of world economic growth in the foreseeable future. OPEC has indicated that based on a global economic growth rate of 3.5% per annum (purchasing power parity basis), the demand for oil is set to rise to 118

million barrels per day by 2030 from the current level of 85 million barrels per day.

The transportation sector is expected to be the main demand driver as more and more developing countries are expected to grow in terms of commercial vehicle and passenger car volumes. The non transportation sector will also

Retail sales

Your Company is faced with an extremely challenging situation in relation to

expansion of its retail outlets. However, as a long-term strategy and in the hope that the anomaly in pricing has to find a correction in the near future, your Company has strengthened its retail network to 1178 (as on March 31, 2007) from 700 last year. Your Company has managed to reduce the impact

grow, mainly in the developing nations of Asia and Africa, as petrochemical industry takes stronger roots there.

of

anomaly in pricing by higher prices in certain markets to contain demand

Based on the projections of demand for petroleum products, the total investment in refinery processing by the year 2020 is estimated to be around USD 450 billion including the cost of capacity expansion, new projects and ongoing maintenance and replacement. The Asia Pacific region will require the highest level of investments with China accounting for a major portion.

coupled with a suitable compensation package for fanchisees to compensate lower thruput through their outlets. We operate on the principle of quality, optimum cost and reasonable operating returns and in the current adverse context, the low cost franchisee based model we have chosen for our retail business is considered the most appropriate.

Environmental regulations will also play a critical role in terms of technology as well as product quality specifications of end products. The search for alternative fuels, though gathering pace and usage is not expected to have a significant impact on the demand for oil and its end products.

The emphasis during the year was on selective network expansion and standardization. Your Company commissioned 513 new retail outlets, representing 16% of the 3200 new retail outlets commissioned by the industry during 2006-2007.

Almost the entire reserves in the world of “easy oil” have already been found and are being exploited. Those which are now increasingly being made available are “difficult oil” – difficult in geographical reach stretching logistics and sour, heavy and acidic which are difficult to refine and more difficult to manage environmentally.

Direct sales

The year 2006-2007 has been a year of diversification for the Direct Sales business as, for the first time, the Company commenced marketing of Furnace

Oil, from the refinery in the domestic market. The Company also commenced sale of LPG to PSUs from the refinery. It is pertinent to note that your Company

The opportunity for your Company to increase refining capacity based on the above scenario is exciting. The need for ultra clean transport fuels to meet stringent environmental specifications for petroleum products is an opportunity that new refineries based on contemporary technology can take advantage of. These technologies offer not only product quality and specifications to the most stringent standards, but are also able to deal with heavier or highly sour crude. This enables maximum utilisation of crude input and allows for production of the most stringent end products translating into higher margins.

The Indian Scenario

is

not allowed to sell these products directly since they are subsidised and

can be sold only to the public sector companies.

A

number of new initiatives were undertaken during the year in the area of

customer service and technical support. These initiatives are expected to help retain the existing customers and facilitate tying up of new business. Intense competition and aggressive marketing by the Public Sector and private marketers will, however, continue to be the order of the day.

Your Company is seeking a level playing field between the PSUs and the private sector and has made representations to the Government for further liberalization and deregulation of the industry and restoration of a market determined pricing mechanism. This will enable the industry to invest in world class refining, retailing and exploration facilities and ensure the integration of India with the global Hydrocarbon industry. In this endeavour, we are one with other oil companies in the private sector like Reliance Industries Limited and Shell.

The Refinery

The consumption of petroleum products in India during the year under review

stood at 119.85 million metric tonnes (MMT), an increase of 5.9 % as compared

to

the previous year, contributed by growth in demand for transport fuels.

However, many refineries, especially those in the private sector are exporting petroleum products as global demand continues to be robust. Against domestic refining capacity of close to 150 MMTPA and consumption of around 120 MMTPA, the country continues to have surplus refining capacity. With several refineries planning capacity expansion, the surplus is expected to continue. Exports of petroleum products have reached a level of 32.4 MMT during the year under review. There are some strong reasons for private refineries in India looking outside their domestic markets and exporting a fair proportion of their products to protect their margins. Although international prices have being rising, domestic prices were not allowed to be increased and this has had a substantial adverse impact on the profitability of the oil marketing

companies during 2006-07, given the fact that domestic production of crude oil was only 31.5 MMT against imports of 111 MMT during this year.

The sharp increases and more critically the wide fluctuations in crude oil prices in the last two years have made it virtually impossible for oil marketing companies to sustain margins. In spite of severe constraints in feeding their retail outlets with products, the private marketing organisations added over 700 outlets last year. Despite all efforts to convince Government to bring about

Your Directors are proud to report that 2006-2007 will be remembered as the landmark year in which the primary units of the refinery commenced trial operations along with various utilities and offsite facilities. This was achieved in November 2006 when crude was introduced into the crude and vacuum distillation units, the refinery’s primary process facility. This was followed by the trial start-up of the Vis-breaker in January and the Continuous Catalytic Reformer and the Naphtha Hydro Treator in February.

Construction of the balance units of the Refinery is at an advanced stage. The major challenge facing the project team was in securing timely delivery of materials and equipment as a consequence of very strong world-wide construction activity which has resulted in delay in commissioning of the balance units. We expect the balance units to be commissioned in the next quarter.

a

level playing field, these companies do not receive the kind of Governmental

In

support that Public sector companies get in the form of Oil Bonds. The private sector oil marketing companies had made aggressive marketing efforts and

the last two years had gained a market share of close to 12% in a market

dominated by the public sector. The Government’s discriminatory approach

in

response to changes in current and forecasted product demand patterns,

the refinery’s processing capability has been adjusted to maximize production

of

that the refinery will be positioned at the upper end of the “gross refinery

middle distillates (Aviation Turbine Fuel and diesel). This change will ensure

margin” range when full operation is achieved.

in

favour of public sector oil companies (by subsidising retail prices) has now

resulted in the market shares of the private oil marketing companies dwindling

To further optimize performance, the creation of additional treating capability, storage facilities and coastal despatch facilities are being expedited and construction is well underway. Construction of the GAIL pipeline for LPG from our Refinery to their existing Jamnagar-line System is also well underway providing us this most cost effective transportation mode to the high growth demand centres in North India.

During the trial run till 31 st March, 2007 the Refinery produced 1.32 million metric tonnes of finished petroleum products. The expenses relating to trial runs are being capitalised pending completion of the Project.

to a mere 2%.

The Rangarajan Committee, constituted by the Government to look into various aspects of pricing and taxation of petroleum products, submitted its report in February 2006. The Committee has given recommendations relating to the pricing of MS, HSD, domestic LPG and SKO for supply through the Public Distribution System. Besides, it has also recommended restructuring of excise duties to make it a pure specific levy, instead of the current Ad valorem. Some of these recommendations have already been implemented, including the

 

7

Essar Oil Limited

 

Quality Assurance

The Company has almost completed a program of drilling 12 core-wells in CBM Block, Raniganj East in West Bengal, where it has 10% participating interest. This has resulted in delineation of an area of about 100 sq. kms. where existence of adequate gas resources has been established. Your

Company will next undertake test drilling in this area to establish commercial reserves.

Your company has a state-of-the-art laboratory which is well-equipped to monitor the quality of intermediate streams and certify the quality of final products before dispatch. It tests all samples from the consumer end to provide quality assurance. This Lab is well on its way to getting ISO accredition.

The laboratory is staffed by a highly skilled and experienced team that provides round the clock support to operations. It has been inspected and certified by DGCA (Director General of Civil Aviation).

Your Company has a 25% “carried” participating interest in one onshore and one offshore exploration block in Myanmar, operated by Essar Exploration & Production South East Asia Limited (EEPSEAL). Seismic acquisition has been completed in both blocks. Data is currently under processing and interpretation to establish drilling locations in each block. EEPSEAL will next undertake drilling of wells, expected to commence by year end 2007.

As of 31 st March, 2007, the laboratory had certified, without a single error over a Million tonnes of shipped product and over 10,000 road tanker loads of product.

International Supply and Trading

Planning for the future

Oil prices were strong in the last year due to a number of reasons like robust world economic growth, supply disruptions, and geopolitical tensions. Dated Brent was stronger by over USD 6 per barrel over the last year averaging about USD 64.14 per barrel. Global oil demand growth however slowed slightly

Your Company has begun the implementation of the up-gradation of base refinery by addition of the following units i.e. Delayed Coker, VGO Hydrotreater, second Diesel Hydrotreater (High Pressure), ATF Hydrotreater and three small units Amine Regeneration Unit, Sour Water Stripper Unit and ATF Merox Units. This will enable the Refinery to process very heavy and sour crudes to produce products meeting exacting current international standards. In petroleum terminology this would translate into increasing the “Nelson’s complexity index from 6 to 12". Simultaneously, the Company would also be de-bottlenecking the primary units (CDU/VDU) which will increase the refining capacity to 16 MMTPA. All these actions are expected to have a significant positive impact on margins.

to

0.8 mbpd in 2006 from 1.2 mbpd in 2005. The premium for light products

over fuel oils remained high, favouring complex refineries over less complex sites. Product quality continued to tighten worldwide; this is one of the last

stages to virtual elimination of sulphur from transportation fuels.

Crude price movement of the past year can be divided into two distinct time periods viz. July to January and February onwards. In the first period, prices reached an all time high of USD 78.64 in July followed by a move to

a

low of USD 50.75 in January. For the past three years, oil prices have

regularly dropped in this period by significant amounts. In the second period, prices retraced to its highs.

World renowned Technology providers and consultants, UOP have completed the configuration study with the objective of processing heavy, sour crudes to produce international quality petroleum products while expanding minimum energy and protecting and preserving our environment. Your Company has already executed contracts with key process licensors (UOP, Jacobs and ABB) who have made significant strides in completing the Basic Engineering work for these Units. Contracts have also been executed for Detailed Engineering, Procurement of Equipment and Construction of the Refinery, and the Contractors have received firm bids for equipment with long lead delivery periods. The cost of the proposed expansion and up-gradation is estimated

at USD1.2 billion and is proposed to be funded with a debt to equity of 2.85:1. The Company has targetted to complete the expansion project by December

The first crude oil cargo for your company arrived at our SBM on 6 th September, 2006. During the financial year, the Company contracted 26

mbls of crude oil on spot basis. Most of these grades were contracted from the West African and Mediterranean region. The Company exported 8 mbls

of

product valued around USD 517 million from the trial runs of some of the

units. Our export markets are mainly in Far East Asia, Europe, Africa, Middle East and the US Gulf Coast. Your Company has also commenced risk management activity and are judiciously hedging crude imports, product exports and foreign exchange.

With the commissioning of the FCCU and DHDS during 2007-2008, our crude diet and product specifications will change substantially. The Company will be able to process sour, heavy and acidic grades and will explore the possibilities of terming up crude contracts through an optimum mixture of spot and term cargoes. The Company is already exploring new export markets for product evacuation. The aim will be to term up an optimum percentage of our product cargoes to mitigate off take risks. With the inclusion of more VLCC shipments and Middle Eastern crudes our freight bills are also expected to reduce considerably.

The combination of rising consumption, the continued effects of production cuts by members of the OPEC, and only modest increases in non-OPEC production is expected to pull the inventories down. Consequently, the prices are expected to remain strong. World oil consumption is projected to grow by 1.3 million bbl/d. But, slowdown in economic growth in the US may contribute towards weakening of oil prices.

Upstream Activities

2009.

Financial Highlights

Your Company earned a total income of Rs 484.37 crore in the twelve months ended 31 st March 2007 as against Rs 699.22 crore in the twelve months ended March 31, 2006. The under-recoveries in the marketing of transport fuels on account of Government’s retail pricing policy forced the Company to further curtail its sales during the year, resulting in steep decline in total income. This has helped your Company to contain the loss before tax excluding non- recurring other income to Rs. 64.94 crore in the twelve months ended 31 st March, 2007 as against Rs 154.64 crore in the corresponding period last year.

Internal Control System

Your Company has a proper and adequate internal control system commensurate with its size and nature of operations to provide reasonable assurance that its assets are safe guarded against significant misuse or loss. This is effectively supported by SAP, a Enterprises Resources Planning software, through which the Company ensures that all material business transactions are properly authorized, recorded and reported. Further, the utilization of funds for the Refinery project and its progress continues to be monitored by an independent and reputed accounting firm and by an international engineering firm respectively on behalf of the lenders.

The Company has a proper budgetary control system to monitor capital related as well as other costs, against approved budget on an ongoing basis. The significant observations made by internal auditors and other agencies on the control system and procedures are reviewed and remedial measures taken, wherever required. These are periodically brought to the notice of the Audit and Governance committee for their review and recommendations, if any.

Human Resources

Upstream oil and gas sector continues to be buoyed by high international crude oil and gas prices driven by astronomical growth in the emerging economies. Accordingly, market sentiment continues to be very positive for the Exploration & Production business worldwide. However, intense competition for resources has led to increased costs across all areas of manning, equipment and exploration and development services.

In the Indian context, several public and private sector companies and international companies are actively pursuing opportunities in oil and gas, as the Government continues to encourage investment in exploration activity. The Government conducted bidding rounds NELP-VI and CBM-III successfully, for award of acreage for exploration. NELP-VII is expected to be announced around September 2007.

Your Company has 11% participating interests in Mehsana (Gujarat) block.

Commercial production has just commenced and further exploration activity

in the same block continues in Phase II.

Your Company views its employees as valuable resources and important stakeholders in the growth, prosperity and development of the organization. The Company is committed to creating an appropriate climate, opportunities and systems to facilitate identification, development and utilization of their full potential. Various talent management initiatives like motivational campaigns, Employee Assistance Programs, family bonding activities etc., have been undertaken to promote a stress-free environment to enable employees to enhance their efficiency and productivity and at the same time enjoy a better quality of life.

There were 1542 employees, mostly professionally qualified, on the rolls of the Company as on 31 st March, 2007. As a part of the HR planning process, your Company has developed well-established systems for identifying training

A Consortium comprising your Company (with 10% Participating Interest)

and other parties was awarded two new blocks in the Assam (Arakan basin) under NELP-VI round of bidding.

Your Company expects to receive the long awaited final approval for the Production Sharing Contract (PSC) shortly for the “Ratna and R Series Fields” from the Government of India, in which the Company has a 50% share with ONGC having 40% and Premier Oil 10%.

Premier Oil, the field Operator in our existing exploration Block in Cachar District, Assam is currently drilling an exploratory well (Masimpur-3) where your Company has a 16% “carried interest”.

8

and development needs for the benefit of the individual as well as the organization. Further,
and development needs for the benefit of the individual as well as the
organization. Further, a learning forum has been initiated to foster collective
thinking and development. A coaching and mentoring initiative has recently
been launched as part of building careers as well as tomorrow’s leaders.
Essa Oil recently opened the “Essar Learning Center” at Vadinar which
caters to the technical as well as behavioral training requirements at the
Refinery.
Corporate Social Responsibility
As a part of its social obligation, your Company contributes to the development
and well being of neighbouring rural communities through a variety of
programmes. These range from the provision of basic necessities such as
drinking water, education and health services through to aiding growth in
prosperity by employment of locals and support of local businesses. Some
major initiatives are outlined below:
Safety, Health and Environment
ponds were deepened in two villages to collect more of the monsoon
rains for drinking purposes
Your Company is committed to creating a work environment free of injuries
and incidents. This is manifested by the considerable human and physical
resources devoted to this endeavour. It is therefore with regret that we have
over 1200 tankers of potable water were supplied to villages
two school buildings have been renovated
to
report that a fire occurred in the terminal project area in January 2007 in
over 155,000 kg of fodder have been supplied to surrounding villages
which six people died and fifteen others were hospitalized. Your Company
ensured that the injured received the very best care and we are pleased that
all have been discharged from hospital. A comprehensive, independent
investigation into the incident was conducted and management continues to
ensure the implementation of all recommendations.
Around 12,000 local villagers have been treated in our mobile clinic, 500
people attended the four eye camps that were organized during the year
and 1450 school bag kits were distributed to school newcomers.
Safety, health, fire and environment management systems were enhanced
through the year. The refinery’s fire fighting systems (both fixed and mobile)
were commissioned, proven and brought into service. The occupational health
centre was started and is currently providing both proactive and reactive health
services to all employees and contractors. It is equipped with the latest
diagnostic equipments.
In addition to above, employment opportunities have been provided to locals
who have the necessary skills and experience. As a result, a large percentage
of our staff are natives of Gujarat and specifically, Jamnagar. Local industry
and contractors have been contracted to execute construction projects in the
Refinery.
We are pleased to state that your Company’s contributions to social
responsibility are well appreciated by the District Administration, Health
Authorities and the State Government.
Work place inspections and audits are being performed to a defined schedule
to
both monitor conformance to the refinery’s procedures as well as identify
Cautionary Statement
improvement opportunities.
Your Company has obtained all environmental clearances and compliance
reports are being submitted regularly to the concerned authorities. Further, it
is
matter of great satisfaction to inform you that the Expert Appraisal Committee
(Ministry of Environment & Forests), at its February meeting, cleared both the
expansion of the base refinery and the development of a world-scale
petrochemical complex, with associated increase in power generation capacity.
Certain words and statements in this Management Discussion and Analysis
are forward looking statements based on numerous assumptions regarding
your Company’s present and future business strategies and the environment
in which your Company will operate in the future. The important factors that
could cause actual results, performance or achievements to differ materially
from such forward-looking statements include, among others, changes in
demand and supply, government policies or regulations, political and economic
A
comprehensive green-belt has already come up well on the refinery site.
development within and outside India and, in particular, changes relating to
the administration of oil and gas industry.
During the year another 193 acres were added, bringing the total to 600. In
doing so, over 100000 trees have been planted, bringing the total to date to
For and on behalf of the Board of Directors
over 280,000. The concept of an eco-park was conceived, developed and
endorsed. This will be a unique feature for an industrial facility that will provide
habitat for many local animal and bird species and a focal point for school
and other tours.
a
Mumbai
HARI L MUNDRA
Dy. Managing Director &
P S RUIA
Director
30 th August, 2007 Director (Finance)
Annexure C to the Directors’ Report
AUDITORS’ CERTIFICATE
To
The Members of Essar Oil Limited
We have examined the compliance of conditions of Corporate Governance by Essar Oil Limited (“the Company”), for the year ended 31st March, 2007 as
stipulated in clause 49 of the Listing Agreement entered into by the said company with stock exchanges in India.
The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited to procedures and implementation
thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance as stipulated in the said clause. It is neither
an audit nor an expression of opinion on the financial statements of the Company.
In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company has complied with the conditions
of Corporate Governance as stipulated in the above-mentioned Listing Agreement.
We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the
Management has conducted the affairs of the Company.
For Deloitte Haskins & Sells
Chartered Accountants
Khurshed Pastakia
Partner
Membership No. 31544
Mumbai, 30th August, 2007
9
Essar Oil Limited CORPORATE GOVERNANCE REPORT 1. Company’s philosophy on Corporate Governance Your Company believes
Essar Oil Limited
CORPORATE GOVERNANCE REPORT
1. Company’s philosophy on Corporate Governance
Your Company believes that adhering to global standards of Corporate
Governance is essential to enhance shareholder value and achieve
long term corporate goals. The Company’s philosophy on Corporate
Governance stresses the importance of transparency, accountability
and protection of shareholder interests. The Board conducts periodic
review of business plans, monitors performance and compliance to
regulatory requirements.
Shri R N Ruia and Shri A N Sinha retire by rotation and being eligible
seek re-appointment at the ensuing Seventeenth Annual General
Meeting (AGM) Shri Hari L. Mundra retires at the AGM and does not
offer himself for reappointment. A brief resume of the Directors retiring
by rotation along with nature of their expertise and details of other
directorships, committee positions held by them and their shareholdings
in
the Company have been disclosed to the shareholders through Notes
annexed to the Notice for the AGM.
2. Board of Directors
3. Code of Conduct for Directors and Senior Management
The composition of the Board of Directors and other required details
are given below:
The Company has adopted a Code of Conduct (‘Code’) for Directors
and Senior Management personnel one level below the Executive
Directors including all Functional Heads. The Code has been posted
on the Company’s website.
Name
Category
No. of
Whether
No. of other
Committee
Board
attended
director-
Membership
meetings
last AGM
ships
attended
Held #
Member
Chairman
The Directors, Senior Management and Functional Heads have
affirmed compliance with the Code. A declaration to this effect signed
Shashikant NRuia
Promoter
Nil
No
9
1
Nil
[Chairman]
Non–Executive
by the Dy. Managing Director & Director (Finance) is annexed to the
Annual Report.
Ravikant NRuia
Promoter
Nil
No
8
1
Nil
4. Audit & Governance Committee
[ViceChairman]
Non–Executive
The Audit & Governance Committee comprises 4 members viz: Shri D
Prashant SRuia
Promoter
2
No
11
3
Nil
J
Thakkar, Shri P S Ruia, Shri K N Venkatasubramanian and the
Non–Executive
nominee of ICICI Bank Limited, Shri N S Kannan. All the members of
AnshumanSRuia
Promoter
1
No
12
4
Nil
Non–Executive
the Committee are financially literate. Shri D J Thakkar, a qualified
Chartered Accountant, chairs the meetings of the Committee. The
AwadheshNSinha 1
Non-Executive
5
Yes
2
2
Nil
constitution and terms of reference of the Committee are set out in
Hari LMundra
[Dy. ManagingDirector &
Director(Finance)]
Executive
6
Yes
4
3
Nil
compliance with the requirements of section 292A of the Companies
Act, 1956 and clause 49 of the Listing Agreement.
During the financial year 2006-2007, the Committee met seven times.
SureshMathur
Executive
5
Yes
2
Nil
Nil
Shri D J Thakkar and Shri K N Venkatasubramanian attended all seven
[WholetimeDirector]
meetings and Shri N S Kannan attended 4 meetings. The Statutory
DilipJThakkar
Independent
6
Yes
10
9
5
Non-Executive
Auditors, Internal Auditors, the Managing Director & CEO, the Dy.
Managing Director & Director (Finance), Wholetime Director, the Chief
KNVenkatasubramanian
Independent
6
Yes
9
3
1
Non-Executive
Financial Officer and the Vice-Presidents (Finance & Accounts) are
invited to attend the meetings of the Committee. The Company
GGoswami
Nominee of IDBI Ltd.*
6
Yes
8
6
Nil
Secretary of the Company acts as the Secretary to the Committee.
NSKannan
Nominee of ICICI Bank
Ltd. *
3
No
3
1
Nil
5. Remuneration Committee
The Remuneration Committee comprises 4 non–executive,
SanjeevGhai
Nominee of IFCI Ltd.*
4
No
4
3
Nil
Independent Directors as members viz: Shri K N Venkatasubramanian,
Shri VKSinha 2
Nominee of LIC of India *
1
N.A.
Nil
Nil
Nil
Shri D J Thakkar, the Nominee Director of ICICI Bank Ltd., Shri N S
KSridhar 3
Nominee of LIC of India *
1
N.A.
3
2
Nil
Kannan and the Nominee Director of IDBI Ltd., Dr. G Goswami. Three
SriramNGogate 4
Nominee of Debenture
Trustees, WITECO
2
N.A.
Nil
Nil
Nil
# Excluding directorship in Private Limited Companies and Foreign
Bodies Corporate.
* Nominees appointed by Lenders
1. Managing Director & CEO upto 30 th January, 2007 and thereafter as
Non Executive Director.
meetings of the Committee were held during the financial year 2006-
2007. All the meetings were attended by Shri K N Venkatasubramanian,
Shri D J Thakkar and Dr. G Goswami. Shri K N Venkatasubramanian
chaired the meetings. The terms of reference of Remuneration
Committee include review, determination, increase / decrease and
approval of remuneration, determination of terms of appointment,
company’s policy for specific remuneration packages etc. for the
Executive and other Directors, etc. and sitting fee payable to Directors
other than the Executive Directors.
Remuneration to Directors
2. Appointed as Nominee Director of LIC of India w.e.f. 30 th October,
Non- Executive Directors
2006.
3. Ceased to be Director w.e.f. 30 th June, 2006.
4. Ceased to beDirector w.e.f. 31 st July, 2006.
The Non Executive Directors do not draw any remuneration from the
Company except for sitting fees. The Non Executive Directors are paid
sitting fees at the rate of Rs.7,500/- for attending each meeting of the
Board of Directors and Rs.5,000/- for attending each meeting of
Six Board Meetings were held during the financial year 2006-2007 on
28 th April, 2006; 30 th June, 2006; 31 st July, 2006; 28 th August, 2006;
30 th October, 2006 and 30 th January, 2007.
Committees thereof. The sitting fees paid to the Directors for the year
ended 31 st March, 2007 are as follows: Shri P S Ruia: Rs.65,000/-; Shri
A
S Ruia: Rs.7,500/-; Shri D J Thakkar: Rs.3,45,000/-; Shri K N
Venkatasubramanian: Rs.1,20,000/-; Dr. G Goswami: Rs.70,000/-; Shri
The management of the Company was conducted by the Managing
Director & CEO, Shri A N Sinha upto 30 th January, 2007. Subsequently,
Shri Hari L Mundra, Dy. Managing Director & Director (Finance) has
been handling the day to day operations of the Company. The Managing
Director and thereafter the Dy. Managing Director has been assisted
by the Wholetime Director and other Heads of Divisions / Departments,
subject to the supervision and control of the Board of Directors.
N
S Kannan: Rs.42,500/- (paid to ICICI Bank Ltd.); Shri Sanjeev Ghai:
Rs.30,000/- (paid to IFCI Ltd.); Shri V K Sinha: Rs.7,500/- (paid to LIC of
India); Shri S N Gogate: Rs.15,000/-; and Shri K Sridhar:Rs.7,500/-.
Shri K N Venkatasubramanian has been paid professional charges of
Rs.25,000/- during the year being the Chairman for declaring the
outcome of a resolution sent to the shareholders for seeking their
10
approval by Postal Ballot. Executive Directors During the financial year 2006-2007 remuneration paid to the
approval by Postal Ballot.
Executive Directors
During the financial year 2006-2007 remuneration paid to the Executive
Directors was as under:
(Amount in Rs.)
ballot for seeking voluntary delisting of equity shares of the
Company from Bombay Stock Exchange Limited and National
Stock Exchange of India Limited in accordance with notice received
from Essar Energy Holdings Limited, a Promoter company,
declaring their intention to delist equity shares of the Company.
The procedure adopted for the above referred postal ballot is setout
below:
Shri Awadhesh
N Sinha,
Managing
Director & CEO
Shri Hari L Mundra,
Dy. Managing
Director &
Director (Finance)
Shri Suresh
Mathur
Wholetime
Director
Basic Salary
Allowances & Perquisites
Retirement benefits
Total
Service contract
2,990,323
3,600,000
1,200,000
The Board of Directors at its meeting held on 30 th January, 2007
authorised the Dy. Managing Director and the Company Secretary
to conduct the postal ballot process and appointed Shri Prakash
Pandya, Practicing Company Secretary as scrutinizer for
7,643,075
6,097,080
6,007,500
conducting the voting process. Posting of the Notice along with
358,839
972,000
the Postal Ballot form to the members commenced on 7 th February,
10,992,237
10,669,080
7,207,500
2007
and got completed on 9 th February, 2007. The last date for
3 years
4 years
From04.04.2006
receipt of postal ballot forms was 12 th March, 2007. The scrutinizer
from31.01.2004
from31.10.2003
to 31.08.2008
Notice period
3 months
3 months
3 months
Severance fee
N.A.
N.A.
N.A.
During the financial year, the entire amount paid to the Executive
Directors represents fixed component of their salaries and no amounts
were paid as performance linked incentives. The resolutions appointing
these directors do not provide for stock option.
submitted his report to the Chairman appointed for declaring the
postal ballot outcome, Shri K N Venkatasubramanian on 15 th
March, 2007. Based on the scrutinizers report the results of the
Postal Ballot were declared on 15 th March, 2007 at the Registered
Office of the Company. The resolution has been passed with a
majority of 99.06% of votes cast in favour of the resolution.
In
terms of the applicable provisions of the Companies Act, 1956, due
Presently there are no proposals to pass any resolution by postal
ballot.
to
inadequacy of profits during the preceding financial year ended 31 st
March, 2006, approvals have been obtained from the Central
Government for appointment and payment of remuneration to the
Executive Directors.
8.
Disclosures
As
on 31 st March,
2007, Shri
D J Thakkar and Shri
K
N
Venkatasubramanian held 300 shares and 8000 shares in the Company
respectively. None of the other directors held any shares in the Company.
i. The Company does not have any material related parties’
transactions which have potential conflict with the interest of the
Company at large. Transactions with related parties are disclosed
in Note no.B(34) of Schedule XVII to the Annual Accounts forming
part of the Annual Report.
6. Investors’ Relations Committee
ii. The financial statements have been prepared in accordance with
the accounting policies generally accepted in India. In compliance
The Investors’ Relations Committee comprises 4 members viz: Shri P
th
with clarificatory orders dated 4 th August, 2006 and 11
August,
S
Ruia, Shri Awadhesh N Sinha, Shri Hari L Mundra and Shri D J
2006
issued by Hon’ble Gujarat High Court interest on restructured
Thakkar. Shri D J Thakkar generally chairs the meetings.
During the financial year 2006-2007, the Committee had 36 meetings.
Shri D J Thakkar was present at all meetings, Shri P S Ruia attended
9 meetings, Shri A N Sinha attended 16 meetings and Shri Hari L
Mundra was present at 32 meetings.
debentures has been accounted on cash basis details whereof
are setout in Note no.B(13)(b) of Schedule XVII to the Annual
Accounts forming part of the Annual Report.
The Company Secretary, Shri Sheikh S Shaffi, is the Compliance
Officer.
There were 358 complaints from share / debenture holders pending
at
the beginning of the financial year. During the financial year, 5,184
complaints were received and 5,386 complaints were replied to /
resolved. As of 31 st March, 2007, 156 complaints were pending, which
were replied to / resolved within a period of one month.
Regarding certain funded interest facilities and lease transaction
to give effect to the substance of the transations, the Company
has followed the principles laid down in International Accounting
Standards and US GAAP, as detailed in note no.B(13)(a) and
B(18) of schedule XVII to the Annual Account forming part of the
Annual Report, in the absence of specifice guidance under Indian
GAAP.
As
on 31 st March, 2007, 75 requests involving transfer of 12,020 shares
iii. There were no instances of non-compliance on any matter related
to the capital markets, during the last three years except in respect
of the following:
and 9 requests involving transfer of 650 debentures were pending to
be processed. These pending requests are less than eight days old.
a) Trading in shares of the Company was suspended by BSE
th
on 13
March, 2003, for non-payment of listing fees. On
7. General Body Meetings
(a)
Annual General Meetings
The date, time and venue of the last three Annual General Meetings
and special resolutions passed at the meetings are given below:
payment of outstanding dues, trading resumed under “Z”
category with effect from 24 th May, 2004. On representation
from the Company, the scrip was shifted to “B2” category with
th
effect from 19
July, 2004.
Financial
Date
Time
Venue
Special resolutions
Year
passed
2005-2006
29
th September, 2006
2:30 p.m.
Khambhalia Post,
b) Securities and Exchange Board of India (SEBI) had in 2003,
initiated adjudication proceedings against the Company for
alleged failure to resolve the complaints mainly from debenture
Dist. Jamnagar
1
holders about non-receipt of interest / principal amount.
Schemes of Arrangement / Compromise with debenture
2004-2005
30
th September, 2005
11:30 a.m.
Khambhalia Post,
Dist. Jamnagar
5
holders have been sanctioned by the Hon’ble Gujarat High
Court and the complaints stand resolved under the sanctioned
2002-2003
25
th September, 2004
3:00 p.m.
Khambhalia Post,
schemes. The Adjudicating Officer has by order passed on
Dist. Jamnagar
5
15 th December, 2006 disposed the proceedings without any
adverse pronouncement against the Company.
All resolutions including the Special Resolutions are generally passed
by
show of hands.
(b)
Postal ballot
During the year, one special resolution was passed through postal
iv. The Company has implemented the mandatory requirements of
Corporate Governance as set out in the Listing Agreement with
Stock Exchanges. In respect of compliance with the non-mandatory
requirements, the Company has constituted a Remuneration
11
Essar Oil Limited Committee details whereof are given under the heading: Remuneration Committee. The quarterly
Essar Oil Limited
Committee details whereof are given under the heading:
Remuneration Committee. The quarterly and half-yearly financial
results are put up on the Company’s website, besides being
available on SEBI website www.sebiedifar.nic and being published
in English and Gujarati newspapers. The auditors’ observations/
suggestions, if any, have been adequately explained wherever
necessary in the appropriate notes to accounts and are self
explanatory.
As stated in paragraph 7 above, a special resolution was passed
through postal ballot for seeking voluntary delisting of equity shares
of the Company from Bombay Stock Exchange Limited and
National Stock Exchange of India Limited in accordance with Notice
received from Essar Energy Holdings Limited (EEHL) a Promoter
Company, declaring their intention to delist equity shares of the
Company. Public announcement in terms of SEBI (Delisting of
Securities) Guidelines, 2003 from EEHL is awaited.
vi.
Stock Codes :
v.
The Company has a Risk Management Policy Framework for risk
identification, assessment and control to effectively manage risks
associated with the business of the Company.
Trading Symbol
Bombay Stock Exchange Limited
National Stock Exchange of India Limited
500134
ESSAROIL
9. Means of Communication
i. Quarterly / annual financial results are regularly submitted to Stock
Exchanges in accordance with the Listing agreement and
published in all editions of English daily, viz. The Financial Express/
Business Standard and in a Gujarati daily, Jai Hind. The quarterly/
annual results are also made available at the website of the
Company www.essar.com.
ISIN with NSDL and CDSL
Equity shares
INE011A01019
6% Non Convertible Debentures of Rs. 105/- each
redeemable on 31.12.2009 (Option 3A)
[Rs. 25/- per debenture redeemed during the year
INE011A07032
ii. Management Discussion and Analysis Report, in compliance with
the requirements of Clause 49 of the Listing Agreement with Stock
Exchanges, is annexed to the Directors’ Report which forms part
of this Annual Report being sent to all the members of the
Company.
9.25% Non Convertible Debentures of Rs. 105/- each
redeemable on 20.04.2016 (Option 1)
INE011A07065
6% Non Convertible Debentures of Rs.105/- each (Option 3B)
bearing ISIN INE011A07040 were redeemed on 31 st December,
2006.
vii.
iii. The consolidated financial statements of the Company and its
subsidiary, Vadinar Power Company Limited, form part of this
Annual Report.
Stock Market price data for the financial year 2006-2007
High / Low of daily closing market price of the Company’s shares
traded at NSE and BSE during each month in the financial year
ended 31 st March, 2007 are as under:
Month
Year
NSE
BSE
iv. The quarterly / annual financial statements along with Corporate
Governance reports, Shareholding pattern, Annual Report and
other documents in compliance with the requirements of Listing
Agreement entered into with Stock Exchanges, are made available
on the website for Electronic Data Information Filing and Retrieval
System (EDIFAR) maintained by SEBI and National Informatics
Centre.
(in Rs. per share)
(in Rs. per share)
High
Low
High
Low
April
2006
73.25
41.00
73.05
40.95
May
2006
77.40
44.40
77.35
44.35
June
2006
49.95
33.20
49.90
33.20
July
2006
47.35
37.40
47.35
37.40
10. General Shareholder Information
August
2006
53.25
40.20
53.25
40.20
September
2006
57.15
52.55
57.00
52.50
i.
AGMdate, time and
venue
29 th September, 2007, at 11:30
a.m. at Registered Office of the
Company, Khambhalia Post,
Post BoxNo. 24, Dist. Jamnagar
– 361305.
October
2006
59.15
54.45
59.10
54.35
November
2006
57.25
48.80
57.25
48.85
December
2006
54.70
44.10
54.55
44.30
January
2007
63.40
53.95
63.20
53.85
ii.
Financial calendar
Approval of the results
for the quarter ending
In the following month of the
quarter ending
February
2007
62.00
54.10
61.95
54.15
March
2007
55.90
51.40
55.90
51.50
30
th June, 2007; 30 th
September, 2007; 31 st
December, 2007; and
viii.
Performance of share price in comparison to BSE 100 :
31
st March, 2008.
Audited annual results
for the year ending 31 st
March, 2008
Before 30 th June,
2008
iii
Date of Book closure
28 th September, 2007 to 29 th
September, 2007 (both days
inclusive)
iv.
Dividend payment date
N. A.
v.
Listing of equity shares on Stock Exchanges :
ix.
The equity shares of the Company are listed at Bombay Stock
Exchange Ltd. (BSE) and National Stock Exchange of India Ltd.
(NSE). The shares are available for trading in the Futures and
Options (F&O) segment by NSE.
In compliance with the provision of SEBI (Delisting of Securities)
Guidelines, 2003, the shares of the Company were delisted from
Calcutta Stock Exchange Association Ltd. with effect from 25 th
January, 2007, as the shares were infrequently traded and trading
volume was negligible at this stock exchange.
The Company has paid listing fees, as applicable to the Stock
Exchanges.
Share Transfer Agent: M/s. Sharepro Services (India) Pvt. Ltd. is
the Share Transfer Agent of the Company. The Share Transfer
Agent acknowledges and executes transfers of securities and
arranges for issue of dividend / interest warrants. The Share
Transfer Agent also accepts, deals with and resolves complaints
of shareholders and debentureholders.
x.
Share Transfer System: The Company’s shares are traded on
the Stock Exchanges compulsorily in demat mode. Physical
shares, which are lodged for transfer with the Transfer Agent are
processed and returned to the shareholders within a period of
15–20 days.
12
xi. Distribution of shareholding as on 31 st March, 2007: xii. Dematerialisation of shares: As
xi.
Distribution of shareholding as on 31 st March, 2007:
xii. Dematerialisation of shares: As on 31 st March, 2007, 97.58% of
the Company’s total shares, i.e.1,111,969,979 shares were held
No. of
No. of
%
No. of
%
in dematerialized form and 2.42% comprising 27,560,659 shares
Shares
Shareholders
Shares
were held in physical form.
Upto 500
322330
95.73
45203357
3.97
xiii. Outstanding GDRs/ADRs/Warrants or any Convertible
501 – 1000
9278
2.76
7324901
0.65
instruments, conversion date and likely impact on equity:
1001
– 2000
2926
0.87
4474831
0.39
2001
– 3000
789
0.23
2036826
0.18
5,126,708 Global Depository Shares (GDSs) represented by
3001
– 4000
340
0.10
1245580
0.11
784,386,324 equity shares were outstanding as on 31 st March,
4001
– 5000
314
0.09
1500285
0.13
2007. Each GDS represents one hundred fifty three (153) equity
5001 – 10000
407
0.12
3046770
0.26
shares. There were no warrants or other convertible instruments
10001 and above
344
0.10
1074698088
94.31
outstanding as at the year end.
Total
336728
100.00
1139530638
100.00
xiv. Plant Location: The Refinery Project of the Company has
Shareholding pattern as on 31 st March, 2007 :
commenced trial production and the same is located at Khambhalia
Post, Dist. Jamnagar–361 305, Gujarat. The Refinery is soon going
Sl.
Category
No. of shares
Percentage
no.
to commence commercial production at full capacity.
I
Promoters
xv. Address for communication: For any assistance, request or
a.
Promoter and
Promoter Group
instruction regarding transfer or transmission of shares and
21,79,81,874
19.13
debentures, dematerialization of shares/debentures, change of
b.
Depository for GDSs
78,43,86,324
68.83
address, non-receipt of annual report, interest warrant and any
Sub-total
100,23,68,198
87.96
other query relating to the shares and debentures of the Company,
II
Non-Promoters
please write to the following address: M/s Sharepro Services
a.
FIs. and Banks
55,61,256
0.49
(India) Pvt. Ltd., Unit: Essar Oil Limited, Satam Estate, 3 rd Floor,
b.
Mutual Funds and UTI
40,84,200
0.36
c.
Foreign Institutional
Investors
Above Bank of Baroda, Cardinal Gracious Road, Chakala,
4,53,70,211
3.98
Andheri (East), Mumbai – 400 099. Phone: 91-22-28215168,
d.
Private Corporate Bodies
1,39,30,951
1.22
Fax: 91-22-28375646, Email address: sharepro@vsnl.com
e.
Indian Public
6,56,31,353
5.76
f.
NRIs and OCBs
25,84,469
0.23
For any assistance, share/debenture holders may write to the
Sub-total
13,71,62,440
12.04
Company at the following e-mail ID exclusively designated for the
TOTAL
113,95,30,638
100.00
purpose: eolinvestors@essar.com
Declaration by Dy. Managing Director & Director (Finance)
I, Hari L Mundra, Dy. Managing Director & Director (Finance) of Essar Oil Limited hereby declare that all the Board members and Senior Executives one
level below the Executive Directors including all Functional Heads have affirmed for the financial year ended 31st March, 2007 compliance with the Code
of Conduct of the Company laid down for them.
30th August, 2007
Hari L Mundra
Dy. Managing Director & Director (Finance)
Persons constitution Group coming within the definition of group as defined in the Monopolies Restrictive Trade Practices Act, 1969 for the
purpose of inter-se transfer of shares of the Company under regulation 3(1)(e)(i) of SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997.
Sr. no.
Name of Body corporate
Sr. no.
Name of Body corporate
1.
Essar Global Limited
10.
Asia Pacific Far East Limited
2.
Essar Infrastructure Holdings Limited
11.
Essar Investments Limited
3.
Essar Steel Holdings Limited
12.
Teletech Investments (India) Limited
4.
Essar Energy Holdings Limited
13.
ETHL Global Capital Limited
5.
Essar Logistics Holdings Limited
14.
Hazira Steel 2
6.
Vadinar Oil
15.
Essar Steel Limited
7.
Asia Pacific Markets Limited
16.
Essar Shipping Limited
8.
Asia Pacific Corporation Limited
17.
Reclame Commercial & Securities Private Limited
9.
Asia Pacific Enterprises Limited
13

Essar Oil Limited

 

AUDITOR’S REPORT

 

(1) of Section 274 of the Companies Act, 1956;

TO THE MEMBERS OF ESSAR OIL LIMITED

(vi)

Further to our remarks above, in our opinion and to the best of our information and according to the explanations given to us, the said financial statements give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India and where accounting principles generally accepted in India do not provide specific guidance in a situation, in conformity with the principles laid down in related International Financial Reporting Standard (IFRS) and / or United States Generally Accepted Accounting Principles (US GAAP):

1. We have audited the attached balance sheet of Essar Oil Limited (“the Company”) as at 31st March, 2007, and also the statement of profit and loss and the cash flow statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement

(a)

in the case of the balance sheet, of the state of affairs of the Company as at 31st March, 2007;

(b)

in the case of the statement of profit and loss, of the loss for the year ended on that date; and

(c)

presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditor’s Report) Order, 2003, issued by the Central Government of India in terms of sub-section (4A) of section 227 of the Companies Act, 1956, we enclose in the Annexure, a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to above, we report that:

in the case of the cash flow statement, of the cash flows for the year ended on that date.

For Deloitte Haskins & Sells Chartered Accountants

Mumbai, 30 th August 2007

Khurshed Pastakia Partner Membership No. 31544

(i)

We have obtained all the information and explanations, which to the best of our knowledge and belief were necessary for the purposes of our audit;

Annexure to the Auditor’s Report to the members of Essar Oil Limited [referred to in paragraph (3) thereof]

In our opinion and according to the information and explanations given to us, the nature of the Company’s business / activities during the year are such that clauses (xii), (xiii), (xiv), (xviii) and (xx) of the Companies (Auditor’s Report) Order, 2003, are not applicable to the Company.

(ii)

In our opinion, proper books of account as required by law have been kept by the Company so far as appears from our examination of those books. Attention is invited to note (iv) (b) below;

(iii)

The balance sheet, statement of profit and loss and cash flow statement dealt with by this report are in agreement with the books of account;

In our opinion, the balance sheet, statement of profit and loss and cash flow statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956;

(a)

1. In respect of its fixed assets:

(iv)

a. The Company has generally maintained proper records showing full particulars, including quantitative details and situation of fixed assets except that the Company is in the process of allotting identification particulars and updating the location records in respect of certain fixed assets.

b. Some of the fixed assets were physically verified during the year by the management in accordance with a programme of verification, which in our opinion provides for physical verification of all the fixed assets at reasonable intervals having regard to the size of the Company and the nature of its assets. As per the information given to us by the management, no material discrepancies as compared to book records were noticed in respect of fixed assets verified during the year.

c. The fixed assets disposed off during the year, in our opinion, do not constitute a substantial part of the fixed assets of the Company and such disposal has, in our opinion, not affected the going concern status of the Company.

 

Attention is invited to note B (13) (a) of schedule XVII to the financial statements detailing the state of Master Restructuring Agreement and reasons for following principles laid down in International Financial Reporting Standard (IAS) 39 (Revised) - Financial Instruments - Recognition and Measurement and Statement of Financial Accounting Standard (SFAS) 15 - Accounting by Debtors and Creditors for Troubled Debt Restructuring under United States Generally Accepted Accounting Principles (US GAAP) in respect of part of the funded interest facilities;

 

(b)

Attention is invited to note B (13) (b) of schedule XVII to the financial statements with regard to following cash basis of accounting pursuant to the Court Order in respect of funded / accrued interest on debentures amounting to Rs 355.45 crores as at balance sheet date, pertaining to the Refinery Project under construction and payable at various future dates as per the scheme of arrangement and compromise between the Company and its scheme lenders; and

2. In respect of its inventories:

 

a. As explained to us, inventories were physically verified during the year by the management at reasonable intervals.

b. In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the management were generally reasonable and adequate in relation to the size of the Company and the nature of its business.

 

(c)

Attention is also invited to note B (21) of schedule XVII to the

c. In our opinion and according to the information and explanations

 

financial statements detailing the reasons for following principle of recognizing the finance lease upon commencement of the lease in accordance with International Financial Reporting Standard (IAS 17) – Leases in the absence of specific guidance in Indian Generally Accepted Accounting Principles for recognition of leases in case the assets taken on lease are under construction and fair value of Capital Work- in-Progress cannot be measured reliably.

given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.

3. The Company had granted one interest free unsecured loan to a company covered in the register maintained u/s 301 of the Companies Act, 1956, in earlier years. The maximum amount involved in respect of the above loan during the year was Rs. 23.40 crores while the year end balance was Rs. nil. The Company has taken loans / advance for the purpose of the Refinery Project from three companies listed in the register maintained under Section 301 of the Companies Act, 1956. The amount of loans / advances taken during the year is Rs. 901.66 crores (including funded

(v)

On the basis of written representations received from the directors and taken on record by the Board of Directors, we report that none of the directors is disqualified as on 31st March, 2007, from being appointed as a director in terms of clause (g) of sub-section

14

interest Rs. 7.86 crores). The maximum amount involved during the year was Rs. 838.19 crores
interest Rs. 7.86 crores). The maximum amount involved during the
year was Rs. 838.19 crores and the closing balance is Rs. 513.32
crores. The payments of principal or interest on loans taken, where
applicable, are regular.
b.
According to the information and explanations given to us, details
of disputed Customs Duty which has not been deposited as on
31st March, 2007 on account of any dispute are given below:
Name of
Nature of the
dues
Amount
(Rs. in crores)
Period to
Forum where
In our opinion and according to the information and explanations given
to us, the rates of interest and other terms and conditions of the loans
granted and taken are not, prima facie, prejudicial to the interest of the
Company.
statute
which the
dispute is
amount
pending
relates
4. In our opinion and according to the information and explanations given
to us, there is an adequate internal control system commensurate
with the size of the Company and the nature of its business for the
purchase of inventory and fixed assets and for the sale of goods and
services. The internal control system with regard to reconciliation and
updating of records needs to be further strengthened to be
commensurate with the growing size of the Company and nature of its
business in respect of purchases of fixed assets and capital equipment
/ materials. During the course of our audit, we have not observed any
continuing failure to correct major weaknesses in internal controls.
Customs
Customs duty,
0.17
March,2000
CESTAT
Act,1962
penalty and
interest thereon
0.01
January, 2001
Hon. Supreme
Court
According to the information and explanations given to us, there
were no disputed amounts in respect of Income Tax, Wealth Tax,
Sales Tax, Service Tax, Excise Duty and Cess as on 31st March,
2007.
5. In our opinion and according to the information and explanations given
to us, there are no contracts or arrangements that need to be entered
into the register maintained in pursuance of Section 301 of the
Companies Act, 1956.
10. The accumulated losses in the statement of profit and loss of the
Company are not more than fifty per cent of its net worth at the end
of the financial year. The Company has incurred cash loss during
the year and also in the immediately preceding financial year.
6. In our opinion and according to the information and explanations given
to us the Company has not accepted any public deposits within the
meaning of Section 58A and 58AA of the Companies Act, 1956, or any
other relevant provisions of the Companies Act, 1956 and the
Companies (Acceptance of Deposits) Rules, 1975 with regard to the
deposits accepted from the public. No Order has been passed by the
Company Law Tribunal or Reserve Bank of India or any Court or any
other Tribunal.
7. In our opinion, the internal audit function carried out during the year by
in-house internal audit department appointed by the management is
commensurate with the size of the Company and nature of its business.
11. In our opinion, according to the information and explanations given
to us, and taking into consideration the terms of Master Restructuring
Agreement (“MRA”) entered into with the financial institutions and
banks pursuant to Corporate Debt Restructuring package approved
under RBI’s Corporate Debt Restructuring scheme (“CDR scheme”)
and the terms of the approved schemes of arrangement with the
debenture-holders and the scheme lenders, the Company has not
defaulted in the repayment of dues to banks, financial institution and
debenture holders except that loans of Rs 306.34 crores (including
interest of Rs 56.82 crores) to the banks not covered by MRA for the
period May, 2002 to March, 2007 are in the process of being
restructured in accordance with stipulations in the CDR scheme.
8. The Central Government has prescribed for the maintenance of cost
records in respect of manufacture of petroleum products of the
Company under clause (d) of sub-section (1) of section 209 of the
Companies Act, 1956. However, as the Company’s Refinery Project is
under construction/ trial run, in the view of the management based on
an expert opinion, the requirements of Section 209 (1) (d) of the
Companies Act, 1956 are not currently applicable to the Company.
12. In our opinion and according to the information and explanations
given to us, the terms and conditions of the guarantees given by the
Company for the loans taken by others from banks and financial
institutions, are not, prima facie, prejudicial to the interests of the
Company.
9. In respect of statutory dues:
a.
According to the information and explanations given to us, the
Company has been generally regular in depositing undisputed
statutory dues, including Provident Fund, Investor Education and
Protection Fund, Income Tax, Sales tax, Wealth Tax, Custom Duty,
Excise duty, Cess and any other material statutory dues, as
applicable, with the appropriate authorities during the year except
for certain dues in respect of Service Tax, Works Contracts Tax,
Tax deducted at source under Income Tax Act, 1961, Non
Agricultural Land Assessment Tax and interest thereon. Further,
since the Central Government has till date not prescribed the final
rate of Cess payable under Section 441A of the Companies Act
1956, we are not in a position to comment upon the regularity or
otherwise of the Company in depositing the same. As explained
to us, the provisions of Employees’ State Insurance are not
applicable to the Company during the year.
According to the information and explanations given to us and as
per records of the Company, the extent of the arrears of the
undisputed statutory dues which were outstanding, at the year
end for a period of more than six months from the date they became
payable are as under:
13. To the best of our knowledge and belief and according to the
information and explanations given to us, in our opinion, term loans
availed by the Company were, prima facie, applied by the Company
during the year for the purposes for which the loans were obtained,
other than temporary deployment pending application.
14. According to the information and explanations given to us, and on
an overall examination of the balance sheet of the Company, following
funds raised during the year on short term basis have been used for
long term investment as bridge funding:
a) short term loan of Rs. 15 crores raised (which has fully been
repaid during the year);
b) acceptances of bills of exchange repayable for periods up to
180 days from the date of acceptance as a temporary
arrangement. The closing balance of bills payable is Rs. 54.45
crores.
15. According to the information and explanations given to us and the
records examined by us, the securities have been created in respect
of the debentures except the personal guarantees by some of the
directors together with collateral securities.
16. To the best of our knowledge and belief and according to the
information and explanation given to us, no material fraud on or by
the Company was noticed or reported during the year.
Name
Nature of
Amount
Period to
Due Date
Date of
of statute
the dues
(Rs. in
which the
Payment
Crores)
amount
relates
IncomeTax
Tax
0.01
July and
7
th August,
7
th April,
Act, 1961.
Deducted at
August,
2006 and
2007
For Deloitte Haskins & Sells
Chartered Accountants
Source on
2006
7
th September
commission
2006
Mumbai Land
Non
0.75
August
31 st July,
9
th April
Khurshed Pastakia
Revenue
Agricultural
2005 to
2006
2007
Partner
Act, 1879.
Land
July 2006
Mumbai, 30 th August, 2007
Membership No. 31544
Assessment
Tax
15

Essar Oil Limited

BALANCE SHEET AS AT 31ST MARCH, 2007

 

SCH.

As at 31st March, 2007 Rs. in crores

As at 31st March, 2006 Rs. in crores

SOURCES OF FUNDS

Shareholders’ Funds

a) Capital

I

1,156.13

1,100.18

b) Advance towards issue of global depository shares

189.39

-

c) Reserves and surplus

II

1,649.61

1,420.55

Loan Funds

a) Secured loans

III

7,739.08

5,602.96

b) Unsecured loans

IV

832.36

464.62

Deferred Tax Liability (Net) (Refer note B (29) of schedule XVII)

32.10

33.08

 

TOTAL

11,598.67

8,621.39

APPLICATION OF FUNDS Fixed Assets

V

a) Gross block

303.86

279.12

b) Less: Accumulated depreciation, amortisation and lease adjustment

107.59

94.76

c) Net block

196.27

184.36

Capital Work-in-Progress

VI

4,359.98

3,686.34

Expenditure during Construction

VII

4,095.79

2,873.25

Advances on Capital Account

VIII

2,177.86

1,744.48

Investments Current Assets, Loans and Advances

IX

109.37

89.65

X

a) Inventories

3,417.97

36.49

b) Sundry debtors

176.84

81.12

c) Cash and bank balances

642.97

519.93

d) Loans, advances and deposits

399.12

305.23

4,636.90

942.77

Less : Current Liabilities and Provisions

XI

a) Current liabilities

3,970.48

897.96

b) Provisions

7.02

1.50

3,977.50

899.46

Net Current Assets

659.40

43.31

 

TOTAL

11,598.67

8,621.39

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS

XVII

As per our Report of even date attached

For Deloitte Haskins & Sells Chartered Accountants

For and on behalf of the Board of Directors

 

Khurshed Pastakia Partner Mumbai, 30th August, 2007

V. Suresh Chief Financial Officer

P. S. Ruia Director

S. S. Shaffi Company Secretary Mumbai, 30th August, 2007

Hari L. Mundra Deputy Managing Director & Director (Finance)

16

 
 

STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH, 2007

 

PARTICULARS

SCH.

For Year ended 31st March, 2007 Rs. in crores

For Year ended 31st March, 2006 Rs. in crores

INCOME

Sale of traded petroleum products

473.98

636.63

Other income

XII

10.39

62.59

 

484.37

699.22

EXPENDITURE

Cost of traded petroleum products sold

466.08

667.46

(Refer note B (33) of schedule XVII)

Payments to and provisions for employees

XIII

12.32

18.32

Administrative and other expenses

XIV

9.95

20.01

Selling and distribution expenses

XV

13.47

24.31

Marketing infrastructure expenses

21.94

35.37

Interest and other finance charges

XVI

10.65

21.14

 

534.41

786.61

PROFIT / (LOSS) BEFORE DEPRECIATION AND TAX

(50.04)

(87.39)

Less : Depreciation / Amortisation

4.51

4.66

PROFIT / (LOSS) BEFORE TAX

(54.55)

(92.05)

TAXES

Foreign tax (Refer note B (32) (iii) of schedule XVII)

13.34

-

Deferred tax (Net)

(0.99)

0.84

Fringe benefit tax

0.59

0.79

12.94

1.63

PROFIT / (LOSS) AFTER TAX

(67.49)

(93.68)

Balance brought forward from previous year

7.71

82.89

Add: Transferred from foreign projects reserve

39.51

18.50

(Refer note B (25)(a) of schedule XVII)

BALANCE CARRIED FORWARD

(20.27)

7.71

Earnings / (Loss) per share (Rs.)

(Refer note B (27) of schedule XVII)

- Basic and diluted

(0.61)

(0.89)

SIGNIFICANT ACCOUNTING POLICIES AND NOTES TO FINANCIAL STATEMENTS

XVII

As per our Report of even date attached

For Deloitte Haskins & Sells Chartered Accountants

For and on behalf of the Board of Directors

 

Khurshed Pastakia Partner Mumbai, 30th August, 2007

V. Suresh Chief Financial Officer

P. S. Ruia Director

S. S. Shaffi Company Secretary Mumbai, 30th August, 2007

Hari L. Mundra Deputy Managing Director & Director (Finance)

 

17

Essar Oil Limited CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2007 For the
Essar Oil Limited
CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH, 2007
For the
year
ended 31st
March, 2007
Rs. in crores
For the year
ended 31st
March, 2006
Rs. in crores
For the
year
ended 31st
March, 2007
Rs. in crores
For the year
ended 31st
March, 2006
Rs. in crores
A)
Cash Flow from Operating Activities
Net Profit before Tax
Adjustments for :
(54.55)
(92.05)
Depreciation
Lease adjustment
Income from lease rentals
Fixed assets written off
Inventory written off
Interest receivable arising from arbitration award
Interest income (on investing activities)
Profit on disposal of Investments
4.51
4.66
(3.41)
(5.53)
-
(0.06)
(0.66)
(0.80)
0.18
0.21
(11.41)
68.85
-
0.20
0.17
0.08
(3.10)
(4.45)
(0.41)
(7.66)
(Refer note B (13) (a) and B (13) (b) of schedule
XVII) (After adjustment of changes in amounts
payable / receivable)
Advances to the subsidiary (net of repayment
during the year Rs.nil (Previous year Rs. 4.14 crores))
Amount received / (incurred / spent) towards
common expenditure allocated to the port Terminal
(Refer note B (16) of schedule XVII)
Sale of fixed assets
Purchase of investments
Fixed deposit matured / (placed) - Net
(28.27)
(67.73)
-
(22.70)
12.00
(13.67)
(Profit) / Loss on sale of fixed assets (Net)
Interest on borrowings (other than Refinery Project)
Bad debts written off /
Doubtful debts / Advances provided for
Old payables written back
Interest on income tax refund
Operating Profit / (Loss) before
Working Capital Changes
Adjustments for :
-
(0.03)
0.19
9.48
3.85
1.43
Interest received
Lease rentals received
Net Cash used in Investing Activities (B)
0.06
-
(2,495.99)
(2,097.78)
0.50
0.85
C)
(0.03)
(8.64)
3,638.41
1,134.72
(0.07)
(0.73)
352.51
180.44
(49.78)
(129.77)
189.39
-
Changes in inventories
Changes in receivables and advances
Changes in payables
Cash generated from / (used in) Operations
Income tax payment (Net of refund including interest)
Net Cash generated from / (used in) Operations (A)
(96.85)
97.79
(1,210.47)
(95.80)
(7.96)
28.79
69.85
(108.86)
(296.75)
326.22
(84.74)
(112.05)
(1.08)
(1.43)
(8.98)
(6.22)
(93.72)
(118.27)
B)
Cash Flow from Investing Activities
Capitalisation / Additions to fixed assets
Capital work in progress / Expenditure during
construction / Advances on capital account
(Including interest paid / funded (net) pertaining
to the refinery project)
Cash Flow from Financing Activities
Borrowings {Including funding of interest (net)}
(Refer note B 13 (a) of schedule XVII)
Proceeds from issue of foreign currency
convertible bonds (FCCBs) and GDS
Advances against GDS received
Repayment of borrowings
Changes in balance of bills of
exchange accepted
Interest paid
Unclaimed dividend / Excess debenture monies
paid / Transferred to investor education
and protection fund
-
(0.43)
(33.02)
(48.73)
Net Cash from Financing Activities
(C)
2,672.01
1,543.72
82.30
(672.33)
(2,432.30)
(2040.53)
Net Change in Cash and Cash equivalents (A+B+C)
Cash and Cash equivalents at the
beginning of the period
Cash and Cash equivalents at the end of the period
34.95
707.28
117.25
34.95
Notes :
1. Non cash financing transactions:
a
)
Conversion of Rs. 96 crores to unsecured loan from current liabilities.
b
Settlement of unsecured loan receivable from Essar Power Limited Rs.23.40 crores with payable of Rs 22.25 crores and balance adjusted in current liability from Essar Power Limited.
During Previous Year :
)
a) Settlement of borrowings Rs. 103.36 crores in exchange of the Company’s investments of equity shares with book value of Rs. 50 crores.
b) Conversion of FCCBs into equity shares Rs.178.91 crores
2. Non cash investing transaction:
a
)
Shares alloted by subsidiary against adjustment of payable of Rs. 8.09 crores.
3. Cash and cash equivalents included in the cash flow statement comprise of the following balance sheet amounts:
As at
31st March, 2007
Rs. in crores
As at
31st March, 2006
Rs. in crores
Cash on hand and balances with banks
Cash on hand
Balance with banks
in current accounts
0.43
0.42
114.22
30.98
in
deposits @
528.32
488.53
Cash and bank balances as per balance sheet
642.97
519.93
Less : Overdrawn bank balances
Less : Margin & long term fixed deposti
6.50
0.73
519.22
484.25
Cash and cash equivalents as restated
117.25
34.95
@ Comprises of margin deposits mainly towards letters of credit facilities availed and term deposits
As per our Report of even date attached
For Deloitte Haskins & Sells
Chartered Accountants
For and on behalf of the Board of Directors
Khurshed Pastakia
Partner
Mumbai, 30th August, 2007
V. Suresh
Chief Financial Officer
P. S. Ruia
Director
S. S. Shaffi
Company Secretary
Mumbai, 30th August, 2007
Hari L. Mundra
Deputy Managing Director
& Director (Finance)
18
SCHEDULES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT 31ST MARCH, 2007
SCHEDULES ANNEXED TO AND FORMING PART OF THE BALANCE SHEET AS AT 31ST MARCH, 2007
As at
As at
As at
As at
31st March,
31st March,
31st March,
31st March,
2007
2006
2007
2006
Rs. in crores
Rs. in crores
Rs. in crores
Rs. in crores
SCHEDULE - I
SCHEDULE - III
SECURED LOANS
CAPITAL
Debentures
AUTHORISED
(Refer note B (13) (b) of schedule XVII)
5,000,000,000 equity shares
a)
453.09
of Rs.10 each
(Previous year 5,000,000,000
equity shares of Rs.10 each)
5,000.00
5,000.00
Non convertible debentures
(Including 6%, 9.25% and 12.50% debentures)
537.79
b)
12.5% Non convertible debentures
6.57
6.57
(A)
459.66
544.36
ISSUED AND SUBSCRIBED
Term loans and funded interest facilities
Term loans#
1,201,456,638 equity shares of Rs.10 each
(Previous year 1,145,503,314 Equity
shares of Rs. 10 each)
1,201.46
1,145.50
a) From banks
(Including interest accrued and due Rs. 4.74
3,773.79
2,130.00
PAID UP
crores (Previous year Rs. Nil))
(Refer note B (13) (a) of schedule XVII)
1,139,530,638 equity shares of
Rs. 10 each fully paid up
(Previous year - 1,083,577,314 equity
shares of Rs. 10 each fully paid up)
2,717.53
2,083.53
1,139.53
1,083.58
b) From financial institutions
(Including interest accrued and due Rs. 3.42
crores (Previous year Rs. Nil))
(Refer note B (13) (a) of schedule XVII)
Add : Forfeited shares
(61,926,000 equity shares forfeited
during the financial year 1999-2000)
16.60
16.60
TOTAL
1,156.13
1,100.18
Term loans - funded interest facilities
(comprising of funding of interest for
the period October, 1998 to December, 2003)
(Refer note B (13) (a) of schedule XVII)
Notes: Of the above equity shares:
a)
From banks
1,095.69
1,095.69
a) 65,370,000 equity shares were allotted as fully paid-up equity shares pursuant to a
contract for consideration other than cash during the financial year 1992-1993.
Less: Amount not payable if relevant
b) 784,386,324 equity shares (Previous year 728,433,000) are represented by 5,126,708
(Previous year 4,761,000) global depository shares (GDS). GDS issued during the
year 365,708 (Previous year 4,761,000) represented by 55,953,324 equity shares
(Previous year 728,433,000).
funded interest is paid on or before
24 th April, 2007
927.93
167.76
927.93
167.76
b)
From financial institutions
Less: Amount not payable if relevant
funded interest is paid on or
before 24 th April, 2007
1,432.43
1,432.43
1,213.12
219.31
1,213.12
219.31
(B)
6,878.39
4,600.60
SCHEDULE - II
RESERVES AND SURPLUS
Short term loan from banks
Demand loan from a bank
(C)
351.03
458.00
(D)
50.00
-
Capital reserve
TOTAL (A+B+C+D) 7,739.08
5,602.96
Balance as per last balance sheet
Add : Effect of settlement of principal liability of
loan / debentures
40.89
10.21
-
30.68
# Term loans include interest funded for period upto September, 1998, for the period
subsequent to December, 2003 and interest funded on 1st April, 2007 (Previous year 1st
April, 2006).
(A)
40.89
40.89
Notes :
Share premium account
Debentures
Balance as per last balance sheet
1,254.48
1,219.85
Add : Premium on issuance of GDS
296.55
34.63
(B)
1,551.03
1,254.48
Foreign projects reserve
Balance as per last balance sheet
Less: Transferred to Statement of profit and loss
(Refer note B (25) (a) of schedule XVII)
57.96
76.46
39.51
18.50
Rs. 453.09 crores (Previous year Rs. 537.79 crores) debentures are secured / to be secured
by first / second ranking security interests, on all movable and immovable assets, present
and future, and first ranking security interests in favour of holders of more than 2000
debentures by pledge of certain shares of the company held by the promoters / associates,
security interest on rights, title and interests under project documents, trust and retention
accounts / sub-accounts, insurance policies related to projects and personal guarantees
by some of the promoter directors together with collateral securities.
(C)
18.45
57.96
General reserve
Term loans and funded interest facilities from banks and financial institutions and
debentures of Rs. 6.57 crores (Previous year Rs. 6.57 crores)
Balance as per last balance sheet
Less: Debit balance in Statement of profit and loss
(D)
22.30
22.30
20.27
-
2.03
22.30
Debenture redemption reserve
Balance as per last balance sheet
(Refer note B (25) (b) of schedule XVII)
37.21
37.21
(E)
37.21
37.21
Surplus as per Statement of profit and loss
(F)
-
7.71
TOTAL ( A+B+C+D+E+F)
1,649.61
1,420.55
Rs. 9019.44 crores term loans, funded interest facilities and debentures of Rs. 6.57 crores
are secured by first ranking security interests on all immovable assets (except certain
leased out assets), all movable assets other than current assets and second ranking security
interests on current assets, present and future, pledge of certain shares of the Company
held by the promoters / associates, security interest on rights, title and interests under
project documents, trust and retention accounts / sub-accounts, insurance policies related
to refinery project and personal guarantees by some of the promoter directors together with
collateral securities. A term loan of Rs. 104 crores is also secured by a corporate guarantee
and other assets pertaining to terminal project of Vadinar Oil Terminal Limited.
Rs. 0.33 crores (Previous year Rs. Nil) vehicle loans are secured by hypothecation of the
vehicles financed.
19
Essar Oil Limited Short term and demand loans from banks a) Rs. 401.04 crores (Previous
Essar Oil Limited
Short term and demand loans from banks
a)
Rs. 401.04 crores (Previous year Rs.23.00 crores) short term and demand loans from
As at
31st March, 2007
Rs. in crores
As at
31st March, 2006
Rs. in crores
banks are secured / to be secured by first ranking security interests on all the current
assets, second ranking security interests on (i) all the movable assets other than current
assets and immovable assets (except certain leased out assets), present and future (ii)
pledge of certain shares of the Company held by the promoters / associates (iii) security
interest on rights, title and interests under project documents, trust and retention accounts
/ sub-accounts, insurance policies related to refinery project and personal guarantees by
SCHEDULE - IV
UNSECURED LOANS
Conditional grant from a bank
(Refer note B (24) of schedule XVII)
6.20
6.29
Term loan
some of the promoter directors together with collateral securities. Of the above, loan of Rs.
-
From a bank #
275.47
263.11
17.60
crores (Previous year Rs. 23.00 crores) from a bank is further secured by fixed
deposits placed by the company.
{Including interest accrued and due Rs. 56.82 crores
(Previous year Rs. 39.01 crores)}
b)
Rs. Nil crores (Previous year Rs. 435.00 crores) from a bank is secured by first ranking
Other loans
security interests, on all movable and immovable assets, present and future, pledge of
shares of the company held by the promoters / associates, security interest on rights, title
and interests under project documents, trust and retention accounts / sub-accounts,
insurance policies related to projects and guarantees by promoters and Vadinar Oil Terminal
-
From a bank #
30.87
31.64
-
From others
513.32
162.85
Overdrawn bank balances
6.50
0.73
TOTAL
832.36
464.62
Limited.
# In foreign currency
SCHEDULE - V
FIXED ASSETS
(Rs. in Crores )
Gross Block (At Cost)
Depreciation / Amortisation
Lease
Net Block
(I)
(II)
Adjustment
IV = I - ( II + III )
(III)
Description of the Assets
As at
Additions
Deductions /
As at
As at
For the
Withdrawals (on
As at
As at
As at
As at
01.04.2006
write offs /
adjustments
31.03.2007
01.04.2006
year
sale) / Write
backs/adjustments
31.03.2007
31.03.2007
31.03.2007 31.03.2006
TANGIBLE ASSETS
Land
Buildings
Plant and machinery
Furniture and fixtures
Office equipment
Vehicle
Barge
48.60
0.01
-
48.61
--
-
-
-
48.61
48.60
28.97
0.42
-
29.39
12.81
0.93
-
13.74
-
15.65
16.16
151.17
9.57
-
160.74
44.73
7.40
-
52.13
-
108.61
106.44
4.16
1.18
-
5.34
3.55
0.39
-
3.94
-
1.40
0.61
19.38
6.00
0.47
24.91
12.88
2.50
0.33
15.05
-
9.86
6.50
1.29
2.45
0.14
3.60
0.70
0.26
0.12
0.84
-
2.76
0.59
2.09
-
-
2.09
1.85
0.14
-
1.99
-
0.10
0.24
Sub - Total
A
255.66
19.63
0.61
274.68
76.52
11.62
0.45
87.69
-
186.99
179.14
ASSET GIVEN ON LEASE
Plant and machinery
18.20
-
-
18.20
10.58
-
-
10.58
7.62
-
-
Sub-Total
B
18.20
-
-
18.20
10.58
-
-
10.58
7.62
-
-
Total Tangible Assets C = (A+B)
273.86
19.63
0.61
292.88
87.10
11.62
0.45
98.27
7.62
186.99
179.14
INTANGIBLE ASSETS
(Other than internally generated)
Software and licenses
5.26
5.72
-
10.98
0.04
1.66
-
1.70
-
9.28
5.22
Total Intangible Assets D
5.26
5.72
-
10.98
0.04
1.66
-
1.70
-
9.28
5.22
Total
E = (C + D)
279.12
25.35
0.61
303.86
87.14
13.28
0.45
99.97
7.62
196.27
184.36
Previous Period
233.52
50.21
4.61
279.12
80.95
10.41
4.22
87.14
7.62
184.36
NOTES:
1. Total depreciation / amortisation for the period - Rs. 13.28 crores (Previous year Rs. 10.41 crores) is charged / allocated as under :
(i)
Rs. 4.51 crores (Previous year Rs. 4.66 crores) to statment of profit and loss;
(ii)
Rs. 6.17 crores (Previous year Rs. 5.05 crores) to Expenditure during Construction;
(iii)
Rs. 0.29 crores (Previous year Rs. 0.09 crores) to Capital Work-in-Progress (exploration activities);
(iv)
Rs. 2.31 crores (Previous year Rs. 0.61 crores) to port terminal project.
2. Additions to plant and machinery include capital expenditure of Rs. 22.81 crores incurred by the company for a 220 KVA line from Paschim Gujarat Vij Company Limited (PGVCL)
feeder, the ownership of which now vests with PGVCL and is amortised over a period of 20 years.
3. Land includes Rs. 18.67 crores (Previous year Rs. 18.67 crores) representing cost of land leased to Vadinar Oil Terminal Limited and Vadinar Power Company Limited.
4. The estimated useful life of software and licenses is 5 years from the date of acquisition.
As at
As at
As at
As at
31st March,
31st March,
31st March,
31st March,
2007
2006
2007
2006
Rs. in
Crores
Rs. in Crores
Rs. in crores
Rs. in crores
SCHEDULE - VI
CAPITAL WORK IN PROGRESS
6.43
4.40
Refinery project
a) Project management consultancy,
201.88
126.90
technical advisory fees, etc.
688.19
594.82
{Including in transit / pending custom clearance
Rs. 95.86 crores (Previous year Rs. 35.47 crores)}
- Indigenous
Exploration activities
Expenditure on oil and gas exploration #
(Refer note B (22) of schedule XVII)
b) Equipment / materials
4,359.98
3,686.34
- Imported
3,463.48
2,960.22
{The above includes gain on account of foreign exchange fluctuation of Rs. 1.03 crores
during the year (Previous year loss of Rs. 0.81 crores)}
# include stores/spares consumed Rs. 3.40 crores (Previous year Rs. 2.54 crores)
20
SCHEDULE - VII As at As at EXPENDITURE DURING CONSTRUCTION (Refer note B (14) of
SCHEDULE - VII
As at
As at
EXPENDITURE DURING CONSTRUCTION (Refer note B (14) of schedule XVII)
31st March,
31st March,
Rs. in crores
2007
2006
Rs. in crores
Rs. in crores
Nature of Expenses
As at
Incurred during
As at
31.03.2006
the year
31.03.2007
SCHEDULE - VIII
Advance on capital Account
Interest and finance charges
Interest and other finance charges
(Gain) / Loss on foreign exchange
fluctuation on loans (Net)
Less: Interest income (current year
amount mainly includes interest on fixed
deposits furnished as margin) inclusive of
tax deducted at source Rs. 6.02 crores
(Previous year Rs. 2.73 crores)
Less: Gain on cancellation of currency
swap (Refer note B 28 (b) of schedule XVII)
4,451.82
804.93
5,256.75
Advances
Towards indigenous supply / labour
/ construction (Net of amount
capitalised / released to capital
work-in-progress)
-
169.18
(30.99)
138.19
2,092.53
1,692.80
-
Towards project management,
107.28
27.88
135.16
technical advisory fees, etc.
52.39
28.13
-
Others
32.94
23.55
0.73
5.50
6.23
4,512.99
740.56
5,253.55
2,177.86
1,744.48
Less : Reduction in the amount of funded
interest i.e. amount not payable if relevant
funded interest is paid on or before
24th April, 2007 (Refer note B (13)
(a) of schedule XVII)
SCHEDULE - IX
INVESTMENTS (Unquoted) - At Cost
Investment in subsidiary company
2,141.05
-
2,141.05
(A)
2,371.94
740.56
3,112.50
Investment in wholly owned Subsidiary
Other expenditure
Raw material consumed
103,000,000 (Previous year - 66,649,307)
(Refer note B (8) (i) of schedule XVII)
Consumption of chemical, stores and spares
Freight and material handling charges
Excise duty #
Terminalisation charges
Salaries, wages and bonus
Contribution to / provision for provident
and other funds
Employees’ welfare and other amenities
Rent
Rates and taxes
Repairs and maintenance:
-
3,669.54
3,669.54
Equity shares of Rs. 10
each of Vadinar Power Company
103.00
66.65
-
17.78
17.78
-
34.87
34.87
-
16.40
16.40
Limited (fully paid up)
-
15.16
15.16
Trade - long term
71.91
57.29
129.20
i) 13,000,000 Equity shares (previous year - 13,000,000)
6.10
3.40
9.50
8.06
5.17
13.23
13.00
21.78
6.11
27.89
of Rs. 10 each of
Petronet VK Limited (fully paid up)
13.00
2.72
0.73
3.45
- Buildings
11.81
1.58
13.39
1.58
1.58
- Machinery / equipment
14.52
47.22
61.74
ii) 1,584,000 equity shares (previous year - 1,584,000)
of Rs. 10 each of
Petronet CI Limited (fully paid up)
- Others
4.49
8.07
12.56
Professional and other technical advisory fees
Power and fuel
{Net of consumed out of own
production Rs. 90.10 crores
(Previous year Rs. Nil)}
Insurance
Depreciation / amortisation
Loss on sale of assets (Net)
(Gain) / Loss on foreign exchange fluctuation (Net)
Commission
Provision for diminution in value of investments
Commodity derivative loss (net)
Fringe benefit tax
Miscellaneous expenditure written off
Bad debts written-off
Sundry expenses
51.20
24.23
75.43
iii)10,000,000 (Previous year 10,000,000)
Equity shares of Rs. 10 each of
Petronet India Limited (fully paid up)
10.00
10.00
6.33
79.21
85.54
127.58
91.23
Less : Provision for diminution in value of investments
18.21
1.58
51.26
6.40
57.66
39.95
6.17
46.12
Total
109.37
89.65
2.18
-
2.18
11.88
(115.08)
(103.20)
SCHEDULE - X
-
7.53
7.53
CURRENT ASSETS, LOANS AND ADVANCES
1.58
16.62
18.20
-
20.75
20.75
Current assets
1.14
1.97
3.11
Inventories
42.63
-
42.63
-
4.72
4.72
a) Stores and spares
8.96
3.07
158.81
76.80
235.61
b) Raw material - crude oil
2,181.46
-
(B)
508.35
4,012.64
4,520.99
c) Work-in-progress
820.68
-
Less : Income during construction / trial operations
(Refer note B (14) of Schedule XVII)
d) Traded / finished goods
406.87
33.42
Sales of products out of trial run production
of some of the units
Less: Excise duty
Net sales
Accretion / (Deduction) in stocks of finished
and semi-finished products and
work-in-process (deducted) / added
Opening stock
Finished goods
Work-in-progress
3,417.97
36.49
-
2,455.74
2,455.74
-
22.77
22.77
Sundry debtors (unsecured)
(Refer note B (17) of schedule XVII)
-
2,432.97
2,432.97
a)
Over six months
- Considered good
80.61
80.26
- Considered doubtful
0.56
0.56
-
-
-
b)
Others - considered good
96.23
0.86
-
-
-
177.40
81.68
(i)
-
-
-
Less : Provision for doubtful debts
0.56
0.56
Closing stock
176.84
81.12
Finished goods
-
276.60
276.60
Cash and bank balances
Work-in-progress
-
820.68
820.68
(ii)
-
1,097.28
1,097.28
a) Cash on hand
0.43
0.42
Accretion in stocks
(ii) - (i)
-
1,097.28
1,097.28
Technical advisory services fees
Less : Expenses incurred to
earn technical advisory services fees
Salaries, wages and bonus
Employees’ welfare and other amenities
-
2.24
2.24
b) Balances with banks in
(Refer note B (35) of schedule XVII)
i) Current accounts
114.22
30.98
-
2.13
2.13
ii) Deposit
and escrow accounts
528.32
488.53
-
0.10
0.10
-
0.01
0.01
Miscellaneous income
6.46
0.40
6.86
Capitalised
0.58
-
0.58
(Deposit account comprises of margin deposits mainly
placed for letters of credit facilities, guarantees
and other term deposits)
(C)
7.04
3,530.66
3,537.70
Expenditure during Construction
642.97
519.93
- pending allocation -
(D = A + B-C)
2,873.25
1,222.54
4,095.79
(A)
4,237.78
637.54
# Pertains to closing stock as on 31st March, 2007 (Opening stock Nil)
21

Essar Oil Limited

 

As at

As at

SCHEDULES ANNEXED TO AND FORMING PART OF THE STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH, 2007

31st March,

31st March,

2007

Rs. in crores

2006

Rs. in crores

 

For

Year

For Year ended 31st March, 2006 Rs. in crores

Loans, advances and deposits

(Unsecured, considered good) Advances recoverable in cash or in kind or for value to be received {Includes Rs. 3.41 crores to subsidiary

 

ended 31st March, 2007 Rs. in crores

305.78

225.39

SCHEDULE - XII OTHER INCOME Interest {Inclusive of tax deducted at source Rs. 0.08 crores (Previous year Rs. 0.39 crores)}

 

(Previous year Rs. 8.02 crores)} Bills receivable {Net of interest accrued but not due Rs. Nil pertaining to period after 31st March, 2007 (Previous year Rs. 0.02 crores)} Deposits

-

1.67

a) On deposits

1.08

7.66

b) Others

3.45

7.58

{including interest arising out of arbitration

a) With government and semi government departments

17.43

16.00

award Rs. 3.10 crores (Previous year Rs. 4.91 crores)}

(A)

4.53

15.24

b) Other deposits

55.92

23.36

Loans / inter corporate deposits Advance income tax {Net of provisions of Rs. 28.60 crores (Previous year Rs. 28.60 crores)}

-

24.98

Lease rentals

0.66

0.80

20.96

14.09

Add : Lease equalisation charge

-

0.06

 

(B)

0.66

0.86

Foreign exchange fluctuation (Net)

(C)

0.28

0.78

Fringe benefit tax {Net of provisions of Rs. 4.77 crores (Previous year Rs. 2.18 crores)}

0.03

0.24

Miscellaneous income

(D)

4.92

23.01

 

(Refer note B (26) of schedule XVII) Profit on disposal of long term investment

(E)

-

22.70

 

400.12

305.73

TOTAL (A+B+C+D+E)

10.39

62.59

 

SCHEDULE - XIII

PAYMENTS TO AND PROVISIONS FOR EMPLOYEES Salaries, wages and bonus Contribution to / provision for provident and other funds Staff welfare expenses

 

Less : Provision for doubtful advances

1.00

0.50

10.16

16.27

(B)

399.12

305.23

 

Total (A+B)

4,636.90

942.77

0.49

1.09

SCHEDULE - XI

1.67

0.96

 

TOTAL

12.32

18.32

CURRENT LIABILITIES AND PROVISIONS

SCHEDULE - XIV

ADMINISTRATIVE AND OTHER EXPENSES Rates and taxes Electricity and water charges Insurance - others Travelling and conveyance Communication Printing and stationery Professional fees Rent Repairs and maintenance

 

Current liabilities Bills payable on capital account

   

0.55

5.68

54.45

331.43

0.14

0.58

{Net of unamortised discounting charges Rs. 0.69 crores pertaining to period after 31 st March 2007 (Previous year Rs. 4.94 crores pertaining to period after 31 st March, 2006)}

 

0.01

0.04

1.85

4.31

0.66

1.14

0.16

0.42

2.87

2.48

0.74

2.04

Sundry creditors (Refer Note B (32) of Schedule XVII)

a) Buildings

-

0.05

b) Others

0.16

0.36

Advertisement Vehicle hire and maintenance charges Sitting fees to directors Sundry expenses Provision for doubtful debts and advances Inventory written off

 

0.01

-

a) For small scale industrial undertakings

0.07

-

0.07

0.84

b) For others

3,677.73

352.31

0.07

0.05

{Including Rs. 2,011.06 crores (Previous year Rs. 107.98 crores) covered under letter of credit}

 

2.16

0.97

0.50

0.85

-

0.20

TOTAL

9.95

20.01

Advances received from customers / others (Refer note B (23) of schedule XVII)

147.57

147.31

SCHEDULE - XV SELLING AND DISTRIBUTION EXPENSES Terminalisation charges Rent for retail outlets Commission Advertisement and sales promotion expenses Others

 

7.57

16.29

Security deposits Interest accrued but not due on loans

46.15

30.86

4.04

2.63

44.51

36.05

0.01

0.22

 

897.96

0.01

0.23

(A) There is no amount due and outstanding to be credited to investor education and protection fund.

Provisions