Essar Shipping Ports & Logistics Limited Annual Report 2007 - 2008 Dear Members,

As you are aware, the Registered Office of the Company has been shifted. The new address is as under:

Essar Shipping Ports & Logistics Limited, Administrative Building, Essar Refinery Complex, Okha Highway (SH – 25), Taluka Khambalia, District Jamnagar, Pin Code: 361 305, Gujarat State.

Members are requested to take note of the said change. All correspondence to the Company should henceforth be sent to the above address only.

Manoj Contractor Company Secretary BOARD OF DIRECTORS

Shashi Ruia AUDIT COMMITTEE Chairman R. N. Bansal N. Srinivasan Anshuman Ruia Ravi Ruia Vice Chairman COMPENSATION COMMITTEE Anshuman Ruia Ravi Ruia Anshuman Ruia Director Sanjay Mehta

Sanjay Mehta SHARE TRANSFER & SHAREHOLDERS’ Managing Director GRIEVANCE COMMITTEE Ravi Ruia A. R. Ramakrishnan Sanjay Mehta Wholetime Director A. R. Ramakrishnan V. Ashok V. Ashok Wholetime Director REGISTERED OFFICE Administrative Building, Essar Refinery Complex R. N. Bansal Okha Highway (SH - 25), Taluka Khambhalia Distt. - Jamnagar Independent Director Gujarat 361305

N. Srinivasan CORPORATE OFFICE Independent Director Essar House 11, Keshavrao Khadye Marg K. V. Krishnamurthy Mahalaxmi, Mumbai 400 034 Independent Director

REGISTRARS & SHARE TRANSFER AGENTS Dilip J. Thakkar Data Software Research Company Private Limited Independent Director “Sree Sovereign Complex” 22, 4th Cross Street, Trustpuram, Kodambakkam Chennai 600 024 e-mail: [email protected]

COMPANY SECRETARY Manoj Contractor

AUDITORS Deloitte Haskins & Sells

32nd Annual Report 2007-2008 1 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited) NOTICE TO MEMBERS

Notice is hereby given that the Thirty-second Annual General candidature for the office of Director, be and is hereby Meeting of Essar Shipping Ports & Logistics Limited will be appointed as Director of the Company.” held at the Registered Office of the Company at Administrative Building, Essar Refinery Complex, Okha 8. To consider and if thought fit, to pass with or without Highway (SH - 25), Taluka Khambhalia, Distt. Jamnagar, modification, the following resolution as an Ordinary Gujarat 361305 at 3.30 p.m. on Saturday, September 27, resolution: 2008, to transact the following business: “RESOLVED THAT pursuant to the provisions of Section ORDINARY BUSINESS: 198, 269, 309, 311 read with Schedule XIII and other applicable provisions, if any, of the Companies Act, 1. To receive, consider and adopt the Profit and Loss 1956 and subject to the approval of the Central Account for the year ended March 31, 2008 and the Government, Mr. Sanjay Mehta be and is hereby re- Audited Balance Sheet as on that date and the Reports appointed as Managing Director of the Company for a of the Board of Directors and Auditors thereon. period of three years with effect from September 18, 2008 on the terms and conditions as set out in the 2. To appoint a Director in place of Mr. N. Srinivasan, who Explanatory Statement annexed hereto.” retires by rotation and being eligible, offers himself for re-appointment. “RESOLVED FURTHER THAT in the event of loss or inadequacy of profits in any financial year, the Managing 3. To appoint a Director in place of Mr. Sanjay Mehta, Director shall be paid remuneration by way of salary, who retires by rotation and being eligible, offers himself perquisites and allowances as specified above or as for re-appointment. may be decided by the Board of Directors.” 4. To appoint a Director in place of Mr. Ravi Ruia, who “RESOLVED FURTHER THAT the terms and conditions retires by rotation and being eligible, offers himself for set out for appointment and payment of remuneration re-appointment. herein, may be altered and varied from time to time by 5. To re-appoint Messrs. Deloitte Haskins & Sells, the Board of Directors of the Company as it may, in its Chartered Accountants as Auditors of the Company to discretion deem fit so as not to exceed the limits hold office from the conclusion of this Annual General specified under Schedule XIII to the Companies Act, Meeting until the conclusion of the next Annual General 1956 (including any statutory modification or re- Meeting and to fix their remuneration. enactment thereof, for the time being in force) or any amendments made thereto.” SPECIAL BUSINESS: “RESOLVED FURTHER THAT the Agreement may be 6. To consider and if thought fit, to pass with or without terminated by either party (Company or the Managing modification, the following resolution as an Ordinary Director) by giving the other three months prior notice resolution: of termination in writing.” “RESOLVED THAT Mr. K. V. Krishnamurthy, who was “RESOLVED FURTHER THAT the Board of Directors appointed as an Additional Director by the Board of be and is hereby authorised to take all necessary steps Directors pursuant to Section 260 of the Companies including filing of necessary applications, forms, letters, Act, 1956 and who holds office upto the date of this etc., with the Government and other authorities to give Annual General Meeting and in respect of whom the effect to the above resolution.” Company has received a notice in writing under Section 257 of the Companies Act, 1956, proposing his 9. To consider and if thought fit, to pass with or without candidature for the office of Director, be and is hereby modification, the following resolution as an Ordinary appointed as Director of the Company.” resolution: “RESOLVED THAT in partial modification of the 7. To consider and if thought fit, to pass with or without resolution passed by the members at the Thirty-first modification, the following resolution as an Ordinary Annual General Meeting of the Company held on resolution: September 25, 2007, approving the appointment and “RESOLVED THAT Mr. Dilip J. Thakkar, who was terms of remuneration of Mr. V. Ashok, Wholetime appointed as an Additional Director by the Board of Director and in accordance with the provisions of Directors pursuant to Section 260 of the Companies Sections 198, 269, 309, 311 read with Schedule XIII Act, 1956 and who holds office upto the date of this and other applicable provisions, if any, of the Companies Annual General Meeting and in respect of whom the Act, 1956, the Company hereby approves the variation Company has received a notice in writing under Section in the terms of remuneration of Mr. V. Ashok, Wholetime 257 of the Companies Act, 1956, proposing his Director for the remaining period of his tenure in office,

2 32nd Annual Report 2007-2008 with effect from April 1, 2008, as set out in the the Company the details of such folios together with the Explanatory Statement annexed hereto.” Share Certificates for consolidating their holdings in one folio. Members are further advised to hold the shares in “RESOLVED FURTHER THAT all other terms and dematerialised form, as the trading of the shares on conditions of appointment of Mr. V. Ashok, Wholetime Bombay Stock Exchange and National Stock Exchange Director as approved earlier by the members, shall where the shares of your Company are listed is in remain unchanged.” compulsory demat mode. “RESOLVED FURTHER THAT the Board of Directors be and is hereby authorised to take all necessary steps 6. Members are informed that in case of joint holders as may be necessary to give effect to the above attending the meeting, only such joint holder who is resolution.” higher in the order of names will be entitled to vote. By Order of the Board 7. In terms of Section 109A of the Companies Act, 1956, members are entitled to make nomination in respect of shares held by them in physical form. Members desirous of making nominations are requested to send their MANOJ CONTRACTOR requests in Form 2B, in duplicate, to the Secretarial Company Secretary Department at the Registered Office of the Company or Jamnagar to the Registrars and Share Transfer Agents - Data July 29, 2008 Software Research Company Private Limited.

8. Members desiring any information regarding the Notes: accounts are requested to write to the Company at 1. A member entitled to attend and vote at the meeting is Essar House, 11, Keshavrao Khadye Marg, Mahalaxmi, entitled to appoint one or more proxies to attend and Mumbai 400 034 atleast 7 days before the date of the vote instead of himself on a poll. The proxy need not be Meeting to enable the Company keep the information a member of the Company. Proxy forms in order to be ready. effective should be deposited at the Registered Office of the Company not later than 48 hours before the time 9. The Chairman of the Audit Committee of Directors shall fixed for the meeting. be present at the Annual General Meeting to reply to the queries of members on the Annual Accounts of the 2. Members / Proxies should bring the attendance slip Company. duly filled in for attending the meeting. 10. Appointment / Re-appointment of Directors: 3. The Register of Members and Share Transfer Books of the Company will remain closed from Monday, At the ensuing Annual General Meeting, Mr. N. September 22, 2008 to Saturday, September 27, 2008, Srinivasan, Mr. Sanjay Mehta and Mr. Ravi Ruia retire both days inclusive. by rotation and being eligible offer themselves for 4. The members are requested to immediately notify, in reappointment. Mr. K. V. Krishnamurthy and Mr. Dilip J. their own interest, the change in their mailing address Thakkar are proposed to be appointed as Directors. to the Company’s Registrars and Share Transfer Agents, The information pertaining to the aforesaid Directors in Data Software Research Company Private Limited, terms of Clause 49 of the Listing Agreement with the “Sree Sovereign Complex”, 22, 4th Cross Street, Stock Exchanges is annexed hereto. Trustpuram, Kodambakkam, Chennai 600 024, 11. The Explanatory Statement pursuant to Section 173(2) Tel : 91-44-2483 3738, Fax: 91-44-2483 4636. of the Companies Act, 1956 in respect of the special 5. Members who are holding shares in identical order of business at item Nos. 6 to 9 hereinabove, is annexed names in more than one folio are requested to send to hereto.

32nd Annual Report 2007-2008 3 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

ANNEXURE TO NOTICE: EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE COMPANIES ACT, 1956.

Item No. 6 The Company has received a notice from a member under Section 257 of the Companies Act, 1956, with requisite Mr. K. V. Krishnamurthy was appointed as an Additional deposit, proposing the name of Mr. Thakkar as a candidate Director of the Company with effect from June 20, 2008. In for the office of Director of the Company. terms of Section 260 of the Companies Act, 1956 and in accordance with Article 73 of the Articles of Association of Mr. Thakkar, a practicing Chartered Accountant by profession the Company, Mr. Krishnamurthy holds office upto the date since last forty-six years is a Partner of M/s. Jayantilal of ensuing Annual General Meeting. Thakkar & Co., and Jayantilal Thakkar Associates, Chartered Accountants, Mumbai. Mr. Thakkar has vast experience in Accordingly, the resolution at item No. 6 of the notice is the fields of Accounts, Finance, Taxation, FEMA, etc. being proposed for his appointment as Director of the Company. He is also a Director on the Board of various Indian public limited companies. Your board is of the opnion that the vast The Company has received a notice from a member under experience of Mr. Thakkar would be beneficial for the future Section 257 of the Companies Act, 1956, with requisite growth of the Company. Your Directors accordingly deposit, proposing the name of Mr. Krishnamurthy as a recommend the resolution at Item No. 7 of the Notice for candidate for the office of Director of the Company. your approval. Mr. K. V. Krishnamurthy, a Chartered Accountant by None of the Directors, except Mr. Thakkar, is concerned or profession is a fellow member of the Indian Institute of interested in this resolution. Bankers and was a member of its Governing Board. He has over thirty-three years of experience in Public Sector Item No. 8 Banking. His areas of specialisation include both domestic Mr. Sanjay Mehta was appointed as the Managing Director and international banking, treasury management, risk of the Company with effect from September 18, 2005 for a management, foreign exchange management and human period of three years. The term of appointment of Mr. Mehta resource management. as the Managing Director expires on September 17, 2008. Considering his vast experience and management skills, He is credited with the remarkable turnaround of both Bank the Board at its meeting held on July 29, 2008, has re- of India and Syndicate Bank, leading nationalised banks. appointed him as the Managing Director with effect from He has been the Chairman/Director of nationalised banks September 18, 2008 for a further period of three years. like Bank of India, Bank of Baroda, Syndicate Bank and other financial institutions like Indo Hong Kong International Mr. Mehta has an Honors Degree from London School of Finance Company Limited, Export Credit Guarantee Economics and a Masters Degree from London Business Corporation of India and Agricultural Finance Corporation of School. Prior to joining Essar in June 2000, Mr. Mehta was India Limited. head of the South East Asia Investment Banking Desk at American Marine Advisors Inc., New York; Simpson, Spence Mr. Krishnamurthy is also a Director on the Board of various & Young; Hambros Bank and Goldman Sachs. Mr. Mehta Indian public limited companies. Your Board is of the opinion has experience in raising capital in the US financial markets. that the vast experience of Mr. Krishnamurthy would be Mr. Mehta also has vast experience of ports & terminals, beneficial for the future growth of the Company. Your logistics and the shipping industry. Directors accordingly recommend the resolution at Item No. 6 of the Notice for your approval. After considering various factors, the Remuneration Committee recommended the remuneration for Mr. Mehta. None of the Directors, except Mr. Krishnamurthy, is The Board of Directors, accepting the recommendation of concerned or interested in this resolution. the Remuneration Committee, have approved the following Item No. 7 remuneration to be paid to Mr. Mehta with effect from September 18, 2008: Mr. Dilip J. Thakkar was appointed as an Additional Director 1. Remuneration : of the Company with effect from June 20, 2008. In terms of Section 260 of the Companies Act, 1956 and in accordance Basic salary in the range of Rs. 1,00,000/- to with Article 73 of the Articles of Association of the Company, Rs. 3,50,000/- per month, as may be determined by the Mr. Thakkar holds office upto the date of ensuing Annual Board of Directors or such other authority as may be General Meeting. delegated by the Board of Directors. Accordingly, the resolution at item No. 7 of the notice is 2. In addition to the Basic Salary, Mr. Mehta shall be being proposed for his appointment as Director of the entitled to perquisites and allowances like Company. accommodation (furnished or otherwise) or house rent

4 32nd Annual Report 2007-2008 allowance in lieu thereof; house maintenance allowance The Board of Directors, accepting the recommendation of together with reimbursement of expenses/allowances the Remuneration Committee has revised the remuneration for utilisation of gas, electricity, water, furnishing and payable to Mr. Ashok with effect from April 1, 2008 as per repairs; medical reimbursement; education allowance; particulars given hereinbelow: leave travel concession for self and his family including 1. Remuneration : dependents; club fees; premium for medical insurance; commission and all other payments in the nature of Basic salary in the range of Rs. 2,00,000/- to perquisites and allowances as agreed by the Board of Rs. 5,00,000/- per month, as may be determined by the Directors or such other authority as may be delegated Board of Directors or such other authority as may be by the Board of Directors from time to time upto the delegated by the Board of Directors. limit of Rs. 10,00,000/- per month. As per the rules of the Company, Mr. Mehta is eligible for Provident Fund, 2. In addition to the Basic Salary, Mr. Ashok shall be Gratuity and Superannuation, which payments shall not entitled to perquisites and allowances like be included for the purpose of calculation of the accommodation (furnished or otherwise) or house rent managerial remuneration. allowance in lieu thereof; house maintenance allowance together with reimbursement of expenses/allowances The appointment of Mr. Mehta as Managing Director is for utilisation of gas, electricity, water, furnishing and subject to the approval of the Central Government. repairs; medical reimbursement; education allowance; leave travel concession for self and his family including Mr. Sanjay Mehta has been associated with the dependents; club fees; premium for medical insurance; Company for past eight years and under his leadership, commission and all other payments in the nature of the Company has made significant progress to transform perquisites and allowances as agreed by the Board of itself into an integrated logistics solutions provider. Directors or such other authority as may be delegated The Board is of the opinion that his appointment as the by the Board of Directors from time to time up to the Managing Director of the Company would be in the limit of Rs. 10,00,000/- per month. As per the rules of best interest of the Company and accordingly the the Company, Mr. Ashok is eligible for Provident Fund, resolution at Item No. 8 of the Notice is recommended Gratuity and Superannuation, which payments shall not for Members approval. be included for the purpose of calculation of the managerial remuneration. None of the Directors, except Mr. Mehta is concerned or interested in this resolution. All other terms and conditions of his appointment in terms of the resolution passed by the members on This explanation together with the accompanying Notice September 25, 2007 remain unchanged. is and should be treated as an abstract under Section 302 of the Companies Act, 1956. The Board is of the opinion that the increase in the remuneration would be in the interest of the Company Item No. 9 and accordingly the resolution at Item No. 9 of the The members had, at the Annual General Meeting of the Notice is recommended for members approval. Company held on September 25, 2007, approved the None of the Directors, except Mr. Ashok is concerned appointment of Mr. V. Ashok as Wholetime Director of the or interested in this resolution. Company for a period of five years commencing from December 7, 2006 on the terms and conditions as contained This explanation together with the accompanying Notice in the resolution appointing Mr. Ashok as Wholetime Director. is and should be treated as an abstract under Section 302 of the Companies Act, 1956. Mr. Ashok is presently responsible for the Finance, Administration and other functions of the Company. He has also been entrusted with the responsibility of overseeing the finance and business functions of the subsidiaries of the By Order of the Board Company. The Remuneration Committee reviewed the remuneration package of the Wholetime Director with a view to align the package with the best corporate practices prevailing in the MANOJ CONTRACTOR industry. After considering various factors, the Remuneration Company Secretary Committee recommended an increase in the remuneration Jamnagar payable to Mr. Ashok. July 29, 2008

32nd Annual Report 2007-2008 5 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

Annexure to Notice: Details of Directors seeking re-appointment / appointment at the Thirty-second Annual General Meeting in pursuance of Clause 49 of the Listing Agreement.

Mr. N. Srinivasan Logistics Ltd., Essar Bulk Terminal Ltd. and Essar Bulk Terminal (Salaya) Ltd. Mr. N. Srinivasan is a Commerce Graduate and a member of the Institute of Chartered Accountants of India since 1955 Mr. Mehta does not hold any shares in the Company. and was a senior partner in Fraser & Ross / Deloitte Haskins & Sells until 1997. He has been closely associated with the Mr. Ravi Ruia development of the profession of Accounting and Auditing in India. He was Chairman of the Southern India Regional Mr. Ravi Ruia, is an Engineer by training. His rare business Council and also a Central Council Member of the Institute and entrepreneurial abilities with an eye for details has of Chartered Accountants of India. enabled the Essar Group to be ranked among the top industrial houses in the Country. Essar has emerged as the Mr. Srinivasan has been associated with various Business fourth largest industrial house in India in terms of assets. Organisations and has served as Deputy President of the Associated Chamber of Commerce and Industry of India Mr. Ruia, commenced his business career in the family (ASSOCHAM), New Delhi, Chairman of The Madras business way back in 1969. He ably assisted his elder brother Chamber of Commerce and Industry and President of The Mr. Shashi Ruia in steering the Essar Group to its current Indo-American Chamber of Commerce among others. He pre-eminent position. The Essar Group has diversified has also served as a Director on the Board of The Institute business interests in specific areas such as Shipping Ports of Internal Auditors Inc., Florida – USA, Director of Indian & Logistics, Steel, Power, Telecom, Oil & Gas, Construction Bank, Chennai, Senate Member of the Annamalai University and Financial Services. The Essar Group has emerged as a and Honorary Professor, Institute of Financial Management leading business conglomerate in India. and Research, Chennai. Mr. Ruia is a widely travelled industrialist. He is connected Mr. Srinivasan is also a Director on the Board of various with several industry and trade associations both at the Indian public limited companies viz. United Breweries national and bilateral level. Mr. Ruia has provided the (Holdings) Ltd., Best & Crompton Engineering Ltd., McDowell foresight and vision to mastermind Essar Group’s strategy Holdings Ltd., Tractors & Farm Equipments Ltd., The Andhra so as to consolidate Essar’s activities through backward Pradesh Paper Mills Ltd., India Cements Ltd., India Cements and forward integration. In this process the created synergy Capital Ltd., Ador Multiproducts Ltd., Amco Batteries Ltd., has been utilised to propel Essar’s rapid growth. The United Nilgiri Tea Estates Company Ltd., GATI Ltd., Ador Fontech Ltd., Tafe Motors and Tractors Ltd., and U. B. Mr. Ruia is also a Director on the Board of various Indian Engineering Ltd. public limited companies viz. Vodafone Essar Ltd., Essar Oil Ltd., Essar Steel Ltd., Essar Investments Ltd., Essar Power Mr. Srinivasan is also a member of the Audit Committees of Ltd., India Securities Ltd., and Essar Steel (Hazira) Ltd. India Cement Ltd., Amco Batteries Ltd., The Andhra Pradesh Paper Mills Ltd. and India Cement Capital Ltd. He is the Mr. Ruia does not hold any shares in the Company. Chairman of the Audit Committee of GATI Ltd., Tractors & Farm Equipments Ltd. and U.B. Engineering Ltd. He is also Mr. K. V. Krishnamurthy the Chairman of the Investors Grievance Committee of United Breweries (Holdings) Ltd. Mr. K. V. Krishnamurthy, a Chartered Accountant by profession is a fellow member of the Indian Institute of Mr. Srinivasan does not hold any shares in the Company. Bankers and was a member of its Governing Board. He has over thirty-three years of experience in Public Sector Mr. Sanjay Mehta Banking. His areas of specialisation include both domestic Mr. Sanjay Mehta, has a Honors Degree from London School and international banking, treasury management, risk of Economics and a Master’s Degree from London Business management, foreign exchange management and human School. Mr. Mehta has been with the shipping industry for resource management. the last fifteen years. His area of specialisation is shipping He is credited with the remarkable turnaround of Bank of and project finance. Prior to joining Essar, Mr. Mehta was India and Syndicate Bank, leading nationalised banks. He head of the South East Asia and Asia Pacific Maritime has been the Chairman/Director of nationalised banks like Financing Desk of American Marine Advisors Inc., New York. Bank of India, Bank of Baroda, Syndicate Bank and other Prior to this he was associated with Simpson, Spence & financial institutions like Indo Hong Kong International Young, Hambros Bank and Goldman Sachs. Finance Company Limited, Export Credit Guarantee Mr. Mehta is also a Director on the Board of following Indian Corporation of India and Agricultural Finance Corporation of public limited companies viz. Vadinar Oil Terminal Ltd., Essar India Limited.

6 32nd Annual Report 2007-2008 Mr. Krishnamurthy is also a Director on the Board of various Associates, Chartered Accountants, Mumbai. Mr. Thakkar Indian public limited companies, viz., Asset Reconstruction has vast experience in the fields of Accounts, Finance, Co. (India) Ltd., Sundaram BNP Paribas Fund Trustee Co. Taxation, FEMA, etc. Ltd., Rap Media Ltd., Centrum Capital Ltd., Centrum Direct Ltd., Essel Propack Ltd., Borosil Glass Works Ltd., Essar He is also a Director on the Board of various Indian public Steel Ltd., Thirumalai Chemicals Ltd., V.V.F. Industries Ltd. limited companies viz., Omega Management Services Ltd., and KPIT Cummins Ltd. Poddar Developers Ltd., Panasonic Battery India Co. Ltd., Essar Oil Ltd., Thirumalai Chemicals Ltd., The Ruby Mills Mr. Krishnamurthy is the Chairman of the Audit Committee Ltd., PAE Ltd., Himatsingka Seide Ltd., Indo Count Industries of Borosil Glass Works Ltd., VVF Industries Ltd. and Centrum Ltd., Walchandnagar Industries Ltd., Garware Offshore Capital Limited. He is also a member of the Audit Committee Services Ltd. and Garware Polyester Ltd. of Asset Reconstruction Company (India) Limited, Sundaram Mr. Thakkar is the Chairman of the Audit Committee of BNP Paribas Trustees Co. Ltd., Essel Propack Limited, Essar Essar Oil Ltd., Thirumalai Chemicals Ltd., PAE Ltd. and Steel Ltd., Thirumalai Chemicals Ltd. and KPIT Cummins Himatsingka Seide Ltd. He is also a member of the Audit Ltd. Committee of Panasonic Battery India Co. Ltd., and Mr. Krishnamurthy does not hold any shares in the Company. Walchangnagar Industries Ltd. He is the Chairman of the Investors Grievances Committee of Panasonic Battery India Mr. Dilip J. Thakkar Co. Ltd. and a member of the Investors Relations Committee of Essar Oil Ltd. and Share Transfer Committee of Thirumalai Mr. Thakkar, a practicing Chartered Accountant by profession Chemicals Ltd. since last forty-six years and is a Partner of M/s. Jayantilal Thakkar & Co., and Jayantilal Thakkar Mr. Thakkar does not hold any shares in the Company.

32nd Annual Report 2007-2008 7 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited) DIRECTORS’ REPORT

To the Members of Essar Shipping Ports & Logistics Limited Your Directors take pleasure in presenting the Thirty-second Annual Report of your Company together with Audited Accounts for the year ended March 31, 2008. Pursuant to the provisions of section 219 of the Companies Act, 1956 and as permitted by the Securities and Exchange Board of India (SEBI), abridged accounts are enclosed. Any member interested in obtaining a copy of unabridged accounts may write to the Company Secretary at the Registered Office.

FINANCIAL ANALYSIS: A summary of the standalone and consolidated financial results of your Company for the year ended March 31, 2008 are furnished below: (Rs. in crore)

Standalone Consolidated

For the For the For the For the Particulars year ended year ended year ended year ended 31-03-2008 31-03-2007 31-03-2008 31-03-2007

Total Income 1,063.93 1,045.13 2,255.67 1,682.70 Total Expenditure 598.73 719.00 1,460.36 1,301.41 EBITDA 465.20 326.13 795.31 381.28 Less: Interest & Finance charges 89.19 94.48 266.55 104.25 Less: Provision for Depreciation 106.64 90.51 221.48 112.03 Profit before tax 269.37 141.14 307.28 165.01 Less: Provision for Tax (27.70) (7.16) (43.68) (7.26) Profit before Share of Minority Interest 241.67 133.98 263.60 157.75 Add : Share of Minority Interest — — 13.81 — Profit after tax 241.67 133.98 277.41 157.75 Add: Balance in Profit and Loss Account as per last Balance Sheet 589.93 490.45 1,010.83 887.58 Less: Transfer to Tonnage Tax Reserve (30.00) (34.50) (30.00) (34.50) Balance carried forward to Balance Sheet 801.60 589.93 1,258.24 1,010.83

DIVIDEND: integrated logistics company. As part of this re-organisation exercise, your Company has brought the ports and terminal During the year, your Company has consolidated the ports assets under its fold. In order to become a fully integrated and terminals businesses into its fold and also proposes to logistics solutions provider, it is proposed to also bring the bring in the oilfields & drilling services business through a oilfields & drilling services business carried on by Essar merger. These businesses are highly capital intensive and Oilfields Services Limited in its fold. With investments in dry nurturing these new businesses to their optimum value would bulk ports and oil terminals, crude and dry bulk carriers, require significant capital commitments. These investments port to plant logistics and interests in oil field services, this will add value in the coming years. In order to plough back re-organisation will enable your Company to provide end-to- earnings into the growth of these businesses, no dividend end logistics solutions to its customers. The business model for the current year has been recommended. adopted by your Company is unique in nature with no peer MANAGEMENT DISCUSSION & ANALYSIS: group having advantage of this model. The business model is driven on the intrinsic demand for transportation services and logistics & cargo handling infrastructure required by the RE-ORGANISATION OF THE SHIPPING, PORTS AND growing steel, power generation and refining industry in India LOGISTICS BUSINESS: and worldwide. In order to reflect the new identity, the name Your Company has re-organised its business with certain of your Company has also been changed to Essar Shipping other businesses of the Essar Group to become a one-of-a-kind Ports & Logistics Limited.

8 32nd Annual Report 2007-2008 Holding Structure: The holding structure upon completion of the re-organisation will be as under:

Essar Global Ltd. (Cayman Islands)

Essar Shipping & Logistics Ltd. (Cyprus) 76.46%* Essar Shipping Ports & Logistics Ltd. (India)

100% 100% 100% 100% Essar Port & ** Essar Oilfields Essar Essar Logistics Ltd. Terminals Ltd. Services Ltd. International Ltd. (India) (Mauritius) (Mauritius) (Guernsey)

74%*** 100% 100% 100% 100% Essar Bulk Vadinar Oil Essar Bulk Energy Transportation Energy II Ltd. Terminal Ltd. Terminal Ltd. Terminal (Salaya) Ltd. International Ltd. (Bermuda) (India) (India) (India) (Bermuda)

* Alongwith other promoter group companies ** Upon merger of India Shipping *** Balance 26% held by Essar Steel Limited

Essar Ports & Terminals Limited: Depreciation for the year was Rs. 161.84 crore and As a part of the re-organisation, your Company has Rs. 88.28 crore respectively. incorporated a new subsidiary Essar Ports & Terminals VOTL is currently expanding its capacity to support Limited (EPTL) in Mauritius. EPTL will be the holding EOL’s refinery capacity of upto 34 mmtpa from the company for the ports and terminals business of the group. existing 10.5 mmtpa. During the year under review, EPTL acquired 74% b. Essar Bulk Terminal Limited (EBTL) – EBTL is setting shareholding of Essar Bulk Terminal Limited (EBTL), 90.50% up an all weather deep draft dry bulk port at Hazira in shareholding of Vadinar Oil Terminal Limited (VOTL) and Gujarat located on the West Coast of India for import of 100% shareholding of Essar Bulk Terminal (Salaya) Limited. iron ore, pellets, limestone, steel products and other Subsequently, EPTL has acquired the balance 9.50% dry bulk cargoes and export of finished steel and other shareholding of VOTL, as a result of which VOTL has dry bulk products. The facilities would include a become a wholly owned subsidiary of EPTL. dedicated all weather channel, 550 metres long jetty, The principal activities covered by its subsidiaries are as ship unloaders, storage facilities for finished products, follows: conveyors for transportation of raw materials to the stack house, a rail network, dredgers, tugs and mooring boats. a. Vadinar Oil Terminal Limited (VOTL) – VOTL is in the The port facility is currently under construction and is business of providing crude oil and petroleum products expected to start commercial operations during the storage, handling and terminalling facilities. VOTL has calendar year 2009. invested in port and terminal facilities to support a 10.5 million metric tonnes per annum (mmtpa) refinery c. Essar Bulk Terminal (Salaya) Limited (EBTL Salaya) capacity at Vadinar in Gujarat on the West Coast of – EBTL Salaya is setting up a dry bulk port facility at India set up by Essar Oil Limited (EOL). The facilities of Salaya in Gujarat. The port will handle import of coal VOTL include a product port, crude oil and petroleum and export of pet coke and other bulk cargoes. product tankages, single point mooring, cross country Essar Oilfields Services Limited (EOSL): and sub sea pipelines, rail and road gantry. As part of the re-organisation process, EOSL will become a The terminal commissioned operations in July 2007 and wholly owned subsidiary of your Company through a merger hence the financial results reflect nine months of of India Shipping (holding 100% shares of EOSL) with the operations. During the year under review, VOTL Company. Your Company is in the process of filing registered a Total Income of Rs. 150.36 crore. EBITDA applications with the relevant Courts for the merger. for the year under review, stood at Rs. 104.53 crore, Through the process of merger as mentioned above, based registering an operating margin of 69%. Interest and on a swap ratio of 32 shares at a valuation of Rs. 220/- per

32nd Annual Report 2007-2008 9 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited) share of your Company for every 100 shares of India Interest and Finance charges for the year increased to Shipping, 18.96 crore fresh shares of your Company will be Rs. 266.55 crore as compared to Rs. 104.25 crore for the issued to Essar Shipping & Logistics Limited (Cyprus) (being previous year mainly due to interest expenses for VOTL the only shareholder of India Shipping), as a consideration which was Rs. 161.84 crore for the year. The increase in for the merger. Depreciation for the year to Rs. 221.48 crore is largely due EOSL is in the business of providing onshore and offshore to commencement of operations by VOTL. contract drilling services to leading oil and gas producers Net Profit after Tax for the year increased to Rs. 277.44 worldwide. EOSL operates a fleet of a third generation semi- crore compared to Rs. 157.75 crore in the previous year submersible offshore rig and twelve land rigs. The clientele thereby registering an increase of 76%. of EOSL includes, Gujarat State Petroleum Corporation Limited, India (GSPCL), Petrobras, Brazil (through TOTAL INCOME 2500 intermediaries) and Essar Oil Limited, India. 2,256 2000 1,683 The semisubmersible offshore rig has been contracted with 34.1% GSPCL on long term charter basis. Five land rigs are 1500 contracted with Petrobras (through intermediaries) and four 1000

land rigs are contracted with Essar Oil Limited. Out of the INR Crore 500 thirteen rigs, seven rigs are already operational and 0 remaining land rigs are being refurbished and should be FY 07 FY 08 employed thereafter. Essar Logistics Limited (ELL): 900 EBITDA ELL is in the business of providing transhipment, lighterage 800 759 and trucking services. Going forward, ELL is exploring 700 opportunities in logistics handling of large project cargoes. 600 500 The Total Income of ELL for the year under review was 400 381 108.6% 300 Rs. 874.28 crore as compared to Rs. 644.40 crore during INR Crore 200 the previous year. The increase in the revenues was on 100 account of increased cargo handled during the year under 0 FY 07 FY 08 review as compared to the previous year. Interest during the year under review was Rs. 15.30 crore PROFIT AFTER TAX as compared to Rs. 9.71 crore in the previous year. The 300 277 increase in interest was on account of increase in total debt 250 from Rs. 3.16 crore during the previous year to Rs. 151.51 200 crore during the year under review, due to acquisition of 158 150 75.9% certain shipping assets. 100 INR Crore Net Profit after Tax for the year under review increased by 50 27% and stood at Rs. 28.80 crore as compared to 0 Rs. 22.60 crore during the previous year. FY 07 FY 08 CONSOLIDATED FINANCIAL RESULTS: STANDALONE RESULTS (SEA TRANSPORTATION As a result of the integration of the above-mentioned BUSINESS): businesses, the Total Income of your Company increased During the year under review, your Company achieved a from Rs. 1,682.70 crore during the previous year to Total Income of Rs. 1,063.93 crore as compared to Rs. 2,255.67 crore in the current year. The increase in Rs. 1,045.13 crore during the previous year. revenues was on account of increased earnings in the logistics business being operated by ELL and The Net Profit for the year increased from Rs. 133.98 crore commencement of operations of the crude oil and petroleum during the previous year to Rs. 241.67 crore in the current product terminal being operated by VOTL. year. This is largely due to Profit on Sale of Ships of Rs. 197.10 crore as compared to Rs. 12.47 crore during the The Total Income for the year included: previous year. The Net Profit for the year under review also i. Profit on Sale of Ships in the Sea Transportation includes a notional currency exchange difference of Rs. 75.65 Business — Rs. 198.11 crore crore. ii. Profit on Sale of Investments — Rs. 107.56 crore and Income and EBIDTA iii. Notional Currency Exchange difference — Rs. 80.43 The Income during the year under review of this segment crore. marginally increased to Rs. 1,063.93 crore from Rs. 1,045.13 The Gross Profit for the year increased by 109% and stood crore as compared to the previous year. The EBITDA at Rs. 795.31 crore as compared to Rs. 381.29 crore during increased by 42% from Rs. 326.12 crore in the previous the previous year. year to Rs. 465.20 crore during the year under review.

10 32nd Annual Report 2007-2008 Profitability thorough due diligence by BP of the Company’s systems and procedures. 1200 300 269 262 1045 1064 Integrated Bulk and Petroleum Product Transportation 1000 250 Group 863 800 760 195 200 This group provides integrated bulk transportation and 671 petroleum products transportation services to various 600 150 496 496 469 465 refineries, steel mills and power generation plants along the

INR Cr 141.15 INR Cr 109 400 78 326 100 Asian and South East Asian coast through various 278 258 208 200 employment contracts including Contracts of Affreightment 200 62 50 (COA’s). This segment contributed Rs. 500.43 crore to the 0 0 total income during the financial year as compared to Mar-02 Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Rs. 666.15 crore during the previous year. Years Revenues Operating Profit PBT This group operates of a fleet of five Capesizes, ten Mini Bulk carriers, four Tugs and two Diving Support Vessels. Debt-Equity Ratio These vessels are employed on COA’s with major steel The Debt Equity Ratio of your Company stood at 0.68:1 as mills in India and South East Asia to provide supply chain on March 31, 2008, as compared to 0.51:1 as on March 31, logistics services along the Indian Coast and for global 2007. The increase in the ratio was on account of increased movement of commodities like iron ore, coal, etc. The Diving leverage due to acquisition of one capsize bulk carrier, M.V. Support Vessels have been chartered to assist mid sea Kiran on a Bareboat Cum Demise Charter basis. Your terminalling facilities along the west coast of India. Company, has over the years, maintained a Debt Equity ratio within acceptable norms, which will enable it to raise INDUSTRY REVIEW AND PROSPECTS: debt for growth in future. Crude Oil Transportation:

Debt:Equity Ratio • Average spot earnings for the year under review were 0.80 lower as compared to the previous year.

0.70 0.69 0.68 • Average five year old tanker values rose by almost 7% 0.62 as compared to the previous year. 0.60 0.55 0.54 0.50 0.51 0.51 • The crude tanker fleet grew by 5.7% during the year 0.40 with the VLCC segment growing by 4% and the 0.30 Suezmax segment grew by 3.7%. Percentage 0.20 • The order book for crude oil tankers stood at 43% of 0.10 the total crude oil trading fleet. The average annual 0.00 gross fleet growth in 2008-2010 is expected at about 2002 2003 2004 2005 2006 2007 2008 Years 10%. The increased tonnage would be partially offset Debt:Equity Ratio against the phase out of old tankers in line with the IMO guidelines and the projected increase in worldwide Interest refining capacity. The interest outgo of your Company reduced to Rs. 89.19 The freight rates for a modern VLCC averaged at USD 57,200 crore during the year under review from Rs. 94.48 crore in per day during the year under review as compared to USD the previous year. 63,100 during the previous year. SEA TRANSPORTATION BUSINESS: RISK MANAGEMENT: Energy Transportation Group Economic Risks: Shipping is a global industry and the This group provides crude oil transportation and crude oil performance of the shipping industry is closely linked to the transportation management services to global and domestic world economic growth, global demand and supply trends crude oil refiners. It contributed Rs. 267.57 crore to the total and the commodity markets. Your Company has managed income during the financial year as compared to Rs. 358.15 to mitigate this risk by having a global focus rather than crore in the previous year. The drop in the earnings was on region / country specific focus and has helped diversify risks. account of lower freight earnings as compared to the previous Freight Risks: Shipping industry is prune to high volatility year and dry docking of the Suezmax tanker, M.T. Ishwari. in freight rates thereby making the cashflows highly During the year under review, your Company entered into a unpredictable. An optimum mix of voyage charters, time two-year time charter for one of its Very Large Crude Carrier charters and COAs has enabled your Company to take (VLCC), M.T. Smiti, with British Petroleum Limited (BP). advantage of the freight rates and also maintain consistency The time charter was awarded to the Company after a of earnings.

32nd Annual Report 2007-2008 11 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

Forex Risk: A majority of the revenues of your Company Given the high economic growth globally and more so in are in foreign currency which creates a natural hedge against India, the demand for skilled and competitive personnel is foreign exchange exposures. Apart from this, the Essar ever increasing. Your Company is taking suitable measures Group’s specialised forex team provides efficient advice to for talent retention and reducing attrition at all levels. mitigate the exchange risk of your Company. INFORMATION TECHNOLOGY INITIATIVES: Interest Rate Risk: Your Company has been undertaking Your Company strongly believes that Information Technology suitable hedging strategies to overcome any adverse interest is very vital for increasing efficiencies and better customer rate risks. It has formulated internal target rates at which service. Towards this, your Company has implemented SAP any open interest rate risk can be hedged. At present 64% in its financial management. Your Company is also in the of the total loans are completely hedged with interest rates process of implementing fleet management, logistics and being fixed during the tenure of the facility. maintenance management systems. SALE AND ACQUISITION OF VESSELS: SUBSIDIARIES: During the year under review your Company bought and sold the following vessels: Your Company has the following Subsidiaries as on March 31, 2008: Vessels Bought 1. Essar Ports & Terminals Limited, Mauritius (EPTL) • Capesize Dry Bulk Carrier, M.V. Govind Prasad (129,237 DWT). 2. Vadinar Oil Terminal Limited, India • Newly Built Diving Support Vessel, Tug Perseverance. 3. Essar Bulk Terminal Limited, India (subsidiary of EPTL) • Capesize Dry Bulk Carrier, M.V. Kiran (175,048 DWT). 4. Essar Bulk Terminal (Salaya) Limited, India (wholly Vessels Sold owned subsidiary of EPTL) • Handysize Dry Bulk Carrier, M.V. Chennai Polivu (38,023 5. Essar Logistics Limited, India DWT). 6. Essar Sisco Ship Management Company Limited, India • Handysize Dry Bulk Carrier, M.V. Chennai Valarchi 7. Essar International Limited, Guernsey, Channel Islands (38,019 DWT). (EIL) • Mini Bulk Carrier, M.V. Nand Bhavani (2,200 DWT). 8. Energy Transportation International Limited, Bermuda INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY: (wholly owned subsidiary of EIL) Your Company has instituted internal control systems which 9. Energy II Limited, Bermuda (wholly owned subsidiary are adequate for the nature of its business and the size of of EIL) its operations. In the beginning of the year, the scope of the Essar Ports & Terminals Limited became a subsidiary of the internal audit exercise and the key business processes and Company on March 4, 2008. Essar Bulk Terminal Limited selected risk areas to be audited are decided in consultation and Essar Bulk Terminal (Salaya) Limited became with the Audit Committee. All significant audit observations subsidiaries of the Company on March 29, 2008 and March and follow up actions thereon are reported to the Audit 27, 2008 respectively. Committee. The Audit Committee comprises of three Directors with the Chairman being a person well qualified Your Company has obtained exemption from the Central and conversant with matters pertaining to Accounts, Finance, Government under Section 212(8) of the Companies Act, Budgeting, Systems, etc. The Audit Committee met five times 1956 from attaching the Balance Sheets, Profit & Loss during the year. Account, report of the Board of Directors and the report of the Auditors of the subsidiary companies with the Annual HUMAN RESOURCES: Report of the Company, as required under Section 212 of The operational efficiency of any company is dependent a lot the Companies Act, 1956, vide Order no. 47/435/2007-CL- upon the quality of personnel. Your Company believes in III dated January 16, 2008 and June 19, 2008. The Company imparting the required training to its personnel at various will make available the annual accounts of the subsidiary levels. Your Company is managed by highly skilled companies to members seeking such information at any professionals in all its operations, ashore and afloat, thereby point of time. achieving organisational efficiencies. Operations are managed In accordance with Accounting Standard AS-21 on professionally, ensuring high productivity levels which Consolidated Financial Statements read with Accounting increases operational efficiency and utilisation, thereby Standard AS-23 on Accounting for Investments in Associates, increasing the revenues. Regular onboard and offshore your Directors have pleasure in attaching the Consolidated training activities are undertaken by your Company to improve Financial Statements, which forms part of the Annual Report. the performance of its employees. Skilled and efficient personnel also managed the ports and terminal business. DIRECTORS: Adequate systems have been put in place for mapping the In accordance with the provisions of the Companies Act, competencies of personnel across the ranks. The 1956 and the Articles of Association of the Company, competencies are then mapped against the desired Mr. N. Srinivasan, Mr. Sanjay Mehta and Mr. Ravi Ruia, competencies taking into consideration the business and retire at the ensuing Annual General Meeting of the Company quality objectives of your Company. and being eligible, offer themselves for re-appointment.

12 32nd Annual Report 2007-2008 Mr. K. V. Krishnamurthy and Mr. Dilip J. Thakker were TRANSFER TO THE INVESTOR EDUCATION AND appointed as Additional Directors on your Company’s Board PROTECTION FUND: with effect from June 20, 2008. They cease to be Directors In terms of Section 205C of the Companies Act, 1956, an on the date of the Thirty-second Annual General Meeting. amount of Rs. 0.44 crore being unclaimed Debenture Notice has been received from members proposing their redemption amount and Interest thereon was transferred appointment as Directors on the Board. during the year to the Investor Education and Protection Mr. S. K. Poddar and Mr. Rewant Ruia have resigned from Fund established by the Central Government. the Board of Directors of your Company with effect from STATEMENT OF DIRECTORS’ RESPONSIBILITIES: June 20, 2008. Your Board places on record its appreciation for the valuable guidance provided by them during their Pursuant to the requirement of Section 217(2AA) of the tenure as Directors. Companies Act, 1956 the Board of Directors hereby state that: AUDITORS: (a) in the preparation of the annual accounts, the applicable accounting standards have been followed and there have Your Company’s Auditors, M/s. Deloitte Haskins & Sells, been no material departures; Chartered Accountants, retire at the ensuing Annual General Meeting. It is proposed to re-appoint M/s. Deloitte Haskins (b) the Directors have selected such accounting policies & Sells, Chartered Accountants as the Auditors of the and applied them consistently and made judgments and Company from the conclusion of this Annual General Meeting estimates that are reasonable and prudent so as to until the conclusion of the next Annual General Meeting. give a true and fair view of the state of affairs of the Company at the end of the financial year and of the CORPORATE GOVERNANCE: profit or loss of the Company for that period; The Company has complied with the requirements under (c) the Directors have taken proper and sufficient care for the Corporate Governance reporting system. The disclosures the maintenance of adequate accounting records in as required therein have been furnished in the Annexure to accordance with the provisions of this Act for the Directors’ Report under the head “Corporate safeguarding the assets of the Company and for Governance”. preventing and detecting fraud and other irregularities; PARTICULARS REQUIRED UNDER THE COMPANIES (d) the Directors have prepared the annual accounts on a (DISCLOSURE OF PARTICULARS IN THE REPORT OF going concern basis. THE BOARD OF DIRECTORS) RULES, 1988: APPRECIATION AND ACKNOWLEDGEMENTS: This does not apply to your Company as the shipping industry Your Directors would like to express their sincere is not included in the Schedule to the relevant rules. appreciation to all the employees for their commendable Foreign exchange earnings and outgo are summarised teamwork and contribution to the growth of the Company. below: Your Directors also thank its bankers, charterers and other Total Foreign Exchange: business associates for their continued support and co- (1) Earned (including loan receipts, : Rs. 716.58 crore operation during the year. sale of ships, freight, charter For and on behalf of the Board hire earnings, interest income, etc.) (2) Used (including cost of : Rs. 563.85 crore Jamnagar Sanjay Mehta R. N. Bansal acquisition of ships, loan July 29, 2008 Managing Director Director repayments, interest, operating expenses, etc.) “Persons constituting ‘group’ coming within the definition of group as defined in the Monopolies and Restrictive Trade Your Company has obtained exemption from the Central Practices Act, 1969 for the purpose of interse transfer of Government under Section 211(4) of the Companies Act, shares of the Company under regulation 3(1)(e)(i) of SEBI 1956 from giving information required under clauses (a), (b), (c) and (e) of Paragraph 4-D of Part II of Schedule VI to (Substantial Acquisition of Shares and Takeovers) the Companies Act, 1956 vide Order no. 46/203/2007-CL-III Regulations, 1997” dated January 29, 2008. Sr. No. Name of the Company PARTICULARS OF EMPLOYEES: 1. Essar Investments Limited Information in accordance with the provisions of Section 2. Teletech Investments India Limited 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as 3. Shubhangi Investments and Trading Limited amended, is given in Annexure to this report. Pursuant to 4. Essar Global Limited the provisions of section 219 of the Companies Act, 1956 members are provided with abridged accounts. Any member 5. India Shipping interested in obtaining a copy of this statement may write to the Company Secretary at the Registered Office. 6. Essar Shipping & Logistics Limited

32nd Annual Report 2007-2008 13 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited) CORPORATE GOVERNANCE REPORT 1. Statement on Company’s philosophy on Code of Corporate Governance Your Company believes that adhering to global standards of Corporate Governance is essential to enhance shareholders 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 with regulatory requirements. 2. Board of Directors The Company has a Non-Executive Chairman and has one-third of the total number of Directors as Independent Directors. The number of Non-Executive Directors is more than 50% of the total number of Directors. A. Composition, category, attendance and number of other directorships of the Directors are furnished below: As at March 31, 2008 the Board consisted of ten members. The composition, category of directors and directorships held in other companies was as under: Name of Director Category of No. of Attendance No. of outside No. of *No. of Committee Director Board at last Directorships Directorships Positions held in Meetings AGM in other Indian in Indian other public limited attended public limited private limited companies companies companies Chairman Member Mr. Shashi Ruia Promoter, (Chairman) Non-Executive 4 N 8 1 - - Mr. Ravi Ruia Promoter, (Vice Chairman) Non-Executive 3 N 7 - - - Mr. Anshuman Ruia Promoter, Non-Executive 7 N 8 - - 3 **Mr. Rewant Ruia Promoter, Non-Executive 5 N 5 - - - Mr. R. N. Bansal Independent, Non-Executive 7 Y 8 1 4 4 **Mr. S. K. Poddar Independent, Non-Executive - N 12 3 3 3 Mr. N. Srinivasan Independent, Non-Executive 7 Y 14 2 4 5 Mr. Sanjay Mehta Non-Promoter, (Managing Director) Executive 2 N 4 - - - Mr. A. R. Ramakrishnan Non-Promoter, (Wholetime Director) Executive 7 Y 1 - - - Mr. V. Ashok Non-Promoter, (Wholetime Director) Executive 7 Y 4 - - - Note: The number of Independent Non-Executive Directors is determined as per Section 256 of the Companies Act, 1956. * includes membership of Audit and Share Transfer & Shareholders’ Grievance Committee only. **have resigned with effect from June 20, 2008. Mr. K. V. Krishnamurthy and Mr. Dilip J. Thakkar have been appointed as Independent Directors with effect from June 20, 2008. B. Details of Board Meetings held during the year: Sr. No. Date Board Strength No. of Directors present 1 May 29, 2007 10 5 2 June 29, 2007 10 6 3 July 30, 2007 10 7 4 October 11, 2007 10 6 5 October 31, 2007 10 7 6 January 22, 2008 10 9 7 January 31, 2008 10 9 3. Audit Committee b) recommending the appointment and removal of statutory auditor, fixation of audit fees and approval The Audit Committee of the Company performs the for payment of any services. following functions: c) approving payment to statutory auditors for any a) overseeing the Company’s financial process and other services rendered by the statutory auditors. disclosure of financial information to ensure that the financial statement is correct. d) reviewing with the management annual financial statements before submission to the Board.

14 32nd Annual Report 2007-2008 e) reviewing with the management, the quarterly 4. Remuneration to Directors financial statements before submission to the Board Details of Remuneration paid to the Managing Director for approval. and Wholetime Directors during the year ended March 31, 2008 is as under: f) reviewing with the management performance of (Rs.) Name of Director Basic Allowances Perquisites Contribution Total statutory and internal auditors and adequacy of Salary and other to Provident internal control systems. benefits & Superannu- ation Fund

g) reviewing the adequacy of internal audit function. Mr. Sanjay Mehta, Managing Director (w.e.f. 18.9.2005 for h) discussing with internal auditors any significant a period of 3 years) 12,00,000 50,60,868 6,50,000 1,44,000 70,54,868 findings and follow up on such issues. Mr.A.R.Ramakrishnan, Wholetime Director i) reviewing the findings of any internal investigations (w.e.f. 31.7.2006 for 1,05,51,816 by the internal auditors into matters where there is a period of 5 years) 16,20,000 86,17,416 1,20,000 1,94,400 Mr. V. Ashok, suspected fraud or irregularity or a failure of internal Wholetime Director control systems of a material nature and reporting (w.e.f. 7.12.2006 for a period of 5 years) 24,75,000 50,15,716 — 2,97,000 77,87,716 the matter to the Board. No Employee Stock Option Schemes have been j) discussing with statutory auditors before the audit provided by the Company till date. Services of the commences on the nature and scope of audit, as aforesaid Executive Directors can be mutually terminated well as having post-audit discussion to ascertain by giving three months notice or three months salary in lieu thereof. any area of concern. Details of sitting fees paid to Non-Executive Directors k) reviewing the Company’s financial and risk for the meetings held during the year ended March 31, management policies; and 2008: Non-Executive Directors Sitting Fees paid for l) examining reasons for substantial default in the Board/Committee meetings payment to depositors, debenture holders, Mr. Shashi Ruia Rs. 19,500 shareholders and creditors, if any. Mr. Ravi Ruia Rs. 15,500 Composition: Mr. R. N. Bansal Rs. 61,000 Mr. N. Srinivasan Rs. 61,000 The Committee comprises of three Directors of which Mr. Anshuman Ruia Rs. 57,500 two are Independent Directors. All the members of the Mr. Rewant Ruia Rs. 28,500 Committee are financially literate and have relevant financial management and/or audit exposure. The Number of shares or convertible instruments held Managing Director, Wholetime Directors, General by non – executive directors: Manager - Accounts, Statutory Auditors and Internal Non-Executive Directors No. of shares held Auditors attend the meetings. The Company Secretary Mr. Shashi Ruia Nil is the Secretary to the Committee. Mr. Ravi Ruia Nil Details of Audit Committee Meetings held during Mr. Anshuman Ruia Nil the year: Mr. Rewant Ruia Nil Mr. R. N. Bansal Nil Sr. No. Date Committee No. of Mr. N. Srinivasan Nil Strength Members Mr. S. K. Poddar 254 shares present 5. Share Transfer & Shareholders’ Grievance 1 May 29, 2007 3 3 Committee: 2 June 29, 2007 3 3 Terms of reference: 3 July 30, 2007 3 3 To approve transfer, transmission, sub-division and issue of duplicate shares/debentures and for redressal of 4 October 31, 2007 3 3 investor complaints on all matters. 5 January 31, 2008 3 3 Composition: The Committee members comprise of Mr. Ravi Ruia, Attendance at Audit Committee Meetings: Vice Chairman, Mr. Sanjay Mehta, Managing Director, Mr. A. R. Ramakrishnan, Wholetime Director and Director No. of No. of Mr. V. Ashok, Wholetime Director. The Executive meetings held meetings Directors and Company Secretary, are authorised to attended approve the Share Transfer and other related transactions on a day to day basis under the supervision Mr. R. N. Bansal of the Committee. (Chairman) 5 5 Details of shareholders complaints received, solved Mr. Anshuman Ruia 5 5 and pending share transfers: Mr. N. Srinivasan 5 5 There were no complaints pending at the beginning of the year. A total of 393 complaints were received during

32nd Annual Report 2007-2008 15 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

the year ended March 31, 2008, most of which being 10. General Shareholders information: non-receipt of dividend/debenture warrants, non-receipt A. Annual General Meeting details: of share certificates. All the complaints were redressed under the supervision of the Committee and no Date September 27, 2008 complaints were outstanding as on March 31, 2008. Venue Administrative Building, All the valid share transfer requests received during the Essar Refinery Complex, year were duly attended to and processed in time. There Okha Highway (SH - 25), were no valid requests pending for share transfers as Taluka Khambhalia, on March 31, 2008. Distt. Jamnagar, Gujarat 361305 6. General Body Meeting: Time 3.30 p.m. (a) Details of General Meetings held in last three years: Book Closure 22-09-2008 to 27-09-2008 Dates (both days inclusive) Financial Meeting Date Time Location B. Financial Calendar: year Financial year of Company April 1, 2008 to March 31, 2009 2004-05 AGM 29-09-05 10.15 AM Dayanandasagar Memorial Hall, First Quarter results On or before July 31, 2008 Chandrasagar Complex, 2005-06 AGM 22-09-06 10.15 AM No.264/266, Second Quarter results On or before October 31, 2008 EGM 02-01-07 11.00 AM T. Mariappa Road, Third Quarter results On or before January 31, 2009 2nd Block, Jayanagar, AGM 25-09-07 11.00 AM Bangalore 560011 Annual results for the year On or before June 30, 2009 2006-07 Srinivasa Sagar Kalyana Mahal, C. Registrars and Share Transfer Agents: EGM 23-02-08 11.00 AM Chandrasagar Complex, No.264/266, T. Mariappa Road, Data Software Research Company Private Limited 2nd Block, Jayanagar, th Bangalore 560011 “Sree Sovereign Complex”, 22, 4 Cross Street Trustpuram, Kodambakkam, Chennai 600 024 (b) Whether any special resolutions passed in the Tel: (044) 2483 3738, Fax: (044) 2483 4636 previous three Annual General Meetings? e-mail: [email protected]. No special resolutions were passed in the previous D. Share Transfer System: three Annual General Meetings. (c) Whether any special resolution was passed last To expedite the process of share transfers, year through postal ballot? transmissions, etc., the Board of your Company has delegated these powers to the Executive No special resolution was passed during the Directors and the Company Secretary. financial year 2007 – 08 through postal ballot. All valid share transfer requests received by the (d) Whether any special resolution is proposed to be Company in physical form are registered within an conducted through postal ballot? average period of 15 days. Presently the Company No dematerialises the shares after getting the 7. Disclosures: dematerialisation requests being generated by the 1 There are no materially significant related party Depository Participant. transactions made by the Company with its E. Listing on Stock Exchanges: Promoters, Directors or Management, their relatives, The Company’s securities are listed on the following its subsidiaries, etc. that may have potential conflict Stock Exchanges: with the interest of the Company at large. Bombay Stock Exchange Ltd. * National Stock Exchange 2 Transactions with related parties during the year Phiroze Jeejeebhoy Towers, of India Ltd. are disclosed in Note No. B-12 of Schedule 13 to Dalal Street, Mumbai 400 023 Exchange Plaza, the accounts in the Annual Report. Bandra Kurla Complex Bandra East, Mumbai 500051 3 During the last three years no penalty or stricture Code : 500630 Code : ESSARSHIP has been imposed on the Company by Stock Exchanges/SEBI/Statutory Authorities on matters * w.e.f. March 11, 2008 related to Capital Markets. Annual Listing fee for the year 2008-09 has been 9. Means of Communication: paid to both the exchanges. Financial results and The quarterly and annual F. Market price data (High/Low) during each month other information about financial results are in the year 2007-2008 on the Bombay Stock the Company displayed on the Company’s website: Exchange Limited: www.essar.com Month Highest Lowest Publication of financial Published in major April 35.75 29.15 results newspapers such as May 38.85 25.00 Business Standard, June 29.15 18.80 Udayavani, etc. July 28.00 20.60 Presentation to Press releases and Institutional Investors presentations made to August 26.90 22.40 and to the Analysts Institutional Investors and September 29.25 24.65 Analysts are displayed on October 28.90 23.50 the Company’s website : November 26.25 22.50 www.essar.com December 40.80 24.00 Management Discussion Forms part of the Annual January 50.85 35.05 & Analysis Report, which is mailed to February 51.90 43.20 the shareholders of the March 54.80 34.50 Company Scrip Code : 500630

16 32nd Annual Report 2007-2008 G. Share Price performance in comparison to BSE L. Status of Dematerialisation of shares as on Sensex March 31, 2008: Share Price Movement versus BSE Sensex Mode No. of shares No. of Folios Percentage 275 22000 250 Physical 1,17,40,149 70,798 2.75 21000 225 Demat 41,43,37,058 48,543 97.25 200 20000 TOTAL 42,60,77,207 1,19,341 100.00 175 19000 150 11. Nomination Facility: 18000 125 Shareholders holding shares in physical form and desirous of making a nomination in respect of their Share Price 100 17000 BSE Sensex shareholding in the Company, as permitted under 75 Section 109A of the Companies Act, 1956 are requested 16000 to submit to the R&T Agent of the Company the 50 15000 prescribed nomination form. 25 12. Outstanding GDRs/ADRs/Warrants or any 0 14000 convertible instruments, conversion date and likely Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- 07 07 07 07 07 07 07 07 07 08 08 08 impact on equity: Months 3,76,000 GDRs representing 12,44,56,000 equity shares are outstanding as on March 31, 2008. Share price on BSE BSE Sensex 13. Secretarial Audit: H. Shareholding Pattern as on March 31, 2008: A qualified practicing Company Secretary carries out Shareholding by No. of shares % secretarial audit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Essar and Associates 20,13,19,284 47.25 Central Depository Services (India) Limited (CDSL) and Financial Institutions/ 14,09,360 0.33 the total issued and listed capital. The audit confirms Mutual Funds/Banks/ Insurance Companies that the total issued/paid up capital is in agreement with the total number of shares in physical form and the Other Corporate Bodies 1,47,09,096 3.45 total number of dematerialised shares held with NSDL Non-Domestic Companies/ and CDSL. Foreign Banks 24,259 0.00 14. Non-mandatory requirements: Foreign Institutional Investors 4,81,41,363 11.30 1. The Board : Non-Resident Individuals 9,54,717 0.22 (a) The expenses incurred by Non-Executive Public 3,50,63,128 8.24 Chairman are reimbursed by the Company. GDRs/ADRs/ADSs (b) At present there is no policy fixing the tenure (Promoters) 12,44,56,000 29.21 of Independent Directors. Total 42,60,77,207 100.00 2. Remuneration Committee: Distribution of Shareholding as on March 31, The Committee comprises of three Non-Executive 2008: Directors and the Company Secretary is the Secretary of the Committee. The Committee is No. of equity Number % of Total % of shares held of share- share- number of holding empowered to formulate and recommend to the holders holders shares Board from time to time, the compensation structure Upto 1000 1,15,573 96.84 1,84,65,847 4.33 for Managing/Executive/Wholetime Directors and to administer and supervise the Employee Stock 1001 to 2000 2,145 1.80 31,36,540 0.74 Option Schemes, whenever applicable. 2001 to 3000 583 0.49 14,87,874 0.35 3. Shareholders right: 3001 to 4000 245 0.21 8,84,471 0.21 Half yearly financial results including summary of 4001 to 5000 194 0.16 9,20,319 0.22 the significant events in last six months are available 5001 to 10000 300 0.25 22,79,446 0.53 on the website of the Company i.e. www.essar.com. 10001 and above 301 0.25 398,902,710 93.62 No separate financials are sent to shareholders of the Company. TOTAL 1,19,341 100.00 42,60,77,207 100.00 4. Audit qualifications: I. Compliance Officer : Mr. Manoj Contractor There are no audit qualifications in the Auditor’s Company Secretary report on the financial statements to the J. Registered Office : Administrative Building Shareholders of the Company. Essar Refinery Complex 5. Training of Board members: Okha Highway (SH - 25) A Presentation about the Company and the industry Taluka Khambhalia in which it operates is made to new Directors. Distt. Jamnagar Gujarat 361305 6. Mechanism for evaluating performance of Non-Executive Board Members: K. Corporate Office : Essar House 11, Keshavrao Khadye Marg There is no formal mechanism for performance Mahalaxmi, Mumbai 400 034 evaluation of Non-Executive directors. Tel : (022) 6660 1100 7. Whistle Blower policy: Fax: (022) 2354 4312 The Company has not established any formal e-mail: [email protected] whistle blower policy.

32nd Annual Report 2007-2008 17 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

AUDITOR’S CERTIFICATE ON CORPORATE GOVERNANCE

To the Members Essar Shipping Ports & Logistics Limited (formerly Essar Shipping Limited)

We have examined the compliance of conditions of corporate governance by Essar Shipping Ports & Logistics Limited (formerly Essar Shipping Limited) (the Company) for the year ended March 31, 2008, as stipulated in Clause 49 of the Listing Agreement of the said Company with the Stock Exchanges. The compliance of conditions of Corporate Governance is the responsibility of the Management. Our examination was limited to review of procedures and implementation thereof, adopted by the Company for ensuring the compliance of the conditions of the Corporate Governance. 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 abovementioned 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) Place : Mumbai Date : July 29, 2008

Declaration on Compliance of the Company’s Code of Conduct

To the members of Essar Shipping Ports & Logistics Limited

The Company has framed a specific code of conduct for the members of the Board and the Senior Management Personnel of the Company pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges to further strengthen corporate governance practices in the Company.

All the members of the Board and Senior Management Personnel of the Company have affirmed due observance of the said code of conduct in so far as it is applicable to them and there is no non compliance thereof during the year ended March 31, 2008.

Sanjay Mehta Managing Director Place : Jamnagar Date : July 29, 2008

18 32nd Annual Report 2007-2008 AUDITORS’ REPORT ON ABRIDGED FINANCIAL STATEMENTS TO THE MEMBERS OF ESSAR SHIPPING PORTS & LOGISTICS LIMITED (formerly known as Essar Shipping Limited) We have examined the abridged Balance Sheet of Essar the management in accordance with the provisions of sub- Shipping Ports & Logistics Limited (formerly known as Essar section 3(C) of Section 211 of the Companies Act, 1956 Shipping Limited) (the Company), as at March 31, 2008 and and covered by our report of even date to the members of also the abridged Statement of Profit and Loss and the the Company, which is attached hereto. Cash Flow Statement for the year ended on that date annexed thereto, together with significant notes thereon. For Deloitte Haskins & Sells These abridged financial statements have been prepared Chartered Accountants by the Company pursuant to Rule 7A of the Companies (Central Government’s) General Rules and Forms, 1956 and Khurshed Pastakia are based on the audited financial statements of the Place: Mumbai Partner Company for the year ended March 31, 2008 prepared by Date : June 20, 2008 (Membership No. 31544)

AUDITORS’ REPORT TO THE MEMBERS OF ESSAR SHIPPING PORTS & LOGISTICS LIMITED (formerly known as Essar Shipping Limited) 1. We have audited the attached Balance Sheet of Essar and belief, were necessary for the purposes of our Shipping Ports & Logistics Limited (formerly known as audit; Essar Shipping Limited) (the Company), as at March (ii) In our opinion, proper books of account as required 31, 2008, the Statement of Profit and Loss and Cash by law have been kept by the Company, so far as Flow Statement for the year ended on that date annexed appears from our examination of those books; thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to (iii) The Balance Sheet, the Statement of Profit and express an opinion on these financial statements based Loss and the Cash Flow Statement dealt with by on our audit. this report are in agreement with the books of account; 2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards (iv) In our opinion, the Balance Sheet, the Statement require that we plan and perform the audit to obtain of Profit and Loss and the Cash Flow Statement reasonable assurance about whether the financial dealt with by this report comply with the accounting statements are free of material misstatement. An audit standards referred to in sub-section (3C) of Section includes examining, on a test basis, evidence supporting 211 of the Companies Act, 1956; the amounts and disclosures in the financial statements. (v) In our opinion and to the best of our information An audit also includes assessing the accounting and according to the explanations given to us, the principles used and significant estimates made by said financial statements, read together with the management, as well as evaluating the overall financial notes thereon, give the information required by the statement presentation. We believe that our audit Companies Act, 1956, in the manner so required provides a reasonable basis for our opinion. and give a true and fair view in conformity with the 3. As required by the Companies (Auditors’ Report) Order, accounting principles generally accepted in India: 2003, (the Order) issued by the Central Government of (a) in the case of the Balance Sheet, of the state India in terms of sub-section (4A) of section 227 of the of affairs of the Company as at March 31, 2008; Companies Act, 1956, we enclose, in the Annexure, a statement on the matters specified in paragraphs 4 and (b) in the case of the Statement of Profit and Loss, 5 of the said Order. of the profit of the Company for the year ended on that date; and 4. On the basis of written representations received from directors, as on March 31, 2008 and taken on record by (c) in the case of the Cash Flow Statement, of the the board of directors, we report that none of the cash flows of the Company for the year ended directors is disqualified as on March 31, 2008 from on that date. being appointed as a director in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, For Deloitte Haskins & Sells 1956. Chartered Accountants 5. Further to our comments in the Annexure referred to in paragraph 3 above, we report that: Khurshed Pastakia (i) We have obtained all the information and Place: Mumbai Partner explanations which, to the best of our knowledge Date : June 20, 2008 (Membership No. 31544)

32nd Annual Report 2007-2008 19 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited) ANNEXURE TO THE AUDITORS’ REPORT

(Referred to in paragraph 3 of our report of even date) 4. In our opinion and according to the information and explanations given to us, there is adequate internal In our opinion and according to the information and control system commensurate with the size of the explanations given to us, the nature of the Company’s Company and the nature of its business for the purchase business/activities during the year are such that clauses of inventory and fixed assets and for the sale of services. (vi), (viii), (xii), (xiii), (xiv), (xviii), (xix) and (xx) of para 4 of We have not observed any continuing failure to correct the Order are not applicable to the Company. major weaknesses in such internal controls. The nature 1. In respect of its fixed assets: of the Company’s business does not involve sale of goods. a. The Company has maintained proper records showing full particulars including quantitative details 5. In our opinion and according to the information and and situation of its fixed assets. explanations give to us, there are no contracts or arrangements that need to be entered into the register b. The fixed assets were physically verified during the maintained under section 301 of the Companies Act year by the management in accordance with a 1956. programme of verification, which in our opinion provides for physical verification of all the fixed 6. In our opinion, the internal audit system is commensurate assets over a period of three years, having regards with the size of the Company and the nature of its to the size of the Company and nature of its business. business. According to the information and 7. According to the information and explanations given to explanations given to us, no material discrepancies us in respect of statutory dues: were noticed on such verification. a. The Company has been generally regular in c. There was no substantial disposal of fixed assets depositing undisputed statutory dues, including during the year. provident fund, investor education and protection 2. In respect of its inventories: fund, employees’ state insurance , income-tax, sales-tax, wealth tax, service tax, value added tax, a. As explained to us, inventories were physically customs duty, excise duty, cess and any other verified during the year by the management at material statutory dues as applicable with the reasonable intervals. appropriate authorities during the year. As informed to us employees state insurance scheme is not b. In our opinion and according to the information and applicable to the Company. explanations given to us, the procedures of physical verification of inventories followed by the b. No undisputed amounts payable in respect of management were generally reasonable and provident fund, investor education and protection adequate in relation to the size of the Company fund, employees’ state insurance, income-tax, and the nature of its business. wealth-tax, service tax, sales-tax, customs duty, excise duty, cess and other material undisputed c. According to the information and explanations given statutory dues were outstanding, at the year end, to us, the Company’s inventories comprise fuel oil for a period of more than six months from the date and lube oil on board the ships. Having regard to they became payable. the nature of the Company’s business and scale of operations, quantities are determined by physical c. The details of disputed income-tax and sales tax count and it is not considered feasible to maintain dues which have not been deposited as at March records of movements of inventories of such items 31, 2008 on account of disputes pending, are given by the vessel in which they are carried. As quantities below: are determined by physical count and records of Name of Nature of Amount Period to Forum where movements are not maintained on board the ships, the statute the disputed (Rs. in which the dispute is the question of discrepancies on physical verification dues crore) amount pending thereof does not arise. relates Income tax Income Tax 110.76 Assessment Appellate 3. In our opinion and according to the information and Act, 1961 (advance tax Year from Authority – explanations given to us, there are no companies, firms payment 1988-1989 to Tribunal or parties required to be entered into the register Rs. 47.27) 2001-2002 Level

maintained under section 301 of the Companies Act, Tamil Nadu Sales Tax 58.10 Assessment Madras 1956. Accordingly, paragraphs 4(iii) (a) to (g) of the Sales Tax and penalty Year 1997-98 High Court. Order are not applicable to the Company. Act, 1959 thereon

20 32nd Annual Report 2007-2008 According to the information and explanation given opinion, term loans availed by the Company were, prima to us, there are no dues of wealth tax, service tax, facie, applied by the Company during the year for the customs duty, excise duty and cess which have purposes for which the loans were obtained, other than not been deposited on account of any dispute. temporary deployment pending application. 8. The Company does not have accumulated losses as at 12. According to the information and explanations given to March 31, 2008. The Company has not incurred cash us, and on an overall examination of the Balance sheet losses during the financial year covered by our audit of the Company, we report that the funds raised on and the immediately preceding financial year. short-term basis have, prima facie, not been used during the year for long-term investment. 9. In our opinion, on the basis of audit procedures and according to the information and explanations given to 13. To the best of our knowledge and belief and according us, the Company has not defaulted in repayment of to the information and explanations given to us, no dues to banks. The Company has not borrowed any fraud on or by the Company was noticed or reported sums from financial institutions or through debentures. during the year. 10. In our opinion and according to the information and explanations given to us, the terms and conditions of For Deloitte Haskins & Sells the guarantees given by the Company for the loans Chartered Accountants taken by others from banks and financial institutions, are not prima facie prejudicial to the interests of the Company. Khurshed Pastakia 11. To the best of our knowledge and belief and according Place: Mumbai Partner to the information and explanations given to us, in our Date : June 20, 2008 (Membership No. 31544)

32nd Annual Report 2007-2008 21 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited) ABRIDGED BALANCE SHEET AS AT 31ST MARCH, 2008 (Statement containing the salient features of Balance Sheet as per Section 219 (1) (b) (iv) of the Companies Act, 1956.) As at 31.03.2008 As at 31.03.2007 (Rs. in crore) (Rs. in crore) I. SOURCES OF FUNDS Shareholders’ funds: a) Capital i) Equity 426.21 426.21 b) Reserves and surplus i) Capital reserve 307.09 307.09 ii) Revenue reserve 835.89 836.18 iii) Revaluation reserve 538.01 112.27 iv) Tonnage tax reserve 162.50 132.50 v) Surplus in Statement of Profit and Loss 801.60 2,645.09 589.93 1,977.97 Loan funds: a) Secured loans 559.36 606.44 b) Finance lease obligations 778.09 393.34 c) Unsecured loans 373.00 1,710.45 160.00 1,159.78 Total 4,781.75 3,563.96

II. APPLICATION OF FUNDS Fixed assets: a) Net block 2,123.71 1,246.26 (Original cost Rs. 2680.86 (previous year Rs.1919.10) crore less depreciation Rs. 557.15 (previous year Rs. 672.84) crore) (Refer Note no.B.1) b) Capital work in progress (including capital advances) — 2,123.71 6.19 1,252.45 Investments a) Investments in subsidiary companies - Unquoted 3,107.35 1,545.15 b) Others i) Quoted* 2.27 2.27 ii) Unquoted 15.00 3,124.62 399.96 1,947.38 * (Aggregate market value of quoted investments is Rs. 78.32 (previous year Rs. 19.86) crore) Current assets, loans and advances: a) Inventories 21.03 25.67 b) Sundry debtors 105.94 233.20 c) Cash and bank balances 134.84 64.05 d) Other current assets 1.07 0.70 e) Loans and advances to: i) subsidiary companies 0.05 3.29 ii) others 252.35 97.10 515.28 424.01 Less: Current liabilities and provisions: a) Liabilities 975.36 52.50 b) Provisions 6.50 7.38 981.86 59.88 Net current (liabilities)/ assets (466.58) 364.13 Total 4,781.75 3,563.96 Refer accounting policies and notes to abridged financial statements Compiled from the audited annual accounts of the Company referred to in our report dated 20th June, 2008. As per our report of even date For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants Sanjay Mehta N. Srinivasan Khurshed Pastakia Managing Director Director Partner V. Ashok Manoj Contractor Wholetime Director Company Secretary Place: Mumbai Place: Mumbai Date : June 20, 2008 Date : June 20, 2008

22 32nd Annual Report 2007-2008 ABRIDGED STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH 2008 (Statement containing the salient features of Statement of Profit and Loss as per Section 219 (1) (b) (iv) of the Companies Act, 1956.) For the year ended For the year ended 31.03.2008 31.03.2007 (Rs. in crore) (Rs. in crore) INCOME a) Fleet operating and chartering earnings 776.24 1,024.30 b) Dividend on non trade current Investments 1.33 1.08 c) Interest income 5.21 5.41 d) Other income i) Profit on sale of fleet 197.10 12.47 ii) Exchange gain 75.65 0.51 iii) Miscellneous income 8.40 281.15 1.36 14.34 Total 1,063.93 1,045.13

EXPENDITURE a) Fleet operating expenses i) Direct voyage expenses 423.35 505.70 ii) Employee expenses (off shore staff) 43.47 52.97 iii) Other fleet operating expenses 54.14 520.96 55.75 614.42 b) Establishment and other expenses i) Employee expenses (office staff) 16.99 15.91 ii) Managerial remuneration 2.54 1.51 iii) Auditors’ remuneration 0.66 0.70 iv) Bad debts / provision for doubtful debts — 23.67 v) Other expenses 57.58 77.77 62.80 104.59 c) Interest and finance expenses 89.19 94.48 d) Depreciation 106.64 90.50 Total 794.56 903.99

PROFIT BEFORE TAX 269.37 141.14 Less: Provision for taxation - Current tax including tonnage tax (23.60) (4.81) - Fringe benefit tax (3.45) (2.29) - Tax adjustment for earlier years (0.65) (0.06) PROFIT AFTER TAX 241.67 133.98 Balance brought forward from previous year 589.93 490.45 AMOUNT AVAILABLE FOR APPROPRIATION 831.60 624.43 APPROPRIATIONS: Transferred to tonnage tax reserve 30.00 34.50 Balance carried forward to balance sheet 801.60 589.93 831.60 624.43

Earnings per share - basic and diluted (Rs.) (face value of Rs. 10/- per share) 5.67 3.14 Refer accounting policies and notes to abridged financial statements Compiled from the audited annual accounts of the Company referred to in our report dated 20th June, 2008. As per our report of even date For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants Sanjay Mehta N. Srinivasan Khurshed Pastakia Managing Director Director Partner V. Ashok Manoj Contractor Wholetime Director Company Secretary Place: Mumbai Place: Mumbai Date : June 20, 2008 Date : June 20, 2008

32nd Annual Report 2007-2008 23 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited) CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2008

Year ended Year ended 31.3.2008 31.3.2007 (Rs. in crore) (Rs. in crore) A. CASH FLOW FROM OPERATING ACTIVITIES Net Profit before taxes 269.37 141.14 Adjustments for : Depreciation 106.64 90.50 Interest and finance expenses 89.19 94.48 Interest Income (5.21) (5.41) Profit on sale of assets (196.99) (12.42) Balances written off — 0.01 Profit on sale of investments (7.85) (0.25) Provision for bad / doubtful debts — 23.69 Dividend on current investments (1.33) (1.08) Foreign exchange loss / (gain) (75.89) 0.76 Operating profit before working capital changes 177.93 331.42 Adjustments for: Trade and other receivables 115.25 (156.58) Inventories 4.64 (3.39) Trade payables 4.11 (10.21) Cash generated from operations 301.93 161.24 Income taxes paid (net of refund) (18.19) (12.18) Fringe benefit tax paid (5.29) (2.41) Net cash flow from operating activities 278.45 146.65

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets including capital work in progress / advance (560.54) (120.55) Sale of fixed assets 205.36 15.80 Insurance claim received on fixed asset — 2.10 Advance received against sale of fixed asset 22.06 — Advance received against sale of investments 911.92 13.13 Advance received against sale of investment repaid (13.13) — Proceeds from sale of current investments 585.37 426.98 Investment in shares of subsidiaries (1,562.19) (0.15) Other investments purchased (344.56) (796.98) Fixed deposits placed for a period of more than three months 23.92 (45.63) Refund to / advance from subsidiary 3.25 (1.58) Dividend on current investment 1.33 1.08 Interest received 4.84 4.87 Net cash flow from investing activities (722.37) (500.93)

24 32nd Annual Report 2007-2008 CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2008

Year ended Year ended 31.3.2008 31.3.2007 (Rs. in crore) (Rs. in crore) C. CASH FLOW FROM FINANCING ACTIVITIES Interest and finance expenses paid (88.53) (93.61) Proceeds from term loans 162.59 18.40 Additional lease obligations 445.28 86.36 Proceeds from unsecured loans 513.00 320.00 Repayment of term loans (169.42) (82.68) Repayment of finance lease obligation (23.84) (23.40) Repayment of unsecured loans (300.00) (320.00) Payment of unclaimed debentures and interest thereon (0.45) (0.63) Refund of Inter corporate deposit given — 20.00 Net Cash flow from financing activities 538.63 (75.56) INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 94.72 (429.84) Cash and cash equivalents as at the beginning of the year 15.04 444.88 Cash and cash equivalents as at the end of the year 109.76 15.04 Non cash investing and financing transactions Conversion of share application money into shares — 72.95 Investment in shares against advance — 4.84 Notes : 1 Cash and cash equivalents include : Cash and bank balances 49.61 9.40 Balances in fixed deposits (maturity period of less than 3 months) 58.17 4.78 Unrealised (gain)/ loss on foreign currency on cash and cash equivalents 1.98 0.86 Total cash and cash equivalents 109.76 15.04 Balances in fixed deposits (maturity period of more than 3 months) 25.08 49.01 CASH AND BANK BALANCES 134.84 64.05

2 Cash flow statement has been prepared under the indirect method as set out in Accounting Standard - 3 ‘Cash Flow Statement’ as notified under the Companies (Accounting Standards) Rules, 2006. As per our report of even date For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants Sanjay Mehta N. Srinivasan Khurshed Pastakia Managing Director Director Partner V. Ashok Manoj Contractor Wholetime Director Company Secretary Place: Mumbai Place: Mumbai Date : June 20, 2008 Date : June 20, 2008

32nd Annual Report 2007-2008 25 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

NOTES TO ABRIDGED FINANCIAL STATEMENTS FOR b) Estimated amount of contract remaining to be THE YEAR ENDED 31st MARCH 2008 executed on capital account and not provided for is 1) Fixed assets Rs. Nil (previous year Rs. 24.75) crore. a) In order to reflect the fair value of the Company’s 4) Sundry debtors fleet, the Company revalued its fleet on 1st April 2004 and on 31st March 2008. The valuations were (Note no. B (3) of schedule 13 of annual accounts) done by accredited valuers on the basis of expected Sundry debtors (unsecured and considered good) market value in an arm’s length transaction and outstanding for more than six months include Rs.3.70 free of encumbrances on the valuation date. The (previous year Rs.3.70) crore awarded on arbitration in enhancement in the value of fleet amounting to the year 2002-03. The concerned debtor went into Rs.669.52 crore and Rs.452.69 crore respectively appeal and the matter is pending before the Honorable were credited to fixed asset revaluation reserve. High Court of Madras. As the arbitration tribunal award st Gross block as on 31 March, 2008 includes is in favour of the Company, the debt is considered Rs. 651.60 crore being amount added on good. revaluation of fleet. Incremental depreciation on account of the revaluation amounting to Rs.26.95 5) The details of provision made by the Company for (previous year Rs.34.90) crore has been recouped present obligations arising out of past events are as from the fixed assets revaluation reserve. below: b) Secured Loans amounting to Rs. 1,336.45 (previous (Note no. B (4) of schedule 13 of annual accounts) year Rs. 998.78) crore is secured by first charge on fleet. (Rs. in crore) c) The Company has taken two vessels and an aircraft Particulars As on Additions Reversed/ As on on finance lease. 01.04.2007 during paid during 31.03.2008 d) Gross block of plant and machinery includes the year the year Rs. 38.84 (previous year Rs. 38.84) crore leased Claims against the out; W.D.V. as on March 31, 2008 is Nil (previous Company pending year Nil). arbitration proceedings 0.82 - 0.82 - 2) Investments 6) Leases The Company has pledged its investments in equity shares of Essar Oil Limited amounting to Rs. 2.27 (Note no. B (5) of schedule 13 of annual accounts) (previous year Rs. 2.27) crore in favour of lendors for a) Finance leases loans availed by Essar Oil Limited and in equity shares The minimum lease rentals outstanding at year end of Vodafone Essar Mobile Services Limited amounting are as under: to Rs.1 (previous year Rs.1) crore against loan availed for acquisition of shares. (Rs. in crore) 3) (Note no. B (2) of schedule 13 of annual accounts) As on 31.03.2008 As on 31.03.2007 a) Contingent liabilities: Particulars Minimum Interest Present Minimum Interest Present (Rs. in crore) lease value of lease value of Particulars As on As on payments minimum payments minimum 31.03.2008 31.03.2007 lease lease i) Claims against the Company payments payments pending arbitration proceedings - 0.39 ii) Guarantees given by banks* 15.38 14.80 Future lease rental obligation payable: iii) Letter of credit (capital commitment) - 24.56 iv) Corporate guarantees on behalf of - Not later than one year 85.04 48.57 36.47 54.55 28.83 25.72 a subsidiary – Vadinar Oil Terminal Limited 250.00 250.00 - Later than one year but not later than v) Corporate guarantees on behalf of five years 787.74 202.73 585.01 254.68 113.00 141.68 Essar Shipping & Logistics Limited ** 1346.44 730.45 - Later than five years 182.65 26.04 156.61 270.14 44.20 225.94 vi) Disputed sales tax demand under appeal in the Honorable TOTAL 1055.43 277.34 778.09 579.37 186.03 393.34 High Court of Madras 58.10 58.10 vii) Income tax appeals before ITAT 110.76 109.20 b) Operating leases * includes guarantee of Rs. 13.74 crore issued by bank in favour of Outstanding commitments by the lessee on account ETIL which is backed by counter guarantee of the Company. of assets leased out by the Company under non- ** Corporate guarantee on behalf of Essar Shipping & Logistics cancelable leases: Rs. Nil (previous year Rs. 20.32) Limited has been backed by a counter guarantee from Essar Global Limited. crore.

26 32nd Annual Report 2007-2008 7) Earnings per share 9) (Note no. B (10) of schedule 13 of annual accounts) (Note no. B (7) of schedule 13 of annual accounts) The outstanding foreign currency exposures that have not been hedged by a derivative instrument or otherwise The calculation of the basic and diluted earnings per are given below: share is based on the following data: a) Amount receivable in foreign currency of the Year ended following: Particulars Rs. in crore Currency In million Basic and diluted 31.03.2008 31.03.2007 2007-08 2006-07 2007-08 2006-07 Earnings for the purpose of basic earnings per share (net i) Export of profit for the year) (Rs. in crore) 241.67 133.98 goods and services 38.90 23.98 USD 9.84 5.55 Equity shares at the beginning/ end of the year (Nos.) 426,077,207 426,077,207 ii) Advance to vendors 2.29 1.24 USD 0.58 0.29 Weighted average number of equity shares for the purpose iii) Bank of calculating basic and balances diluted earnings per share and fixed (Nos.) 426,077,207 426,077,207 deposits including Earnings per share - basic and interest diluted (face value of accrued Rs.10/- each) (Rs.) 5.67 3.14 there on 93.41 14.76 USD 23.71 3.41

8) Business segment and geographical segment b) Amount payable in foreign currency of the following: (Note no. B (6) of schedule 13 of annual accounts) Particulars Rs. in crore Currency In million a) Business segment 2007-08 2006-07 2007-08 2006-07 The Company has one primary business segment i) Import of of fleet operations and chartering. goods and services 13.38 13.39 USD 3.34 0.30 b) Geographical segment 0.11 0.08 GBP 0.01 - The Company’s fleet operations are managed on a worldwide basis from India. Fleet operating and 0.03 0.01 DKK 0.03 - chartering earnings based on the geographical - 0.04 DHS - - location of customers: 0.62 0.03 EUR 0.10 - (Rs. in crore) 0.21 0.13 JY 5.23 0.34 Year ended 0.30 0.23 SGD 0.10 0.01 Fleet Operating & -0.15HKD-0.02 Chartering Earnings 31.03.2008 31.03.2007 0.02 - AED 0.01 - India 451.64 696.50 14.66 14.06 8.82 0.67 China 90.08 20.63 ii) Secured loans U.S.A 57.10 60.52 payable (including U.K. 77.38 139.70 interest U.A.E 77.26 2.65 accrued) 558.36 495.56 USD 139.21 113.19 iii) Lease Rest of the world 22.78 104.30 loans obligation 778.09 394.34 USD 193.99 89.86 TOTAL 776.24 1024.30 Note: Since the majority of the revenue of the Company is The main operating assets represent floating fleet, which is in foreign currency therefore it has a natural hedge against not identifiable to any geographical location. foreign exchange exposures.

32nd Annual Report 2007-2008 27 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

10) Auditor’s remuneration (Note no. B (8) of schedule b) Investing company in respect of which the 13 of annual accounts) Company is an associate (Rs. in crore) i) Teletech Investments (India) Limited Particulars Year ended ii) India Shipping, Mauritius 31.03.2008 31.03.2007 c) Individuals owning directly or indirectly an Audit fees 0.25 0.25 interest in the voting power that gives them Other matters 0.34 0.37 control or significant influence Out of pocket expenses* 0.00 0.00 i) Mr. Shashi Ruia, Chairman Service tax on above 0.07 0.08 ii) Mr. Ravi Ruia, Vice Chairman TOTAL 0.66 0.70 iii) Mr. Anshuman Ruia, Director *Amount is less than Rs. 1 lakh iv) Mr. Rewant Ruia, Director 11) Employee benefits: The Company has adopted Accounting Standard (AS) d) Key management personnel st 15 (Revised) ‘Employee Benefits’ with effect from 1 i) Mr. Sanjay Mehta, Managing Director April, 2007. In accordance with the above standard, the additional obligation of the Company on account of ii) Mr. A. R. Ramakrishnan, Wholetime Director employee benefits, based on independent actuarial iii) Mr. V. Ashok, Wholetime Director valuation, amounting to Rs. 0.29 crore has been accounted for by debiting the opening balance of general e) Other related parties where there have been reserve as on 1st April, 2007 as per transitional provision transactions: of AS-15. Enterprises commonly controlled or influenced by 12) Related party transactions: major shareholders / directors / relatives of directors (note no. B (12) of schedule 13 of annual accounts) of the Company: a) Subsidiaries (i) Essar Information Technology Limited i) Vadinar Oil Terminal Limited (ii) Essar Shipping & Logistics Limited, Cyprus ii) Essar Sisco Ship Management Company Limited (iii) Essar Agrotech Limited iii) Essar Logistics Limited (iv) Essar House Limited iv) Essar International Limited, Guernsey, Channel (v) Essar House Services Limited Islands v) Energy Transportation International Limited, (vi) Essar Steel Limited Bermuda (vii) Futura Travels Limited vi) Energy II Limited, Bermuda (viii)India Securities Limited vii) Essar Ports & Terminals Limited, Mauritius (w.e.f. 4th March 2008) (ix) Essar Oil Limited th viii) Essar Bulk Terminal Limited (w.e.f. 29 March (x) Essar Steel Hazira Limited 2008) (xi) Essar Oilfields Services Limited, Mauritius ix) Essar Bulk Terminal (Salaya) Limited (w.e.f. 27th March 2008) (xii) Aegis BPO Services Limited

28 32nd Annual Report 2007-2008 The details of transactions with related parties during the year are as under: (Rs. in crore) Nature of Transactions Subsidiaries Other Related Key Management Total Parties Personnel

2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Fleet operating income Essar Steel Limited - - 400.48 433.91 - - 400.48 433.91 Essar Steel Hazira Limited - - 1.89 72.17 - - 1.89 72.17 Essar Logistics Limited 11.37 26.97 - - - - 11.37 26.97 Vadinar Oil Terminal Limited 9.16 0.97 - - - - 9.16 0.97 Others - -2.363.52- -2.363.52

Total 20.53 27.94 404.73 509.60 - - 425.26 537.54

Equipment lease rental / hire income Essar Logistics Limited - 0.78 - - - - - 0.78 Essar Steel Limited - - 0.19 0.19 - - 0.19 0.19

Total - 0.78 0.19 0.19 - - 0.19 0.97

Agency and management fees Essar Shipping & Logistics Limited - - 0.35 - - - 0.35 - Remuneration Sanjay Mehta - - - - 0.71 0.74 0.71 0.74 A. R. Ramakrishnan - - - - 1.05 0.60 1.05 0.60 V. Ashok - - - - 0.78 0.17 0.78 0.78

Total ----2.54 1.51 2.54 1.51

Fuel oil Essar Logistics Limited 0.01 - - - - - 0.01 - Essar Oil Limited - - 0.87 3.22 - - 0.87 3.22

Total 0.01 - 0.87 3.22 - - 0.88 3.22

Direct voyage expenses Essar Logistics Limited 0.11 - - - - - 0.11 - Spares & stores purchased Essar Logistics Limited -4.52-----4.52 Business center fees Essar House Services Limited - - 13.56 20.19 - - 13.56 20.19 Rent Essar House Limited - - 4.20 4.80 - - 4.20 4.80 Essar House Services Limited --0.24 - - - 0.24 -

Total - - 4.44 4.80 - - 4.44 4.80

Repair & maintenance Essar Agrotech Limited - - 0.30 0.30 - - 0.30 0.30 Essar Constructions (India) Limited - - - 0.23 - - - 0.23

Total - - 0.30 0.53 - - 0.30 0.53

Traveling expenses Futura Travels Limited - - 4.23 4.21 - - 4.23 4.21 Reimbursement of expenses Futura Travels Limited - - 19.53 16.11 - - 19.53 16.11 Others - -1.140.78- -1.140.78

Total - - 20.67 16.89 - - 20.67 16.89

32nd Annual Report 2007-2008 29 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

(Rs. in crore) Nature of Transactions Subsidiaries Other Related Key Management Total Parties Personnel 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Professional /advisory / agency fees Essar Information Technology Limited - - 0.37 0.38 - - 0.37 0.38 Essar Steel Limited - - 0.05 0.11 - - 0.05 0.11 India Securities Limited - - 0.22 0.22 - - 0.22 0.22 Aegis BPO Services Limited - - 0.22 0.45 - - 0.22 0.45 Essar Logistics Limited 0.10 - - - - - 0.10 - Total 0.10 - 0.86 1.16 --0.96 1.16 Interest on loan Essar Sisco Ship Management Co. Limited 1.49 - - - - - 1.49 - Essar Shipping & Logistics Limited - - 0.28 - - - 0.28 - Total 1.49 - 0.28 ---1.77 - Fixed assets sold Essar Logistics Limited - 2.42 - - - - - 2.42 Essar Shipping & Logistics (Panama) Inc. - - 5.38 - - - 5.38 - Total - 2.42 5.38 - - - 5.38 2.42 Fixed assets (including capital advances) Essar Constructions (India) Limited ---1.14---1.14 Fixed assets under finance lease Essar Shipping & Logistics Limited - - 445.28 - - - 445.28 - Investments in shares Essar Ports & Terminals Limited 1,562.19 - - - - - 1,562.19 - Vadinar Oil Terminal Limited - 4.94 - - - - - 4.94 Essar Logistics Limited - 72.95 - - - - - 72.95 Total 1,562.19 77.89 - - - - 1,562.19 77.89 Loans & advances including deposit given Essar Sisco Ship Management Co. Limited - 0.14 - - - - - 0.14 Essar Logistics Limited - 10.48 - - - - - 10.48 Essar International Limited - 18.72 - - - - - 18.72 Energy Transportation International Limited - 24.92 - - - - - 24.92 Essar Ports & Terminals Limited 0.04 - - - 0.04 - Essar House Limited - - 2.45 3.50 - - 2.45 3.50 Essar House Services Limited - - 1.41 - - - 1.41 - Essar Oil Limited - - - 12.00 - - - 12.00 Essar Information Technology Limited - - 0.71 - 0.71 - Essar Oilfields Services Limited - - 0.42 0.15 - - 0.42 0.15 Essar Bulk Terminal Limited 0.02 0.17 - - - - 0.02 0.17 Essar Investments Limited - - - 0.58 - - - 0.58 Total 0.06 54.43 4.99 16.23 - - 5.05 70.66 Loans and advances received Essar Sisco Ship Management Company Limited 213.00 - - - - - 213.00 - Advance received against sale of investments Essar Shipping & Logistics Limited - - 9.90 13.13 - - 9.90 13.13 Essar Ports & Terminals Limited 911.92 - - - - - 911.92 - Total 911.92 - 9.90 13.13 - - 921.82 13.13 Guarantee on behalf of others - - Essar Shipping & Logistics Limited 615.99 730.45 615.99 730.45 - - 615.99 730.45

30 32nd Annual Report 2007-2008 Outstanding balance as on 31/03/2008 Balances Subsidiaries Other Related Key Management Total Parties Personnel 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Sundry debtors Essar Steel Limited - - 36.94 73.24 - - 36.94 73.24 Essar Logistics Limited 21.46 28.01 - - - - 21.46 28.01 Essar Steel Hazira Limited - - - 102.39 - - - 102.39 Essar Shipping & Logistics (Panama) Inc. - - 5.34 - - - 5.34 - Vadinar Oil Terminal Limited 4.38 1.21 - - - - 4.38 1.21 Total 25.84 29.22 42.28 175.63 - - 68.12 204.85 Loans and advances including deposit given Essar Logistics Limited 0.01 3.29 - - - - 0.01 3.29 Essar House Limited - - 31.45 29.00 - - 31.45 29.00 Futura Travels Limited - - 6.25 6.25 - - 6.25 6.25 Essar Oil Limited - - 12.00 12.00 - - 12.00 12.00 Others - -3.070.26- -3.070.26 Total 0.01 3.29 52.77 47.51 - - 52.78 50.80 Unsecured loan Essar Sisco Ship Management Company Limited 213.00 - - - - - 213.00 - Lease loan obligation Essar Shipping & Logistics Limited - - 441.21 - - - 441.21 - Advance received against sale of investments Essar Shipping & Logistics Limited ---13.13 - - - 13.13 Essar Ports & Terminals Limited 911.92 - ---- 911.92 - Total 911.92 - - 13.13 - - 911.92 13.13 Sundry creditors Essar Oil Limited - - - 0.53 - - - 0.53 Futura Travels Limited - - 3.84 6.18 - - 3.84 6.18 Essar Shipping & Logistics Limited - - 2.38 - - - 2.38 - Essar Constructions (India) Limited - - - 1.14 - - - 1.14 Essar House Services Limited - - - 1.09 - - - 1.09 Aegis BPO Services Limited - - - 0.17 - - - 0.17 Sanjay Mehta - - - - 0.03 0.03 0.03 0.03 A. R. Ramakrishnan - - - - - 0.12 - 0.12 V. Ashok - - - - - 0.06 - 0.06 Others - - - 0.03 - - - 0.03 Total - - 6.22 9.14 0.03 0.21 6.25 9.35 Security deposit received Essar Steel Limited - - 0.04 0.04 --0.04 0.04 Interest accrued but not due on loans Essar Sisco Ship Management Co. Limited 1.15 - - - - - 1.15 - Essar Shipping & Logistics Limited - - 0.28 - - - 0.28 - Total 1.15 - 0.28 - - - 1.43 - Guarantee given on behalf of others Essar Shipping & Logistics Limited - - 1,346.44 730.45 - - 1,346.44 730.45 Energy Transportation International Limited 13.74 13.74 - - - - 13.74 13.74 Vadinar Oil Terminal Limited 250.00 250.00 - - - - 250.00 250.00 Total 263.74 263.74 1,346.44 730.45 - - 1,610.18 994.19 Note: The names of related parties are disclosed under each class of transaction during the year where the transaction with a single related party is 10% or more of the aggregate transactions of a class.

32nd Annual Report 2007-2008 31 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

13) (Note no. B (13) of schedule 13 of annual accounts) c) The Company’s entire shareholding in Vadinar Oil The Company’s name has been changed to “Essar Terminal Limited, has since been transferred to Shipping Ports & Logistics Limited” with effect from 24th Essar Ports & Terminals Ltd., its wholly owned subsidiary. March 2008. 14) (Note no. B (14) of schedule 13 of annual accounts) d) The Scheme of merger approved by the Board of th Pursuant to the notification on AS 11 (Revised 2003) Directors on 13 February 2008 provides for: issued by the Ministry of Corporate Affairs, requiring a) Merger of India Shipping, a company registered foreign exchange fluctuations on repayment of foreign in Mauritius, which is the holding company of currency loans and year end translation of foreign Essar Oilfields Services Ltd., Mauritius with the currency liabilities relating to assets acquired from a Company. Upon merger 18,96,06,113 equity country outside India to be credited to the Statement of shares of Rs. 10/- each at a premium of Profit and Loss as against the earlier practice of Rs. 210/- will be issued by the Company. adjusting against the carrying cost of the assets. The Company has from the current year taken such b) Merger of Essar Sisco Ship Management exchange gain / loss to Statement of Profit and Loss. Company Limited, a wholly owned subsidiary Accordingly the profit for the year and corresponding with the Company. reserves are higher by Rs. 76.94 crore. 15) (Note no. B (15) of schedule 13 of annual accounts) The above scheme has been approved by both Bombay Stock Exchange Ltd. and National Significant events occurring after the balance sheet date Stock Exchange of India Ltd. (not requiring adjustments to assets and liabilities as at balance sheet date) e) The consent of the members through postal a) The Company has entered into a Memorandum of ballot has been obtained for the shifting of the Agreement (MOA) for acquisition of two 53,500 registered office to the State of Gujarat which DWT and 55,000 DWT Supramax dry bulk carriers, will be given effect to upon receipt of approval with delivery of the vessels scheduled by end of from Central Law Board. July 2008. 16) (Note no. B (18) of schedule 13 of annual accounts) b) The Company has entered into Memorandum of Agreement for sale of one 1,28,000 DWT suezmax Previous year’s figures have been regrouped/reclassified Tanker and one 6290 DWT Product Carrier. wherever necessary.

As per our report of even date For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants Sanjay Mehta N. Srinivasan Khurshed Pastakia Managing Director Director Partner V. Ashok Manoj Contractor Wholetime Director Company Secretary Place: Mumbai Place: Mumbai Date : June 20, 2008 Date : June 20, 2008

32 32nd Annual Report 2007-2008 BALANCE SHEET ABSTRACT AND COMPANY’S GENERAL BUSINESS PROFILE (As per Schedule VI, part (iv) of the Companies Act, 1956) I Registration Details Registration No. 2 7 7 1 State Code 0 8 Balance Sheet Date 3 1 0 3 2 0 0 8 II Capital Raised During the year (Amounts Rs. in Thousands) Public Issue Right Isuue NIL NIL Bonus Issue Private Placement NIL NIL III Position of Mobilisation and Deployment of Funds (Amount Rs. in Thousands)) Total Liabilities Total Asset 47817575 47817575 Source of Funds Paid- up Capital Reserves & Surplus 4262077 26450988 Secured Loans Unsecured loans 5593602 11510908 Application of Funds Net Fixed Assets Investments 21237331 31246179 Net Current Assets Misc. Expenditure (4665935) NIL Accumulated Losses NIL IV Performance of Company (Amount Rs. in Thousands) Turnover Total Expenditure 10639303 7945610 + - Profit/Loss Before Tax + - Profit /Loss After Tax + 2693693 + 2416732 Earning Per Share in Rs. Dividend Rate % 5 . 64 NIL V Generic Names of Three Principal Products/services of Company (as per monetary terms)_Not applicable being Shipping Company Item code No Product (ITC Code) N A Description Ship Operation and Chartering Item code No Product (ITC Code) N A Description N A Item code No Product (ITC Code) N A Description N A Item code No Product (ITC Code) N A Description N A Note: for ITC code of Products please refer to the publication “Indian Trade Classfication “ based on harmonized Commodity description and coding system by Ministry of Commerce, Directorate General of Commercial Intelligence & Statistics Calcutta-700 001.

For and on behalf of the Board

Sanjay Mehta N. Srinivasan Managing Director Director

V. Ashok Manoj Contractor Wholetime Director Company Secretary Place: Mumbai Date : June 20, 2008

32nd Annual Report 2007-2008 33 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited) 1) ($. 306,474) NIL NIL For and on behalf of the Board Sanjay MehtaManaging DirectorV. AshokWholetime Diractor Director N. Srinivasan Company Secretary Manoj Contractor 408,891 $.327,296 ($. 94 872,324/- ( $ 412,025/- ) $ 4,661/- NIL NIL NIL ment International Limited Limited (Salaya) 100% 100% 100% 100% 100% 100% 74% 100% Limited 282,630) Rs.226,090,492 $ 6, Company Limited Limited 46,387,940 73,000,000 125,840,000 1,952,000 12,000 387,105,532 37,005 50,000 Limited Manage- Limited Limited tion Terminals Terminal Terminal Terminal Ship Logistics International Transporta- Limited & Ports Bulk Bulk Jamnagar Chennai Mumbai Guernsey Bermuda Bermuda Mauritius Hazira Mumbai Vadinar Oil Essar Sisco Essar Essar Energy Energy II Essar Essar Essar 458,458,597) Rs.9,108,631 Rs.287,922,719 $.34, 31st March, 2008Subsidiary since they became the Company’s subsidiaries NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL Subsidiary since they became the Company’s subsidiaries NIL (Rs.17, 31st March, 2008 (Rs.1, ii) For the previous financial years of for meeting current Liabilities (Net) NIL NIL NIL NIL NIL NIL NIL NIL NIL i) For the financial year ended ii) For the previous Financial years of i) For the financial year ended between the end of financial year Subsidiary and that of the Companyyear of the Subsidiary and end financial year of the Company in respect Subsidiary’s fixed assets, investments, monies lent and borrowed a) Assets Fixed b) Investmentsc) Money lent by the subsidiaryd) Money borrowed by the Subsidiary other than NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL NIL b) Dealt with in the Company’s Accounts: the financial period 100% Profit/(Loss) so far as it concerns the members of the Company. a) Not dealt with in the Company’s Accounts : ended onCompany as on 31.03.08 854,661,500 31.03.08 31.03.08 31.03.08 31.03.08 31.03.08 31.03.08 31.03.08 31.03.08 31.03.08 5 Change of interest the Company in Subsidiary 6 Material changes between the end of financial 3 Extent of holding by the Company as at end 4 net aggregate amount of the Subsidiaries The 1 relevant financial year of the subsidiary The 2 No. of shares in the Subsidiaries held by PARTICULARS STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 RELATING SUBSIDIARY Place: Mumbai Date : June 20, 2008

34 32nd Annual Report 2007-2008 Details of Subsidiary Companies pursuant to approval obtained U/S.212 ( 8 )

(Rs. in crore)

Vadinar Oil Essar Essar Essar Energy Energy II Essar Essar Essar Terminal Sisco Logistics International Transporta- Limited Ports & Bulk Bulk Name of Subsidiary Limited Ship Limited Limited tion Terminals Terminal terminal Companies Manag International Limited Limited (Salaya) ment Limited Limited Company Limited Jamnagar Chennai Mumbai Guernsey Bermuda Bermuda Mauritius Hazira Mumbai Year ending 31-Mar-08 31-Mar-08 31-Mar-08 31-Mar-08 31-Mar-08 31-Mar-08 31-Mar-08 31-Mar-08 31-Mar-08 Sr. No. Particulars 1 Capital 944.39 46.39 73.00 501.09 7.77 0.05 1,541.45 126.57 0.05 2 Reserves - 167.93 42.61 350.60 20.69 0.04 (1.20) (0.02) - 3 Total Assets 3,131.82 214.32 286.02 999.02 28.46 0.09 2,494.45 213.54 0.85 4 Total Liabilities 3,131.82 214.32 286.02 999.02 28.46 0.09 2,494.45 213.54 0.85 5 Details of investments (including investments in subsidiaries) - - - 7.82 - - 1,544.88 - - 6 Turnover 150.36 1.49 874.27 185.40 1.40 0.02 0.29 - - 7 Profit before taxation (145.59) 1.41 44.00 138.15 1.31 - (1.21) - - 8 Provision for taxation 0.25 0.50 15.21 ------9 Profit after taxation (145.84) 0.91 28.79 138.15 1.31 - (1.21) - - 10 Proposed dividend ------

For and on behalf of the Board

Sanjay Mehta N. Srinivasan Managing Director Director

Place: Mumbai V. Ashok Manoj Contractor Date : June 20, 2008 Wholetime Diractor Company Secretary

32nd Annual Report 2007-2008 35 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited) AUDITORS’ REPORT ON ABRIDGED CONSOLIDATED FINANCIAL STATEMENTS TO THE BOARD OF DIRECTORS OF ESSAR SHIPPING PORTS & LOGISTICS LIMITED

(formerly known as Essar Shipping Limited)

We have examined the attached abridged consolidated Consolidated Financial Statements, as notified under the Balance Sheet of Essar Shipping Ports & Logistics Limited Companies (Accounting Standards) Rules, 2006 and covered (formerly known as Essar Shipping Limited) (the Company), by our report of even date to the members of the Company, and its subsidiaries (together the Group) as at March 31, which is attached hereto. 2008 and also the abridged consolidated Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date annexed thereto, together with significant notes thereon. These abridged financial statements have been For Deloitte Haskins & Sells prepared by the Company pursuant to Rule 7A of the Chartered Accountants Companies (Central Government’s) General Rules and Forms, 1956 and are based on the audited consolidated financial statements of the Group for the year ended March Khurshed Pastakia 31, 2008 prepared by the management in accordance with Place: Mumbai Partner the requirements of Accounting Standard (AS) 21, Date : June 20, 2008 (Membership No. 31544)

36 32nd Annual Report 2007-2008 AUDITORS’ REPORT ON CONSOLIDATED FINANCIAL STATEMENTS TO THE BOARD OF DIRECTORS OF ESSAR SHIPPING PORTS & LOGISTICS LIMITED

(formerly known as Essar Shipping Limited)

1. We have audited the attached Consolidated Balance 4. Based on our audit, and to the best of our information Sheet of Essar Shipping Ports & Logistics Limited and according to the explanations given to us, we are (formerly Essar Shipping Limited) (the Company) and of the opinion that the said consolidated financial its subsidiaries (together the Group) as at March 31, statements give a true and fair view in conformity with 2008, the Consolidated Statement of Profit and Loss the accounting principles generally accepted in India: and the Consolidated Cash flow Statement for the year ended on that date annexed thereto. These consolidated (i) In the case of the Consolidated Balance Sheet, of the financial statements are the responsibility of the state of affairs of the Group as at March 31, 2008; Company’s management. Our responsibility is to express (ii) In the case of Consolidated Statement of Profit and an opinion on these consolidated financial statements Loss, of the consolidated results of operations of the based on our audit. Group for year ended on that date; and 2. We conducted our audit in accordance with the auditing (iii) In the case of the Consolidated Cash Flow Statement, standards generally accepted in India. Those standards of the consolidated cash flows of the Group for the year require that we plan and perform the audit to obtain ended on that date. reasonable assurance about whether the financial statements are free of material misstatements. 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 presentation. We believe that our audit provides a reasonable basis for our opinion. For Deloitte Haskins & Sells Chartered Accountants 3. We report that the consolidated financial statements have been prepared by the Company in accordance with the requirements of Accounting Standard (AS) 21, Khurshed Pastakia Consolidated Financial Statements, as notified under Place: Mumbai Partner the Companies (Accounting Standards) Rules, 2006. Date : June 20, 2008 (Membership No. 31544)

32nd Annual Report 2007-2008 37 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited) ABRIDGED CONSOLIDATED BALANCE SHEET AS AT 31ST MARCH, 2008 (Statement containing the salient features of Consolidated Balance Sheet as per Section 219 (1) (b) (iv) of the Companies Act, 1956) As at 31.03.2008 As at 31.03.2007 (Rs. in crore) (Rs. in crore) I. SOURCES OF FUNDS Shareholders’ funds: a) Capital i) Equity 426.21 426.21 ii) Advance against allotment of shares 47.14 89.73 b) Reserves and surplus i) Capital reserve 307.10 307.10 ii) Revenue reserve 728.58 805.16 iii) Revaluation reserve 538.01 112.27 iv) Tonnage tax reserve 162.50 132.50 v) Surplus in Statement of Profit and Loss 1,258.24 1,010.83 2,994.43 2,367.86 Minority interest 32.60 - Loan funds: a) Secured loans 3,084.63 2,744.23 b) Finance lease obligations 778.09 393.34 c) Unsecured loans 307.33 160.00 4,170.05 3,297.57 Deferred tax liability (net) 18.90 7.89 Total 7,689.33 6,189.26 II. APPLICATION OF FUNDS Fixed assets: a) Net block 5,229.53 1,473.37 (Original cost Rs. 5931.22 (previous year Rs.2171.48) crore less depreciation Rs. 701.69 (previous year Rs. 698.11) crore) (Refer Note no.2) b) Capital work in progress (including capital advances) 181.68 1,863.28 5,411.21 3,336.65 c) Expenditure during construction 94.25 1,039.07 d) Goodwill on consolidation 1,387.62 9.65

Investments a) Quoted* 2.27 2.27 b) Unquoted 15.00 1,363.15 17.27 1,365.42 * (Aggregate market value of quoted investments is Rs. 78.32 ( previous year Rs. 19.86) crore) Current assets, loans and advances: a) Inventories 35.61 32.61 b) Sundry debtors 199.79 422.72 c) Cash and bank balances 308.91 159.56 d) Other current assets 1.77 1.06 e) Loans and advances 482.83 307.28 1,028.91 923.23 Less: Current liabilities and provisions: a) Liabilities 238.02 475.09 b) Provisions 11.91 9.67 249.93 484.76 Net current assets 778.98 438.47 Total 7,689.33 6,189.26 Refer notes to abridged consolidated financial statements Compiled from the audited annual accounts of the Company referred to in our report dated 20th June, 2008. As per our report of even date For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants Sanjay Mehta N. Srinivasan Khurshed Pastakia Managing Director Director Partner V. Ashok Manoj Contractor Wholetime Director Company Secretary Place: Mumbai Place: Mumbai Date : June 20, 2008 Date : June 20, 2008

38 32nd Annual Report 2007-2008 ABRIDGED CONSOLIDATED STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31ST MARCH 2008 Particulars For the year ended For the year ended 31.03.2008 31.03.2007 (Rs. in crore) (Rs. in crore) INCOME a) Fleet operating and chartering earnings 1,701.98 1,658.76 b) Port and terminal service income 140.44 - c) Dividend on non trade current Investments 1.58 1.23 d) Interest income 18.54 6.59 e) Other income i) Profit on sale of fleet 198.11 13.48 ii) Exchange gain 80.43 1.22 iii) Profit on sale of units 107.56 0.25 iv) Miscellaneous income 7.03 1.17 Total 2,255.67 1,682.70

EXPENDITURE a) Fleet operating expenses i) Direct voyage expenses 962.94 843.34 ii) Salaries, wages and other employee benefits - floating staff 77.40 65.15 iii) Other fleet operating expenses 312.63 277.25 1,352.97 1,185.74 b) Establishment and other expenses i) Salaries, wages and other employee benefits - office staff 34.91 19.88 ii) Managerial remuneration 4.79 2.63 iii) Auditors’ remuneration 1.13 0.90 iv) Bad debts / provision for doubtful debts - 24.25 v) Other expenses 66.56 68.01 107.39 115.67 c) Interest and finance expenses 266.55 104.25 d) Depreciation 221.48 112.03 Total 1,948.39 1,517.69 PROFIT BEFORE TAX 307.28 165.01 Less: Provision for taxation (43.68) (7.26) PROFIT BEFORE SHARE OF MINORITY INTEREST 263.60 157.75 Add: Share of minority’s interest (loss) 13.81 - PROFIT FOR THE YEAR 277.41 157.75 Balance brought forward from previous year 1,010.83 887.58 AMOUNT AVAILABLE FOR APPROPRIATION 1,288.24 1,045.33 APPROPRIATIONS: Transferred to tonnage tax reserve 30.00 34.50 Balance carried forward to balance sheet 1,258.24 1,010.83 1,288.24 1,045.33 Earnings per share - basic and diluted (Rs.) (face value of Rs. 10/- per share) 6.51 3.70 Refer notes to abridged consolidated financial statements Compiled from the audited annual accounts of the Company referred to in our report dated 20th June, 2008. As per our report of even date For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants Sanjay Mehta N. Srinivasan Khurshed Pastakia Managing Director Director Partner V. Ashok Manoj Contractor Wholetime Director Company Secretary Place: Mumbai Place: Mumbai Date : June 20, 2008 Date : June 20, 2008

32nd Annual Report 2007-2008 39 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited) CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2008

Year ended Year ended 31.3.2008 31.3.2007 (Rs. in crore) (Rs. in crore) A. CASH FLOW FROM OPERATING ACTIVITIES Net profit before tax 307.28 165.01 Adjustments for : Depreciation 221.48 112.03 Interest and finance expenses 266.55 104.25 Interest Income (18.54) (6.59) (Profit) / loss on sale of assets (net) (198.00) (13.44) (Profit)/ loss on sale of investments (107.56) 1.61 Provision for bad / doubtful debts - 24.25 Dividend on current investments (1.58) (1.23) Foreign exchange loss / (gain) (79.12) (9.63) Currency alignment on conversion of non - integral foreign subsidiaries and translation adjustments (net) (72.95) (22.06)

Operating profit before working capital changes 317.56 354.20 Adjustments for: Trade and other receivables 243.12 (265.58) Inventories (3.00) (10.31) Trade payables (206.57) 316.31 Cash generated from operations 351.11 394.62 Income taxes paid (net of refund) (38.16) (20.30) Fringe benefit tax paid (3.79) (2.44) Net cash from operating activities 309.16 371.88

B. CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets including capital work in progress/ advances (493.26) (390.90) Sale of fixed assets 206.38 15.81 Insurance claim received on fixed asset 1.00 2.10 Capital work in progress, expenditure during construction and capital advances (61.77) (337.57) Interest on loans given - 7.86 Advance received against sale of fixed asset 22.06 - Advance (repaid)/ received against sale of investments (13.13) 13.13 Proceeds from sale of current investments 1,635.57 710.42 Investment in shares of subsidiaries (1,516.36) - Other investments purchased (331.86) (922.52) Fixed deposits matured / (placed) (32.85) (45.63) Dividend on current investments 1.58 1.23 Interest received 17.83 8.11 Net cash flow from investing activities (564.81) (937.96)

40 32nd Annual Report 2007-2008 CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST MARCH 2008

Year ended Year ended 31.3.2008 31.3.2007 (Rs. in crore) (Rs. in crore)

C. CASH FLOW FROM FINANCING ACTIVITIES Interest and finance expenses paid (174.36) (94.27) Proceeds from term loans 233.71 256.26 Additional lease obligations 445.27 86.36 Proceeds from unsecured loans 447.33 320.00 Repayment of term loans (103.88) (82.68) Interest free advances given to Essar Oil Limited - (301.09) Interest free advances received from Essar Oil Limited - 301.09 Repayment of finance lease obligation (24.49) (23.40) Repayment of unsecured loans (300.00) (320.00) Payment of unclaimed debentures and interest thereon (0.45) (0.63) Payment/ refund of Inter corporate deposits (36.58) 20.00 Advance towards allottment of shares (42.59) 89.73 Net Cash flow from financing activities 443.96 251.37 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 188.31 (314.71) Cash and cash equivalents as at beginning of the year 72.04 386.75 Cash and cash equivalents as at end of year 260.35 72.04 Non cash investing and financing transactions Conversion of share application money into shares 89.73 - Conversion of advance to loan - 96.00 Notes : Cash and cash equivalents include : Cash and bank balances 147.65 29.59 Balances in fixed deposits (maturity period of less than 3 months) 112.70 42.45 Unrealised (gain)/ loss on foreign currency on cash and cash equivalents 1.98 0.87 Total cash and cash equivalents 262.33 72.91 Balances in fixed deposits (maturity period of more than 3 months) 46.58 86.64 CASH AND BANK BALANCES 308.91 159.55 Consolidated Cash flow statement has been prepared under the indirect method as set out in Accounting Standard - 3 ‘Cash Flow Statement’ as notified under the Companies (Accounting Standards) Rules, 2006. As per our report of even date For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants Sanjay Mehta N. Srinivasan Khurshed Pastakia Managing Director Director Partner V. Ashok Manoj Contractor Wholetime Director Company Secretary Place: Mumbai Place: Mumbai Date : June 20, 2008 Date : June 20, 2008

32nd Annual Report 2007-2008 41 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

NOTES TO ABRIDGED CONSOLIDATED FINANCIAL d) Vehicles with the net book value of Rs. 3.16 STATEMENTS FOR THE YEAR ENDED 31ST MARCH 2008. (previous year 3.16) crore have been taken under Hire Purchase agreement from India Securities 1) Subsidiaries Limited and hypothecated to it. (Note no. B (1) of schedule 14 of annual accounts) e) Gross block of plant and machinery includes The reporting date of all the subsidiaries is 31st March Rs. 38.84 (previous year Rs. 38.84) crore leased 2008. The list of the subsidiaries of the Company which out; W.D.V. as on March 31, 2008 is Rs. Nil are included in the consolidation and the Group’s holding (previous year Rs. Nil). therein are as under: 3) The Company has pledged its investments in equity Name of subsidiary Place of Proportion of shares of Essar Oil Limited (EOL) amounting to Rs. incorporation ownership 2.27 crore in favour of lenders for loans availed by EOL interest and and in equity shares of Vodafone Essar Mobile Services voting power Limited amounting to Rs.1 crore against loan availed Vadinar Oil Terminal Limited* India 100% for acquisition of shares.

Essar Sisco Ship Management 4) a) The Vadinar Oil Terminal Project (which was under Company Limited India 100% construction and trial operations) (“the Project”) together with the corresponding loans from financial Essar Logistics Limited India 100% institutions and banks were taken over by Vadinar Essar International Limited Guernsey 100% Oil Terminal Limited (VOTL) from its holding company, Essar Shipping Ports & Logistics Limited Energy Transportation (formerly known as Essar Shipping Limited) on International Limited @ Bermuda 100% October 1, 2000. The construction activities at the project site were disrupted due to a cyclonic storm Energy II Limited @ Bermuda 100% which hit the Gujarat coast in June 1998. The said Essar Ports & Terminals disruption resulted in increase in the project cost Limited (w.e.f. 4th March, 2008) Mauritius 100% requiring reappraisal of the funding requirements. Essar Bulk Terminal Limited # The lenders to the Project had approved in August th (w.e.f. 29 March, 2008) India 74% 2003, under RBI’s Corporate Debt Restructuring

Essar Bulk Terminal (Salaya) Scheme, a debt restructuring package (“the Limited # (w.e.f. 27th March, 2008) India 100% Package”), which was further modified in December, 2003 and November, 2004. The Package provided @ Subsidiary of Essar International Limited. for substantial relief in interest and in the time for # Subsidiary of Essar Ports & Terminals Limited repayment of loans, waiver of liquidated damages, * During the year, Vadinar Oil Terminal Limited had issued disbursement of further loans, etc. The Package additional 9.5% share capital to a Company outside the Group. was formalised and a Master Restructuring These shares were subsequently acquired by Essar Ports & Agreement (MRA) was entered into on 17th Terminals Limited on 27th March, 2008. December, 2004. 2) Fixed assets VOTL complied with all the relevant conditions as on January 31, 2005 as required under MRA a) In order to reflect the fair value of the Company’s st entailing restructuring of the existing loans / interest fleet, the Company had revalued it on 1 April, dues and disbursement of new loans. 2004 resulting in an enhancement from its then carrying value by Rs. 669.52 crore. The Company The interest of Rs.869.08 crore for the period again revalued its fleet on 31st March, 2008 resulting October, 1998 to December, 2003 in respect of the in an enhancement of Rs. 452.69 crore. These loans covered by MRA was converted into funded enhancements have been credited to the fixed interest facilities. The MRA gave an option to VOTL assets revaluation reserve. Incremental depreciation to repay the said funded interest facilities at any for the year on the enhanced value of Rs.26.95 point in time during its term at a reduced amount (previous year Rs. 34.90) crore has been recouped computed in accordance with the mechanism from the fixed assets revaluation reserve. provided in the MRA or in full by one bullet payment in March, 2026. Under the said mechanism provided b) Loans amounting to Rs.794.37 (previous year in the MRA, the funded interest facilities of Rs.605.44) crore is secured by first charge on fleet, Rs. 869.08 crore would stand fully discharged if barge unloader and two dredgers. Rs. 133.06 crore is paid on or before April 24, c) The Company has taken two vessels and an aircraft 2007. Should VOTL opt to discharge the funded on finance lease. interest facilities, subsequent to April 24, 2007, then

42 32nd Annual Report 2007-2008 the expected economic outflow of Rs.133.06 crore VOTL commenced the operation of all facilities being the present value of the obligation under the except the rail gantries on 1st July, 2007 and mechanism would gradually increase at a rate and operation of rail gantries on 1st February, 2008. as per the mechanism provided in the MRA. VOTL Accordingly, Single point mooring buoy (SPM), Jetty has plans to discharge earlier the loan liabilities dispatch facilities, road dispatch gantries, pipelines covered by MRA by getting the same refinanced. and tankages amounting to Rs.2,378.08 crore, being the cost of construction of these facilities, are In order to give accounting effect to reflect the capitalised on 1st July, 2007 and Rs.505.65crore, substance of the transaction on the date of MRA, being cost of rail gantries, are capitalised on 1st VOTL has followed the principles laid down in IAS February, 2008. 39 (revised) - Financial Instruments – Recognition and Measurement and FAS 15 - Accounting by d) Term loans and funded interest facilities amounting Debtors and Creditors for Troubled Debt to Rs. 2,286.75 (previous year Rs. 2,134.63) crore Restructurings in the absence of specific guidance from banks and financial institutions (other than (e) under Indian GAAP to cover the above-mentioned below) are secured / to be secured by first ranking situation. security interests on all movable and immovable Accordingly, the net amount of Rs. 736.02 crore, assets, present and future, pledge of shares of being the difference between the obligation and VOTL held by the promoters and persons the present value of the funded interest facilities if associated with the promoters / VOTL, security the same is paid on or before 24th April, 2007, has interest on rights, titles and interests under each of been shown as deduction from funded interest the project documents, trust and retention accounts/ facilities from banks and financial institutions with a sub-accounts, insurance policies related to the corresponding deduction from “Expenditure during terminal project, immovable properties of EOL construction”. The amount deducted from funded pertaining to terminal project, guarantee by the interest facilities from banks and financial institutions promoters and guarantee of the Company for has been adjusted by Rs.13.81crore being the Rs. 250 crore. differential present value of the obligation from 24th April 2007 to 31st March 2008, computed as per e) The facilities provided by a financial institutions upto the mechanism provided in MRA, and included in Rs. 200 crore and interest and other charges Interest and finance cost. thereon are secured by a guarantee of EOL for Rs. 200 crore. To secure obligation of EOL pursuant The loan balances (including funded interest to the said guarantee, security is created by first facilities) covered by MRA (hereinafter referred to mortgage and charge on immovable and movable as ‘the loan balances’) have been considered in properties pertaining to the EOL refinery project, the books of account in accordance with the bilateral pledge over shares of EOL and an assignment agreements, wherever signed. Where the same are of the project contracts relating to EOL refinery yet to be signed, the loan balances and interest project, the trust and retention accounts pertaining st accrued and payable up to 31 March, 2008 have thereto. been considered based on the confirmation of balances as at 31st March, 2008 wherever received f) During the year, Essar Bulk Terminal Limited (EBTL) and agreed by VOTL, or as per MRA, where the has undertaken a project for providing Dry Bulk confirmations have not been received or have not Terminal Services. To provide such services, EBTL been agreed pending reconciliation with the lenders. has entered into various arrangements for the construction of Jetty terminal, dredging of the b) “Capital work-in-progress” (CWIP) and “Expenditure channel and procurement of equipments. Estimated during construction” (EDC) includes an amount of project cost of construction is Rs. 738 crore. Rs.8.33 (previous year Rs.29.08) crore and Rs.8.00 (previous year Rs. 24.24) crore respectively apportioned / allocated by Essar Oil Limited (EOL) 5) Sundry debtors during the year in respect of composite contracts / (Note no. B (4) of schedule 14 of annual accounts) common expenditure. The expenditure has been accounted for based on debit note(s) raised by EOL Sundry debtors (unsecured and considered good) and accepted by VOTL. Amount included in CWIP outstanding for more than six months include Rs.3.70 has been capitalised on 1st July 2007 and amount (previous year Rs.3.70) crore awarded on arbitration in included in EDC has been proportionately year 2002-03. The concerned debtor went into appeal capitalised and charged to Statement of Profit and and the matter is pending before the Honorable High Loss. Court of Madras. As the arbitration tribunal award is in c) After successful completion of trial and testing runs favour of the Group, the debt is considered good. of marine, road facilities, tankages and pipelines,

32nd Annual Report 2007-2008 43 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

6) (Note no. B (5) of schedule 14 of annual accounts) 8) Leases a) Contingent liabilities (Note no. B (7) of schedule 14 of annual accounts) (Rs. in crore) (a) Finance leases: Particulars As on As on 31.03.2008 31.03.2007 The minimum lease rentals outstanding at the year i) Claims against the Group not end are as under: acknowledged as debt 17.27 12.53 (Rs. in crore) ii) Guarantees given by banks* 15.98 14.80 As on 31.03.2008 As on 31.03.2007 iii) Letter of credit (capital commitment) - 24.56 Particulars Minimum Interest Present Minimum Interest Present iv) Corporate guarantees on lease value of lease value of behalf of Essar Shipping & payments minimum payments minimum Logistics Limited ** 1,346.44 730.45 lease lease payments payments v) Dividend on optionally convertible cumulative Future lease rental redeemable preference share 0.01 - obligation payable : vi) Guarantee on behalf of others 104.00 104.00 - Not later than one year 86.09 48.87 37.22 55.60 29.23 26.37

vii) Disputed sales tax demand - Later than one year but under appeal in the honorable not later than five years 789.76 202.99 586.77 257.75 113.56 144.19 High Court of Madras. 58.10 58.10 - Later than five years 182.65 26.04 156.61 270.14 44.20 225.94 viii) Income tax appeals before ITAT 110.76 109.20 Total 1058.50 277.90 780.60 583.49 186.99 396.50 ix) Bills discounted with banks 80.00 49.86 (b) Operating leases: x) Letter of credit discounted As at the balance sheet date the outstanding with bank 22.44 76.95 commitments by the lessee on account of assets xi) Interest on facility E on leased out by the Group under non-cancelable principal amount of facility leases entered are Nil (previous year Rs.20.32 stoppage as per MRA 41.43 - crore). However VOTL has a committed liability of Note: Rs.6.95 (previous year Rs. 7.21) crore for future * Includes guarantee of Rs. 13.74 crore issued by bank in favour of lease rental charges in respect of land taken on ETIL which is backed by counter guarantee of the Company lease which is owned by EOL. ** Corporate guarantee on behalf of Essar Shipping & Logistics 9) Business segment and geographical segment: Limited has been backed by a counter guarantee from Essar Global (Note no. B (8) of schedule 14 of annual accounts) Limited. a) Business segment b) Estimated amount of contracts remaining to be Year ended Year ended executed on capital account and not provided for is 31.03.2008 31.03.2007 Rs. 2,580.79 (previous year Rs. 56.42) crore. Rs. in crore Rs. in crore c) Guarantee given by others on behalf of VOTL in Segment revenue respect of loan liability already existing in the books Sea transport 1,433.34 1,391.55 of account Rs. 200 (previous year Rs. 200) crore. Surface transport 493.23 303.25 7) (Note no. B (6) of schedule 14 of annual accounts) Port and terminal services 140.44 - Unallocated 210.76 16.97 The details for provision made by the Company for present obligations arising out of past events are as Total 2,277.77 1,711.77 under: Less : Inter segment (Rs. in crore) revenue (22.10) (29.07) Particulars As on Additions Reversed/ As on Net income from 01.04.2007 during the Paid 31.03.2008 operations 2,255.67 1,682.70 period during the period Segment results Sea transport 338.90 147.50 Claims against Surface transport 19.60 19.59 the Company Port and terminal services 6.33 - pending arbitration Unallocated 190.46 95.58 proceedings 0.82 - 0.82 - Total 555.29 262.67

44 32nd Annual Report 2007-2008 b) Geographical segment Year ended Year ended 31.03.2008 31.03.2007 The Group’s fleet operations are managed on a Rs. in crore Rs. in crore worldwide basis from India. Fleet operating and chartering earnings are based on the geographical Less: location of customers. Unallocable interest and finance charges (net) (248.01) (97.66) (Rs. in crore) Profit before tax 307.28 165.01 Segment revenue Year ended Year ended Less: Income tax (43.68) (7.26) 31.03.2008 31.03.2007 Profit after tax, before share of minority interest 263.60 157.75 India 1,664.88 1,261.27 Add: Share of loss China 90.08 20.63 transferred to minority 13.81 - U.S.A 70.56 60.52 Profit for the year 277.41 157.75 U.K. 86.08 157.69 Segment assets Sea transport 2,695.22 2,050.93 UAE 77.26 37.23 Surface transport 93.40 52.00 Rest of the world 57.54 128.39 Port & terminal services 4,664.38 - Unallocated 209.27 16.97 Unallocated 486.65 4,571.09 Total 2,255.67 1,682.70 Total assets 7,939.65 6,674.02 Segment liabilities The main operating assets represent floating fleet, which Sea transport (1,031.54) (265.54) is not identifiable to any geographical location. Surface transport (43.75) (123.54) 10) Earnings per share: Port & terminal services (102.21) (86.11) Unallocated (3,294.38) (3,315.03) (Note no. B (9) of schedule 14 of annual accounts) Total liabilities (4,471.88) (3,790.22) The calculation of the basic and diluted earnings per share is based on the following data: Fixed assets acquired during the year Year ended Sea transport 568.83 117.02 31.03.2008 31.03.2007 Surface transport 3.92 8.96 Earnings for the purpose Port & terminal services 2,991.96 - of basic earnings per share Total 3,564.71 125.98 (net profit for the year after share of minority interest) - Depreciation* Rs. in Crore 277.41 157.75 Sea transport 131.54 111.69 Equity shares at the beginning Surface transport 1.66 0.34 and end of the year (Nos.) 426,077,207 426,077,207 Port & terminal services 88.28 - Weighted average number of Total 221.48 112.03 equity shares for the purpose of calculating basic and Non cash expense other diluted earnings per share than depreciation (Nos.) 426,077,207 426,077,207 Bad debts / provision for Basic and diluted earnings doubtful debts per share of face value of Sea transport - 23.67 Rs.10/- each (Rs.) 6.51 3.70 Surface transport - 0.58 Port & terminal services - - 11) (Note no. B (10) of schedule 14 of annual accounts) Total - 24.25 The year-end foreign currency exposures that have not * excludes depreciation of Rs. 4.43 (previous year been hedged by a derivative instrument or otherwise Rs.3.33) crore transferred to expenditure during are given below: construction and Rs. 26.95 (previous year Rs.34.90) crore recouped from fixed assets revaluation reserve.

32nd Annual Report 2007-2008 45 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

a) Amount receivable in foreign currency on 12) Deferred tax liability account of the following: (Note no. B (12) of schedule 14 of annual accounts) Particulars Rs. in crore Currency In million The components of net deferred tax liability are as follows: As on As on As on As on 31.03.08 31.03.07 31.03.08 31.03.07 (Rs. in crore) i) Export of Particulars As at As at goods and 31st March 31st March services 38.92 23.98 USD 9.84 5.55 2008 2007 ii) Advance to vendors 2.89 1.69 USD 0.60 0.30 Deferred tax liability 0.11 0.79 EUR - 0.01 Depreciation on fixed assets 19.72 15.17 3.00 2.48 0.60 0.31 (A) 19.72 15.17 iii) Bank Deferred tax assets balance and fixed Unabsorbed depreciation - 6.94 deposits including Other disallowance 0.82 0.37 interest (B) 0.82 7.31 accrued thereon 93.41 14.76 USD 23.71 3.41 Net deferred tax liability(A-B) 18.90 7.86

b) Amount payable in foreign currency on account 13) (Note no. B (13) of schedule 14 of annual accounts) of the following: Essar Logistics Limited (subsidiary) has changed its Particulars Rs. in crore Currency In million method of depreciation on fixed assets with retrospective effect from straight line method to written down value As on As on As on As on method in respect of furniture and fixtures, office 31.03.08 31.03.07 31.03.08 31.03.07 equipments, motor cars and two wheelers. The i) Import of additional depreciation due to change in the method goods and amounting to Rs.0.08 crore has been charged to the services 21.42 54.62 USD 3.36 9.13 Statement of Profit and Loss. 0.17 0.21 GBP 0.01 0.02 0.03 0.01 DKK 0.03 0.00 14) Employee benefits: -0.04DHS-0.00 (Note no. B (14) of schedule 14 of annual accounts) 0.62 0.03 EUR 0.10 0.00 0.29 0.28 JY 5.25 0.38 Accounting Standard (AS) 15 ‘Employee benefits’ has 0.37 0.23 SGD 0.12 0.01 been adopted by the Group effective from 1st April 2007. -0.15HKD-0.02 In accordance with the standard, the additional obligation 0.05 - AED 0.01 - 22.95 55.57 8.88 9.56 of the Group on account of employee benefits, based ii) Advance on independent actuarial valuation amounting to Rs 2.66 from crore (net of deferred tax adjustment of Rs.0.32 crore) customer 0.09 USD ---has been accounted by debiting the opening balance of iii) Outstanding revenue reserve / Statement of Profit and Loss, as liabilities 0.45 USD -0.09- iv) Lease appropriate, as on 1st April 2007. obligation 778.09 393.34 USD 193.99 89.86 15) Related party transactions: v) Secured loans (Note no. B (15) of schedule 14 of annual accounts) payable (a) Investing company in respect of which the (including interest Company is an associate: accrued) 558.36 495.56 USD 139.21 113.19 i) Teletech Investments (India) Limited vi) Letter of credit for ii) India Shipping supply - 14.79 USD -3.38 (b) Individuals owning directly or indirectly an vii) Liability on account of interest in the voting power that gives them Essar control or significant influence: Shipping & i) Mr. Shashi Ruia, Chairman Logistics Limited 48.13 - USD 12.00 - ii) Mr. Ravi Ruia, Vice Chairman Note: Since the majority of the revenue of the Group is in iii) Mr. Anshuman Ruia, Director foreign currency there is a natural hedge against foreign exchange exposures. iv) Mr. Rewant Ruia, Director

46 32nd Annual Report 2007-2008 (c) Key Management Personnel: (v) Essar House Services Limited i) Mr. Sanjay Mehta, Managing Director (vi) Essar Steel Limited (Essar Shipping Ports & Logistics Limited) (vii) Futura Travels Limited ii) Mr. A. R. Ramakrishnan, Wholetime Director (viii) India Securities Limited (Essar Shipping Ports & Logistics Limited) (ix) Essar Oil Limited iii) Mr. V. Ashok, Wholetime Director (x) Bhander Power Limited (Essar Shipping Ports & Logistics Limited) (xi) Essar Steel Hazira Limited iv) Mr. K. K. Sinha, Wholetime Director (xii) Essar Power Limited (Vadinar Oil Terminal Limited) (xiii) Clickforsteel Services Limited v) Mr. Rajen Sachar, Manager (Vadinar Oil Terminal Limited) (xiv) Essar Shipping & Logistics Limited vi) Mr. A. K. Musaddy, Wholetime Director (xv) Essar Investments Limited (Essar Logistics Limited) (xvi) Essar Teleholdings Limited vii) Admiral Sampath Gopal, Wholetime Director (xvii) Essar Oilfields Services Limited (Essar Bulk Terminal Limited) (xviii) Aegis BPO Services Limited (d) Other related parties where there have been (xix) Essar Steel Limited (SEZ unit ) transactions: (xx) Essar Properties Limited Enterprises commonly controlled or influenced by (xxi) Imperial Consultants and Securities Private major shareholders / directors / relatives of directors Limited of the Group: (xxii) Essar Project Management Consultancy (i) Essar Information Technology Limited Limited (ii) Essar Agrotech Limited (xxiii) Essar Engineering Services Limited (iii) Essar Constructions (India) Limited (xxiv) Vadinar Power Company Limited (iv) Essar House Limited

Transactions with related parties are as under: (Rs. in crore)

Other related Key management parties personnel Total 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Fleet operating income Essar Steel Limited 1,130.49 1,013.31 - - 1,130.49 1,013.31 Essar Steel Hazira Limited 3.90 77.66 - - 3.90 77.66 Essar Oil Limited 35.62 14.97 - - 35.62 14.97 Essar Constructions (India) Limited 5.21 - - - 5.21 - Others 0.36 1.16 - - 0.36 1.16 Total 1,175.58 1,107.10 - - 1,175.58 1,107.10 Port, terminal and technical service Essar Oil Limited 202.29 56.84 - - 202.29 56.84 Sale of materials Essar Oil Limited - 11.84 - - - 11.84 Equipment lease rental / hire income Essar Steel Limited 0.19 0.19 - - 0.19 0.19 Interest receipts Essar Shipping & Logistics Limited 1.00 - - - 1.00 - Agency and management fees Essar Shipping & Logistics Limited 0.35 - - - 0.35 -

32nd Annual Report 2007-2008 47 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

(Rs. in crore)

Other related Key management parties personnel Total 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Remuneration Sanjay Mehta --0.64 0.62 0.64 0.62 A. R.Ramkrishnan --1.04 0.90 1.04 0.90 V. Ashok --0.78 0.52 0.78 0.52 A. K. Musaddy --0.78 - 0.78 - K. K. Sinha --0.98 0.33 0.98 0.33 Rajen Sachar --0.30 0.26 0.30 0.26 Sampat Gopal --0.27 - 0.27 - Total - - 4.79 2.63 4.79 2.63 Fuel oil Essar Oil Limited 0.87 3.22 - - 0.87 3.22 Stores and spares Essar Constructions (India) Limited 0.05 - - - 0.05 - Essar Steel Limited 5.31 1.61 - - 5.31 1.61 Total 5.36 1.61 - - 5.36 1.61 Business center fees Essar House Services Limited 13.56 20.19 - - 13.56 20.19 Rent Essar House Limited 4.20 4.80 - - 4.20 4.80 Essar House Services Limited 0.24 - - - 0.24 - Total 4.44 4.80 - - 4.44 4.80 Repair and maintenance Essar Agrotech Limited 0.30 0.30 - - 0.30 0.30 Essar Constructions (India) Limited 1.91 1.78 - - 1.91 1.78 Total 2.21 2.08 - - 2.21 2.08 Travelling / lodging expenses Futura Travels Limited 4.97 4.24 - - 4.97 4.24 Essar Properties Limited 0.01 - - - 0.01 - Total 4.98 4.24 - - 4.98 4.24 Freight / lease hire charges Essar Constructions (India) Limited 7.80 5.46 --7.80 5.46 Essar Oil Limited 0.25 0.25 --0.25 0.25 Total 8.05 5.71 - - 8.05 5.71 Jetty constructions and PMC Essar Constructions (India) Limited 3.80 ---3.80 - Essar Project Management Consultants Limited 0.23 - - - 0.23 - Total 4.03 - - - 4.03 - Steel procurement Essar Steel Limited 0.68 - - - 0.68 - Reimbursement of expenses Essar House Limited - 0.03 - - - 0.03 Essar House Services Limited 1.14 0.75 - - 1.14 0.75 Essar Constructions (India) Limited 0.12 - - - 0.12 - Essar Steel Limited 0.01 - - - 0.01 - Futura Travels Limited 19.53 16.11 - - 19.53 16.11 Total 20.80 16.89 - - 20.80 16.89

48 32nd Annual Report 2007-2008 (Rs. in crore)

Other related Key management parties personnel Total 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Professional / advisory / agency fees Essar Information Technology Limited 0.43 0.40 - - 0.43 0.40 Essar Steel Limited 0.05 0.11 - - 0.05 0.11 India Securities Limited 0.22 0.22 - - 0.22 0.22 Aegis BPO Services Limited 0.22 0.45 - - 0.22 0.45 Essar Oil Limited 3.17 - - - 3.17 - Total 4.09 1.18 - - 4.09 1.18 Purchase of materials Essar Constructions (India) Limited 0.54 - - - 0.54 - Cenvat receivable Essar Oil Limited 7.63 19.39 - - 7.63 19.39 Cenvat payable Essar Constructions (India) Limited 14.65 19.39 - - 14.65 19.39 Interest on loan Essar Shipping & Logistics Limited 0.47 - - - 0.47 - Essar Steel Limited - 9.11 - - - 9.11 India Securities Limited 0.40 - - - 0.40 - Total 0.87 9.11 - - 0.87 9.11 Loan arrangement expenses India Securities Limited - 0.02 - - - 0.02 Sale of fixed assets Essar Shipping & Logistics (Panama) Inc. 5.38 - - - 5.38 - Purchase of fixed assets Essar Constructions (India) Limited 0.89 1.14 - - 0.89 1.14 Fixed asset on finance lease Essar Shipping & Logistics Limited 445.28 - - - 445.28 - Loans and advances including deposits given Essar House Limited 2.45 3.50 - - 2.45 3.50 Essar House Services Limited 1.41 - - - 1.41 - Essar Oil Limited 112.37 416.96 - - 112.37 416.96 Essar Information Technology Limited 0.71 - - - 0.71 - Essar Oilfields Services Limited 0.42 0.15 - - 0.42 0.15 Essar Investments Limited - 0.58 - - - 0.58 Essar Steel Limited 25.08 - - - 25.08 - Essar Constructions (India) Limited 0.07 - - - 0.07 - Essar Steel Hazira Limited 0.02 - - - 0.02 - Essar Shipping & Logistics Limited 28.27 - - - 28.27 - Essar Bulk Terminal Limited - 0.17 - - - 0.17 Total 170.80 421.36 - - 170.80 421.36 CWIP capitalised during the year Essar Constructions (India) Limited 31.33 - - - 31.33 - CWIP- expansion Essar Engineering Services Limited 13.62 177.26 - - 13.62 177.26

32nd Annual Report 2007-2008 49 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

(Rs. in crore)

Other related Key management parties personnel Total 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Advances for expansion project Essar Constructions (India) Limited 135.72 89.50 --135.72 89.50 Loans and advances received Essar Steel Limited - 42.40 - - - 42.40 Essar Shipping & Logistics Limited 159.28 - - - 159.28 - Essar Investments Limited 12.00 - - - 12.00 - India Securities Limited - 3.16 - - - 3.16 Essar Oil Limited 42.03 56.02 - - 42.03 56.02 Total 213.31 101.58 - - 213.31 101.58 Advance received against sale of investments/allotment of shares Essar Shipping & Logistics Limited 57.04 102.86 --57.04 102.86 Issue of equity shares Essar Shipping & Logistics Limited 89.73 - - - 89.73 - Allotment of preference shares Essar Shipping & Logistics Limited 82.02 - - - 82.02 - Guarantee on behalf of others Essar Shipping & Logistics Limited 615.99 730.45 --615.99 730.45

Outstanding as on 31/03/2008 Sundry debtors Essar Steel Limited 111.60 202.73 - - 111.60 202.73 Essar Steel Hazira Limited 0.34 109.35 - - 0.34 109.35 Essar Shipping & Logistics (Panama) Inc. 5.34 - - - 5.34 - Essar Oil Limited 37.65 71.06 - - 37.65 71.06 Others 1.47 0.55 - - 1.47 0.55 Total 156.40 383.69 - - 156.40 383.69 Loans and advances including deposits given Essar House Limited 31.45 29.00 - - 31.45 29.00 Futura Travels Limited 6.25 6.25 - - 6.25 6.25 Essar Oil Limited 161.39 151.18 - - 161.39 151.18 Essar Infrastructure Holding Company Limited 0.19 0.20 - - 0.19 0.20 Essar Information Technology Limited 0.71 - - - 0.71 - Essar House Services Limited 1.41 - - - 1.41 - Essar Steel Limited - 0.16 - - - 0.16 Essar Oilfields Services Limited - 0.10 - - - 0.10 Essar Steel Limited - 1.15 - - - 1.15 Essar Constructions (India) Limited 89.50 88.42 - - 89.50 88.42 Essar Shipping & Logistics Limited 28.07 - - - 28.07 - Total 319.92 276.46 - - 319.92 276.46

50 32nd Annual Report 2007-2008 (Rs. in crore)

Other related Key management parties personnel Total 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Advance received against allotment of shares Essar Shipping & Logistics Limited 47.14 102.86 - - 47.14 102.86 Unsecured loan Essar Shipping & Logistics Limited 147.33 - - - 147.33 - Lease loan obligation Essar Shipping & Logistics Limited 441.21 - - - 441.21 - Sundry creditors Essar Oil Limited 17.60 0.53 - - 17.60 0.53 Essar Agrotech Limited - 0.03 - - - 0.03 Futura Travels Limited 3.90 6.25 - - 3.90 6.25 Essar Shipping & Logistics Limited 2.38 - - - 2.38 - Essar Constructions (India) Limited 12.72 20.53 - - 12.72 20.53 Essar Engineering Services Limited 13.11 - - - 13.11 - Essar House Services Limited - 1.09 - - - 1.09 Essar Steel Limited 0.35 187.30 - - 0.35 187.30 Essar Investments Limited 12.00 - - - 12.00 - Essar Project Management Consultants Limited 0.10 - - - 0.10 - Aegis BPO Services Limited - 0.17 - - - 0.17 Sanjay Mehta - - 0.03 0.03 0.03 0.03 A. R. Ramakrishnan - - - 0.12 - 0.12 V. Ashok - - - 0.06 - 0.06 K. K. Sinha - - - 0.09 - 0.09 Rajen Sachar - - - 0.04 - 0.04 Total 62.16 215.90 0.03 0.34 62.19 216.24 Security deposit received Essar Steel Limited 0.04 0.04 - - 0.04 0.04 Interest accrued but not due on loan Essar Shipping & Logistics Limited 0.47 - - - 0.47 - Essar Steel Limited - 7.06 - - - 7.06 Total 0.47 7.06 - - 0.47 7.06 Guarantee on behalf of others Essar Shipping & Logistics Limited 1,346.44 730.45 - - 1,346.44 730.45 Essar Oil Limited 104.00 104.00 - - 104.00 104.00 Total 1,450.44 834.45 - - 1,450.44 834.45 Guarantee availed for loan taken Essar Oil Limited 200.00 200.00 - - 200.00 200.00 Note: 1) The names of related parties are disclosed under each class of transaction during the year where the transaction with a single related party is 10% or more of the aggregate transactions of a class. 2) The Company has paid sitting fees to group of individuals having significant influence: Rs.0.01 (previous year Rs.0.01) crore.

32nd Annual Report 2007-2008 51 Essar Shipping Ports & Logistics Limited (formerly known as Essar Shipping Limited)

16) (Note no. B (16) of schedule 14 of annual accounts) c) The Company’s entire shareholding in Vadinar Oil Terminal Limited has since been transferred to Pursuant to the notification on AS 11 issued by the Essar Ports & Terminals Limited, its wholly owned Ministry of Corporate Affairs, requiring foreign exchange subsidiary. fluctuations on repayment of foreign currency loans and year end translation of foreign currency liabilities relating d) The Scheme of merger approved by the Board of to assets acquired from a country outside India to be Directors on 13th February 2008 provides for: credited to the Statement of Profit and Loss as against the earlier practice of adjusting against the carrying i) Merger of India Shipping, a company registered cost of the assets. The Company has from the current in Mauritius, which is the holding company of year taken such exchange gain / loss to Statement of Essar Oilfields Services Ltd., Mauritius with the Profit and Loss. Accordingly the profit for the year and Company. Upon merger 18,96,06,113 equity corresponding reserves are higher by Rs. 76.94 crore. shares of Rs. 10/- each at a premium of 17) (Note no. B (17) of schedule 14 of annual accounts) Rs. 210/- will be issued by the Company. The Company’s name has been changed to “Essar ii) Merger of Essar Sisco Ship Management Shipping Ports & Logistics Limited” with effect from 24th Company Limited, a wholly owned subsidiary March, 2008. with the Company. 18) (Note no. B (18) of schedule 14 of annual accounts) The above scheme has been approved by both Significant events occurring after the balance-sheet date Bombay Stock Exchange and National Stock (not requiring adjustments to assets and liabilities as at Exchange of India Limited. balance sheet date): e) The consent of the members through postal ballot a) The Company has entered into a Memorandum of has been obtained for the shifting of the registered Agreement (MOA) for acquisition of two 53,500 office to the State of Gujarat which will be given DWT and 55,000 DWT Supramax dry bulk carriers, effect to upon receipt of approval from Company with delivery of the vessels scheduled beyond July Law Board. 2008. 19) (Note no. B (19) of schedule 14 of annual accounts) b) The Company has entered into Memorandum of Agreement for sale of one 1, 28,000 DWT Suezmax Previous year’s figures have been regrouped / Tanker and one 6,290 DWT Product Carrier. reclassified wherever necessary. As per our report of even date For and on behalf of the Board For Deloitte Haskins & Sells Chartered Accountants Sanjay Mehta N. Srinivasan Khurshed Pastakia Managing Director Director Partner V. Ashok Manoj Contractor Wholetime Director Company Secretary Place: Mumbai Place: Mumbai Date : June 20, 2008 Date : June 20, 2008

52 32nd Annual Report 2007-2008 ESSAR SHIPPING PORTS & LOGISTICS LIMITED REGD. OFFICE: Administrative Building, Essar Refinery Complex, Okha Highway (SH – 25), Taluka Khambhalia, District Jamnagar, Gujarat 361 305 PROXY FORM

Member’s Folio No. : ______and/or DPID No./Client ID No.* :

I/We...... of ...... in the district of...... being a member of ESSAR SHIPPING PORTS & LOGISTICS LIMITED, hereby appoint...... of ...... or failing him...... of...... as my/our proxy to vote for me/us and on my/our behalf at the THIRTY-SECOND ANNUAL GENERAL MEETING of the Company to be held on Saturday, September 27, 2008 at 3.30 P.M. at the Registered Office of the Company at Administrative Building, Essar Refinery Complex, Okha Highway (SH – 25), Taluka Khambhalia, District Jamnagar, Gujarat 361 305 and at every adjournment thereof.

Signed this...... day of...... 2008.

PROXY FORM MUST REACH THE COMPANY’S REGD. OFFICE, AT Affix Re.1 ADMINISTRATIVE BUILDING, ESSAR REFINERY COMPLEX, OKHA Revenue HIGHWAY (SH – 25), TALUKA KHAMBHALIA, DISTRICT JAMNAGAR, GUJARAT 361 305, NOT LESS THAN 48 HOURS Stamp BEFORE THE COMMENCEMENT OF THE MEETING. SIGNATURE * Applicable only in case of Investors holding shares in electronic form.
ESSAR SHIPPING PORTS & LOGISTICS LIMITED REGD. OFFICE: Administrative Building, Essar Refinery Complex, Okha Highway (SH – 25), Taluka Khambhalia, District Jamnagar, Gujarat 361 305 ATTENDANCE SLIP

Member’s Folio No. : ______and/or DPID No./Client ID No.* :

32nd ANNUAL GENERAL MEETING TIME : 3.30 P.M. DATE : SEPTEMBER 27, 2008 VENUE : ADMINISTRATIVE BUILDING ESSAR REFINERY COMPLEX OKHA HIGHWAY (SH-25) TALUKA KHAMBHALIA DISTRICT JAMNAGAR GUJARAT 361 305 MEMBER PROXY [Name in Capital letters] I hereby record my presence at the 32nd AGM of the Company Signature of Member/Proxy NOTE: 1. Admission restricted to Members/Proxies only. 2. Please avoid bringing children/non-members with you. * Applicable only in case of Investors holding shares in electronic form. Book Post

If undelivered, please return to : Data Software Research Company Private Limited Unit : Essar Shipping Ports & Logistics Limited “Sree Sovereign Complex” No. 22, 4th Cross Street, Trustpuram Kodambakkam, Chennai - 600 024