Essar Oil Limited | Annual Report 2012-13 Positive Moves. Positive Results. CORPORATE INFORMATION
BOARD OF DIRECTORS BANKERS (As on August 14, 2013) ICICI Bank Ltd. State Bank of India Prashant Ruia, Chairman IDBI Bank Ltd. Naresh K. Nayyar, Deputy Chairman Punjab National Bank Lalit Kumar Gupta, Managing Director & CEO HDFC Bank Ltd. Chakrapany Manoharan, Director (Refinery) Axis Bank Ltd. Philip Aiken AM Indian Overseas Bank Dilip J. Thakkar Oriental Bank of Commerce K. N. Venkatasubramanian Indian Bank V. S. Jain Central Bank of India Rajiv Pal Singh, Nominee of State Bank of India Bank of India Melwyn Rego, Nominee of IDBI Bank Ltd. State Bank of Patiala Suneet Shukla, Nominee of IFCI Ltd. Yes Bank R. Sudarsan, Nominee of LIC of India Allahabad Bank Syndicate Bank COMPANY SECRETARY Bank of Baroda Sheikh S. Shaffi State Bank of Mysore
TRANSFER AGENTS REGISTERED OFFICE M/s. Datamatics Financial Services Ltd. Khambalia Post, Post Box No. 24 Unit: Essar Oil Limited Dist. Jamnagar – 361 305, Gujarat Plot No. B-5, Part B Cross Lane, Tel: +91-2833-661444 MIDC, Andheri (East), Mumbai – 400 093 Fax: +91-2833-662929 Tel: +91-22-66712151 to 66712156 Email: [email protected] Fax: +91-22-66712209 Email: [email protected] CORPORATE OFFICE Website: www.dfssl.com Essar House, Post Box No. 7945 11, Keshavrao Khadye Marg AUDITORS Mahalaxmi, Mumbai – 400034 M/s. Deloitte Haskins & Sells, Ahmedabad Tel: +91-22-66601100 Fax: +91-22-23544281/ 23540450 Website: www.essar.com Contents Company Overview 02 Positive Moves. Positive Results. 03 Highlights 04 Essar Oil at a Glance 06 Chairman’s Message 08 MD & CEO’s Message 12 Profiles of the Board of Directors 16 Senior Management Team
18 Management Discussion and Analysis
40 Sustainability
Governance 48 Directors’ Report 59 Corporate Governance Report
Financials 70 Independent Auditors’ Report 76 Balance Sheet 77 Statement of Profit & Loss 78 Cash Flow Statement 80 Notes to the Financial Statements
129 Notice
Green Belt at Vadinar
Cover images: 1 2 1. Gas Gathering Station (GGS) at Raniganj 3 4 2. Vacuum Gas Oil Hydrotreater (VGOHDT) Unit, Charge Heaters and Reactors at the Vadinar Refinery 3. Essar Foundation supported Gujarat Government school enrolment drive (Shala Pravesh Utsav) 4. Company owned and operated retail outlet at Hazira, Gujarat Positive Moves. Positive Results.
At Essar Oil, we are moving forward with a consistent focus to deliver stakeholder value, despite growing challenges in an uncertain global economy. Following the completion of the Expansion and Optimisation Projects of the Vadinar Refinery, we have concentrated on operational excellence to set new industry benchmarks. As India continues to be one of the fastest growing major economies in the world, the country’s energy demand will escalate further. We will continue to emphasize on domestic markets to help achieve India’s energy security. Our positive moves during FY 2012-13 helped us to perform better in an adverse operating environment.
We have initiated concrete measures to facilitate enhanced refinery operations and dollarisation of the balance sheet leading to reduced cost of debt. Besides, we are taking appropriate measures to ensure workplace safety, reduce environmental impact and give back to the communities we work with.
Our positivity and holistic sustainability efforts are creating long-term value for the community and society at large.
2 Annual Report 2012-13
COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS
96,797 7.96 12-13
12-13
63,340
11-12 4.23 53,119 11-12 crore) `
(
10-11 4.53
(USD/bbl) 42,402
10-11
09-10
41,816 1.6 REVENUE 08-09 09-10
CP GRM
3,651 19.77
12-13 12-13
13.5 2,101
11-12 11-12
(MMT)
2,779 14.76 10-11 10-11
Crore)
13.5 ` 1,938 (
09-10 09-10
11.95 1,203 08-09 08-09 EBITDA THROUGHPUT THROUGHPUT Highlights Essar Oil at a glance
20 MMTPA Capacity Processed 19.8 MMT in FY 2012-13
Vacuum Gas Oil Hydrotreater (VGOHT) Unit at Vadinar
With 11.8 complexity: The Vadinar refinery is now amongst most complex refineries in the world Crude diet comprised of 86% heavy & ultra heavy crude Improved product mix with 83% high value light & middle distillates
4 Annual Report 2012-13 5 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS
to BBB+
100% Credit Credit Achieved capacity utilisation within a quarter post expansion flexibility Completed CDR exit allowing for future operational & financial USD 481 million a Dollarised to create natural hedge full benefits of upgraded refinery Delivered Delivered Improved Improved Rating BBB-) (from Fluid Catalytic Cracking Unit (FCCU) Fluid Catalytic Cracking
at Vadinar 100,000 scm/day with a strong presence presence with a strong fully integrated oil and fully integrated Currently producing producing Currently 165 wells drilled
Raniganj Block received Approval for full development for the Approval On the marketing side, the Company operates a On the marketing side, the Company outlets, with pan-India network of over 1,400 retail another 200 in various stages of commissioning. feet (TCF), or about 1.7 billion barrels of oil feet (TCF), or about 1.7 billion barrels resources, and prospective equivalent, of reserves country. makes it the largest CBM player in the Essar Oil’s portfolio of five Coal Bed Methane portfolio of five Essar Oil’s cubic (CBM) gas blocks with a total of 10 trillion The Company’s refinery at Vadinar, Gujarat, is Vadinar, at refinery The Company’s with an second largest single site refinery India’s or 405,000 barrels annual capacity of 20 MMTPA, and 11.8 complexity. per day, from exploration and production to production exploration and from retail. and oil refining gas company value chain – the hydrocarbon across Business Highlights Essar Oil is a Chairman’s Message
PRASHANT RUIA
5.6% CAGR growth in petroleum products in India
Dear Shareholders, Economy and industry I am very happy to present The overall growth in our to you the Annual Report for country was constrained FY 2012-13. It was indeed by supply-side bottlenecks, a watershed year for your slowdown in fixed capital Company. Our proactive formation, weakness in attitude contributed largely industrial sector and lack to our significant progress of push on much needed and achievements. Last year, structural reforms. Despite we were at the threshold the challenges faced by a of entering a new phase of slowdown of economic growth, growth. We can be proud both on domestic and global to have realised our dream fronts, your Company sustained of building one of the most its position as the country’s complex world-class refineries second largest private refiner. globally.
6 Annual Report 2012-13 7 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS helped us ,
milestones during the course this spirit It is of our journey. and that has fueled our growth helped us build a successful enterprise. Positive Attitude Going forward we are we are Going forward committed to delivering value by superior stakeholder potential of unleashing the full on stand firm our people. We keeping our entrepreneurial our people spirit alive among leadership and achieve more Chairman It was a memorable year which operational showed strong and people performance. This, coupled with excellent financial performance as world-class emerge stronger integrated energy player post stabilisation of Expansion and While we Optimisation Projects. several of the indeed proud are milestones we achieved during confident of we are the year, in growth displaying a stronger the coming years to maximise value. shareholder Best wishes Prashant Ruia 24,000 ` full potential of full potential potential of our assets. us to demonstrate an excellent operating performance with focus on safety a very strong Refining Gross and post record Margins (GRM). Between FY 2011-12 and FY 2012-13, we almost doubled our GRMs by high margin more producing light and middle distillates and a higher percentage processing of lower cost heavy and ultra- heavy crude oil. By doing so, we have showcased the true the country. We successfully We the country. being a transitioned, from company project-focused to an operational company. Refinery was Our Vadinar completed at an investment of approximately Since June 2012 our crore. facility is expanded 20 MMTPA fully operational, benchmarked with a global high complex This enabled capability. refining focus on domestic markets, focus on domestic increasing keeping in mind the for energy. domestic demand on its As our country continues the trajectory as one of growth economies in fastest growing is an increasing the world, there need to bridge the demand- supply gap in the energy sector. Company is Your advantageously positioned to capitalise on this transformative change in energy sector in the maximum. We continue to the maximum. We Refinery, we have leveraged we have leveraged Refinery, our operational expertise to basic fundamentals. Post completion of Expansion and of Vadinar Optimisation Projects Positivity at Essar Oil optimism for our derive We on a few business growth the industry present significant the industry present opportunities to your Company. prices and an ambiguous for environment regulatory exploration), the changes in persistent risks that surround persistent risks that surround on the industry (lower return capital investments in initial years, fluctuating commodity contributed positively to the in the industry. overall growth Despite the concern on taken by the Government to the sector and accelerate revive investments which have country imports almost 80% There of crude oil for refining. have been some positive steps component of the country’s component of the country’s accounting for 15% economy, Domestic Gross of the country’s our (GDP). Even today, Product Rate (CAGR) of 5.6% to 194 Rate (CAGR) of 5.6% by 2016-17. The oil and MTPA gas sector in India is a critical overall demand for petroleum petroleum overall demand for is expected to grow products Growth at a Compound Annual Global demand for energy Global demand for especially in continues to grow, In India, developing countries. stakeholder value by unleashing the unleashing value by stakeholder our people. We are committed towards delivering superior superior delivering towards committed are We MD & CEO’s Message
LALIT KUMAR GUPTA
20 MMPTA increase in capacity from second quarter Dear friends, MMTPA rated capacity from the It is a pleasure to present the second quarter of FY 2012-13. Annual Report for FY 2012-13 The benefits of increased of Essar Oil Limited. The year complexity of 11.8 were also was remarkable for us in more reflected in the operations of ways than one. the Refinery as it is using almost We began the year with lot of 85% of heavy and ultra-heavy uncertainties and challenges crudes and is still able to but were able to successfully produce the stringent Euro III/ address them during the year. IV-compliant high-margin light The Refinery operations and middle distillates. were stabilised in a record The sourcing of ultra-heavy period of three months post crudes has been tied-up completion of the Expansion with domestic and overseas and Optimisation Projects and suppliers and the enhanced is now successfully operating production has been marketed at more than 100% of the 20 in the domestic market to the
8 Annual Report 2012-13 9 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS
3,651 ` 96,797 crore and 96,797 crore completely dollarised business and our Revenues /GRMs are this linked to the US Dollar, will also de-risk our balance sheet and align our debt in line i.e. with our earnings currency, US Dollars. It is important to note that dollar debt is 5 to 6 barrel (/bbl) in FY 2012-13 barrel against USD 4.23/bbl in FY 2011-12. In fact our CP GRM for the second half of FY 2012- we had full benefit 13, where power and higher of coal fired complexity upon stabilisation of the new units, was USD 9.4/ the fact that we bbl. Moreover, than 100% of operated at more capacity from our 20 MMTPA the second quarter onwards enabled with higher complexity, us to post our highest-ever of and EBITDA figures revenue ` respectively. crore, now Post CDR exit we are fully focused to convert our Rupee debt into low cost have already USD loans. We converted Rupee loan to the extent of USD 480 Million Since ECBs/swaps. through business is a the refining Strengthening Our Strengthening Performance but did not just improve We refining almost doubled our Price margins. Our Current Refining Margin (CP Gross GRM) stood at USD 7.96 per USD 480 Million USD 480 to 20 MMTPA and taking the to 20 MMTPA complexity level to 11.8. refining The elevated complexity puts refineries us among the top five in the world. Additions of several technological advanced VGO-HT units (ISOM, DHDT, and DCU) which enhanced our complexity contributed refinery to a quantum jump in our Refining Margins overall Gross (GRM). a single location in India, accounting for almost 10% of capacity. total refining India’s Our achievements at of a a result were Vadinar We strategy. focused growth successfully stabilised the expansion units taking the to 10.5 MMTPA capacity from at the beginning 18 MMTPA of FY 2012-13. By June 2012, we completed the Optimisation the capacity increasing Project, faced both on the global and faced both on the domestic fronts. Doing Things Right allowed us Our agility not only Expansion to commission the Refinery at the Vadinar Project on time, but also enabled us to complete the commissioning of four the Optimisation Projects months ahead of schedule. our Refinery is the Today, at second largest refinery
5,000 crore 5,000 crore ` Your Company’s credit credit Company’s Your The Third stage The Third The CDR exit has been The uncertainty of Sales The uncertainty of through ECBs/swaps. through Rupee debt into low cost USD loans. We have already already have loans. We cost USD debt into low Rupee of to the extent Rupee loan converted Post CDR exit we are now fully focused to convert our focused to now fully exit we are Post CDR It is important to mention that your Company achieved the above amidst challenges and removal of uncertainties and removal faced. previously notches from BBB- to BBB+ notches from CARE, by the rating agency, outlook an improved reflecting wells. by two ratings improved been received and the project and the project been received is now on a fast track with the completion of drilling of 165 Environmental Clearance of Environmental has our Raniganj CBM project have much better operational and other flexibilities in its decision making processes. completed in March 2013 and completed in March will your Company therefore commencing from January commencing from tied up have already 2013. We a bank facility of of this payment. to take care from the date of its decision from on 17/1/2012 in eight equal quarterly instalments Supreme Court allowed us to Court allowed us Supreme along dues pay the Sales Tax prospectively with 10% interest Tax incentives payments was Tax after the Hon’ble addressed extent of 65 to 70% of total extent of 65 to 70% production. percentage points cheaper than ensuring a continuous supply among others. Over the coming rupee debt. This exercise will of crude diet at competitive years, we plan to increase therefore reduce our interest pricing. the number of wells to 360 cost and enable us to benefit and expect to increase the from longer maturities of ECBs. While we are running our production to reach 3 million refinery at more than 100% scmd. Operations capacity on sustainable basis, During the year, the Refinery we continue to focus on Marketing maintaining the highest safety achieved a throughput of Since starting our retail standards at our facilities. 19.76 MMT which was 46% business a decade ago, Our Refinery continues its higher compared to 13.5 MMT we expanded our network commitment to excellence in in FY 2011-12 owing to the to include over 1,400 safety standards with a track completion of Expansion and commissioned outlets, with of 1,960 Lost Time Injury (LTI) Optimisation Projects. We another 200 in various stages free man days and 1,545 days also could reduce average of commissioning, making us without any major fire as of API of our crude intake to 27, the largest private sector player August 14, 2013. compared to 33 in FY 2011- in the market. The Government 12. The higher complexity of Exploration & Production has shown a firm resolve with the Refinery also enabled us number of steps taken in the to improve our product mix by On the exploration front, we recent past to deregulate producing high-margin middle focus on the exploration of the marketing of petroleum and light distillates at 83% of non-conventional gas. We products. Gasoline prices have our product slate, compared to are one of the leading Coal been made fully market driven. 72% in FY 2011-12. Bed Methane (CBM) players The prices of bulk gasoil have in the country with more than also been made market driven. With a view to achieve a 2,500 sq.km of acreage under The retail prices of gasoil are substantial reduction in our exploration. At Raniganj, our being incrementally raised by fuel cost, we commissioned flagship CBM block, activity 40 to 50 paise per litre starting a captive coal-based power has progressed significantly January 2013. It now appears plant during the year, making us such that we have completed reasonably certain that retail one of the few refineries in Asia drilling of more than 165 wells gasoil prices will be made to operate a coal fired power and increased the production market-driven in due course. plant. This is expected to result to almost 100,000 standard in the enhancement in margins cubic metres per day (scmd). Once fully deregulated, our to the tune of ~USD 1/bbl. In totality, we transformed retail network will provide great several risks and challenges in value to our stakeholders. In We have a right sourcing Raniganj into opportunities by fact the time has come for us to strategy assuring continuous making significant progress in have a serious look on further supply of crude oil to our drilling technology. This entire strengthening of our retail refinery with the flexibility to take exercise is backed by a highly network to seize this upcoming advantage of any future market qualified team of geologists, opportunity in the Indian oil opportunities. We have balance geophysicists, petro-physicists retail market. of spot and long-term contracts and petroleum engineers 10 Annual Report 2012-13 11 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS MD & CEO’s Message CEO’s MD & positive attitude will transform reliable and us into an efficient, sustainable organisation. With best wishes and regards Lalit Kumar Gupta & CEO Managing Director transparency and quality of and transparency by us information provided by carbon disclosure towards Project the Carbon Disclosure our high (CDP), UK. This reflects which governance standards align with quality in operations the and ensure processes health and meeting of safety, standards. environmental On a concluding note, I would the fact that we like to restate committed to move ahead are heights in our to achieve greater stakeholder to fulfil responsibility confident are expectations. We that benefits accruing to us due to our Expansion and will make Optimisation Projects long-run. in the us stronger capacities, quality Increased operations, low-cost coal- integrated power, captive fired business, positive government above all our and reforms continue to be our key focus continue to be our going forward. areas Positive Future For the second consecutive recognised we were year, level of for the increased a focus to nurture and retain and retain a focus to nurture high performing employees will Asset is our Our biggest strength human capital that has supported us in fulfilling our objectives. I am grateful to each one of my team members and their families for their commitment and support of vision to be our Company’s the Employer of Choice and make our assets the very Employee best in the industry. engagement, innovation and Health and Safety Health and safety of our employees and people who work for us is one of our top committed are priorities. We to making continued efforts assess hazards, to recognise health and safety risks in our operations and taking steps to mitigate those risks to enhance our safety performance. People – our Biggest implementation and disclosure disclosure implementation and social and of environmental, governance policies and practices. committed to being a are We corporate citizen responsible and will continue to participate in community engagement long-term activities to create benefits for the community and society at large. for the development, for the development, continuous supply of supply continuous
diet at competitive pricing. competitive diet at crude We have balance of spot and long-term spot and long-term balance of have We a ensuring contracts recognised policy framework recognised of this initiative, Essar Oil also commits to adopting an established and globally Compact, the largest corporate initiative in the responsibility world in April 2013. As part Our parent company, Essar company, Our parent Energy plc, became a signatory to the United Nations Global is approved by the Board. by the Board. is approved Committed to Sustainability and commodity prices, your Company follows a very robust risk management policy which Risk Management to insulate the business In order exchange volatile foreign from service to consumers at our outlets. retail For this, we have tied-up with leading industrial players (like Amul and JK Tyres, Castrol, end-to-end Pepsi) to provide A part of our strategy also holistic non- includes providing fuel solutions under one roof. them with lease rentals, ROI them with lease rentals, and margins on sale – in line with state-run oil companies. Through this arrangement, the this arrangement, Through dealer has to make the initial capex while we compensate value-added proposition to value-added proposition putting our dealers, without on our finances. pressure Our asset-light franchisee Our asset-light franchisee owned model (franchisee a and operated) provides Profiles of the Board of Directors
PRASHANT RUIA NARESH NAYYAR LALIT KUMAR GUPTA Chairman Dy. Chairman Managing Director & CEO
Mr. Prashant Ruia has been Mr. Naresh Nayyar is the Chief Mr. Lalit Kumar Gupta is the actively involved with Essar Group’s Executive Officer of Essar Energy Managing Director and Chief operations and management since plc. He joined Essar Group in Executive Officer of Essar Oil Ltd. 1985 and spearheads the Group’s October 2007 as Managing since December 2, 2011. In his growth and diversification both Director and CEO of Essar Oil current position, he is responsible within India and internationally. He Limited and became Non Executive for managing downstream oil is known for his project execution Director and Deputy Chairman in business of Essar Oil Limited. skills, financial expertise and people December 2011. Prior to joining management capabilities. He was Essar Oil, Mr. Nayyar was the CEO Mr. Gupta has over 32 years of instrumental in commissioning of of ONGC Mittal Energy Limited. leadership experience in core the Vadinar refinery in record time sectors of Energy (Oil & Gas), and the acquisition of Algoma Steel Mr. Nayyar has close to 40 years Utilities (Power) and Steel. Before in Canada. of experience in the Energy market joining Essar Oil, he was CEO and in India. He has been actively Joint Managing Director of JSW He holds several key positions on involved in Energy Policy making Energy Ltd. Prior to this, he was various regulatory and professional and energy security initiatives Director (Finance) with Mangalore boards. He is a member of the of India. He started his career Refinery & Petrochemicals Ltd., Audit Committee of World Steel with Indian Oil (India’s largest an ONGC subsidiary. At MRPL Association and the Energy Board downstream Oil Company) in 1975 he was responsible for Finance, Room at the World Economic and rose to become its Director in Taxation, Insurance, Legal and Forum. He has also served as October 2002, after having handled Commercial function as well Chairman of the Hydrocarbons several key assignments in finance, as International Trade including Committee of the Confederation treasury, international trade and Crude Procurements Strategy of Indian Industries in 2008 and as business strategy. and Strategic Management of member of the Prime Minister of major Expansion projects. He was India’s Advisory Council on Trade Mr. Nayyar’s previous directorships recognised by CNBC TV18 as the & Industry in 2007. He is Chairman include Indian Oil Corporation, Best performing CFO in the Indian on the Board of Essar Energy plc Oil & Natural Gas Corporation, Oil & Gas sector in 2008-09. which is listed on the London Stock Petronet LNG Ltd; IBP, and Lanka Exchange. IOC Limited where he served as Mr. Gupta is a Rank Holder Chairman. He was also Chairman Chartered Accountant, a Company of the Indian Oil Marubeni Panipat Secretary and holds a Bachelors Power Project between March degree in Commerce (Gold 2003 and November 2005. Medallist), from Jiwaji University, Gwalior.
12 Annual Report 2012-13 13 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS Independent Director J. Thakkar was appointed Dilip Mr. on of Directors to the Board November 3, 1994. He is a Accountant, practicing Chartered with over 52 years’ experience exchange in taxation and foreign He is associated regulations. with several public and private companies as a director. He is a Fellow member of the Accountants Institute of Chartered of India. DILIP J. THAKKAR Congress and a Board member and a Board Congress of Governor of Guangdong International Consultative Council, Energy Council and Monash World Mt. Eliza Business School. He has done his Bachelor of Engineering (Chemical) from Sydney University. in industry and commerce. Mr. Mr. in industry and commerce. Chairman Aiken is currently Independent plc, Sr. of Aveva Essar Energy plc and of Director Kazakhmys plc and Non Executive National Grid and of Director Mining. He has held Newcrest senior positions with BHP Billiton, in the UK and BTR and BOC Group appointments Australia. Previous include Chairman of Robert Walters of plc, Non Executive Director Chairman Express, Miclyn Offshore Energy of the 2004 Sydney World PHILIP AIKEN AM Independent Director Aiken AM was appointed Philip Mr. on August of Directors to the Board 14, 2012. He has over 40 years of experience MANOHARAN He is a Chemical Engineer from He is a Chemical Engineer from Kerala. Calicut University, first Indian to be on the panel of Q&A 2003 session held at NPRA’s New Orleans in U.S.A. of NNPC. He was a Board member of NNPC. He was a Board and also served as Chairman of Limited. He Indian Oil Technologies also has the distinction of being the to Nigeria providing technical to Nigeria providing assistance to the operating Refinery personnel at Port Harcourt His last assignment with IOCL was at Panipat Refinery as Executive has also Manoharan Mr. Director. worked for 2 years on deputation and Technical Services at Gujarat and Technical Panipat Refinery as well Refinery, (Refinery Division). as Head Office Limited (IOCL), Gujarat Refinery, Limited (IOCL), Gujarat Refinery, handled a variety of key He Baroda. assignments in various positions in Refining Operations, Maintenance, Refinery in May 2008. He started in as Engineer Trainee his career 1977 at Indian Oil Corporation Mr. Chakrapany Manoharan was Chakrapany Mr. (Refinery) appointed as Director 29, 2012. He joined on March Essar Oil Limited as Head of CHAKRAPANY (Refinery) Director K. N. VENKATASUBRAMANIAN V. S. JAIN RAJIV PAL SINGH Independent Director Independent Director Nominee of State Bank of India
Mr. K. N. Venkatasubramanian Mr. V. S. Jain was appointed to Mr. Rajiv Pal Singh was appointed was appointed to the Board the Board of Directors on May 10, to the Board of Directors on May of Directors on November 29, 2013. He has worked with Indian 24, 2013. He has over 37 years 2000. He has over 51 years of Oil Corporation for 26 years. He rich experience in Banking and experience in the oil & gas and was responsible for international Finance industry. Mr. Singh began petrochemicals sectors having negotiations for procurement of his professional career with State worked for IPCL, IOCL and Gulf crude and petroleum products Bank of India and was engaged Oil Limited. He has previously and implementation of financial in various capacities as Country served as director, Marketing strategies and financial appraisal Head (Project Finance), DGM and Director, Operations of IPCL, of projects. Thereafter, he served Corporate Accounts Group, DGM Chairman and Managing Director another Maharatna – SAIL, first as (MIS), Personnel Manager, and of Engineers India Ltd., Chairman Director – Finance, and thereafter Manager Credit & Operations in and Managing Director of IOCL as the Chairman till his retirement Japan. He rose to the position of and as Chairman of Gulf Oil Ltd. in 2006. After retirement, he served Chief General Manager (Foreign He is currently Chairman of Times the Jindal Group as Managing Offices) of SBI from which position Technoplast Ltd. Director and CEO of Jindal he retired in January 2012. Mr. R P Stainless Limited. He also held Singh has also served as Director He is a Chemical Engineer from the post of Member of the Public on the Boards of 7 international A.C. College of Technology, Enterprises Selection Board till July subsidiaries of State Bank of India Chennai and an M.Tech from IIT, 2011. including as Managing Director of Kharagpur. its Indonesian subsidiary. He a Fellow member of the Institute of Chartered Accountants Mr. Singh has done B. Tech in of India and the Institute of Cost Chemical Engineering from IIT, Accountants of India. Delhi and CAIIB from the Indian Institute of Banking & Finance.
14 Annual Report 2012-13 15 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS irectors on on irectors Ltd. D IFCI Profiles of the Board of Directors of Board of the Profiles Nominee of Shukla was appointed Suneet Mr. of to the Board November 9, 2012. He has worked in man-made fiber industry for 9 joining IFCI Limited in years before April 2000. At IFCI he gained vast experience in all the dimensions financing, structured of project financing and equity/equity- He headed the structures. related of IFCI Hyderabad Regional Office than two and half Ltd. for more the Mumbai years and thereafter and Ahmedabad Regional Offices of IFCI since April 2011. He has elevated to the been recently of position of Managing Director IFCI Financial Services Ltd. He is a graduate in Chemical HBTI, Kanpur, from Technology Indian Institute of a CAIIB from Banking and Finance and has done MBA (Banking and Finance) from IGNOU. SUNEET SHUKLA of India LIC He has a Masters Degree in He has a Masters Degree Economics. Mr. R. Sudarsan joined LIC of R. Mr. Recruit India in 1984 as a Direct He has served in various officer. Western, Eastern Central, of offices and Southern Zones of LIC of in India, mostly in IT environment LIC which has evolved in a big way during the last 15 years with computerisation of all branches and operations, networking, portal and he has been CRM initiatives, where actively involved at all levels. He has served in other assignments like Personnel, CRM also. R. SUDARSAN Nominee of the Sudarsan is presently R. Mr. of IT (Software Executive Director Development) of LIC of India with at Mumbai. its Corporate Office
Bank Ltd. IDBI He is a Bachelor of Commerce and He is a Bachelor of Commerce an MBA. 2007, whereafter he returned to he returned 2007, whereafter Executive currently is He Bank. IDBI IDBI Bank Ltd. at Director appointed as Managing Director appointed as Managing Director & CEO of IDBI Homefinance Ltd., a position he held upto December International Banking, Finance & Accounts, Subsidiaries & Associate Institutions and Legal. Rego was In September 2003, Mr. has held assignments in the Banking, of Corporate areas Rehabilitation Finance, Treasury, Mr. Melwyn Rego was appointed Melwyn Mr. on of Directors to the Board October 18, 2010. He joined IDBI in February 1984. He MELWYN REGO MELWYN Nominee of Senior Management Team
1 2 3 4 5 6
1. Mr. Lalit Kumar Gupta, Managing Director & CEO 2. Mr. Chakrapany Manoharan, Director (Refinery) 3. Mr. Iftikhar Nasir, CEO – Exploration & Production 4. Mr. S Thangapandian, CEO – Marketing and International Supply & Trading 5. Mr. Suresh Jain, Chief Financial Officer 6. Mr. K Govindarajan, CEO – Projects
16 Annual Report 2012-13 17 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS 12 13 11 10 9 Head – Economic Planning & Scheduling Head – Economic Planning & Scheduling President – CRG President Company Secretary & Head Legal Company Secretary Head – Human Resources Head – Human Resources Chief Information Officer Head – Marketing Head – Marketing Head – International Supply & Trading 8 Mr. Vikas Prabhu, Mr. Mr. T Srinivas, Mr. Ajit Mishra, Mr. Rudraraju, Sreedhar Mr. Harsh Bhosale, Mr. Mr. V Ramachandran, Mr. Sheikh S Shaffi, Mr.
13. 11. 12. 9. 10. 7. 8. 7 Management Discussion and Analysis
55% Night view of the Vadinar Refinery
Asia’s share of total oil demand growth in 2013-2017 15% Oil & gas sector’s contribution to India’s GDP
18 Annual Report 2012-13 19 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS in next 2-3 years are expected in next 2-3 years are or less equal to to be more demand which is incremental expected to support the refinery margins. shifted from developed markets developed shifted from Global markets to Asian region. continue to witness closures capacities due to of refining high operating cost, declining due to tough economic growth high maintenance environment, cost to maintain high quality to V), inability (Euro products heavy and ultra heavy process crudes due to environmental etc. In the last 4 restrictions than years an average of more capacities 1 mmbbl of refining have been shut down each capacities New refinery year. being added in Asia and are demand is Middle East where at a healthy expected to grow region in this rate; the refineries also have structural cost to competitiveness compared their west counterparts. On net capacity additions basis, refinery a key issue for policy makers a key issue for policy the world. across oil demand is expected World 1 million at around to grow of oil equivalent per year barrel 2017 with between 2013 and 55% of the Asia accounting for demand growth. incremental energy The focus of global has decisively demand growth However, this is not expected However, to significantly impact the oil demand. As per International Energy Agency (IEA), oil & natural gas is expected to be of total energy 53% around consumption by year 2030. Hence, the global strategic focus fuels will be on hydrocarbon deficit, high inflation and bring in about overall improvement fiscal consolidation. Oil and natural gas will remain of fuel in the global key sources energy basket in the foreseeable in spite of global thrust future of the share on increasing will be There energy. renewal / of green gradual increase energy and bio-fuels renewal in overall basket of energy mix. in the future, the Government in the future, key needs to quickly address huge infrastructural bottlenecks, account deficit and current to policy uncertainty with regard matters. The and regulatory is expected economy growth to be back on track in coming year on account of new reforms announced and measures undertaken by the Government account to contain current While India continues to be one While India continues major of the fastest growing in order economies in the world, rate growth to sustain a healthy 6.2% in the previous year. year. 6.2% in the previous India (Government) moderated to Indian economic growth 5% during FY 2012-13 from environment and delay in environment implementation of key policy decisions by the Government of account deficit a challenge for policy makers. The global economic particularly India which largely depends on import of crude. This has made managing current developed markets which led to of emerging sharp depreciation against USD currencies market’s flow of money from emerging flow of money from markets to US and other to 3% in 2012. However, the the to 3% in 2012. However, prospectus stability and growth in of US economy resulted published in April 2013, global is progressing economic growth to 3.3% in 2013 compared zone and Japan. As per the zone and Japan. As International Monetary Fund’s Economic Outlook’ (IMF) ‘World of other emerging market of other emerging China economies like India, in Euro and Brazil and revival to improve gradually with to improve in US economic improvement moderate growth environment, Global Economic & Market Global Economic Overview is expected The global economy Delayed Coker Unit (DCU) at Vadinar
Indian Oil And Gas CURRENT GAS DEMAND VS DOMESTIC SUPPLY Industry 600 India is the fourth largest (BCF/day) 550 (MMSCD) (19.4) 500 consumer of oil and the ninth 488(17.2) largest crude oil importer in 434 (15.3) 400 the world. The Oil and Gas 385 (13.6) sector contributes more than 300 305 (10.8) 15% to the GDP of the country. 243 (8.6) 240 215 Economic growth is directly 200 203 192 198 (8.5) (7.0) linked with energy demand 155 (7.2) (5.5) (6.6) (7.0) and a conservative estimate 100 of 7% growth is expected (Actual 130) 0 to double India’s per capita 2011-12 2012-13 2013-14 2014-15 2015-16 2019-20 energy consumption from 560 Demand Supply
kilograms of oil equivalent Source: Director General of Hydrocarbons and Mercados Analysis 2011 (kgoe) in FY 2009-10 to 1,124 kgoe by FY 2031-32.
20 Annual Report 2012-13 21 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS Capacity TMT Others Naphtha Kerosene Diesel Refinery Fuel FO/LSHS ATF LPG Gasoline 235 FY15E 234 FY14E sectors. As the economy expands and percolate the benefits thereof residents, to the country’s the demand for modern and cleaner fuels like oil and gas to witness sharp expected are growth. requirement. Current natural Current requirement. gas consumption in the country is primarily attributed to the industrial fertilizer and power, 216 FY13E Management Discussion and Analysis Discussion Management FY12 211 206 FY11 FY10 187
FY09 157 FY08 156 147 FY07 2.8 mbpd capacity refining expected to come up in Asia, balancing the demand. region’s playing a crucial role in playing a crucial role energy meeting the nation’s The robust economic growth economic growth The robust of India over the past few years has led to increasing Presently, demand for energy. coal (~53%) and oil (~30%) primary constitute India’s However, energy sources. natural gas with a ~11% share, to the global low as compared is increasingly ~24% share, FY06 130 127 FY05 122 FY04 113 FY03 107 FY02 . 103 FY01 0 50 A view of the Vadinar Refinery A view of the Vadinar 100 150 250 200
India’s primary energy primary energy India’s sources coal (~53%) and oil (~30%) constitute growth of India has of growth led to increasing demand for energy; The robust economic The robust Source: MoPNG, XIIth Plan, FACTS, BP Stats and Industry sources MoPNG, XIIth Plan, FACTS, Source: INDIAN DEMAND FOR FUELS (MMT) INDIAN DEMAND FOR FUELS CBM well drilling work in progress at Raniganj
KEY OIL FACTS IN 2012-13
Petroleum products accounted for about one-fifth of India’s outbound shipments, giving the much-needed boost to the country’s exports. Petroleum product exports rose 7.7% at USD 60.3 billion A key issue impeding the in FY 2012-13 from USD 56.04 billion in FY 2011-12. country from unlocking its full hydrocarbon potential is energy Indian refiners processed218.85 Million Metric Tonnes (MMT), pricing. The Government has which was 7.4% higher than the previous year reflecting expanded taken firm policy decisions capacity. during the year to deregulate the pricing of transport fuels paving the way for a totally deregulated market. Today, market for oil and gas in India. able to produce higher grade the prices of bulk gasoil are Essar Oil Limited, with its fuel products complying with fully deregulated effective complex refinery will be well- stricter environment norms. January 2013 while retail gasoil placed to increase its footprint prices are being aligned with in India and optimise sales Indian Oil Retail Scenario international prices through further. Bulk gasoil deregulation regular incremental increases brought in by the Government in the range of 40-50 paisa per Indian Refining Scenario has opened a window of limited month w.e.f. January 2013. The total refining capacity in the opportunity. There was a With respect to Liquefied country increased from 187.4 significant drop in marketing of Petroleum Gas (LPG), the MMT (as on April 1, 2011) to products to institutional clients Government has put a cap 215 MMT (as on April 1, 2013). on account of deregulation of 9 cylinders per year per Measured by the number of in pricing. A drop of 40% in family for subsidised cylinders. upgraded capacities (secondary bulk sales was reciprocated The Government has also units) to primary distillation by a rise in sales to retail launched a Direct Cash Transfer capacities (Crude Distillation outlets. This situation will be of LPG subsidy to targeted Unit - CDU), Indian refineries’ corrected once retail prices families which is expected to combined complexity is today reach market-determined substantially reduce the subsidy among the highest in the world levels. As retail gasoil prices burden of the Government. and is growing. Hence, while approach market-determined Another notable policy decision the Asian overall upgrading/ levels, it will create a more of the Government is the price CDU ratio is 36%, India is at level playing field to unlock an correction in gas sales thereby 41% and is expected to rise enormous upside for private giving a much-needed fillip to further. However it is also sector refiners. The growth the Indian upstream industry. pertinent to note that around rate of gasoline products’ The above measures point 30% of the country’s refineries consumption has been lower towards a fully deregulated are more than 30 years old. than expected over the past These ageing refineries are less year in view of correction in the 22 Annual Report 2012-13 23 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS with low infrastructure with low infrastructure implementation and low development of resources. announcement of The recent in gas prices by the revision the Government, based on of the the recommendation Rangarajan Committee Dr. is a welcome step and will encourage large new investments in this sector for domestic production increasing reducing of gas, thereby imports of costly LNG. trillion cubic feet (TCF), out trillion cubic only 8.92 TCF have of which so far been established. of CBM production Commercial a in India has now become CBM gas with current reality of about 0.28 Million production Cubic Metres Metric Standard per Day (MMSCMD). the CBM industry However, largely fragmented remains Management Discussion and Analysis Discussion Management
Gas Gathering Station
(GGS) at Raniganj Pradesh, Maharashtra, Odisha, Nadu and Rajasthan, Tamil Bengal. Out of the total West available coal-bearing area of 26,000 sq. km for CBM exploration in the country, exploration has been initiated in about 17,000 sq. km. The CBM resources prognosticated about 92 in the country are India’s Coal Bed Methane Coal India’s (CBM) Prospects India has the fourth-largest in the coal reserves proven world and holds significant for exploration and prospects exploitation of CBM. Under 33 exploration the CBM policy, blocks have been awarded in the states of Andhra Pradesh, Assam, Chhattisgarh, Gujarat, Jharkhand, Madhya on various Policy initiatives to Policy initiatives on various oil and gas boost domestic so that the country’s production may be import dependence reduced. The demand for gasoil The demand for gasoline The demand for gasoline
Government has been working imports as a percentage of the imports as a percentage GDP is higher for India country’s to others. The as compared India continues to be a huge importer of crude oil. The average spending on oil the growing FMCG sector the growing increase will proportionately demand of oil. investments (up to USD 1 and trillion) in infrastructure will also be propelled from from will also be propelled and sectors like infrastructure FMCG, among others. Huge vehicles and railways) and The the industrial sector. demand of oil and gas indirect from the transportation from sector (heavy commercial vehicles, light commercial is also expected to rise on demand account of increased 12.6% CAGR to 10.2 million 5.6 units in FY 2011-12 from million units in FY 2006-07. automobiles. The gasoline car population in the country is at estimated to have increased is expected to increase on is expected to increase account of rising number of Growth drivers Growth Government and the setting in FY in of a good monsoon 2013-14. measures. These measures These measures measures. cylinders per include a cap of 9 taken by the house per annum pricing of gasoline and gasoil gasoline and gasoil pricing of on account of various and also Diesel Hydrotreater (DHDT) at Vadinar Essar Oil Limited – opportunities, both in the Crude Slate An insight domestic market and abroad. It Consequent to the expansion of has proximity to the Middle East Essar Oil’s Vadinar Refinery to Essar Oil Limited is an end- – the largest crude oil source 18 MMTPA in March 2012, the to-end integrated oil and gas in the world. This ensures Refinery’s complexity increased company with a strategic sourcing crude oil at effectively to a level of 11.8. Subsequently presence across hydrocarbon lower freight costs which with the completion of the value chain. The integration is enhances the margins and Optimisation Project in June visible from the fact that the competitiveness of the Refinery. 2013, the refining capacity Company’s operations extend The Company has strong further increased to 20 MMTPA. from exploration and production captive infrastructure including This enabled the Refinery to to refining to retail. port/ jetty and power plants process a high proportion (60%) which further strengthens the of cheaper ultra-heavy crudes Location overall synergies. The location from the earlier levels of around Essar Oil’s Vadinar Refinery of the Vadinar Port also puts the 19%. The Company has shifted is strategically located Refinery on the major maritime to a crude mix portfolio tilted to capitalise on rising route from the Middle East to the Far East. 24 Annual Report 2012-13 25 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS Majority of heavy and Crude diet fully geared Crude diet fully geared The Optimisation Project Project The Optimisation a The Refinery achieved
ultra-heavy crudes were ultra-heavy crudes were tied-up under term sourcing Long-term MOUs/ agreements. with PSUs were Agreements of also in place for off-take products. petro throughput of 19.76 Million throughput (MMT) post the Metric Tonnes Expansion-cum-Optimisation year against the previous The of 13.5 MMT. processing than Refinery operated at more second 100% capacity from quarter of the FY 2012-13 Refinery complexity onwards. of 11.8 allowed the processing of 86% heavy and ultra-heavy crude (72% in FY 2011-12). the product Additionally, with 83% of light slate improved and middle distillates produced (71% in FY 2011-12). ultra-heavy crude (60% towards light towards plus) and product and middle distillates (85%) with IV Euro capability to produce and V grade products. Refinery Focused Refinery highlights: FY 2012-13 June 2012, was completed in of schedule, four months ahead capacity taking the Refinery Tonnes to 20 Million Metric 18 from Per Annum (MMTPA) All units of the Refinery MMTPA. than fully stabilised in less were of 3 months post completion the Optimisation Project. Management Discussion and Analysis Discussion Management future exploration activities on a exploration future large scale basis. to 360. Going ahead, the of Company is in the process availing statutory clearances authorities regulatory from four CBM for the remaining blocks at Rajmahal (Jharkhand), Sohagpur (Madhya Pradesh- and IB Chhattisgarh), Talchir The expertise (Odisha). Valley and knowledge earned through activities at exploration current Raniganj will enable it to excel in of gas with the objective to 3 of peak production reach MMSCMD of gas. Currently, Essar Oil supplies gas from Raniganj to a number of industrial customers, within the pipeline and through vicinity, cascades. Over the next few years, the the Company plans to increase number of wells at Raniganj blocks under development. blocks under development. the block was During the year, granted Phase III environmental clearance by regulatory clearance, authorities. Post this full Essar Oil has conducted field development of 143 wells 2013, of which drilled till March Current in production. 75 were these wells from production stood at 100,000 Standard Day (scm/d) per Cubic Metres approximately 10 TCF of 10 approximately and prospective reserves Essar Oil has formed resources. portfolio of assets a balanced exploration which focuses on Raniganj in key basins of the Bengal. Raniganj block in West CBM Oil’s is the first of Essar Train- 1 Sulphur Recovery Unit 1 Sulphur Recovery Unit Train-
focus is on the unconventional the 5 CBM gas space where gas blocks have a total of covers 5 unconventional (CBM) and 3 conventional oil and gas blocks in India. Its current hydrocarbon space. The hydrocarbon Exploration and Company’s (E&P) business Production CBM players in India and is on leadership a secure to mission a position in the unconventional Exploration-led Approach Essar Oil is one of the leading increased from 72% before 72% before from increased Expansion and Optimisation to 83% during the year. high-margin light and middle meeting distillates production, norms III/IV/V stringent Euro heavily in favour of heavy and ultra-heavy crude oil. Also, the (SRU) at Vadinar Coal-based captive power plant was successfully commissioned in phases and is now fully operational. This plant is expected to provide a minimum saving of USD 1/bbl compared to using plant fuelled by gas or fuel oil.
Expanded crude basket with the introduction of 11 new crudes in process as a part of continuous optimisation.
Processed more than 36 varieties of crude during the year including ultra-heavy and tough crudes. New Sulphur Recovery Unit at Vadinar
Achieved 1,825 LTI Free Days and 1,410 days without major fire incident as of March 31, 2013, highlighting safe operating practices.
SUPERIOR REFINING CAPABILITIES
14 12 10 8 6 4
Nelson Complexity 2 0 BP Shell S-Oil IOCL Citgo BPCL HPCL Valero MRPL CNPC Tesoro Fuji Oil Thai Oil Sunoco Sinopec CNOOC Premcor Reliance Idemitsu Formosa Essar Oil Petronas JX Group Marathon Cosmo oil GS Caltex Singapore CPC Corp SK Energy BORL Bina Petro China Petro Exxon Mobil PT Pertamina Conoco-Philips HMEL Bhatinda Chevron Texaco Chevron Hyundai Oil Banl
Source: Industry The Essar Oil’s Vadinar Refinery is amongst theglobal top quartile on the complexity scale (which measures the value-additive quantum of a Refinery’s secondary processing units).
26 Annual Report 2012-13 27 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS addition, the R&D is actively engaged in multiple studies for new required which are development, product in quality and improvement shooting. trouble of ASTM, it participated in the Testing International Proficiency to enhance Programmes its knowledge capital on of optimum quality production of gasoline and gasoil. The laboratory conducts extensive evaluation of crude Boiling Unit its True through (TBP). The capability of TBP was vindicated by evaluating 46 grades of crude, most of which potentially being tested were for the very first time. The TBP arriving at a qualitative ensured with minimum possible product cost. to The R&D team has resolved upkeep with changing times. It successfully commissioned required analysers which are to study crude oil fouling. In Quality Pledge Quality Gujarat Vadinar, at The Refinery state-of-the is equipped with a The credentials art laboratory. of the laboratory include assessment and monitoring oil and the of quality of crude chain. The process entire with laboratory is benchmarked for Testing American Society and Euro and Materials (ASTM) member grades. Being a fellow Management Discussion and Analysis Discussion Management
TBP Unit
FY 2012-13 83% output of light & Total middle distillates of process total refining in FY 2012-13 27 API density Average of crude in 86% Capability to process in tough/heavy crude FY 2012-13 19.8 MMT 19.8 MMT in Crude processed FY 2012-13 Euro Euro Grades
Quality
R&D Team
ASTMs Standard 71% output of light & Total middle distillates of process total refining in FY 2011-12 32 API density Average of crude in FY 2011-12 tough/heavy crude in tough/heavy crude FY 2011-12 72% Capability to process 13.5 MMT 13.5 MMT in Crude processed FY 2011-12 Hallmark of quality Progress – uninterrupted Progress GASOLINE BLENDING OPTIMISATION
Post implementation of Train-1 Refinery operations, gasoline production increased significantly with increased number of gasoline grades and subsequent component streams. This increased the Essar Oil Retail Outlet criticality of gasoline blending operation in order to avoid quality giveaway and minimise tank corrections.
In line with the change, the Company successfully Oil Trivia commissioned the gasoline online blending optimisation system Gasoline is also at Refinery for production of multiple grades of gasoline to meet the pre-set specifications at all times.This ensured reduction known as Petrol in quality which minimised batch preparation time and / Motor Spirit, is maximised tank utilisation. typically a mixture of fractions of petroleum composed of hydrocarbons. Major components Sales and Marketing increase in production as of the Gasoline During the year, Essar Oil well as the general increase Blending optimisation sold 12.7 MMT of products in Indian refinery production. system are blend in the domestic market with Retail volumes increased a growth of more than 60% post complete deregulation headers with required compared to FY 2011-12. This of Gasoline. Additionally, Bulk field instruments, represented 67% of its total Gasoil deregulation and phased state of the art sales, with exports contributing deregulation of retail Gasoil is Online Analysers 33%. The Company maintained expected to further improve volumes and profitability. and Blending its domestic share of sales at a high level, in spite of the Optimisation system.
28 Annual Report 2012-13 29 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS % 819 933 589 336 195 210 1.21 1683 79.59 19.20 7,818 12,583 154 FY 2012-13 2,439 10,112 12,705 - 80 FY 2012-13 576 828 630 540 261 4,777 7,692 % FY 2011-12 1.65 1,400 commissioned retail 1,400 commissioned retail the country fuel outlets across 31, 2013. The as on March at sales stood retail Company’s over of 14% a growth 154 TMT, with FY 2011-12. Agreements various public sector OMCs to network from supply to its retail on account of its endeavour the capacity and to increase complexity of its Refinery. the crude diet As a result, has changed and so has the Sulphur sulphur production. has almost tripled production and to last year, compared has most of the production been sold in the domestic market. Essar Oil has the largest outlets number of active retail amongst private players with an extensive network of around 87.09 10.86 - Management Discussion and Analysis Discussion Management 81 596 851 706 761 456 843 128 5,344 8,795 6802 7,773 FY 2010-11 FY 2011-12 % 6.15 80.47 13.38 557 7,289 1,212 9,058 Essar Oil’s potential to maximise Essar Oil’s realisation has been refinery During the year, the Company the Company During the year, added petcoke as a new its portfolio. The to product Company finalised agreements with large cement consumers, from sale of product to ensure In line first day of production. Essar with these agreements, Oil has set up logistics to move rail and by road, the product coastal shipping. agreement is to be signed agreement with Hindustan Petroleum Corporation Ltd. shortly. Essar Oil supplies to a number of industrial segments, such as cement factories, power plants, chemical industries, fertiliser plants and construction companies among others. FY 2010-11
Total PSU Customers & Traders Direct Retail Particulars (in KTPA) Sulphur Sub-total FO Bitumen Petcoke MS Kerosene ATF/ HSD Particulars (in KTPA) Particulars LPG amongst private players. largest number of largest outlets active retail Essar Oil has the Bharat Petroleum Corporation Bharat Petroleum Ltd. (BPCL). A similar signed product purchase and purchase signed product with Indian Oil sale agreements Corporation Ltd. (IOCL) and constituted close to 80% of domestic sales entire Essar Oil’s The Company or 10.1 MMT. companies (PSUs) continue to major customers. be Essar Oil’s Sales to these companies Review of Sales Public sector oil marketing Distribution of Domestic sale Distribution of Product sales portfolio (Domestic) sales portfolio Product their refineries and depots has As of end March 2013, the like Indraprastha Gas and helped the Company to ensure Company has 25 retail outlets Mahanagar Gas among others, uninterrupted product supplies offering Compressed Natural helped secure gas supplies to to its retail network across the Gas (CNG) and 5 offering Auto outlets. country. LPG (ALPG). Among the total, 12 CNG outlets and one ALPG Outlook Essar Oil has taken a multi-fuel outlet were commissioned The road ahead is filled with approach and has established in FY 2012-13. On this front, challenges and optimism. tie-ups with all major CNG and strategic tie-up with leading The growth rate of petroleum auto-LPG players in the country. gas marketing companies products consumption has moderated in India, which, along with surplus refining capacity is expected to exert pressure on the domestic evacuation. However, 1,400 Retail Outlets can ramp up quickly in case of reasonable certainty in retail Gasoil deregulation gasoil price deregulation will provide a level playing field for private fuel retailers. Petcoke demand is expected to be robust due to strong coal demand and the increasing 43 acceptability of petcoke 60 as a coal substitute by 11 various customer segments. 16 Additionally, plans to add 215 26 3 1 non-fuel retail focused on the 103 5 11 western and southern markets 40 3 4 are also on the anvil.
195 103 27 26 4 3 35 159 74 70
2 Retail gasoil price 37 70 deregulation will provide a level playing field for private fuel retailers.
30 Annual Report 2012-13 31 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS 53 28 74 147
Increase/ (Decrease) (%) (Decrease) Increase/ Coal-fired captive power captive power Coal-fired
4.23 and one time settlement of CDR exit charges with CDR lenders for CDR exit. The Company demonstrated excellent operating performance for FY 2012-13. However, higher forward charges due higher forward rates in forward to increase the Company from to protect exchange rates volatile foreign plant at Vadinar 2,101 1,387 63,340 Management Discussion and Analysis Discussion Management FY 2011-12 7.96 3,651 3,424 96,797 of the Company 3,424 crore on 3,424 crore FY 2012-13 ` June 2012 respectively, June 2012 respectively, Finance Cost to increased Supreme account of adverse 2012 Court decision in January now which on sales tax matter, will carry 10% rate of interest in additional besides resulting commissioning of borrowing, Expansion and Optimisation and 2012 in March Projects
improved improved crore) ` for the year ended 3,651 crore from from 3,651 crore ` 2,101 crore for the year 2,101 crore EBITDA Finance Cost Revenue (Gross) CP GRM (USD/bbl) Particulars ( Particulars income. Optimisation Projects coupled Optimisation Projects in other with an increase operating income and interest throughput and improvement and improvement throughput Refinery Margin post in Gross completion of Expansion and ` 31, 2012. This ended March is due to higher increase EBITDA 74% 2013 increased 31, March to Company like coal based power plant. refinery to coking refinery refinery to coking refinery optimisation other apart from undertaken by the measures GRM attributes to change in configuration of cracking from USD 4.23/bbl for the from 2012. year ended March in CP The improvement Current Price GRM Current by 28% to USD 7.96/bbl of rupee and better product mix of rupee and better product post completion of Expansion and Optimisation Projects. to FY 2011-12 led by higher to FY 2011-12 led higher sales throughput, due to depreciation realisation Company’s Gross Revenue Gross Company’s of a growth has registered compared 53% in FY 2012-13 Highlights: Financial performance Financial The CDR exit has provided the Company greater operational and financial flexibility for converting rupee debt into dollar debt.
the rupee debt incurred for capital expenditure. Under this route, the Company has received an approval from RBI to raise ECBs to the extent of USD 2.27 billion to replace ` 2,611 crore its rupee debt with lower cost US dollar loans. Almost entire Refinanced into foreign revenues of the Company are currency debt in United States dollar terms / linked to United States dollars. Amine Regeneration Unit (ARU) Therefore, the Company has a at Vadinar natural hedge for debt servicing in respect of USD borrowings. USD borrowings are cheaper the interest and finance cost revised commercial terms from than the rupee borrowings. increased sharply, impacting a similar group of lenders. The The Company is making all out EBITDA. The Company has CDR exit has provided the efforts to raise USD borrowings initiated various steps to reduce Company greater operational to refinance the expensive its cost of debt and improve its and financial flexibility for rupee debt with lower cost USD financial health. converting rupee debt into loans. This will lower the interest dollar debt. Additionally, it paves cost, improve cash flows and Corporate Debt Restructuring the way for participation of profitability. The Company has (CDR) Exit: foreign lenders in term debt / already refinanced` 2,611 crore In March 2013, the Company WC facilities which will reduce of rupee loan into equivalent completed the process of overall cost of debt. foreign currency debt of USD exiting the CDR mechanism 481 million through the use of which was implemented in Dollarisation of Debt: ECBs and by swapping rupee December 2004 to help the The Reserve Bank of India (RBI) loans into USD by March 31, completion of the Vadinar has opened a window allowing 2013. Refinery in Gujarat. The CDR companies with export earnings loan facilities have been to raise External Commercial Improvement in Credit Rating: replaced with new debt facilities Borrowings (ECB) funds and The Company is no longer of about ` 9,100 crore on use the proceeds to prepay a restructured asset and in 32 Annual Report 2012-13 33 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS management of operations. Key transaction systems like SAP ECC (Financials, Sales & Distribution, Materials Management, Plant Maintenance, Quality Management, etc.), SAP SAP Human Resources, and the Supply & Treasury Systems (Bulldog) are Trading closely integrated with each other enabling seamless flow of information between systems. This has helped reduce and duplication of processes through advanced systems advanced through involves This and processes. and development of application of new technology introduction demand to satisfy business infrastructure along with strong them. SAP support to manage which has Solution Manager the across been implemented the organisation has helped enhance, Company effectively the automate and improve Management Discussion and Analysis Discussion Management Central Control Room at Vadinar Central Control
1,900 crore 1,900 crore ` new technology in order to new technology in order IT initiatives with synchronise goals strategic organisation’s and themes. A focus on automation, process excellence and maximising on the technology return investment (ROI), business enabled are processes supported by convincing supported by convincing under evidence” as required 22 Accounting Standard on – Accounting for taxes has Income. The Company Assets Tax Deferred created only to the extent of Deferred Liability. Tax Technology Essar Oil has been on the of embracing forefront on Unabsorbed Depreciation on Unabsorbed Depreciation Losses in & Carried Forward in view of its books of Account the concept of “Virtual certainty Asset (net) to the tune of Asset (net) approximately recognised Deferred Tax Tax Deferred recognised assessments. The Company has not of the Income Tax Act. The of the Income Tax claim Company will accordingly Tax these benefits in its Income seven consecutive Assessment including initial Years u/s 80IB(9) Assessment Year Refinery. New Refinery units are units New Refinery Refinery. eligible for 100% tax deduction for a period of of the profits last financial year ended March last financial year ended March working 31, 2012, which are seamlessly with its existing The Company has installed and commenced production of various new Refinery units in funding at competitive rates. Taxation: multiple sources through which through multiple sources the Company can access to completion of its Expansion in Improvement Projects. Rating will open the Credit credit rating to the Company credit based on its operational post and financial strength by two notches to BBB+ from BBB+ from by two notches to BBB- by CARE. Similarly, Fitch has assigned BBB+ Project, the Company’s credit credit the Company’s Project, loan rating for raising term upgraded facilities has been With of like removal positives of the CDR tag, completion Expansion and Optimisation speedy approval mechanism speedy approval USD and access to cheaper profits. funds leading to better its new avatar, it will have it will its new avatar, operational flexibility, more Seamless data integration across systems and workflow through EPS/IST allows the Company to keep pace with constantly changing scenarios. Coal-fired captive power plant Control Room at Vadinar
most importantly, promoting was taken by implementing Email and mobile-based greater co-operation between a tool called ‘Boardbooks’, alerts have been adopted departments. Applications which seamlessly works on for Manufacturing Execution like Weighbridges, Terminal traditional computing devices Systems in order to minimise Automation, Trade Capture, as well as new age tablets. failures and maintain a safe Payment and Indent This has helped the Company operating environment. Process Management System are conduct its Board and its Sub Information Centre is enhanced also integrated with the SAP Committees Meetings and for effective monitoring of System. other executive level meetings critical operation parameters eliminating use of paper. to leverage maximum Considering safety is a key plant capability. Laboratory feature of Essar Oil’s culture, a Seamless data integration Information Management Work Clearance Management across systems and workflow System is enhanced with direct System has been implemented through EPS/IST allows the interface of Instruments; this is within ERP, catering various Company to keep pace with providing accurate data visibility types of work permit needs with constantly changing scenarios. and error free transactions. enhanced flow and traceability A couple of ‘What-If scenarios’ Integration of Laboratory in future. modules have been adopted Information Management to cut across available systems Systems with Manufacturing During the year under review, allowing the Company to the Company management Execution Systems and evaluate and consolidate its Process Information Centre is envisaged a Green Mission of position. paperless office. A green step helping the business to meet market demand and tight quality targets. 34 Annual Report 2012-13 35 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS and a well defined replies and follow up actions replies periodically placed before are the Audit & Governance Committee. The internal control system includes a delegation of authority comprehensive Management Information System. Company. All the significant All Company. made audit observations by the internal auditors of and its parent the Company plc) company (Essar Energy by a reviewed regularly are Committee Management Audit by the Managing chaired & Chief Executive Director of the Company to Officer properly all issues are ensure All significant addressed. along with audit observations the management responses/ Management Discussion and Analysis Discussion Management The audit plan attempts to cover all significant risk areas, and evaluation of review of existing the effectiveness and controls processes, compliances and ensure to policies and adherence In addition, the procedures. internal auditors of the parent company Essar Energy plc also conducts audit of the well experienced and seasoned well experienced and and supported professionals and technical by both financial across personnel drawn from internalthe organisation. The as per a audit is conducted plan drawn at the beginning of the year in consultation with the management and statutory auditors of the Company which by the Audit is finally approved and Governance Committee. operational and financial operational a well structured performance, regular with process budgeting of expenses, a state monitoring and Internalof art ERP systems audit. The internal team is led by audit Lab unit at Vadinar
with monthly reviews of with monthly reviews delegation of authority and a Management comprehensive Information System coupled The internal control system The internal control includes a well defined safe guarding the assets of the the safe guarding misuse/ Company and prevent losses and legal compliances. over reliability in financial over reliability appropriate ensure reporting, authorisation of transactions, The internal control systems The internal control designed to provide are assurance a reasonable system and procedures system and procedures commensurate with its size of operations. and nature Internal Control Systems Internal Control The Company maintains adequate internal control capabilities. strong integrated infrastructure integrated infrastructure strong acting as a backbone to enhance surveillance secured with Access Control Control with Access secured CCTV cameras System and with the premises safeguarding All Essar Oil locations are Oil locations are All Essar Rail Gantry at Vadinar
On the IT (Information SWOT Analysis Strong, captive infrastructure Technology) side, various like port / jetty, power plants in Strengths components of the overall IT proximity. landscape undergoes audit 20 MMTPA world-scale every year to strengthen Refinery with a complexity of Large proportion of internal controls and improve 11.8: one of the most complex operating costs under control the IT processes. During the refineries in the World. Capable through long-term contracts. of producing a high proportion year, the Company reviewed Strong senior management the security and robustness of high-margin middle (60%) and light distillates (25%) team: each member has parameters of its IT systems industry experience of about and communication network meeting stringent Euro III/IV/V norms despite processing a 30 years in leading oil and gas with the help of an independent companies. external agency. The findings high proportion of heavy and ultra-heavy crudes. are being worked upon Challenges rigorously. Strategically located on Higher level of debt due The Company have further the west coast of India with to adverse sales tax ruling embarked on the journey proximity to the Middle East, and historical backlog of CDR of putting in place a strong the largest crude oil source in period interest impacting Governance, Risk & the world, resulting in lower capability to take up future Compliance (GRC) tool which crude freight costs: catering growth projects. will help it to systematically the demand of growing Indian Higher interest cost due monitor and manage domestic market and supply to very high proportion of authorisation-related risks in an to global markets due to a Indian Rupee Debt affecting organised approach. presence in the major maritime route from the Middle East to profitability. Essar Oil is also working the Far East Historically regulated oil and with key software vendors gas retail sector: only PSUs are to strengthen its systems Supply security of ultra- compensated through subsidies by implementing global heavy crudes through long-term for selling products below best practises to improve supply agreements market prices. functionalities, security Coal- based power plant to and control facets of these save liquid fuel and gas costs Exposure to geo-political applications. resulting in overall reduction of risks for crude sourcing due to fuel cost by more than USD 1 lack of equity crude. per barrel.
36 Annual Report 2012-13 37 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS
1,689 Addition of complex refining refining Addition of complex
(BSC) methodology in its HR function. Moving forward, the performance related variable pay of the employees was linked this year with the Business objectives and each individual executive’s performance in the form of capacities to impact the availability of tough and heavy crudes. Intellectual Capital The Company has 1,689 employees including advisors 31, 2013. The as on March priorities last year Company’s included employee retention, succession planning and internal nurturing and growing employee talent. Various engagement initiatives, coupled with an enhanced focus on individual training needs in alignment with the business objectives and a need- based compensation policy, helped the Company to meet objectives. the Company Last year, Balance Scorecard introduced depreciation in Indian Rupee vs. in Indian Rupee depreciation USD. Management Discussion and Analysis Discussion Management The Company has The Company advisors including employees 31, 2013. as on March Delay in refinancing of Delay in refinancing pricing Shifting of product Delay in Retail diesel price Global / Domestic Economic in the Geo-political unrest De-regulation of retail sector of retail De-regulation in Global Oil Weakness
deregulation due to steep deregulation Middle East and Africa. existing rupee loans by ECBs. Parity Pricing Trade policy from to Export Parity Pricing for Gasoil, LPG and Kerosene sold to PSU oil for products marketing companies. Product Demand, mainly in Product developed markets. may not materialise as Growth per expectation net additional in global capacity of refineries market higher than that of demand, if all incremental are projects the proposed commissioned as per schedule. maturity and full protection from from maturity and full protection of rupee due to depreciation and GRMs. dollarised income level playing field for to create private refiners. Threats RBI approval in place for RBI approval Accelerate the development Further optimisation of Export of treated Vacuum Vacuum Export of treated
conversion of high cost rupee currency debt into foreign debt / ECBs with extended structure from Government from structure April 2014. from effective of CBM Raniganj and other blocks with clarity of pricing infrastructure readily available readily infrastructure projects. high growth for future payback margin booster schemes. Land, environment clearance and other supporting Project for the conversion of Project VGO into high-margin middle distillates and other quick Refinery operations through Refinery operations through implementation of a second Manufacturing unit. Hydrogen Opportunities Gas Oil (VGO), an intermediate impacting ability to product, full margins. capture ideas. All business feasible ideas are being implemented which is envisaged to lead to not only process improvements but also substantial value generation.
At Essar Oil the philosophy of continuous learning is reinforced frequently. Initiatives such as ‘Career Desk’ for career discussions, cross- functional learning opportunities such as Refinery Value Chain and Strategic Business Simulation were introduced.
As an organisation, Essar Oil places utmost importance in engaging with employees and their families beyond work. This is done by sharing business updates with Oil Tankages at Vadinar employees through various interactive forums like Town an enhanced BSC-linked Continuing with a focus on halls, Sampark, or celebrating Incentive Plan to ensure that promoting innovative practices, with families the various all individuals are aligned this year, an organisation- Indian festivals, conducting completely with the Company’s wide competition, “Innovation Sports events and cultural business goals and are Quest”, was launched by programmes. achieved together as a team. the Managing Director & Special incentives were CEO himself to galvanise During the year, the Company designed and implemented to all individuals across the was recertified to ISO exemplify high performance and organisation to take-on 9001:2008 for HR processes by to incentivise achievement of 6 business challenges. United Kingdom Accreditation important milestones. Employees participated in this Service and received Greentech quest with great zeal with 412 Award for Best HR Strategy.
Cautionary Statement Certain words and statements in this Management Discussion and Analysis are forward looking based on numerous assumptions regarding the Company’s present and future business strategies and the environment in which the Company will operate in the future. The important factors that could cause actual results, performance or achievements to differ materially from such forward-looking statements include, among others, changes in demand and supply, government policies or regulations, political and economic development within and outside India and, in particular, changes relating to the administration of oil and gas industry.
38 Annual Report 2012-13 39 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS Management Discussion and Analysis Discussion Management Routine inspection at the Reverse at the Reverse Routine inspection
Osmosis (RO) unit at Raniganj Osmosis (RO) Sustainability at Essar Oil
Green belt at Vadinar
Essar Oil Ltd. is operating a To demonstrate our Despite global and national refinery and building oil and commitment to sustainability, challenges being faced by the gas/exploration and production our parent company Essar energy sector, we were able to assets which will have lifespans Energy plc became a signatory make considerable progress in of several decades. Therefore, it to the United Nations Global our economic, environmental is critical that these assets can Compact principles on April 2, and social performance last operate sustainably for a very 2013, requiring us to follow a year. long period, taking into account clearly defined way of operating the needs of all stakeholders, across all our businesses, with This section of the annual report particularly the health and a focus on environment, labour, gives a brief overview of our safety of our employees and anti-corruption and human performance in FY 2012-13. the communities around our rights. We believe this is the operations. best way for us to create long term, sustainable value.
40 Annual Report 2012-13 41 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS 30 6.63 31.3 1659 2244 1638 FY 2012-13 33 24.3 1664 2942 6.91 1710 FY 2011-12 23 n/c n/c 1658 2595 6.64 FY 2010-11 c b a c c Total workforce by type workforce Total Employees Fixed term contract party contract Third % women employees hours of training per Average employee Number of employees appraised 15% reduction in hazardous waste generation at Vadinar refinery waste generation at Vadinar in hazardous 15% reduction For the second successive year, Essar Oil was ranked the highest scorer in the energy sector by the highest scorer Essar Oil was ranked the For the second successive year, India Project, Carbon Disclosure refinery in energy saved at Vadinar 189% increase Over 29,000 beneficiaries of our community care initiatives undertaken at Vadinar and CBM Project, Project, Vadinar and CBM at initiatives undertaken of our community care Over 29,000 beneficiaries Raniganj and CBM Project, Vadinar undertaken at of our educational initiatives Over 16,200 beneficiaries Raniganj Act 1,517 employees trained in the UK Bribery 326% increase in number of contractors trained in health and safety at CBM project, Raniganj at CBM project, contractors trained in health and safety in number of 326% increase rate achieved at all sites occupational disease Zero Vadinar and CBM Project, initiatives undertaken at of our healthcare Over 25,200 beneficiaries Raniganj Increase in the number of employees trained in health and safety by 124% at Vadinar refinery and refinery at Vadinar and safety by 124% trained in health of employees in the number Increase Raniganj 123% at CBM project, personnel directly hired through the company on a fixed term contract basis for a period ranging one and three years for certain projects years for the company on a fixed term contract basis for a period ranging one and three through hired personnel directly for specific jobs at sites includes contractors and sub-contractors hired and fixed term contract employees for E&P employee analysis includes permanent employees only for Refining and Marketing, India and permanent not calculated business - - -
b c n/c - a separation. policies in place for induction, performance management, business practices learning and and development, retirement an employee friendly organisation. There an employee friendly organisation. There in place for recruitment HR processes are and selection of personnel at all levels; appropriate to our operations in India. We to our operations in India. We appropriate to labour aspects maintain policies relating which highlight our commitment to being Our People Essar Oil operates within a framework of HR policies, practices and regulations Environment Social Sustainability Performance Highlights Performance Sustainability ESSAR OIL: THE INNOVATION QUEST With the never ending process of innovation being instilled in the DNA of the organisation and our people being our most important asset, an organisation wide competition was launched to harness untapped potential. With the theme “One Idea can change the World and it could be yours”, innovative solutions to six key business challenges Central Control Room at Vadinar were sought.
The competition generated a lot of enthusiasm and 412 ideas were Health and Safety registered, of which 97 were short listed Managing the health and safety for extensive evaluation. Mentors were of the people who work for introduced at this stage and provided us, both directly and indirectly, support, created awareness and helped continued to be our top priority. The focus at most of our sites to refine the ideas. Subsequently, last year was to enhance 22 finalists were chosen and made safety culture, contractor safety presentations to Mr. L K Gupta, MD & management, risk assessment CEO, who reviewed these ideas for their and training. Although our true potential on the basis of parameters overall safety performance was such as benefits to the organisation, good and Vadinar refinery won feasibility of implementation, ease of external recognition for their adoption and resources required for safety efforts, there were also key learnings from the incidents implementation. 11 winning ideas were that occurred at our sites which chosen and were awarded prizes. we will use to further improve our safety processes.
42 Annual Report 2012-13 43 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS Sustainability at Essar Oil at Sustainability Disclosure Project (CDP) level. Project Disclosure For the second successive Essar Oil was ranked year, in the the highest scorer Energy sector by the Carbon India. In Project, Disclosure terms of the Carbon Disclosure Leadership Index (CDLI), Essar of 72 out Oil achieved a score We continue to report our to report continue We carbon performance at Carbon the latest technology and energy conservation measures. Oil recognises its obligations Oil recognises to climate change with regard mitigation and adaptation. towards Our approach climate change mitigation and adaptation continues to aim at clean solutions to our providing our customers and reducing carbon footprint by adopting oil and gas company, Essar oil and gas company, Environment and responsible As a respected is committed to achieving excellence in occupational health management. occupational disease rate since commissioning of its first plant refinery in 2006, the Vadinar Having achieved a zero Having achieved a zero and feedback and helps us to benchmark our organisation against others. and feedback and helps us to benchmark In September 2012, we conducted post exit interviews with 20 employees in the middle and senior In September 2012, we conducted post valuable insights during the exit interview provides gathered information Accordingly, management cadre. Employees can also provide us with market information on why they chose a new employer. The reasons The reasons us with market information on why they chose a new employer. Employees can also provide or a posting closer to home. This information better compensation could be, for example, better prospects, and systems with employee expectations. align our processes helps us take necessary decisions to employee expectations regarding job responsibilities and performance, working conditions, opportunities and performance, working job responsibilities employee expectations regarding compensation advancement, supervision and management, work satisfaction, for skill development, career communication. work group organisational and and benefits , organisational culture, In the event that the employee maintains his decision to exit despite efforts made, necessary actions his decision to exit despite efforts In the event that the employee maintains a window to view and benchmark exit. Employee exit interviews provide a smooth taken to ensure are acquisition manager work together on creating a retention strategy. In the event the employee decides strategy. a retention creating acquisition manager work together on retain the are taken to both financial and non-financial his decision, necessary actions to reconsider employee. employee is departing. A human resource manager engages in discussions with the employee to identify engages in discussions with the manager A human resource employee is departing. member the employee. A three made to retain are all efforts for the decision to exit. If appropriate, reasons and benefits manager and talent compensation manager, comprising of the human resource task force delight or fail. information that an 48 hours of receiving within is triggered interview process At Essar Oil, the exit Employee exit interviews at Essar Oil focus on retention by identifying the reason the employee by identifying the reason at Essar Oil focus on retention Employee exit interviews level of performance or the employee’s determines whether the company’s is leaving and also can either environment that employment well aware We are an issue. are unfulfilled expectations At Essar Oil, our personal exit interviews have become a great tool to become a great interviews have Oil, our personal exit At Essar can be used to leaving and this information for an employee understand the reasons employee losses. avoid future ESSAR OIL: EXIT INTERVIEWS ESSAR TOWARDS ACHIEVING EXCELLENCE IN ENERGY CONSERVATION
Our sites are committed to conserving energy to derive multiple benefits such as lower fuel consumption, better profitability, environment protection, and a lower carbon footprint.
Individual proposals, discussions in small groups, and brain storming sessions help identify as many opportunities as possible to save power. Optimising existing processes, equipment modifications and incorporation of new technologies are key actions in saving energy and natural resources.
One energy conservation initiative involved the energy team at our CBM project at Raniganj, who found a much more Lab unit at Vadinar efficient way of running the large number of pumps required to push gas around the gas pipeline distribution network. These so-called progressive cavity pumps were previously being operated at their optimum speed through the use of variable frequency drives (VFDs) to control the motors operating them. But the problem with having multiple VFDs was that they generated harmonics in the power network which reduced the capacity utilisation of the generators being used to provide power. The Raniganj team therefore introduced harmonic filters into the system, which resulted in an increase in power efficiency of nearly 10%. An estimated reduction of 79.56 metric tonnes of carbon dioxide of 100, and was the only energy equivalent was achieved with this initiative during the few company in India to be featured months of FY 2012-13 post-installation. in the list. Overall, Essar Oil is positioned sixth in the CDLI Amongst various energy initiatives implemented at our List, cutting across all sectors. refinery in Vadinar, one of the key initiatives was to recover This score was achieved in desalinated condensate heat to then be used to heat spite of the refinery’s capacity demineralised water and reduce the cooling tower heat addition and Nelson complexity load. Before the implementation of the project, desalinated index enhancement as well as condensate with an average temperature of 66 deg C was the inclusion for the first time of routed to the condensate tank without any heat exchange. emissions being generated from With a small modification to divert the desalinated our exploration and production condensate to the demineralised water condensate division’s coal bed methane exchanger, 2.9 gigacalories per hour of energy was saved. operations, which contributed Whilst the project cost was a minimal amount of USD 1,800, to Essar Oil’s total emission the savings amounted to an estimated count. USD 182,000 per annum.
44 Annual Report 2012-13 45 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS socio- auses. of our community Sustainability at Essar Oil at Sustainability evaluate the positive Identifying and implementing projects in line with business goals and government programmes Third-party assessment Third-party to impact projects Assessing the and social structure understanding the economic and political dynamics follows an equally dedicated and in-depth execution which is as follows: approach Last year several activities undertaken in the were of education, health area The and community care. Foundation also celebrated local and international events to social c promote the community in line with the in line with the the community philosophy. Foundation’s Foundation at The Essar of each year the beginning activities in draws up a plan of sites, local consultation with our government authorities and the that the community to ensure the undertaken during projects positive year have maximum impact on the community. socio- Our mission towards of economic improvement is neighbourhood communities and an investment for the future engagement s. engagement model is designed to deliver maximum value to financial services, and food and beverage Community The community at our locations at projects Project, and CBM Vadinar undertaken Raniganj are Essar Group the through Foundation, which is a not for profit registered organisation under the The Act, 1882. Indian Trust customers. we On the marketing front, continued to develop strategic alliances with alternative fuel products and non-fuel retail and congenial a more to offer mutually-beneficial business outlet to our retail environment Essar franchisees. Currently Oil has existing tie-ups with 23 brands across around segments including lubricants, banking and products, agro competency assessment of competency assessment the refinery our laboratory, in has been participating the International Proficiency conducted Programs Testing body by the ASTM standards and the for various products gasoline and diesel fuel engine scheme conducted correlation by the Energy Institute. This our participation has ensured confidence in certifying the to our releasing before products been designed to cater to the to cater to the been designed complying jet fuel demands 91. DEF STAN to BIS and the lab has a In addition, point (TBP) true boiling the crude’s unit to predict it is characteristics before processed. and As a part of the reliability ertified Potable water being supplied Potable water being supplied
(DGAQA). The laboratory has testing laboratory approved testing laboratory approved General of by the Directorate Quality Assurance Aeronautical with the completion of the We also expansion. refinery have a dedicated jet fuel and vacuum gasoil. The facilities have been upgraded built to and new infrastructure house additional equipment kerosene, aviation turbine kerosene, fuel/jet fuel, gasoline, diesel, furnace oil, bitumen, petcoke fully equipped laboratory to range of certify the refinery’s for example; LPG, products, right through to product ship product to right through loading. Vadinar has a at Our refinery stage when crude oil is crude and unloaded through and streams process product stringent measures to ensure to ensure stringent measures the quality of our products. assessment The quality control raw material the starts from Product Responsibility Product As an ISO 9001c organisation, we deploy to villages around Vadinar to villages around VADINAR: A FIGHT AGAINST MALNOURISHMENT – SHISHU MANGALAM PROJECT
The World Bank estimates that India is ranked 2nd in the world of the number of children suffering from malnutrition. The prevalence of underweight children in India is amongst the highest in the world, with severe consequences for mobility, mortality, productivity and economic growth.
Gujarat has a particularly high proportion of children in this category, with 44.7% of children underweight, 22.3% of the population undernourished and 6.1% of children who die under the age of five from hunger. According to the National Family Health Survey III, 2005-06, every second child under three years age is underweight, and every second adolescent girl is anaemic.
The Essar Foundation, in collaboration with the District Panchayat, Jamnagar, started the Shishu Mangalam project during June 2012 to December 2012 in Khambhaliya, Jamnagar. This area has the highest percentage in India of malnutrition (38%) among children under the age of 5 years. The project strategy was to leverage the existing Integrated Child Development Services (ICDS) structure and focus exclusively on raising the health and nutritional level of malnourished children below six years old and reducing the number of highly malnourished children.
A physical assessment was conducted to identify and grade the nutritional status of children. Health check-ups of children in yellow zones were carried out by medical officers of the primary health centre and those in red zones were carried out by paediatricians. Medical causes were identified and basic treatment as well as referral was ensured. Additionally, a high protein nutrition supplement was provided along with nutrition education.
Post completion of the project, a third party assessment was completed to study the impact and the results showed a significant improvement in the nutritional status of children.
CHANGES IN SEVERELY UNDERNOURISHED CHILDREN COVERED BY THE PROJECT
Particulars June 2012 November 2012 Age Severely Severely Moderately Healthy children Total undernourished undernourished undernourished children children children Boys Girls Total Boys Girls Total Boys Girls Total Boys Girls Total 6-12 months 94 67 161 22 14 36 34 19 53 26 22 48 137 1-3 years 228 242 470 79 99 178 88 89 177 36 33 69 424 3-6 years 192 199 391 63 73 136 71 72 143 21 15 36 315 Total 514 508 1.022 164 186 350 193 180 373 83 70 153 876 (Source: Calculations based on the data compiled by the ICDS from the Shishu Mangalam Health Card)
46 Annual Report 2012-13 47 COMPANY OVERVIEW MANAGEMENT DISCUSSION AND ANALYSIS SUSTAINABILITY GOVERNANCE FINANCIALS Sustainability at Essar Oil at Sustainability www.essarenergy.com DURGAPUR - INSTILLING - INSTILLING DURGAPUR SELF-RELIANCE AMONGST AMONGST SELF-RELIANCE RURAL GIRLS Jasmin Kahatun, aged 22, came from 22, came from Jasmin Kahatun, aged a farming family in Akandara village and a farming family in was struggling to make ends meet. She had was struggling to make a burning desire to assist the family but lacked to assist a burning desire the skills training and confidence to take up a job. the skills training and Jasmin participated in the Information, Education Jasmin participated company, Essar Energy plc’s second sustainability plc’s Essar Energy company, a Sustainable Energy Business’, – ‘Building report which is available at marketing sector and enter the workforce. along with additional Jasmin now earns a salary, chains in incentives, at one of the biggest store challenges many She has overcome Durgapur. working such as lengthy travel to work, long family hours and the bias of being a girl in the self- attitude through by changing the family’s confidence and aspiration. me Jasmin said, “The opportunity has taught in the retail, many things besides making friends a mentor sales and marketing domain and having very I’m really to guide me whenever required. this training thankful to the Essar Foundation for programme.” girls, are Over 100 young people, many of whom in have been trained, absorbed as workforce a healthy organisations and now receive reputed income. detailed information on Essar Oil’s For more to our parent sustainability activities, please refer and Communication campaign, undertook the and Communication tools gave her requisite intensive training that and retail to understand the and self-confidence Company Overview Management Discussion and Analysis Sustainability Governance Financials 3,651 1,180 778.25 was part of 63,428 crore in the previous in the previous 63,428 crore 2,101 crore for previous financial year. This is financial year. for previous 2,101 crore 97,068 crore up from ` up from 97,068 crore ce Financial performan the capacity, in refining with increase During the year, of 53% at growth revenue a strong Company recorded ` financial year. The Current Price Gross Refining Margin (CP Refining Price Gross The Current financial year. a quantum registered also business GRM) for the refinery to USD4.23 per compared barrel jump at USD7.96 per Earning The before financial year. for the previous barrel for Amortization (EBIDTA) and Tax Depreciation, Interest, 74% to ` by financial year increased the current ` from crore in the sales volume arising mainly on account of increase 10.5 MMTPA due to expansion of Refining capacity from in increase margins, refining gross higher MMTPA, 20 to by MTM offset other operating income which is partially previous the in Further hedging. commodity on provision even though the income arising out of defeasement year, of sales tax incentive amounting to ` and shown as exceptional was reversed EBITDA, this 31, 2013, March item. For the financial year ended marginally due to higher the loss after tax decreased in interest by increase EBITDA as explained above offset expenses post completion of Refinery and depreciation expenditure of part as treated was which expansion, Exceptional year. during construction in the previous of reversal represents mainly year previous the for items of this matter sales tax incentive income post litigation Corporate exit from for impact towards and provision in the whereas Debt Restructuring mechanism (CDR exit) the additional impact on it only represents year current net loss after tax (after CDR exit. The Company reported financial year at ` exceptional items) for current of ` 1,285 crore. year figure as against previous crore the during the financial year, In the absence of profits any dividend for the year. has not recommended Board and concluded The Sales tax matter has been resolved Court on September with the final judgment of Supreme to pay balance sales 13, 2012. The Company is required Company Your tax liability in two years with 10% interest. has successfully tied up for term loan facility with a Bank to mitigate the liquidity risk of payment of sales tax liability. CDR mechanism is another exit from Company’s Your the the Company towards achieved by crucial landmark end of the financial year. (48.02) (2,879.34) (4,164.82) 63,427.77 2,100.76 (` in Crore) (1,285.48 ) 58,761.39 2011-2012 (1,237.46) (1,180.44) (4,164.82) (5,345.26) 97,067.92 89,186.90 3,650.68 (1,068.96) 2012-2013 (111.48) Directors’ Report Directors’ Particulars Revenue from Gross Operations Net Revenue including other income Earnings before finance Earnings before and cost, depreciation amortization, exceptional items and tax Profit / (Loss) before before / (Loss) Profit and Exceptional Taxes Items Exceptional items / (Loss) after Net Profit tax Add: Balance brought previous from forward year Balance to be carried to Balance Sheet To Oil Limited The Members of Essar annual the 23rd in presenting have pleasure Directors Your of the Company for the and audited accounts report 2013. 31, March financial year ended perational performance Operational in 46% growth an impressive registered The Refinery at 19.77 million metric tones (MMT) crude processing financial to 13.50 MMT during the previous compared I expansion All the new units completed under Train year. of months three two to within fully stabilized were project which took commissioning and the Optimisation project 18 million metric tones per capacity from our refining was also completed four to 20 MMTPA annum (MMTPA) months ahead of schedule in June 2012. The Refinery has operated successfully at the enhanced capacity of 20 July 2012 onwards. from MMTPA Detailed information on the operational performance for the financial year is given in the Management Discussion Report. and Analysis which is annexed to the Directors’ Annual Report 2012-13 48 49 Company Overview Management Discussion and Analysis Sustainability Governance Financials financial year ended March 31, 2013, the applicable March financial year ended followed along with have been accounting standards to material departures; explanation relating proper accounting selected such have the Directors that them consistently and made policies and applied and reasonable that were judgments and estimates a true and fair view of the state prudent so as to give the end of the financial of the Company at of affairs of the Company for that period; year and of the loss and sufficient proper have taken that the Directors the maintenance of adequate accounting for care of the the provisions with in accordance records the assets of Companies Act,1956 for safe guarding fraud detecting and preventing for and Company the and and other irregularities; the accounts for have prepared that the Directors 31, 2013 on a ‘going the financial year ended March concern’ basis.
culars of Employees arti ii) iii) iv) Governance Corporate with Stock In terms of clause 49 of Listing Agreement the auditors of the Company Exchanges, a certificate from Governanceof Corporate on compliance of conditions is on Corporate Report. A report annexed to the Directors’ listing of the 49 in clause Governanceprovided as is included in the Annual Report. agreement Employees Stock Option Scheme Essar Oil Employees The Company has introduced Stock Option Scheme – 2011 (Scheme). The disclosures under the SEBI (Employee Stock to be made required Scheme) Purchase Stock Employee and Scheme Option Guidelines, 1999 (Guidelines) is enclosed as Annexure the auditors confirming B. A certificate obtained from compliance with the Guidelines and shareholders the the Scheme will be placed before approving resolution at the Annual General Meeting. shareholders P of the Companies as per section 217(2A) Information of the Companies (Particulars with Act, 1956 read Employees) Rules, 1975, as amended, is given in the that in the preparation of the accounts for the of the accounts the preparation that in Directors’ Responsibility Statement of the section 217(2AA) of the provisions to Pursuant confirmed: Companies Act, 1956, it is hereby i) Directors been elevated as Chairman of Prashant S Ruia has Mr. takes August 14, 2013. He from with effect the Company Shashikant N Ruia, Mr. of Chairman from over the position 14, August effective the Board stepped down from who Ruia, the Founder Chairman of Shashikant N 2013. Mr. has played a stellar and the Company the Essar Group was It position. premier a to Group the steering in role of the Company into Oil Refining his vision that saw foray was earlier an exclusive domain of business a sector which its sincere wishes to express The Board the public sector. Shashikant N Ruia for the invaluable gratitude to Mr. the Company to contributions made by him for bringing position. its present R Sudarsan joined as Nominee Mr. During the year, the Board on of India Corporation of Life Insurance January 15, from V K Sinha with effect in place of Mr. and S. Jain, Independent Director V. Mr. 2013. Further, Pal Singh, Nominee of State Bank of India joined Rajiv Mr. May 10, 2013 and May 24, from with effect the Board Independent K V Krishnamurthy, Mr. 2013 respectively. passed away on January 16, 2013. The Board Director its heartfelt condolences for Late wishes to put on record wishes to place the Board Further, V Krishnamurthy. K Mr. for the guidance and valuable its appreciation on record K V Krishnamurthy and by Late Mr. services rendered as members of the V K Sinha during their tenures Mr. Board. retire K N Venkatasubramanian Manoharan and Mr. C Mr. at the ensuing Annual General Meeting (AGM) by rotation it is Further, themselves for re-appointment. and offer S. Jain, at the AGM as a director V. to appoint Mr. proposed being Particulars of the directors by rotation. liable to retire under clause 49 of as required re-appointed/appointed, are with the Stock Exchanges, the Listing Agreement given in the Notice / Explanatory Statement convening the ensuing AGM, forming part of the Annual Report. Directors’ Report Directors’ Annual Report 2012-13 48 Company Overview Management Discussion and Analysis Sustainability Governance Financials Auditors have drawn attention that the accumulated Auditors have drawn attention that the accumulated 31, 2013 are losses of the Company as on March 50% of its net worth with cash losses in than more financial year. the immediately preceding deteriorated had Company the of worth net The defeasement sales of reversal of account on mainly during financial years 2008-09 income, recognized Court order. to 2011-12, consequent to a Supreme in cash losses during the This had also resulted financial year. previous year the net worth, during the previous improve To Convertible bonds Currency the terms of Foreign the above (FCCBs) have been amended whereby bonds have become compulsorily convertible / GDSs on the same terms and into equity shares and conditions of FCCBs are conditions. Terms mentioned in note 6 to financial statements. With operating at its full capacity the refinery currently other complexity and and improved (20 MMTPA) the Company by initiated measures reduction cost coal like getting cheap power and steam through and bottom-line of based power plant, the revenue significantly in expected to improve the Company are coming years. iary Company Subsidiary Oil Mauritius Limited, Mauritius Essar During the year, of the Company. ceased to be subsidiary ditors’ Report Auditors and Au Accountants, Chartered Sells, & Haskins Deloitte M/s. conclusion the until office hold Company the of Auditors General Meeting. of the ensuing Annual Accountants, Chartered Sells, & Haskins Deloitte M/s. their that, if appointed, the Company have informed prescribed appointment will be within the limits Act, 1956. under section 224(1B) of the Companies is being sought to the members’ approval Accordingly, Company at the their appointment as the Auditors of the ensuing Annual General Meeting. set out are Our comments on the audit observations below: (i) Annexures forming part of this Report. However, as per as per forming part of this Report. However, Annexures of section 219(1)(b)(iv) of the said Act, the the provisions being sent to all shareholders Report and Accounts are of particulars of the Company excluding the statement the said Act. of employees under section 217(2A) of in obtaining a copy of this interested Any shareholder for the statement may write to the Company Secretary, of the Company. Office same, at the Registered Technology Absorption and Energy, Foreign Exchange under section 217(1)(e) of The particulars as prescribed of Particulars with the Companies (Disclosure the Act read set Rules, 1988 are of Directors) in the Report of Board A to this Report. out in Annexure Fixed Deposits deposits Company has not accepted any public Your under section 58A of the Companies Act, 1956 during report. financial year under Holding Company 4(6) within the meaning of section The Company, subsidiary of the Companies Act, 1956, is an indirect of Essar Oil & Gas Limited, Mauritius, which along with capital as its subsidiary holds 87.09% of the total share 31, 2013. Essar Oil & Gas Limited in turn is a on March wholly owned subsidiary of Essar Energy Plc. This financial year has been a year This financial importance since of significant to increase was able the refinery and 20 MMTPA its capacity to its complexity from also improve the 6.1 to 11.8. During the year, a strong Company recorded of 53% at ` 97,068 growth revenue in the ` 63,428 crore up from crore, financial year. previous Directors’ Report Directors’ Annual Report 2012-13 50 51 Company Overview Management Discussion and Analysis Sustainability Governance Financials ayyar N Naresh Deputy Chairman For and on behalf of the Board of Directors For and on behalf of the Board suppliers. The availment of export advance will not suppliers. The availment extent but also to a great the finance cost only reduce Company. up working capital of the shore the short term funds measures, Hence with the above with long term funds. get replaced will progressively Lalit Kumar Gupta & CEO Managing Director 2013 14, August Mumbai, of the Auditors in the Audit report, Other observations self- accounts are to notes to the by way of reference explanatory. d Cost Audit Report Cost Auditors an & Co was appointed as the Cost M/s. Chandra Wadhwa 31, 2013. The Auditor for the financial year ended March 2013 31, March ended year financial for report audit cost within the Affairs will be filed with the Ministry of Corporate time period. prescribed Acknowledgement and place appreciation wishes to express The Board in and co- its gratitude for the faith reposed on record Governmentoperation extended to the Company by the of India, state governments, various government agencies/ customers, departments, financial institutions, banks, Directors Your suppliers and investors of the Company. of the dedicated their appreciation place on record by the employees of the services rendered and sincere Company. 2,786.08 crore for long term purposes, the for long term purposes, 2,786.08 crore ` On use of funds raised on short term basis amounting basis term short on raised funds of use On to the following steps to improve Company has taken position: completed the expansion and The Company has the operations of the and optimization projects have since stabilized. of 20 MMTPA expanded refinery of the and profitability the revenues This will improve the Company does Further, Company significantly. and hence the capex program not have any major internal will be utilized to deleverage entire accruals the balance sheet. Reserve Bank of The Company has received to raise ExternalCommercial India (RBI) approval billion 2.27 USD of extent the to (ECBs) Borrowings of high cost rupee debt utilized for for repayment The Company has availed ECB of capital expenditure IDBI Bank Ltd. The Company USD 270 million from for ECB of USD 325 approval has further received buyers’ million including commitment to convert USD 170 million into ECBs and approval of credit shortly. of another USD 315 million is expected all other term lenders The Company has requested of the purpose for ECBs sanction of to consider high cost rupee debt. The dollarization refinancing will have positive impact on the cash flows program cost to a large the interest since it will not only reduce extended maturity of existing extent but also provide cash flows will be deployed for debt. The improved the short term liabilities. reducing of availing of long The Company is also in process and exports future against export advance term overseas and banks various with discussions in is
(ii) Directors’ Report Directors’ Annual Report 2012-13 50 Company Overview Management Discussion and Analysis Sustainability Governance Financials Vacuum slop routing to diesel storage or blending slop routing Vacuum of slop; reprocessing reduces Diesel Stopping of wash water pumps in in saving of 102 resulting Unit Hydrosulfurisation KW/hr; for Diesel of step less control Provision to save Make-up Gas compressor Hydrotreater energy; and CDU to Up gradation of Induced Draft fan in recovery. flue gas heat the improve
In the Coal Bed Methane (CBM) field at Raniganj, In the Coal Bed Methane High Speed such as Bengal, energy sources West used for Gas and Electricity are Diesel (HSD), CBM CBM gas of produced Part operational processes. Gas Generator (GG) sets is being used for running gas flaring. in reduced which resulted of consumption for reduction being implemented of energy: In the Refinery: i) ii) iii) iv) of energy consumption and for reduction of consequent impact on the cost of production goods: measures Implementation of the energy conservation accruing started already have above identified recurring basis. benefits to the Refinery on a at electricity of for generation gas of CBM Use in diesel reduction helped has Project Raniganj consumption and flaring of CBM. b) A if any, dditional Investments and proposals, c) at (a) and (b) above impact of the measures Use of coal based power and steam thereby thereby Use of coal based power and steam reducing the fuel costs; significantly using Light Gas Oil improved Crude Pre-Heat using existing idle Exchanger; Pump Around Crude Reduced dry slop generation to improve Distillation Unit (CDU) throughput; utilizing Minimization of cooling tower heat load by heat of desal condensate to heat demineralised water; steam piping Minimization of heat loss from upgradation; and insulation through to Regular steam traps and steam leakage audits steam losses. minimize preventable In the Refinery at Jamnagar consistent efforts are are efforts consistent Jamnagar at Refinery the In conservation. A dedicated being made for energy on energy management and Energy Cell is focusing energy consumption pattern.close monitoring of by Refinery to conducted are Periodic energy audits and benchmark with energy performance improve the Expansion Units During the year, other refineries. stabilized which have contributed of the Refinery have reduction of energy consumption. significantly in measures Some of the major energy conservation undertaken are: i) ii) iii) iv) v) vi) and units process all of consumption energy The constantly and corrective monitored utility blocks are immediately taken to utilize the energy in steps are the most optimal manner. Conservation of Energy Conservation Annexure A to the Directors’ Report the Directors’ A to Annexure in the Report of of Particulars (Disclosure the Companies of particulars under Statement 1988 Rules, of Directors) Board A. a) taken: measures energy Conservation Annual Report 2012-13 52 53 Company Overview Management Discussion and Analysis Sustainability Governance Financials 0 NA NA NA NA 3.29 0.44 7.79 11.87 969.47 759.20 219,135 2011-12 4,989.25 3,260.58 34,168.20 41,842.64 109,093.20 319,282.89 615,207.14 573,364.50 ’ is attached NA NA NA 6.99 4.17 0.41 17.90 991,670 2012-13 4,070.02 1,374.20 7,686.63 2,242.41 40,546.51 12,525.41 300,734.94 741,703.63 1,424,301.11 1,081,889.62 1,411,775.70 s Average Rate (`/MT) Average Total amount (` in lakh) Total Others / Internal Generation Fuel Gas & Natural Gas Unit (MTs) Average Rate (` /MT) Average FurnacePurchased Oil/other Liquid fuels- Quantity (MTs) Cost / Unit (` /KWH) amount (` in lakh) Total Electricity Consumed (a+b) (‘000 KWH) Coal- (specify quality and where used)- Coal generally with calorific Coal- (specify quality and where value of 4000 Kcal/Kg is used in Power Plant – MT KWH per unit of Fuel Oil/Gas/Coal/Naptha/HSD Unit (‘000 KWH) of diesel oil KWH per litre Cost / Unit (` /KWH) Unit (‘000 KWH) Steam Turbine/Generator (ii) Through Own Generation Diesel Generator (i) Through Total Amount (` in lakh) Total iii) Parallel Operation Charges Amount (` in lakh) Total (i+ii+iii) Total Rate / Unit Total Amount (` in lakh) Total ii) Duty on Own Power Generation Unit (‘000 KWH) Electricity i) Purchased Unit (‘000 KWH) Rate / Unit charge) (including minimum demand Power and Fuel Consumption: otal energy consumption and energy consumption per unit of production as per Form ‘A of production and energy consumption per unit otal energy consumption hereto: 4 3 2 1 A (i) (c) (a) (b) d) T Annexure A to the Directors’ Report the Directors’ A to Annexure FORM A Annual Report 2012-13 52 Company Overview Management Discussion and Analysis Sustainability Governance Financials 48.54 0.024 0.026 0.014 2011-12 70,010.54 25,585.60 28,883.03 12,999.98 45,009.04 39,824.92 21,978.39 273,632.63 12,673,556 802,998.88 181,200.32 273,632.63 62.17 0.016 0.039 0.010 2012-13 73,379.92 29,588.87 59,630.40 28,233.94 47,348.23 46,516.43 25,417.16 247,998.39 18,895,277 183,011.89 247,998.39 2,314,233.93 Modified sulfur based Binder with Bitumen for Modified sulfur based Binder with Bitumen Road pavement clay for Kerosene treated Development of acid treatment predicts The Fouling Potential Analyzer (FPA) the heat exchanger performance and the fouling of various tough crudes. during processing between SARA, S-Value Establish correlation and fouling potential of crude blends. Based on the Refinery will be able to broaden correlation, the horizon for tough crude processing. c) d) a) b) 2) result of the above R&D benefits derived as a In-house Design and Development of Indigenous oil for crude Fouling Potential Analyzer (FPA) fouling characterization database for Crude oils for SARA, S- Creating & Fouling Value urchased + Own Generation) (MT) otal Liquid Fuel – (Purchased Power and Fuel Consumption: Total amount (` in lakh) amount Total Average Rate (` /MT) Average Liquid Fuel – Fuel Oil a) FO Unit (MTs) b) HSD, Sour Naphtha Unit (MTs) Total amount (` in lakh) Total Average Rate (` /MT) Average - Liquid Fuel (FO/LSHS/NAPHTHA) (Purchased + Internal Generation) – MTs - Liquid Fuel (FO/LSHS/NAPHTHA) (Purchased - Fuel Gas – MTs - FCCU coke – MTs Consumption per MT of Production + Generated) KWH/MT(Used in Refinery) - Electricity (Purchased ction: Consumption Per Unit of Produ – (MTs) Actual Production Total amount (` in lakh) Total Average Rate (`/MT) Average Generation) + Own Fuel Gas, Liquid, Solid – (Purchased Total Solid Fuel - Fluidised Catalytic Cracker Coke Solid Fuel - Fluidised Catalytic Cracker Unit (MTs) T the Company a) b) de in technology absorption at the Refinery de in technology absorption at the Refinery ma Efforts set out in Form‘B’ hereto: are
5 A (i) B (ii) (ii) (iii) Annexure A to the Directors’ Report the Directors’ A to Annexure FORM A (Contd.) FORM B and development (R & D) Research 1) in which R & D was carried out by specific areas B. Tchnology Absorption e e) Annual Report 2012-13 54 55 Company Overview Management Discussion and Analysis Sustainability Governance Financials heaper than conventional fuel based boilers cheaper than conventional is being Refinery Presently, or Gas Turbines. based Boilers and STGs. operated 100% on coal APC Implementation for CDU-2: Advanced technique is a proven (APC) control process unit margins by safely stretching to improve units operating domain to the process that ensures always It limits. and constraints effectively all available operating windows are energy utilized by optimizing on the yields and usage. With Diesel recovery APC implementation reduced by 34%. fluctuation has been At Raniganj field, while the CBM Gas production have been made is on-going, technological efforts and willfor conservation of energy on pilot basis out in field in the next financial year. be rolled prevent CBM gas is absorbed in the coal seams. To gas into the atmosphere of CBM release free is started in the once the dewatering process wells, a pipeline is laid well in advance to collect gridgas the to transported then is which gas this (Network of Pipeline). Initially five wells-pads were ThePipeline). of (Network grid gas by connected of carbon has helped in reduction above process Diesel Further, footprint. carbon i.e. emission Generator Sets used at the individual well sites are wells the from water and gas out for pumping converted to Gas driven Generator sets, which of carbon emission. has also helped in reduction U: Slurry is a low in FCC Slurry yield reduction successfully has Company The product. value The conversion slurry yield in FCCU. reduced yield has been and slurry has been controlled 12 to 8 wt% from reduced Unit (HMU) Manufacturing Mini Hydrogen Petroleum Liquified feed conversion from Gas (LPG) to Natural Gas (NG): Mini HMU was Based originally designed to run on LPG as feed. feed on economics NG was found to be cheaper modifications were to LPG. Required compared either of carried out in the unit to run the unit on the feeds (NG & LPG) based on economics.
The modified sulfur based binder will have The modified sulfur as bitumen and can equivalent binding potential be sold as a new product. help enhance the to clay will The acid treatment color of improving of normal clay for efficiency to be transferred This technology can Kerosene. the quality of clay. clay supplier to enhance briquettes from possibility of making Explore ash. Petcoke fines and Fly for R&D. of new infrastructure Erection R&D activities. Continuation of current Capital – ` 1.69 crore Recurring – ` 0.53 crore – ` 2.22 crore Total of total as a percentage R & D expenditure Total turnover– negligible Coal based captive power plant: Associate company successfully commissioned a coal based power plant whose operating cost is VBU to CDU Conversion: Commissioning of Delayed Coker Unit (DCU) made the existing utilize VBU To Unit (VBU) redundant. Visbreaker to converted was unit this investment, capital Crude Distillation Unit (CDU) with capacity of 2 as heavy and waxy crudes to process MMTPA, part of Optimisation project.
d) a) b) c) a) b) c) d) absorption, adaptation and innovation Expansion Post commissioning of the Refinery 2012, we also successfully in March, Project After completion of completed Optimisation Project. become Refinery has the Company’s these projects, of one of the most complex and modern refineries second largest single-location the world and India’s or with an annual capacity of 20 MMTPA, refinery, per day (bpd). 405,000 barrels c) Future plan of action – Future echnology, absorption, adaptation and innovation echnology,
3) 4) on R & D: ` 2.22 crore xpenditure e T 1) E technology brief, made towards in fforts, Annexure A to the Directors’ Report the Directors’ A to Annexure Annual Report 2012-13 54 Company Overview Management Discussion and Analysis Sustainability Governance Financials UOP - Yes CB&I – Yes HALDOR TOPSOE – Yes JACOBS- Yes otal foreign exchange used and earned: otal foreign Hydrogen required for VGOHT, DHDT and ISOM. ISOM. and DHDT VGOHT, for required Hydrogen test was completed Guarantee performance meet all design to proved and technology is requirements. specifications and USA for Sulfur Technology, Imported JACOBS and running Recovery Unit, commissioned successfully. Technology. of import of all above Year imported in 2011-12 All above Technologies Has technology been fully absorbed? i) ii) iii) iv) this has not where If not fully absorbed, areas plans of for and future there taken place, reasons action – NA. Exchange Earnings and Outgo: Foreign exports; development of new to increase and services and export markets for products export plans: crude For the financial year 2012-13, of the total was 18% about Company the by purchased oil Some of this indigenous domestically. purchased crude oil was paid for in Indian Rupees, resulting outgo of the Company. in forex in some reduction supply had been to sales focus The Company’s to PSU oil maximum quantity of its products with the country having companies. However, products surplus capacity, refining enough Refinery over and Company’s the from produced exported. were above the domestic requirement the Company has exported Gasoline, This year, Gas Oil thereby Gas Oil, Naphtha and Vacuum earnings. forex contributing to improved Exchange outgo to Foreign Particulars relating and earnings 31 and 33 to appear in Note No. financial statements.
to exports; initiatives taken activities relating iv. b) c) d) C. f) g) t
2 Technology imported: Technology for VGO Hydrotreater, Imported UOP Technology and Isomerisation unit, Diesel Hydrotreater running successfully implemented and all units are This technology enables than one year. for more V grades of HSD IV and Euro Euro us to produce to be performing is proved and MS. Technology well meeting all design specifications. was imported Delayed Coker Unit Technology Company (CB&I) to Chicago Bridge & Iron from Residue into valuable distillates convert Vacuum thermal severe coke through and petroleum of Fuel oil. cracking and to eliminate production This unit is also running successfully for more than a year meeting all design specifications. Imported HALDOR TOPSOE, Denmark 99.9% pure to manufacture Technology generation. Use of Variable Frequency Drive (VFD) reduces reduces Drive (VFD) Frequency Use of Variable of the generators. Active the capacity utilization test basis on introduced harmonic filters were and harmonics generation of which avoid the This the capacity utilization. increases thereby reduces total CO and power efficiency increases
the last 5 years reckoned from the beginning of from the last 5 years reckoned may be the financial year), following information furnished : a) i. ii. iii. roject and coal based power plant and use of and project the of one Refinery the made technologies latest world. the of modernand complex most refineries from The complexity of the Refinery is increased complexity 6.1 to 11.8. The capacity expansion and the capability to enhancement gives the Refinery, lower ultra-heavy and cent heavy per over 80 process helped in cost crude oils. These enhancements also in cost of power and steam production. reduction With the Refinery GRMs have got these measures, USD 3-4 / bbl. substantial boost of approximately e.g., product improvement, cost reduction, reduction, cost improvement, e.g., product substitution, etc. development, import product Annexure A to the Directors’ Report the Directors’ A to Annexure 3) during in case of imported technology (imported ommissioning Expansion units, Optimisation units, Expansion Commissioning 2) efforts, above the of result a as derived enefits b Annual Report 2012-13 56 57 Company Overview Management Discussion and Analysis Sustainability Governance Financials 15 47.94 (8.64). ` 8.36% 0.00% ` 69.05 69.04% 220,971 191,509 47.94 per ` 2.41 crore and 2.41 crore (1,182.85) crore. (1,182.85) crore. 69.05 and ` No. of options granted* 69.05 per share is equal to 69.05 per share Nil in FY 2012–2013 based on the intrinsic value ` Nil in FY 2012–2013 based on the intrinsic per share, respectively. per share, granted is the options value of The fair as an executive of the Company, was subsequently was Company, the of executive an as (Refinery). appointed as Director options amounting to granted Employees who were in financial year 2011 of options granted 5% or more as follows: – 12 are No employee was granted options during any one No employee was granted options during equity year equal to or exceeding 1% of the issued the Company at the time of the grant. of shares on potential The diluted earnings (EPS) per share of options is ` upon exercise issue of shares a compensation cost The Company has recognized of had the Company used the fair of options. However, cost value of options to determine the compensation 31, 2013, the loss for the for the year ended March year would have been higher by ` loss after tax would have been ` Accordingly, EPS basic and diluted earnings per Accordingly, have been ` (8.66). would share price of ` The exercise option. The the market price at the time of grant of weighted- price and exercise weighted-average is options value of fair average The key assumptions used to estimate the share. fair value of options granted during the year ended as follows: 31, 2013 are March
Risk – free interest rate rate interest Risk – free Expected life (years) Expected volatility Expected dividend in market at The price of underlying share the time of option grant Name of the employee Narendra Vachharajani Narendra Chakrapany Manoharan
2)
*The above does not include options granted which have *The above does not include options granted been subsequently cancelled. 3) 10/- each of the Company. 10/- each of the Company. 2011 – 12 3,211,391 ` 69.05 per share Closing price of the equity the Company of shares on the date immediately the date of grant preceding i.e. December 1, 2011at the National Stock Exchange of India Ltd., being the exchange having the higher quantity of trading on the shares Company’s 692,333 Nil 2,519,058 Nil Nil Nil Nil Nil Options granted to Senior managerial personnel: C. Mr. ‘Nil’ at the time of grant of options. However, options 191,509 stock granted who was Manoharan, Options granted price Exercise Pricing formula Options cancelled / forfeited Options lapsed number of options Total in force Options vested Options exercised Number of shares allotted pursuant to of options exercise of terms of Variation options by Amount realized of options (in `) exercise Year of grant Year Employee wise details of options granted: 1) Essar Oil Employee Stock Option Scheme 2011 (Scheme) Essar Oil Employee Stock granted by to approval pursuant was introduced Meeting held on August at Annual General shareholders at Annual resolution approved by 12, 2011 as modified on December 20, 2012. Under General Meeting held option is convertible into equivalent the Scheme, each of ` number of equity shares Annexure B to the Directors’ Report the Directors’ B to Annexure and Option Scheme (Employee Stock under the SEBI to be disclosed required Information 1999: Scheme) Guidelines, Stock Purchase Employee in three manner in a graded vest granted shall Options / 5th years from / 4th 3rd at the end of equal installments, within 7 options can be exercised the grant date. The the date of vesting. years from as follows: Particulars of options granted so far are Annual Report 2012-13 56 Company Overview Management Discussion and Analysis Sustainability Governance Financials Partner R. D. Kamat Chartered Accountants Chartered Membership No. 36822 (Registration No. 117365W) For Deloitte Haskins & Sells We further state that such compliance is neither an further state that such compliance We of the Company viability future assurance as to the with which the or effectiveness nor the efficiency of the conducted the affairs management has Company. that the Company has complied with the conditions that the Company has of Corporate Governance as stipulated in the above- mentioned Listing Agreement.
4. Mumbai, August 14, 2013 We have examined the compliance of conditions of have examined the compliance We Corporate Governance by Essar Oil Limited (“the 31, 2013 year ended March Company”), for the 49 of the Listing Agreement as stipulated in clause Company with stock into by the said entered exchanges in India. of conditions of Corporate The compliance of the management. Governance is the responsibility Our examination was limited to proceduresand adopted by the Company implementation thereof, of the for ensuring the compliance of the conditions Governance.Corporate nor an an audit neither It is of opinion on the financial statements of expression the Company. and In our opinion and to the best of our information to the explanations given to us, we certify according Auditors’ Certificate Auditors’ To Oil Limited The Members of Essar 1. 2. 3. Annual Report 2012-13 58 59 Company Overview Management Discussion and Analysis Sustainability Governance Financials 5 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Chairman 3 2 1 1 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil 10 Committee Membership Δ Member 1 4 1 1 1 1 1 Nil Nil Nil Nil Nil Nil Nil 13 ships held # director- No. of other No No No No No No NA NA NA Yes Yes Yes Yes Yes Yes last AGM Whether attended 3 4 4 4 4 4 2 2 1 2 3 3 1 1 and accountability. The Board of Directors conducts of Directors The Board and accountability. in due compliance with the business of the Company Articles of Association and its Memorandum and to the jurisdictions of the places the laws applicable and undertakes a the Company operates where plans, performance and of business periodic review requirements. compliance to regulatory Nil No. of oard Board attended Meetings Independent Non- Executive Executive Independent Non- Executive Executive Independent Non- Executive Non-Independent Non- Executive Independent Non- Executive Independent Non- Executive Independent Non- Executive Independent Non- Executive Independent Non- Executive Non-Independent Non- Executive Non-Independent Non- Executive Category Independent Non- Executive Non-Independent Non- Executive 9
1 6
3 2
4
5
7
8 Suneet Shukla Philip Aiken AM Melwyn Rego (Nominee of IDBI Bank Ltd.) Chakrapany Manoharan (Refinery)) (Director K N Venkatasubramanian Lalit K Gupta & CEO) (Managing Director V K Sinha Late K V Krishnamurthy Anshuman S Ruia R Sudarsan D J Thakkar Prashant S Ruia Nayyar K Naresh Chairman) (Dy. Shashikant N Ruia Manju Jain (Nominee of IFCI Ltd.) (Nominee of LIC of India) (Nominee of LIC of India) (Nominee of IFCI Ltd.) (Chairman effective August (Chairman effective 14, 2013) (Chairman upto August 14, 2013) Name Corporate GovernanceCorporate Report Company’s philosophy on Corporate on Corporate philosophy Company’s Governance: that adhering to global standards Essar Oil Ltd. believes of Corporate Governance is essential to enhance long term corporate value and achieve shareholder is committed to ethical conduct goals. The Company with fairness its affairs to all of business, manages with openness, integrity stakeholders and operates given below: 31, 2013 are details as on March and other required Directors of Board The composition of the 2. ctors: board of Dire 1. Annual Report 2012-13 58 Company Overview Management Discussion and Analysis Sustainability Governance Financials 1 Nil Chairman 2 Nil Committee Membership Δ $ Member 1 2 director- No. of other ships held #$ N.A. N.A. AGM appointed along with the nature of their expertise and appointed along with the nature and the committee the details of other directorships have positions held by them and their shareholdings notes/ through been disclosed to the shareholders Explanatory Statement annexed to the Notice for is related the ensuing AGM. None of the Directors Prashant S Ruia except for Mr. to any other director Chairman. Ruia, N Shashikant Mr. of son the is who K D J Thakkar and Mr. 31, 2013, Mr. As on March and 6,500 held 300 shares N Venkatasubramanian Jain who joined the S. V. Mr. respectively. shares on May 10, 2013 holds 600 shares of Directors Board hold any None of the other directors in the Company. of all the directors Brief profile in the Company. shares is separately setout in the Annual Report. Whether attended last N.A. N.A. oard No. of Board Meetings attended Independent Non- Executive Category Independent Non- Executive
11 10 cluding directorship in Private Limited Companies and Foreign Bodies Corporate and companies under section 25 of the Bodies Corporate and companies under in Private Limited Companies and Foreign Excluding directorship Companies Act, 1956. Grievance Committee including positions held in the and Shareholders Memberships/Chairmanships of Audit Committee Company. 31, 2013. appointed post March for directors as on the date of appointments and Committee positions are Directorships August 14, 2013. from with effect Ceased to be Director Prashant 14, 2012. Mr. August from effect with April 23, 2012. Appointed as Director from with effect Ceased to be Director August 14, 2013. Company effective Ruia has been elevated as the Chairman of the August 14, 2012. from with effect Appointment as Director November 9, 2012. from of IFCI Ltd. with effect Appointment as Nominee Director January 15, 2013. from effect of LIC of India with Appointment as Nominee Director August 7, 2012. from with effect Ceased to be Director November 9, 2012. from with effect Ceased to be Nominee Director January 15, 2013. from with effect Ceased to be Nominee Director on January 16, 2013. Demise of Director May 10, 2013. from with effect Appointment as Director May 24, 2013. from of State Bank of India with effect Appointment as Nominee Director
(Nominee of State Bank of India) Name V. S. Jain V. Rajiv Pal Singh # Δ $ 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Four Board Meetings were held during the financial Meetings were Four Board 14, 2012; year 2012-2013 on May 12, 2012; August November 9, 2012 and January 15, 2013. The management of the Company is conducted by the & CEO, who is assisted by Heads Managing Director of Divisions/Departments, subject to the supervision of Directors. of the Board and control Venkatasubramanian N K Mr. and Manoharan C Mr. re-appointment seek eligible being and rotation by retire Annual General Meeting Third at the ensuing Twenty as V.S.Jain to appoint Mr. it is proposed (AGM). Further, at the ensuing AGM. by rotation liable to retire Director -appointed / being re of the directors A brief resume Details of directors appointed post March 31, 2013 are as follows: 31, 2013 are March appointed post Details of directors
Corporate GovernanceCorporate Report Annual Report 2012-13 60 61 Company Overview Management Discussion and Analysis Sustainability Governance Financials During the financial year 2012-2013, the Committee During the financial and Mr. Venkatasubramanian K N met five times. Mr. V K Sinha all meetings. Mr. D J Thakkar attended Krishnamurthy V K Mr. Late meetings. two attended one meeting each. The R Sudarsan attended and Mr. InternalStatutory Auditors, Auditors, the Managing and the Officer & CEO, the Chief Financial Director to attend the invited (Accounts) are Vice-President All department heads are meetings of the Committee. whenever Committee meeting to attend the invited being audit issues concerning their departments are of the discussed in the meeting. The representative of the Cost Auditor is invited to attend the meeting is tabled for Committee when the Cost Audit Report company, discussion. Internal audit team of the parent their audit Essar Energy Plc, is also invited to present internalobservations to the Committee when the audit tabled for discussion. by them are generated report of the Company acts as the The Company Secretary to the Committee. Secretary of 4 members The Remuneration Committee comprises K N Venkatasubramanian, Mr. Nayyar, Naresh viz.: Mr. of IDBI Bank J Thakkar and the Nominee Director D Mr. K V Krishnamurthy Melwyn Rego. Late Mr. Ltd., Mr. K Naresh Mr. was a member upto January 16, 2013. 15, 2013. Nayyar joined the Committee on January 2012-13. held during the year meetings were Two D J Thakkar and Mr. K N Venkatasubramanian Mr. K V Krishnamurthy attended all meetings. Late Mr. each. Melwyn Rego attended one meeting and Mr. the generally chairs K N Venkatasubramanian Mr. of Remuneration meetings. The terms of reference determination, increase/ Committee include review, determination of remuneration, and approval decrease policy for specific of terms of appointment, Company’s the Executive and other package, etc. for remuneration scope was the Committee’s During the year, Directors. and finalization of the enhanced to include review performance of senior management executives just and decide the variable below the Managing Director overall the fix and criteria the determine also and pay annual variable pay of all executives. 5. Committee: remuneration Lalit Kumar Gupta Managing Director & CEO Managing Director Director & CEO laration by Managing Declaration August 14, 2013 I, Lalit Kumar Gupta, Managing Director & CEO, of I, Lalit Kumar Gupta, Managing Director that all the Board declare Essar Oil Limited hereby below Members and Senior Executives one level including all Functional the Executive Directors for the financial year ended Heads have affirmed 2013, compliance with the Code of 31, March Conduct of the Company laid down for them. The Audit & Governance Committee comprises K N Mr. D J Thakkar, of 3 members viz. Mr. Life and the nominee of Venkatasubramanian Late R Sudarsan. Insurance Corporation of India, Mr. K V Krishnamurthy was a member of the Committee Mr. the R Sudarsan joined upto January 16, 2013. Mr. as nominee of LIC of India and consequently Board of place in 15, 2013 January on Committee the V K Sinha. All the members of the Committee Mr. a qualified Thakkar, D J Mr. literate. financially are Accountant, chairs the meetings of the Chartered Committee. The constitution and terms of reference set out in compliance with the of the Committee are 292A of the Companies Act, of section requirements 1956 and clause 49 of the Listing Agreement. t for Directors and Code of Conduc Senior Management: adopted a Code of Conduct The Company has Senior Management and (‘Code’) for Directors below the Executive Directors personnel one level The Code has been Heads. including all Functional website. posted on the Company’s and Functional Senior Management The Directors, the Code. The with compliance Heads have affirmed & Managing Director of the declaration to this effect CEO is given below: 4. Audit & Governance Committee: 3. Corporate GovernanceCorporate Report Annual Report 2012-13 60 Company Overview Management Discussion and Analysis Sustainability Governance Financials Relations: In terms of the Essar Oil Employee Stock Options In terms of the Essar entitled to are Executive Directors Scheme – 2011, the Prior to being appointed as be granted stock options. capacity his in Manoharan, C. Mr. (Refinery), Director was granted 191,509 stock as Head of Refinery, FY for options Stock year 2011-12. financial in options to be granted. There yet are 2011-12 and FY 2012-13 of severance fee for payment is no separate provision Directors. to any of the Executive 31, 2013, the Investors’ Relations As of March D J viz. Mr. Committee comprised of 3 members D L K Gupta. Mr. Nayyar and Mr. Naresh Thakkar; Mr. P S Ruia Mr. J Thakkar generally chairs the meetings. members upto K V Krishnamurthy were and Late Mr. April 23, 2012 and January 16, 2013. Committee During the financial year 2012-13, the D J Thakkar L K Gupta and Mr. had 5 meetings. Mr. Nayyar attended Naresh attended all 5 meetings, Mr. K V Krishnamurthy attended 4 meetings and Late Mr. 2 meetings. and Company CEO & Director Managing The every have been authorised to approve Secretary to transfer/transmission/ fortnight, matters pertaining etc. upto certain specified of shares rematerialization limits. Company Secretary is the Sheikh S Shaffi, Mr. The Company Secretary, Compliance Officer. share/debenture from complaints no were There financial the of beginning the at pending holders complaints 1008 year, financial During the year. replied 1008 complaints were and received were no were 31, 2013, there As of March to/resolved. pending complaints. were of 87,000 shares involving transfer 624 requests during the financial year. received the unclaimed certificates of The details regarding 6. investors’ i) investors’ Relations Committee ii) iii) Requests/complaints certificates lying unclaimed: quity share iv) E
2012 Director Director 3 months 864,000 2,20,000/; (Refinery) 29, March 7,200,000 5,883,579 19,928,152 Manoharan 3 years from 3 years from (Amount in `) 5,980,573* 30,000/- (paid to 1,50,000/-; Late Chakrapany Mr. 40,000/- and Mrs. 1,40,000/; Mr. Philip 1,40,000/; Mr.
20,000/- for attending 20,000/- for attending 60,000/-; Mr. Melwyn Melwyn 60,000/-; Mr. 2011 Lalit Mr. 3 months 1,745,280 Managing 3,600,000* 60,000/-; Mr. Anshuman S Ruia: 60,000/-; Mr. 30,109,288 14,544,000 10,220,008 5 years from 5 years from December 2, Kumar Gupta Director & CEO Director 40,000/-. During the year, there were no were there 40,000/-. During the year, 60,000/-; Mr. D J Thakkar: ` 60,000/-; Mr. 70,000/- (paid to IDBI Bank Ltd.); Mr. V K 70,000/- (paid to IDBI Bank Ltd.); Mr. 60,000/-; Mr. R Sudarsan: ` 60,000/-; Mr. ` ` otal 10,000/- for attending each meeting of Committee 10,000/- for attending 20,000/-; Mr. Naresh Nayyar: ` Naresh 20,000/-; Mr. T Service contract Allowances & Perquisites Retirement benefits Performance Linked Incentives Basic Salary Notice period *Paid for previous year *Paid for previous Aiken AM: ` ` K N Venkatasubramanian: Mr. K V Krishnamurthy: ` Mr. Suneet Shukla: ` LIC of India); Mr. Manju Jain: ` or transactions between the pecuniary relationships Company and any of its Non-Executive Directors. options to The Company has not granted any stock its Non – Executive Directors. Executive Directors remuneration paid During the financial year 2012-13, was as under: to the Executive Directors Rego: Sinha: Non-Executive Directors do not draw any Directors The Non-Executive for sitting the Company except from remuneration being paid are Directors fees. The Non-Executive of ` sitting fees at the rate for to the Directors The sitting fees paid thereof. as follows: 2013 are 31, the year ended March S Ruia: ` Prashant Mr. ` each meeting of the Board of Directors and of Directors the Board each meeting of `
Corporate GovernanceCorporate Report remuneration to Directors Annual Report 2012-13 62 63 Company Overview Management Discussion and Analysis Sustainability Governance Financials 3 2 3 Special resolutions passed enue Khambhalia Post, Dist. Jamnagar Khambhalia Post, Dist. Jamnagar Khambhalia Post, Dist. Jamnagar V 2:30 p.m. 2:30 p.m. 2:30 p.m. Time September 24, 2010 August 12, 2011 December 20, 2012 Date The date, time and venue of the last three Annual venue of the last three The date, time and at passed resolutions and special Meetings General given below: the meetings are During the year two resolutions were passed through passed through were During the year two resolutions Clause of postal ballot for amending the Objects and Memorandum of Association of the Company of Directors. the Board of a report taking on record postal adopted for the above referred The procedure ballot is setout below: 2013 16, January on Directors of Board The & CEO and the authorised the Managing Director to conduct the postal ballot Company Secretary Prakash Pandya, and appointed Mr. process as scrutinizer for Practicing Company Secretary Posting of the Notice conducting the voting process. along with the Postal Ballot form to the members got completed on January 17, 2013. Shareholders e – option of voting either through an provided were voting or by physical mode. The postal ballot forms to the Company by 5:00 p.m. on could be tendered closure day for last the 2013 whereas 18, February mode was February 17, 2013. of voting via electronic to the Chairman The scrutinizer submitted his report ear 2009- 2010 2010- 2011 2011- 2012 Financial Y 7. eetings: general Body M a) annual General Meetings b) Postal ballot i) ii) 8 8 250 258 No. of shareholders 1,500 1,500 No. of 40,450 41,950 shares Aggregate number Aggregate and of shareholders the outstanding lying in shares the Unclaimed Suspense Account at the end of the year Number of to shareholders were whom shares from transferred the Unclaimed Suspense Account during the year Number of who shareholders the approached issuer for transfer from of shares the Unclaimed Suspense Account during the year Aggregate number Aggregate and of shareholders the outstanding lying in shares the Unclaimed Suspense Account at the beginning of the year Particulars The voting rights on the shares outstanding in this The voting rights on the shares 31, 2013 shall remain suspense account as on March till rightful owner claims these shares. frozen equity shares lying with the Company in the demat lying with the equity shares Oil Limited – Unclaimed account titled “Essar as follows: are Suspense Account” 4. 3. 2. 1. r. Sr. No.
Corporate GovernanceCorporate Report Annual Report 2012-13 62 Company Overview Management Discussion and Analysis Sustainability Governance Financials issued by Hon’ble Gujarat High Court, interest on Gujarat High Court, interest issued by Hon’ble been accounted have of debentures categories certain in note 7(ii)(a) to financial on cash basis as detailed statements. facilities as interest certain funded Regarding statements, in note 7(ii)(c) to the financial referred of the substance reflect to to give accounting effect Stoppage (FS) loan was, since transaction, the Facility in accordance by the Company inception, measured IAS 39, Financial Instruments, with the principles of in absence of specific Recognition and Measurement, specific the cover to GAAP Indian in guidance said principle the above continuance of situation.In Standard and applying the principle of Accounting and AS 30, Financial Instruments, Recognition the signing of upon has, FS loan the Measurement, (CLA), been re- Common Rupee Loan agreement value since inception, considering present measured of cash flows inclusive of interest. no instances of non-compliance on any were There to the capital markets, during the last matter related years. three of compliance with the non-mandatory In respect the Company has constituted a requirements, given are Remuneration Committee details whereof The Committee. Remuneration heading: the under results half-yearly and annual financial quarterly, www.essar. website up on the Company’s put are com, besides being available on www.corpfiling. being published in English and Gujarati co.in and are observations have been newspapers. The auditor’s Report and also in adequately explained in Directors’ necessary and the notes to the accounts wherever self-explanatory. are The Company has a Risk Management Policy Framework for risk identification, assessment and manage risks associated with the to effectively control business of the Company. of InternalCode a also adopted has Company The of Insider Conduct for Prevention and Procedures trading in securities with a view to regulate Trading and designated employees of the by the Directors Company. ii) iii) iv) v) - - - % 0.01 99.99 of Directors No. of aking on record aking on record shares 87,105 16,559 Resolution No. 2 T oard Report of the Board 232,541,075 232,453,970 232,437,411 - - - % 0.01 99.99 Company No. of shares 87,726 15,544 Amendment in Memorandum of Resolution No. 1 Objects Clause of Association of the 232,541,105 232,453,379 232,437,835 No special resolution is proposed to be undertaken is proposed No special resolution by postal ballot at the ensuing AGM. The Company does not have any material related parties’ transactions which have potential conflict with of the Company at large. Transactions the interest disclosed in note 45 to the parties are with related accompanying notes of the financial statements of the Company forming part of the Annual Report. in The financial statements have been prepared with the accounting policies generally accordance accepted in India. In compliance with clarificatory dated August 4, 2006 and August 11, 2006 orders appointed for declaring the postal ballot outcome, Mr. the postal ballot outcome, Mr. appointed for declaring the on Based 2013. 18, February on Nayyar K Naresh Ballot were of the Postal the results scrutinizers report at the Corporate Office on February 18, 2013 declared for the of voting results The details of the Company. set out below. are resolutions Details of voting results: Total votes Total received Less: Invalid votes received Net valid votes received cast in Votes favour of the resolution Votes cast Votes against the resolution Details iv) 8. Disclosures: i) Corporate GovernanceCorporate Report iii) Annual Report 2012-13 64 65 Company Overview Management Discussion and Analysis Sustainability Governance Financials
September 27, 2013 (both days inclusive) Within 45 days of the quarter ending 30, May Before 2014 N. A. September 25, 2013 to L11100GJ1989 PLC032116 September 27, 2013 at 11 a.m. at September 27, 2013 at of the Company Office the Registered Jamnagar - at Khambhalia Post, Dist. 361305 Approval of the Approval for the results quarter ending June 30, 2013; September 30, 2013; and December 31, 2013. Audited annual the for results year ending 2014 31, March Corporate Identification Number AGM date, time and venue Tentative Tentative financial calendar Dividend payment date Date of Book closure i. ii. iii. v. iv. Shareholder Information: eneral 10. G The Managing Director & CEO and the Chief Financial & CEO The Managing Director compliance of full Board to the have certified Officer the for Agreement Listing the of 49(V) clause per as 2013. 31, March financial year ended regularly results are Quarterly/annual financial with Exchanges in accordance submitted to Stock published in all editions and the Listing Agreement and in a Gujarati Standard Business of English daily, also are results Jai Hind. The quarterly/annual daily, website, www. made available at the Company’s results The quarterly/annual financial essar.com. whose sent by email to those shareholders also are the Company/Depository with registered email IDs are releases, presentations, news Participants. Official the on displayed are analysts and media to made etc. sent to releases are press website. Official Company’s Stock Exchanges. Report, in Management Discussion and Analysis of clause 49 of the compliance with the requirements with Stock Exchanges, is annexed Listing Agreement Report which forms part of this to the Directors’ of the Annual Report being sent to all the members Company. made are Full text of Annual Reports of the Company www.essar. available on the website of the Company; com. along with The quarterly/annual financial statements Pattern, Corporate Governance Shareholding reports, compliance Annual Reports and other documents in entered of Listing Agreement with the requirements available on the into with Stock Exchanges are stock websites of BSE and NSE by the respective exchanges. Speech is distributed Printed copy of the Chairman’s at the Annual General Meeting. to all the shareholders whose those investors to sent were Reminders were amount on debentures interest/redemption of the Company and was unencashed as per records due for transfer to Investor Education and Protection Fund advising them to seek demand drafts in lieu of their lapsed warrants.
9. cation: means of Communi i) ii) iii) iv) v) vi) vii) Corporate GovernanceCorporate Report Annual Report 2012-13 64 Company Overview Management Discussion and Analysis Sustainability Governance Financials 8.24 5.26 5.60 6.93 3.67 5.06 8.36 5.14 9.45 olume 16.06 12.51 15.28 V (in lakh) 500134 ESSAROIL INE011A01019 INE011A07073 54.40 50.35 55.15 55.60 47.30 50.80 62.80 70.00 70.25 85.60 83.60 77.60 Close BSE Low 50.00 49.70 49.35 48.15 46.70 46.85 51.20 62.55 67.40 69.30 83.20 71.05 (in ` per share) High 59.75 53.45 56.70 59.20 56.35 53.10 65.15 70.00 71.85 85.60 94.55 90.00 quity shares Equity shares Symbol: Trading Bombay Stock Exchange Limited of India National Stock Exchange Limited CDSL ISIN with NSDL and Non - Convertible Debentures Non- 12.50% Secured Convertible Debentures on of ` 105/- each redeemable July 23, 2018 olume 26.88 18.72 18.73 25.26 13.76 19.37 37.41 19.31 10.41 23.55 29.75 29.83 Stock Codes: V (in lakh) vii. 54.40 50.25 55.10 55.60 47.05 50.65 62.85 70.30 70.25 85.95 83.80 78.05 Close NSE Low 50.00 49.75 49.50 48.25 46.60 46.85 51.30 62.40 67.40 69.35 83.30 71.35 (in ` per share) High 59.75 53.55 56.75 59.25 56.50 53.00 65.05 70.30 71.85 85.95 94.60 89.80 National Stock Exchange of India Ltd. Exchange Plaza, 5th Floor, Plot No. C/1, G Block Bandra Kurla Complex, Bandra (East) Mumbai - 400 051 ear Y 2012 2012 2012 2012 2012 2012 2012 2012 2012 2013 2013 2013 April Month May June July August September October November December January February March High/Low (based on daily closing prices), closing prices and average of the aggregate of daily traded volume at NSE of daily closing prices and average of the aggregate High/Low (based on daily closing prices), as under: 31, 2013 are year ended March and BSE for each month in the financial Bombay Stock Exchange Ltd. Rotunda Bldg 1st Floor, Dalal Street J. Towers, P. Mumbai - 400 023 The equity shares of the Company are listed at Company are of the The equity shares Ltd. (BSE) and National Bombay Stock Exchange India Ltd. (NSE). The Company Stock Exchange of listing fees for the financial years has paid the annual to BSE and NSE. 2012-2013 and 2013-2014 setout are exchanges of the stock The addresses below: Corporate GovernanceCorporate Report vi. on Stock Exchanges: listing of equity shares viii. 2012-2013: stock Market price data for the financial year Annual Report 2012-13 66 67
Company Overview Management Discussion and Analysis Sustainability Governance Financials Mar-2013 % 3.14 0.52 0.36 0.16 0.11 0.09 0.23 95.39 100.00
Feb-2013 No. of Shares
7,153,542 4,893,901 2,217,833 1,479,982 1,278,681 3,096,742 Jan-2013 42,830,818 1,302,715,587 1,365,667,086 %
2.54 0.90 0.24 0.11 0.07 0.12 0.11 Dec-2012 95.92 100.00 861 408 270 425 396
9,205 3,255 Nov-2012 No. of 348,354 363,174
Shareholders Oct-2012
BSE SENSEX
otal
No. of Shares Upto 500 501-1000 1001-2000 2001-3000 3001-4000 4001-5000 5001- 10000 10001 and above T
Sep-2012 2013: 31, as on March xii. Distribution of shareholding
Aug-2012
July-2012 June-2012
Company’s Share Price Share Company’s
May-2012 Apr-2012 ransfer System: ransfer Agent: 90 80
180 170 160 150 140 130 120 110 100 Relative Price (Base Price 100 for April 1, 2012) 1, April for 100 Price (Base Price Relative traded on the Stock are shares The Company’s Exchanges compulsorily in dematerialised mode. lodged for transfer with which are Physical shares to the and returned processed Agent are the Transfer within a period of 10-15 days. shareholders M/s. Datamatics Financial Services Ltd. is the Share Share the is Ltd. Services Financial Datamatics M/s. Transfer The Share Agent of the Company. Transfer transfers of Agent acknowledges and executes securities and arranges for issue of interest/redemption Agent Transfer The Share warrants on debentures. requests, also accepts, deals with and resolves holders. queries and complaints of share/debenture
xi. T share x. T share ix. comparison to BSE SENSEX: price in performance of share Corporate GovernanceCorporate Report Annual Report 2012-13 66 Company Overview Management Discussion and Analysis Sustainability Governance Financials
1.20 4.62 0.17 0.73 2.49 0.83 10.04 73.99 89.96 15.96 100.00 % 8.68 crore 8.68 crore
otal T 2,295,506 16,464,705 63,093,912 10,014,245 33,984,653 11,270,352 137,123,373 218,020,941 1,365,667,086 1,010,522,772 1,228,543,713
1,506,556 Electronic 16,407,254 45,352,096 10,003,645 33,984,353 11,270,302 118,524,206 218,020,941 1,347,067,919 1,010,522,772 1,228,543,713 Investor ransfer of unclaimed amount to No. of shares For the financial year ended on March 31, 2013, For the financial year ended on March to Investor Education the Company has transferred Fund (IEPF) in compliance with section Protection 205C of the Companies Act, 1956. ` and principal amount remaining interest debenture the from unpaid or unclaimed for a period of 7 years date the amount became due for payment. Khambhalia located at is Company of the Refinery The The Post, Dist. Jamnagar – 361 305, Gujarat. Gujarat Mehsana, at located are fields oil Company’s located are and the Coal Bed Methane (CBM) fields Bengal. West in Durgapur, or instruction regarding For any assistance, request and debentures, transfer or transmission of shares change debentures, / shares of dematerialization interest of annual report, non-receipt of address, to the shares warrant and any other query relating please write to the of the Company, and debentures M/s. Datamatics Financial Services following address: Ltd., Unit: Essar Oil Limited, Plot No. B - 5, Part B Lane, MIDC, Andheri (East), Mumbai – 400 Cross 093. Phone: 91-22-66712151 to 66712156, Fax: 91- 22-66712209, Email: [email protected] holders may / debenture For any assistance, share ID email following the at Company the to write also exclusively designated for the purpose: eolinvestors@ essar.com Fund: Education & Protection
0 0 0 xvi. plant Location: xvii. A communication: for ddress T xv. 50 300 57,451 10,600 788,950 Physical 138 ` 17,741,816 18,599,167 18,599,167 10 each at arrants or any or arrants 153 per share or GDS 153 per share GDRs/ADRs/W 10 each at a conversion price of a conversion price at 10 each 46.85 to USD1.00. The FCCBs have 46.60 to USD1.00. Private Corporate Bodies Indian Public NRIs and OCBs Sub-total Total Mutual Funds and UTI Mutual Funds and UTI Foreign Institutional Investors Institutional Investors Foreign FIs and Banks romoters Non-Promoters Depository for GDSs Depository for GDSs Sub-total Category Promoters Promoters Group and Promoter Promoter USD 147 million FCCBs are convertible at any USD 147 million FCCBs are of ` time into fully paid equity shares subject to 153 equity shares each representing on exchange of rate fixed a with adjustment, conversion of ` a conversion price of ` to be compulsorily converted by maturity date. Dematerialisation of shares: 31, 2013, 98.64% of the Company’s As on March held in were i.e. 1,347,067,919 shares total shares, dematerialized form and 1.36% i.e. 18,599,167shares in physical form. held were Convertible instruments, conversion date and Convertible instruments, conversion likely impact on equity: USD 115 million Foreign Currency Convertible Bonds Currency USD 115 million Foreign paidfully into time any at convertible are which (FCCBs) of ` shares equity 6,604,724 Global Depository Shares (GDSs) represented (GDSs) represented 6,604,724 Global Depository Shares outstanding as were by 1,010,522,772 equity shares one hundred 31, 2013. Each GDS represents on March (153) equity shares. and fifty three per share or GDSs each representing 153 equity shares 153 representing GDSs each or share per subject to adjustments, with a fixed rate of exchange on conversion of `
I f. II e. c. a. a. d. b. b. Sl. no.
xiii. utstanding O xiv.
Corporate GovernanceCorporate Report 31, 2013: pattern on March as Shareholding Annual Report 2012-13 68 69 Company Overview Management Discussion and Analysis Sustainability Governance Financials Independent Auditors’ Report Independent Sheet Balance & Loss Statement of Profit Cash Flow Statement Notes to the Financial Statements Financials 70 76 77 78 80 129 Notice Annual Report 2012-13 68 Independent Auditors’ Report
To presentation of the financial statements in order to design THE MEMBERS OF ESSAR OIL LIMITED audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the Report on the Financial Statements effectiveness of the Company’s internal control. An We have audited the accompanying financial statements audit also includes evaluating the appropriateness of of ESSAR OIL LIMITED (“the Company”), which comprise the accounting policies used and the reasonableness of the Balance Sheet as at March 31, 2013, the Statement of the accounting estimates made by the Management, as Profit and Loss and the Cash Flow Statement for the year well as evaluating the overall presentation of the financial then ended and a summary of the significant accounting statements. policies and other explanatory information. We believe that the audit evidence we have obtained is Management’s Responsibility for the Financial sufficient and appropriate to provide a basis for our audit Statements opinion. The Company’s Management is responsible for the Opinion preparation of these financial statements that give a true In our opinion and to the best of our information and and fair view of the financial position, financial performance according to the explanations given to us, the aforesaid and cash flows of the Company in accordance with the financial statements give the information required by the Accounting Standards referred to in Section 211(3C) of Act in the manner so required and give a true and fair the Companies Act, 1956 (“the Act”) and in accordance view in conformity with the accounting principles generally with the accounting principles generally accepted in India. accepted in India: This responsibility includes the design, implementation and maintenance of internal controls relevant to the (a) in the case of the Balance Sheet, of the state of preparation and presentation of the financial statements affairs of the Company as at March 31, 2013; that give a true and fair view and are free from material (b) in the case of the Statement of Profit and Loss, of the misstatement, whether due to fraud or error. loss of the Company for the year ended on that date; Auditors’ Responsibility and Our responsibility is to express an opinion on these (c) in the case of the Cash Flow Statement, of the cash financial statements based on our audit. We conducted flows of the Company for the year ended on that our audit in accordance with the Standards on Auditing date. issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with the Emphasis of Matters ethical requirements and plan and perform the audit to We draw attention to: obtain reasonable assurance about whether the financial (a) Note 7(ii)(c) to the financial statements detailing the statements are free from material misstatement. recognition and measurement of the borrowings An audit involves performing procedures to obtain audit covered by a Common Loan Agreement which evidence about the amounts and the disclosures in the were hitherto covered by the Master Restructuring financial statements. The procedures selected depend Agreement as per the accounting policy consistently on the auditors’ judgment, including the assessment followed by the Company; and Note 34 to the of the risks of material misstatement of the financial financial statements detailing the adoption of hedge statements, whether due to fraud or error. In making accounting principles in respect of commodity those risk assessments, the auditor considers the internal derivative contracts, as set out in Accounting controls relevant to the Company’s preparation and fair Standard (AS) 30, Financial Instruments: Recognition
70 Annual Report 2012-13 71 Company Overview Management Discussion and Analysis Sustainability Governance Financials Partner R.D. Kamat Chartered Accountants Chartered Membership No. 36822 For Deloitte Haskins & Sells (Firm Registration No. 117365W) The Balance Sheet, the Statement of Profit and the Statement of Profit The Balance Sheet, Statement dealt with by this Loss, and the Cash Flow of account. with the books in agreement Report are Balance Sheet, the Statement In our opinion, the Cash Flow Statement and Loss and the of Profit in to referred Standards Accounting the with comply Act. Section 211(3C) of the received written representations On the basis of the directors other than the nominee the directors from financial institutions who have appointed by public of the provisions been granted exemption from by record section 274(1)(g) of the Act, and taken on none of the said directors of Directors, the Board being 31, 2013 from is disqualified as on March in terms of Section 274(1)(g) appointed as a director of the Act. Mumbai, May 10, 2013 (c) (d) (e) and Measurement, in absence of specific guidance in absence and Measurement, to in sub- referred Standards under the Accounting 211 of the Act. section (3C) of section financial statements describing Note 7(ii)(a) to the on certain of interest the fact about accounting as per the basis on a cash categories of debentures Court order. (ii)] to the financial statements Note 19 [footnote from of ` 2,177.82 crore receivables regarding and the management plans of Essar House Limited securing the dues as explained therein. Report) by the Companies (Auditor’s As required Central the by issued Order”) (“the 2003 Order, Government in terms of Section 227(4A) of the Act, a statement on the matters we give in the Annexure Order. specified in paragraphs 4 and 5 of the by Section 227(3) of the Act, we report As required that: obtained all the information and explanations have We best of our knowledge and belief were which to the necessary for the purposes of our audit. books of account as required In our opinion, proper so far as it by law have been kept by the Company our examination of those books. appears from Independent Auditors’ Report Auditors’ Independent (b) (c) respect of these matters. Our opinion is not qualified in Requirements Report on Other Legal and Regulatory 1. 2. (a) (b) Annexure to the Auditors’ Report
[Referred to in paragraph 1 under “Report on Other 3. According to the information and explanation Legal and Regulatory Requirements” section of our given to us, the Company has neither granted nor report of even date] taken any loans, secured or unsecured, to / from companies, firms or other parties covered in the 1. In respect of its fixed assets: register maintained under section 301 of the Act. (a) The Company has maintained proper records Accordingly, the provisions of clause 4 (iii) (a) to (g) of showing full particulars, including quantitative the Order are not applicable to the Company. details and situation of fixed assets. 4. In our opinion and according to the information and (b) The fixed assets of the Company have explanations given to us, and considering that some been physically verified during the year by of the items purchased are of specialised nature and the Management according to a phased suitable alternative sources do not exist for obtaining programme designed to cover all the items over comparable quotations, there is an adequate internal a period of three years, which in our opinion, control system commensurate with the size of the is reasonable having regard to the size of the Company and the nature of its business for the Company and the nature of its assets. As per purchase of inventory and fixed assets and for the the information given to us by the Management, sale of goods and services. During the course of our no material discrepancies as compared to book audit, we have not observed any failure to correct records were noticed in respect of the fixed major weaknesses in internal controls. assets verified during the year. 5. (a) To the best of our knowledge and belief and (c) In our opinion and according to the information according to the information and explanations and explanations given to us, the Company given to us, we are of the opinion that the has not made any substantial disposals of particulars of contracts or arrangements that fixed assets during the year affecting the going need to be entered into the register maintained concern status of the Company. under Section 301 of the Act have been so entered. 2. In respect of its inventories: (b) In our opinion and according to the (a) As explained to us, inventories were physically information and explanations given to us, the verified during the year by the Management at transactions made in pursuance of contracts or reasonable intervals. arrangements entered in the register maintained (b) In our opinion and according to the information under Section 301 of the Act and exceeding and explanations given to us, the procedures the value of rupees five lakhs in respect of any of physical verification of inventories followed party during the year have been made at prices by the Management were reasonable and which are reasonable having regard to the adequate in relation to the size of the Company prevailing market prices at the relevant time. and the nature of its business. 6. In our opinion and according to the information (c) In our opinion and according to the information and explanations given to us, the Company has and explanations given to us, the Company has not accepted public deposits within the meaning maintained proper records of its inventories. of Section 58A and 58AA of the Act, or any other Records of fuel at third party location from relevant provisions of the Act and the Companies 2012-2013 are being streamlined and are (Acceptance of Deposits) Rules, 1975 with regard to not material in the context of overall inventory the deposits accepted from the public. Accordingly, carried. No material discrepancies were noticed the provisions of clause 4(vi) of the Order are not on physical verification as compared to book applicable to the Company. records.
72 Annual Report 2012-13 73 Company Overview Management Discussion and Analysis Sustainability Governance Financials 0.20 21.99 72.82 68.23* 591.68* Amount (` in crore) 2007-08 2008-09 2008-09 2006-07 2007-08 2008-09 2009-10 2010-11 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Period to which the amount relates According to the information and explanations to the information According has generally been given to us, the Company dues, statutory undisputed in depositing regular Education Investor Fund, Provident including Sales Tax Fund, Income Tax, and Protection Service Tax, paragraph (c) below), Wealth (refer Cess and any Excise Duty, Duty, Custom Tax, the with applicable, as dues, statutory other us, the As explained to authorities. appropriate Insurance are of Employees State provisions year. not applicable to the Company during the no undisputed amounts payable in are There the above statutory dues outstanding of respect than 31, 2013 for a period of more as at March the date they became payable. six months from
In respect of statutory dues: In respect (a) Forum where Forum where 9. dispute is pending Gujarat Sales Tax Gujarat Sales Tax Tribunal Jt. Commissioner Appeal, Rajkot Jt. Commissioner Appeal, Rajkot Central Excise & Appellate Service Tax (CESTAT) Tribunal Commissioner of Central Excise (Appeals) Nature of dues of Nature Sales Tax & Sales Tax Interest Sales Tax & Sales Tax Interest Excise Duty, Excise Duty, Fine Interest, and Penalty Name of Statute Gujarat Value Added Tax Added Tax Gujarat Value Act 2003 Central Sales Tax Act, Central Sales Tax 1956 Central Excise Act, 1944 According to the information and explanations given to us, details of Income tax, Sales tax, Service tax, to the information and explanations given to us, details of Income tax, Sales According account of 31, 2013 on not been deposited as on March which have Customs Duty and Excise Duty below, given below: disputes are (b) In our opinion, the Company has an internalIn our opinion, the audit with the size of the Company system commensurate of its business. and nature the books of account reviewed have broadly We Company pursuant to the maintained by the Central Governmentrules made by the for the 209(1) under Section records maintenance of cost petroleum of of manufacture (d) of Act in respect the facie prima that opinion the of are and products made have been accounts and records prescribed not made a however, have, and maintained. We with a view to detailed examination of the records accurate or complete. determine whether they are Annexure to the Auditors’ Report Auditors’ to the Annexure 8. 7. Annexure to the Auditors’ Report
Name of Statute Nature of dues Forum where Period to Amount dispute is pending which the (` in crore) amount relates Customs Act 1962 Customs Duty, Central Excise & 2006-07 0.42 Interest, Fine Service Tax Appellate 2008-09 and Penalty Tribunal (CESTAT) 2010-11 2009-10 118.73** Commissioner of 2006-07 8.27 Customs Excise (Appeals) Service Tax Rules, 1994 Penalty Commissioner 2004-05 0.13 of Central Excise 2005-06 (Appeals) 2009-10 Central Excise & 2005-06 1.38 Service Tax Appellate Tribunal (CESTAT) Madhya Pradesh Entry Tax, High Court of 2008-09 0.02 Sthaniya Kshetra Me Penalty and Madhya Pradesh Mal Ke Pravesh Par Kar Interest Joint Commissioner 2007-08 0.07 Adhiniyam, 1976 of commercial tax Income tax Act, 1961 Income tax and Supreme Court 1997-98 0.18 Interest *Appeal has been filed on April 30, 2013. **Company is in the process of filing the appeal. According to the information and explanations given to us, there were no dues pending to be deposited on account of any dispute in respect of Wealth Tax and Cess as on March 31, 2013.
(c) In response to a Special Leave Petition filed 11. In our opinion and according to the information by the Company with the Honorable Supreme and explanations given to us, the Company has Court seeking installments for payment of the not defaulted in repayment of dues to any financial sales tax dues without interest, the Honorable institution or bank or debenture holders during the Supreme Court has, on September 13, 2012, year. passed an order allowing the payment of the 12. According to the information and explanations balance sales tax dues in eight equal quarterly given to us, the Company has not granted loans installments beginning January 2, 2013 with and advances on the basis of security by way of interest of 10% p.a. with effect from January pledge of shares, debentures and other securities. 17, 2012. Accordingly, the provisions of clause 4(xii) of the 10. The accumulated losses of the Company are more Order are not applicable to the Company. than 50% of its net worth. The Company has not 13. The Company is not a chit fund or a nidhi/mutual incurred cash losses during the current year. benefit fund/society. Accordingly, the provisions of However, there were cash losses in the immediately clause 4(xiii) of the Order are not applicable to the preceding financial year. Company.
74 Annual Report 2012-13 75 Company Overview Management Discussion and Analysis Sustainability Governance Financials Partner R.D. Kamat Chartered Accountants Chartered Membership No. 36822 For Deloitte Haskins & Sells (Firm Registration No. 117365W) allotment of shares to parties and companies to parties allotment of shares under Sec. 301 in the Register maintained covered clause 4 of the provisions of the Act. Accordingly, the Company. not applicable to are (xviii) of the Order and explanations given to the information According us, securities examined by to us and the records debentures of the in respect have been created guarantees by some of the except for the personal securities. together with collateral directors not raised money by way of The Company has of public issues during the year and the provisions not applicable. are the Order the best of our knowledge and belief and according To no to us, explanations given the information and to and no material fraud on the fraud by the Company during the year. Company was noticed or reported Mumbai, May 10, 2013 19. 20. 21. This excludes the According to the information and explanations to the information According is not dealing in or given to us, the Company and other securities, debentures trading in shares, clause 4 of the provisions investments. Accordingly, the Company. not applicable to are (xiv) of the Order to the information and In our opinion and according us, the terms and conditions explanations given to has given guarantees for on which the Company banks and financial from the loans taken by others to the prejudicial not, prima facie, institutions are of the Company. interest to the information and In our opinion and according have been explanations given to us, the term loans for the applied by the Company during the year than other obtained, were they which for purposes temporary deployment pending application. On the basis of an overall examination of the balance sheet of the Company and according to the effects of the judgment of the Supreme Court dated the judgment of the Supreme of effects ineligible for January 17, 2012 making the Company a sales tax deferral scheme. to the information and explanations given According preferential to us, the Company has not made any information and explanations given to us, we report that funds raised on short-term basis amounting to ` 2,786.08 crore, have, prima facie, been used for long term investment / purposes. 15. 16. 17. 14. Annexure to the Auditors’ Report Auditors’ to the Annexure 18. Balance Sheet as at March 31, 2013
(` in crore) As at As at Particulars Notes March 31, 2013 March 31, 2012 Equity and Liabilities Shareholders’ funds a) Share capital 4 1,382.27 1,382.27 b) Reserves and surplus 5 (275.44) 798.47 Foreign Currency Compulsory Convertible Bonds 6 1,340.00 1,340.00 Non-current liabilities a) Long-term borrowings 7 14,538.73 12,202.80 b) Deferred tax liabilities (Net) 8 - - c) Other Long term liabilities 10 2,216.07 4,795.55 d) Long-term provisions 11 5.14 1.00 Current liabilities a) Short-term borrowings 12 7,840.21 3,818.37 b) Trade payables 9 11,356.10 10,810.04 c) Other current liabilities 10 9,122.71 4,912.49 d) Short-term provisions 11 40.06 30.63 Total 47,565.85 40,091.62 ASSETS Non-current assets a) Fixed assets 13 (i) Tangible assets 21,256.13 21,299.90 (ii) Intangible assets 18.02 20.02 (iii) Capital work-in-progress 2,610.38 1,760.47 b) Non-current investments 14 103.00 103.00 c) Long-term loans and advances 18 1,138.14 410.93 d) Other non-current assets 19 1,334.53 1,809.64 Current assets a) Current investments 14 - 0.00 b) Inventories 15 10,588.37 7,681.67 c) Trade receivables 16 4,716.49 3,996.93 d) Cash and bank balances 17 2,430.66 2,060.94 e) Short-term loans and advances 18 1,276.29 228.02 f) Other current assets 19 2,093.84 720.10 Total 47,565.85 40,091.62 The accompanying notes are an integral part of the financial statements
In terms of our report attached For and on behalf of the Board of Directors
For Deloitte Haskins & Sells Lalit Kumar Gupta Naresh Nayyar Chartered Accountants Managing Director and Deputy Chairman Chief Executive Officer
R. D. Kamat S. S. Shaffi Suresh Jain Partner Company Secretary Chief Financial Officer Mumbai, May 10, 2013 Mumbai, May 10, 2013 76 Annual Report 2012-13 77 Company Overview Management Discussion and Analysis Sustainability Governance Financials - - (9.41) (9.41) (48.02) 424.76 134.56 761.94 (988.10) 1,957.16 2,662.16 2,100.76 1,386.84 1,237.46 (` in crore) (1,285.48) (1,285.48) 58,336.63 58,761.39 52,894.85 56,660.63 March 31, 2012 March For the year ended For the year ended - - Naresh Nayyar Naresh Deputy Chairman Jain Suresh Chief Financial Officer (8.64) (8.64) 608.78 866.72 185.66 111.48 (236.88) 3,386.74 3,650.68 3,423.58 1,296.06 88,578.12 89,186.90 81,333.98 85,536.22 (1,068.96) (1,180.44) (1,180.44) March 31, 2013 March March 31, 2013 ended March for the year For the year ended
20 21 22 23 24 25 26 27 36 13 28 Notes For and on behalf of the Board of Directors For and on behalf of the Board Lalit Kumar Gupta and Managing Director Chief Executive Officer S. S. Shaffi Company Secretary Mumbai, May 10, 2013 Statement of Profit & Loss Profit of Statement For Deloitte Haskins & Sells Accountants Chartered R. D. Kamat Partner Mumbai, May 10, 2013 In terms of our report attached In terms of our report The accompanying notes are an integral part of the financial statements The accompanying notes are Income operations Revenue from Other income Revenue Total Expenses consumed Cost of raw materials of traded goods Purchases Particulars Changes in inventory of finished goods and work-in-progress Changes in inventory of finished goods Employee benefits expense Other expenses / amortisation finance costs, depreciation Earnings before expenses, exceptional items and tax (EBIDTA) Finance costs exceptional items and tax before / (Loss) Profit Exceptional items Depreciation / amortization expense Depreciation tax before / (Loss) Profit expense: Tax tax (a) Current (b) Deferred tax (b) Deferred Profit / (Loss) for the year from continuing operations for the year from / (Loss) Profit : 10 per share) (Face value ` Earnings per equity share (1) Basic (in `) (2) Diluted (in `) Cash Flow Statement for the year ended March 31, 2013
(` in crore) For the year ended For the year ended Particulars March 31, 2013 March 31, 2012 (A) Cash flow from operating activities Net profit / (Loss) before tax and extraordinary items (1,180.44) (1,285.48) Adjustments for : Depreciation / amortisation {Including ` 0.54 crore (Previous year 1,296.60 787.71 ` 25.77 crore) considered in exceptional items} Fixed assets / capital work in progress written off / provided 0.23 - Interest on income tax refund (1.74) (0.37) Interest received on bank deposits (other than margin deposits) (8.61) (100.76) Loss / (Profit) on sale of fixed assets (net) 0.01 (0.08) Unrealised exchange differences 35.73 212.79 Mark to market - commodity hedging losses 24.17 - Interest (Including ` 110.94 crore (Previous year ` 433.44 crore) 2,815.14 1,451.95 considered in exceptional items) Bad debts written off / doubtful debts provided for 2.34 (0.02) Write back old liabilities / excess accrual (3.54) (29.46) Operating profit before working capital changes 2,979.89 1,036.28 Working capital changes Adjustments for : Changes in inventories (2,904.72) (1,981.64) Changes in receivables, advances and deposits (2,837.87) (2,582.94) Changes in payables 1,956.97 4,049.53 Cash generated from operating activities (805.73) 521.23 Income tax refund / (payment) (net) (including interest) 14.58 (44.43) Net cash (used) / generated from operating activities (A) (791.15) 476.80 (B) Cash flow from investing activities Additions to fixed assets / capital work in progress (2,216.71) (2,791.97) Sale of fixed assets 0.04 1.11 Sale / (Purchase) of Investment in a subsidiary 0.00* (0.00)* Placement of long term deposits (0.35) (826.45) Encashment of long term deposits 65.48 2,174.87 Interest received on bank deposits (other than margin deposits) 14.26 98.68 Net cash used in investing activities (B) (2,137.28) (1,343.76)
78 Annual Report 2012-13 79 Company Overview Management Discussion and Analysis Sustainability Governance Financials 317.35 440.16 122.81 317.35 299.36 104.72 0.02 As at 1,184.31 9,448.78 (` in crore) (1,495.03) (5,437.00) (1,736.52) 440.18 440.16 (` in crore) March 31, 2012March For the year ended March 31, 2012 31, March Naresh Nayyar Naresh Deputy Chairman Jain Suresh Chief Financial Officer
62.67 (99.45) 340.71 440.16 (99.45) (74.21) 0.00* As at 2,828.98 6,226.26 340.71 340.71 10,737.41 (3,201.83) (10,921.32) March 31, 2013 March March 31, 2013 31, March For the year ended Managing Director and Managing Director Chief Executive Officer S. S. Shaffi Company Secretary For and on behalf of the Board of Directors For and on behalf of the Board Lalit Kumar Gupta Mumbai, May 10, 2013 for the year ended March 31, 2013 ended March for the year greement dated December 17, 2004 (“the MRA”) and entered into a Common Loan Agreement into a Common Loan Agreement dated December 17, 2004 (“the MRA”) and entered agreement Net (decrease) / increase in cash and cash equivalents / increase Net (decrease) Cash and cash equivalents at the end of the year Cash and cash equivalents at the end Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the beginning Bills of exchange accepted financing activities (C) Net cash generated from in cash and cash equivalents / increase Net (decrease) (A+B+C) Repayment of borrowings and sales tax liabilities and Repayment of borrowings (net) borrowings Changes in short term paid Interest Bills of exchange honoured financing activities Cash flow from (including funding of interest borrowings from Proceeds note 7(ii)(c)) (refer Cash on hand and balances with banks note 17) Cash and cash equivalents (refer Less : Effect of exchange rate changes Less : Effect Cash and cash equivalents as restated *amount less than ` 0.01 crore Particulars Non cash transaction: in termination of Master the Company exited the Corporate Debt Restructuring Scheme resulting During the year, Restructuring hitherto being governed by the 25, 2013 (“the CLA”) with the lenders for the loan facilities which were dated March MRA. sheet balance following the of comprise statement flow cash the in included equivalents cash and Cash amounts:
Chartered Accountants Chartered R. D. Kamat Partner In terms of our report attached In terms of our report For Deloitte Haskins & Sells Mumbai, May 10, 2013 (C) Particulars Notes: 1 2 Flow Statement Cash Notes to financial statements for the year ended March 31, 2013
1. Corporate Information: b) Revenue recognition Essar Oil Limited (The Company) is a public limited Revenue on sale of goods is recognised when company domiciled in India and incorporated under property in the goods is transferred to the buyer the provisions of the Companies Act, 1956. The for a price or when all significant risks and equity shares of the Company are currently listed rewards of ownership have been transferred to on the Bombay Stock Exchange (BSE) and National the buyer and no effective control is retained Stock Exchange (NSE) in India. It is primarily engaged by the Company in respect of the goods in the business of refining and marketing of petroleum transferred to a degree usually associated with products in domestic and overseas markets. It is ownership and no significant uncertainty exists also engaged in the business of Exploration and regarding the amount of consideration that will Production. be derived from the sale of goods. Revenue on transactions of rendering services 2. Basis of preparation: is recognised under the completed service The financial statements of the Company have been contract method. contract is regarded as prepared in accordance with Generally Accepted completed when no significant uncertainty Accounting Principles in India (“Indian GAAP”). The exists regarding the amount of consideration Company has prepared these financial statements to that will be derived from rendering the services. comply in all material respects with the Accounting Standards notified under the Companies (Accounting Interest income is recognized on time Standards) Rules, 2006 (as amended) and the proportion basis taking into account the amount relevant provisions of the Companies Act, 1956. outstanding and rate applicable. The financial statements of the Company have been c) Government grants prepared on an accrual basis and under the historical Government grants are recognised only cost convention. Attention is invited to note (7)(ii)(a) when there is reasonable assurance that and (c). the conditions attached to the grants will be 3. Summary of Significant accounting complied with and where such benefits have policies: been earned and it is reasonably certain that a) use of estimates the ultimate collection will be made. The preparation of financial statements in d) Tangible assets and depreciation conformity with Indian GAAP requires the i. Tangible Assets management of the Company to make Tangible assets are recorded at cost judgments, estimates and assumptions that less accumulated depreciation and affect the reported amounts of revenues, impairment loss, if any. Cost is inclusive expenses, assets and liabilities and disclosures of non-recoverable duties and taxes, relating to contingent liabilities, at the end of cost of construction including erection, the reporting period. Though the management installation, commissioning, know how believes that the estimates used are prudent and and expenditure during construction reasonable and are based on management’s including borrowing costs and results of knowledge of current events and actions, trial run operations. actual results could differ from these estimates resulting in material adjustments to be ii. Depreciation recognized in the periods in which the results Depreciation on plant and machinery are known / materialise. is provided as per straight line method. All other assets are depreciated as per
80 Annual Report 2012-13 81 Company Overview Management Discussion and Analysis Sustainability Governance Financials Oil and gas exploration and development of Oil and gas exploration assets cost method the full The Company follows oil and gas exploration of accounting for its all costs whereby, and development activities exploration and associated with acquisition, are and gas reserves, development of oil capital work-in-progress, capitalised under of specific of success or failure irrespective or parts of the overall exploration activity within (known as ‘cost pool’). outside a cost centre remain Exploration and evaluation expenditure of outside the cost pool until determination or otherwise. These costs reserves commercial being no subject to there un-depleted, remain in a evidence of impairment. When any field to commence commercial cost pool is ready the accumulated costs in that production, capital work- from transferred cost pool are of assets under block to the gross in-progress Subsequent exploration properties. producing added to the pool is cost in that expenditure commencement on either assets of block gross discovery a field from production of commercial the case any block is surrendered, In or failure. pertaining exploration expenditure accumulated block gross the to transferred is block such to of assets within the cost pool. carried within each cost pool Expenditure depleted is cost) development future (including basis with reference on a unit-of-production to quantities, with depletion computed on the basis of the ratio that oil and gas production at reserves bears to the balance proved commencement of the year. Impairment of assets The Company assesses at each balance sheet is any indication that an date whether there If any such indication asset may be impaired. recoverable the estimates Company the exists, amount of the asset. If such recoverable rebuttable presumption that such useful lives that such useful presumption rebuttable will not exceed ten years. h) g) written down value method. Depreciation method. Depreciation written down value rates based on the is computed at the of the assets or at estimated useful lives XIV of under Schedule the rates provided 1956, whichever is the Companies Act, higher. deductions on additions / Depreciation during the year is to fixed assets made / upto basis from on a pro-rata provided / deductions, the date of such additions as the case may be. and/or Cost of assets purchased constructed by the Company whose ownership vests with others by virtue of at amortised are otherwise, or contract a the higher of rates based on the estimated useful lives of the assets or the contract under period, or at the rates provided Schedule XIV of the Companies Act, 1956. ork in progress and Expenditure during Expenditure and progress in ork to financial statements for the year ended March 31, 2013 year ended March statements for the to financial construction period or assets under on projects expenditure Direct under shown is development or construction capital work-in-progress. incidental to the construction Expenditure or assets under construction or of projects period development that take substantial for their intended use of time to get ready during is accumulated as expenditure construction, pending allocation to fixed assets accounts, as applicable. and other relevant Intangible assets and amortisation only when it recognised Intangible assets are benefits economic future the that probable is attributable to the assets will flow to that are be can assets the of cost the and Company the stated Intangible assets are reliably. measured at cost less accumulated amortisation and impairment loss, if any. amortised over the best Intangible assets are estimate of their useful lives, subject to a
e) w f) Notes Notes to financial statements for the year ended March 31, 2013
amount of the asset is less than its carrying Exchange differences arising on a monetary item amount, the carrying amount is reduced to its that, in substance, forms part of an enterprise’s recoverable amount. The reduction is treated net investments in a non-integral operation are as an impairment loss and is recognised in the accumulated in a foreign currency translation statement of profit and loss. If at the balance reserve until the disposal of the net investment, sheet date, there is an indication that a previously at which time the same is recognised in the assessed impairment loss no longer exists, the statement of profit and loss. recoverable amount is reassessed and the Exchange differences arising on settlement asset is reflected at the recoverable amount or conversion of short term monetary items but limited to the carrying amount that would are recognised in the statement of profit and have been determined (net of depreciation / loss or capital work-in-progress / expenditure amortisation) had no impairment loss been during construction, as applicable. Exchange recognised in prior accounting periods. differences relating to long term monetary items i) valuation of inventories are accounted as under: Inventories (other than crude oil extracted by (i) in so far as they relate to the acquisition exploration and production segment) are valued of a depreciable capital asset is added to at the lower of cost and net realisable value. / deducted from the cost of the asset and The cost of crude inventory is determined using depreciated over the balance useful life of the first in first out cost formula and the cost the asset; of finished goods inventory, work-in-progress, stores and spares and other consumable (ii) in other cases such differences are including coal inventories are determined using accumulated in “Foreign Currency the weighted average cost formula. Finished Monetary Item Translation Difference goods and work-in-progress include costs of Account” and amortised in the statement conversion and other costs incurred in bringing of profit and loss over the balance life of the inventories to their present location and the long term monetary item or March 31, condition. 2020 whichever is shorter. Closing stock of crude oil extracted and in Premia or discounts arising on forward saleable condition is valued at net realisable exchange contracts entered into for value. the purpose of hedging currency risk, are recognized as finance cost in the j) Foreign currency transactions statement of profit and loss or expenditure Foreign currency transactions are accounted at during construction, as applicable, over the rate normally prevailing on the transaction the life of the contract. date. Monetary items denominated in foreign currency other than net investment in non- The impact of exchange rate differences integral foreign operations are translated at the between the rates prevailing on the date exchange rate prevailing at the balance sheet of forward exchange contracts and the date. In case of non-integral foreign operations, rate prevailing on the balance sheet date all the assets and liabilities are translated at the or on the dates of settlement of forward closing rate whereas the income and expense exchange contracts whichever is earlier, is items are translated at average exchange rate recognised in the statement of profit and during the period. loss or expenditure during construction, as applicable.
82 Annual Report 2012-13 83 Company Overview Management Discussion and Analysis Sustainability Governance Financials outstanding derivatives contracts are not contracts are outstanding derivatives on conservative basis. recognised Others financial of settlement on arising losses or Gains or gains for credited are contracts derivative to the statement of profit charged for losses as construction, during and loss or expenditure settlement takes place. applicable, as and when of outstanding in respect The net MTM losses as at the balance sheet derivative contracts in The net MTM gains for. provided date are are contracts derivative of outstanding respect on conservative basis. not recognised Lease Operating lease Lease expenses and lease income on operating on a straight line basis recognised leases are profit over the lease term in the statement of as during construction, and loss or expenditure applicable. Finance lease As lessee: capitalised at fair Assets taken on lease are lease minimum value of the net present value or on Depreciation payments, whichever is lower. at the the assets taken on lease is charged assets rate applicable to similar type of fixed on as per accounting policy of the Company returnable If the leased assets are depreciation. to the lessor on the expiry of the lease period, is charged over its useful life depreciation Lease or lease period, whichever is shorter. apportioned between payments made are of the reduction the finance charges and of assets taken on outstanding liability in respect in the generally recognised lease. The leases are books of account at the inception of the lease construction under assets of leases The term. the of commencement on recognized are with International lease term in accordance is 17-Leases, as there Accounting Standard l) to financial statements for the year ended March 31, 2013 year ended March statements for the to financial Derivative instruments (other than forward (other than forward Derivative instruments exchange contracts) Commodity derivatives to commodity to hedge its exposure In order enters into non- price risk, the Company option or such as forward, speculative hedges derivative appropriate swap contracts and other instruments. such derivative The Company designates relationship flow hedging contracts in a cash by applying the hedge accounting principles 30 Financial Standard set out in “Accounting Instruments: Recognition and Measurement”. contracts derivative these on losses Gains/ changes in fair value or settlement arising from “cash flow hedge in directly recognized are under Reserves and surplus. Amounts reserve” reserve” accumulated in the “cash flow hedge and to the statement of profit recycled are the loss in the same periods during which and profit transaction affects forecasted portion is recognized loss. The ineffective and profit of statement the in immediately if the loss. Hedge accounting is discontinued criteria hedging instrument no longer meets the or is sold, for hedge accounting, gets expired the occurrence before terminated or exercised transaction. of the forecasted not form part of For the contracts which are and gains / hedge accounting, the premium settled derivative contracts losses arising from of and mark to market (MTM) losses in respect outstanding derivative contracts as at balance for charged or gains for credited are date sheet losses to the raw material consumed in so far to the derivative instruments taken as it relates to hedge risk of movement in price of crude oil, for gains or charged for losses and credited to the derivative to sales in so far as it relates instruments (including margin cracks) taken to hedge risk of movement in price of finished of respect in gains MTM net The products. k) Notes Notes to financial statements for the year ended March 31, 2013
no specific guidance available under Indian ii. Short-term employee benefits Accounting Standard (AS-19) Leases. The undiscounted amount of short-term As lessor: employee benefits expected to be paid in exchange for the services rendered by The assets given under a finance lease are employees is recognised during the period recognised as a receivable in the balance sheet when the employee renders the services. at an amount equal to the net investment in These benefits include compensated the lease. The recognition of finance income absences such as paid annual leave, and is based on a pattern reflecting a constant performance incentives. periodic rate of return on the net investment outstanding in respect of the finance lease. iii. Long-term employee benefits m) Employee benefits Compensated absences which are not expected to occur within twelve months i. Post-employment benefit plans after the end of the period in which the Contribution to defined contribution employee renders the related services retirement benefit schemes are recognised are recognised as a liability at the present as expense in the statement of profit and value of the defined benefit obligation loss / expenditure during construction, determined actuarially by using Projected as applicable, when employees have Unit Credit Method at the balance sheet rendered services entitling them to date. contributions. iv. Employee Stock Option Scheme For defined benefit schemes, the cost of Stock options granted to employees under providing benefits is determined using the employees’ stock option scheme the Projected Unit Credit Method, with (ESOS) are accounted by adopting the actuarial valuations being carried out at intrinsic value method in accordance with each balance sheet date. Actuarial gains the SEBI (Employee Stock Option Scheme and losses are recognised in full in the and Employee Stock Purchase Scheme) statement of profit and loss / expenditure Guidelines, 1999 and the Guidance Note during construction, as applicable, for the on accounting for employee share based period in which they occur. Past service payments issued by the ICAI. Accordingly, cost is recognised immediately to the the excess of market price of the shares extent that the benefits are already vested, over the exercise price is recognised as and is otherwise amortised on a straight- deferred employee compensation and is line basis over the average period until the charged to statement of profit and loss benefits become vested. account on straight-line basis over the The retirement benefit obligation vesting period. recognised in the balance sheet The number of options expected to vest is represents the present value of the defined based on the best available estimate and benefit obligation and is adjusted both for are revised, if necessary, if subsequent unrecognised past service cost, and for information indicates that the number the fair value of plan assets. Any asset of stock options expected to vest differs resulting from this calculation is limited to from previous estimates. the present value of available refunds and reductions in future contributions to the n) valuation of investments scheme, if lower. Investments are classified into long term and current investments. Long term investments 84 Annual Report 2012-13 85 Company Overview Management Discussion and Analysis Sustainability Governance Financials ompany has elected to present earnings company has elected to present before interest (including finance costs), interest before / amortization expenses and depreciation as a separate line item on the tax (EBIDTA) and loss. The face of the statement of profit of on the basis EBIDTA Company measures continuing operations and from / (loss) profit (including finance does not include interest / amortization expenses, costs), depreciation items and tax. exceptional and extraordinary A provision is recognised when there is a is a when there is recognised A provision event of a past obligation as a result present resources of that an outflow and it is probable required benefits will be embodying economic Contingent liabilities in to settle the obligation. considered are of show cause notices respect only when converted into demand. Contingent but disclosed not recognised liabilities are resources of an outflow of unless the probability neither Contingent assets are is remote. nor disclosed. recognised are Contingent Liabilities and commitments only for items exceeding assessed and reported in each case. ` 0.10 crore of EBIDTA Measurement ompany and the asset can be will flow to the company and the asset reliably. measured contingent contingent liabilities, Provisions, assets and commitments
r) The q) to financial statements for the year ended March 31, 2013 year ended March statements for the to financial are carried at cost. Diminution in value of long carried at cost. Diminution are it is for when is provided investments term temporary in as being other than considered carried at the investments are Current nature. value. lower of cost and fair Borrowing costs theto attributable are that costs Borrowing or development ofacquisition, construction the assets that takequalifying assets (i.e. for its time to get ready substantial period of during charged to expenditure intended use) are construction. in the recognised costs are Other borrowing and loss. statement of profit Taxation taxation is computed for current Provision tax laws and with the relevant in accordance on tax is recognised Deferred regulations. and accounting the between differences timing the taxable income for the year and quantified or using the tax rates and laws enacted date. substantively enacted as on the reporting only when recognised tax assets are Deferred certainty that sufficient a reasonable is there income will be available against taxable future is a carry there Where which they will be realised. losses or unabsorbed depreciation, of forward only if there recognised tax assets are deferred is a virtual certainty supported by convincing income taxable of availability of evidence tax assets can be against which such deferred in future. realised paid in Minimum alternative tax (MAT) with tax laws, which gives rise to accordance economic benefit in form of adjustment future as considered is liability, tax income future of is convincing evidence that an asset if there the Company will pay normal tax after the tax as it is recognised holiday period. Accordingly an asset in the balance sheet when it is probable economic benefit associated with it that future o) p) Notes Notes to financial statements for the year ended March 31, 2013
4. Share capital (` in crore) As at March 31, 2013 As at March 31, 2012 Particulars Number of shares Amount Number of shares Amount Authorised Equity shares of ` 10 each 5,000,000,000 5,000.00 5,000,000,000 5,000.00 Issued and subscribed Equity shares of ` 10 each 1,427,593,086 1,427.59 1,427,593,086 1,427.59
Paid up Equity shares of ` 10 each fully paid up 1,365,667,086 1,365.67 1,365,667,086 1,365.67 Add : Forfeited shares - Equity shares of 61,926,000 16.60 61,926,000 16.60 ` 10 each 1,382.27 1,382.27
a) Reconciliation of the number of shares outstanding at the beginning and at the end of the reporting period (` in crore) As at March 31, 2013 As at March 31, 2012 Particulars Number of shares Amount Number of shares Amount Shares outstanding at the 1,365,667,086 1,365.67 1,365,667,086 1,365.67 beginning of the year Add : Equity Shares issued during - - - - the year Shares outstanding at the end of 1,365,667,086 1,365.67 1,365,667,086 1,365.67 the year
b) Terms / rights attached to the equity Shares / Global depository shares (GDS) The company has only one class of equity shares having a par value of ` 10 per share. Each holder of equity share is entitled to one vote per share. In the event of liquidation of the company, the holders of equity shares will be entitled to receive remaining assets of the company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders. Holders of GDS will be entitled to receive dividends, subject to the terms of the Deposit Agreement, to the same extent as the holders of shares, less the fees and expenses payable under such Deposit Agreement and any Indian tax applicable to such dividends. Holders of GDS will not have voting rights with respect to the Deposited Shares.
86 Annual Report 2012-13 87 Company Overview Management Discussion and Analysis Sustainability Governance Financials
0.00* 728.43 282.09 178.86 Amount (` in crore) 100 728,433,000 282,089,772 178,858,624 As at March 31, 2012 As at March Number of shares Number of shares 0.00* 728.43 282.09 178.86 Amount 100 728,433,000 282,089,772 178,858,624 As at March 31, 2013 As at March Number of shares Number of shares to financial statements for the year ended March 31, 2013 year ended March statements for the to financial Shares held by holding / ultimate holding company and / or their subsidiaries / associates subsidiaries holding company and / or their held by holding / ultimate Shares Particulars year 4,761,000 GDS (Previous by Essar Oil 4,761,000 GDS) held known as & Gas Limited (formerly holding Oil), Mauritius, the Vadinar to section 4(6) Company pursuant of the Companies Act, 1956 1,843,724 GDS (Previous year 1,843,724 GDS (Previous 1,843,724 GDS) held by Essar Energy Holdings Ltd., Mauritius, subsidiary of the holding company Equity shares held by Essar Equity shares Energy Holdings Ltd., Mauritius, subsidiary of the holding company Equity Shares held by Essar Equity Shares Power Hazira Holdings Ltd (name Hazira Steel 2), changed from subsidiary of ultimate holding Essar Global Fund company, Limited * Amount less than ` 0.01 crore Stock Options at the option of the grant of 32,11,391 options (convertible On December 2, 2011, the Company approved 10/- each of the Company, in three equal in three of ` 10/- each of the Company, of equity shares eligible employees into equivalent number and Executive grant date) to the eligible employees the 4th / 5th year from / i.e. at the end of 3rd installments the by approved 2011 Scheme Option Stock Employee Oil Essar to pursuant Company the of Directors period for the options is members at the 21st Annual General Meeting held on August 12, 2011. The exercise the date of vesting. 7 years from of face value of ` 10/- These stock options have been granted at an option value of ` 69.05 per equity share Stock National the at 2011 01, December on Company the of shares equity the of price closing the (i.e. each shares). Company’s Exchange of India Ltd, being the exchange having the higher quantity of trading of 31, 2013. The Remuneration2,519,058 outstanding as on March year 2,910,749) were (Previous options stock options on May 10, 2013. of 391,691 has noted the forfeiture of Directors Committee of the Board c) d)
Notes Notes to financial statements for the year ended March 31, 2013
e) Details of shareholders (including GDS holders) holding more than 5% shares in the Company
As at March 31, 2013 As at March 31, 2012 Particulars Number of shares % of shares Number of shares % of shares 4,761,000 Global Depository 728,433,000 53.34% 728,433,000 53.34% Shares (“GDS”) (Previous year 4,761,000 GDS) held by Essar Oil & Gas Limited (formerly known as Vadinar Oil) Mauritius, the holding Company pursuant to section 4(6) of the Companies Act, 1956 1,843,724 GDS (Previous year 282,089,772 20.66% 282,089,772 20.66% 1,843,724 GDS) held by Essar Energy Holdings Ltd., Mauritius, subsidiary of the holding company Equity shares held by Essar Energy 178,858,624 13.10% 178,858,624 13.10% Holdings Ltd., Mauritius, subsidiary of the holding company
5. Reserves and surplus (` in crore) As at As at Particulars March 31, 2013 March 31, 2012 Capital reserve Balance as per last balance sheet 40.89 40.89 (A) 40.89 40.89 Securities premium account Balance as per last balance sheet 4,928.45 4,928.45 (B) 4,928.45 4,928.45 Debenture redemption reserve Balance as per last balance sheet 37.21 37.21 (C) 37.21 37.21 General reserve Balance as per last balance sheet 22.25 22.25 (D) 22.25 22.25 Cash flow hedge reserve Balance as per last balance sheet - - Add: Transferred during the year (refer note 34) 104.90 - (E) 104.90 -
88 Annual Report 2012-13 89 Company Overview Management Discussion and Analysis Sustainability Governance Financials
- - - - As at (65.51) (65.51) 798.47 312.22 Current Current 1,349.60 (` in crore) (` in crore) (4,164.82) (2,879.34) (1,285.48) March 31, 2012 March
184.21 184.21 1,242.73 8,469.15 As at March 31, 2012 As at March As at 42.20 43.83 Non Current Non Current (63.88) (65.51) (275.44) (5,345.26) (4,164.82) (1,180.44) - - March 31, 2013 March 232.57 Current Current 2,090.31 (F) (G) dates of June 15, 2028 and September 30, 2028 September 2028 and 15, of June dates of 5% per The bonds bear interest respectively. on the annum, subject to certain conditions, (and from outstanding principal amount of the bonds including) January 1, 2016 payable semi-annually. terms of the During the financial year 2011-12, the have become these whereby modified were bonds / GDS on compulsorily convertible into equity share the same terms and conditions as above. 152.18 152.18 1,010.59 As at March 31, 2013 As at March 11,440.98
y urrent Non current
(i) ves and surplus to financial statements for the year ended March 31, 2013 year ended March statements for the to financial Secured loans / Borrowings Secured Debentures note (refer Non convertible debentures (ii)(a) below) Term loans and funded interest facilities loans and funded interest Term banks From financial institutions From Total (A+B+C+D+E+F+G) Total Less : Amortisation during the year Add : Effect of foreign exchange rate variation during the year of foreign Add : Effect Foreign currency monetary item translation difference monetary item translation difference currency Foreign note 3(j)} account {refer (loss) Balance as per last balance sheet gain / (A) Add : Net profit / (loss) for the year / (loss) for the Add : Net profit Long term borrowings Particulars profit and loss and loss profit sheet Balance as per last balance Reser Particulars - Balance in statement of Surplus / (Deficit) Bonds(FCCB) Convertible USD 115 The Company had issued FCCB of million USD 147 and 2010 June 15, on million convertible into on July 9, 2010 which were into or shares equity 38,833,443 and 45,016,372 price of 253,813 and 294,224 GDS at a fixed at the option and ` 153 per share ` 138 per share maturity of the holders of the FCCB until their ulsor Foreign Currency Comp
7. 5.
6. Notes Notes to financial statements for the year ended March 31, 2013
7. Long term borrowings (` in crore) As at March 31, 2013 As at March 31, 2012 Particulars Non current Current Non Current Current
Funded interest facilities (refer note (ii) (c) below) From banks 1,269.29 - 755.66 - From financial institutions 599.50 - 346.58 -
Amount disclosed under the head of - (2,322.88) - (1,661.82) “Other Current / Long Term Liabilities” (refer note 10) (ii) 14,320.36 - 10,814.12 - (A) - (i+ii) 14,472.54 - 10,998.33 - (B) Unsecured loans / Borrowings Finance lease obligation {refer note 37(a)(i)} From related parties (refer note 45) 44.69 7.19 45.11 12.98 From others 1.19 0.32 1.23 0.53 Other loans Conditional grant from a bank 7.14 - 6.85 - From related parties (refer note 45) 13.17 32.58 1,151.28 27.92 Amount disclosed under the head of - (40.09) - (41.43) “Other Current / Long Term Liabilities” (refer note 10) (B) 66.19 - 1,204.47 - Total (A+B) 14,538.73 - 12,202.80 -
The classification of loans between current liabilities and non-current liabilities continues based on repayment schedule under respective agreements as no loans have been recalled due to non-compliance of conditions under any of the loan agreements. The non compliance of conditions under the loan agreements are primarily arising out of the order of the Hon’ble Supreme Court dated January 17, 2012 (refer note 36). This is in accordance with the guidance issued by the Institute of Chartered Accountants of India on Revised Schedule VI to the Companies Act, 1956.
90 Annual Report 2012-13 91 Company Overview Management Discussion and Analysis Sustainability Governance Financials Sales tax / General purpose term loan from a purpose term loan from Sales tax / General year ` Nil) is (Previous bank of ` 3,143.00 crore security by first ranking / to be secured secured for refinery, (pari passu with loans interests ECB Loan and expansion, Refinanced refinery immovable assets optimisation) on all refinery (except certain leased out assets), all movable assets and second assets other than current assets, on current ranking security interests of guarantees personal future, and present and certain undertakings some of the promoters holding companies. from provided bank of ` 1,466.93 Refinanced ECB Loan from be year ` Nil) is secured/to (Previous crore (pari by first ranking security interests secured refinery expansion, passu with loans for refinery, optimisation and Sales tax / General refinery of purpose term loan) on all immovable assets refinery Refinery Division, all movable assets of assets and second division other than current assets, on current ranking security interests of pledge of certain shares future, and present the Company held by promoters. year (Previous loans of ` 3,990.43 crore Term for the Refinery expansion ` 4,562.03 crore) by first ranking / to be secured secured are for loans with passu (pari interests security refinery optimisation, Refinanced ECB refinery, and Sales tax / General purpose term loan) on all immovable assets, all movable assets and second ranking assets other than current assets, present on current security interests charge over immovable properties and future, leased to entities implementing the terminal power utility and township utility (subject utility, to prior charge in favour of the lenders financing title rights, on interest security utilities), said the documents, trust under project and interests accounts, insurance policies and retention and other collaterals being second charge on and other collaterals Company and of the pledge of certain shares by promoters Company held that of a Group by way of mortgage over a and second charge Company. of Group property d) e) c) 44.12 ` 500.00 crore) is secured secured is crore) 500.00 ` 21.37 crore) (Previous year (Previous crore) 21.37 ` 109.82 crore) {(including funded interest {(including funded interest ` 109.82 crore) to financial statements for the year ended March 31, 2013 year ended March statements for the to financial Term loans and funded interest facilities of and funded interest loans Term year ` 9,362.06 (Previous ` 6,996.08 crore of ` 152.18 crore and debentures crore) / secured are year ` 184.21 crore) (Previous security interests by first ranking to be secured expansion, for refinery (pari passu with loans ECB Loan refinanced optimisation, refinery on loan) term purpose General / tax Sales and leased all immovable assets (except certain than out assets), all movable assets other and second ranking security assets current future, and present assets, current on interests on rights, title and interests security interest retention and trust documents, project under to accounts, insurance policies all in relation refinery expansion and including the refinery optimisation, by pledge of certain refinery the Company held by promoters, of shares of some of the promoters personal guarantees pledge and other collaterals being charge on Company and of the Group of certain shares of charge by way of mortgage over a property Lenders have agreed Term Company. Group personal guarantees and collaterals to release majority of the lenders have already and thereto of in process the same and other are released (Previous A term loan of ` 60.78 crore releasing. year of facilities by a corporate guarantee is also secured crore)} Company. and certain assets of a Group a bank of ` 1,000.00 Corporate term loan from year (Previous crore assets (ranking pari by first charge on all current passu with working capital facility) excluding division, that of exploration and production second charge by way of mortgage of land and building and plant and machinery and other assets excluding certain category of assets, of some of the promoters personal guarantees Company and corporate guarantee by a Group Security for term loans and funded interest loans and funded interest Security for term institutions banks and financial facilities from and debentures: a) b) (i) Notes Notes to financial statements for the year ended March 31, 2013
in relation to the refinery, including refinery accounts for certain receivables and corporate expansion and further by pledge and non guarantee by a Group Company. disposal undertaking of certain shares/global (ii) Repayment and other terms: depository shares of the Company held by promoters / associates of promoters or of the a) Secured redeemable non – convertible deben- Company, personal guarantees of promoters of tures (“NCDs”) of ` 105/- each consists of : the Company together with collateral securities 13,868,050 (Previous year 16,918,250) – and certain undertakings from holding and 12.50% NCDs of ` 105/- each amounting to group companies and residual charge on the ` 145.61 crore (Previous year ` 177.64 crore). company’s participating interest and cash flows related to upstream oil and gas, coal bed 700,000 (Previous year 700,000) – 12.50% methane fields and related assets subject to NCDs, of ` 100 each on private placement certain approvals. basis partly paid up at ` 93.86 per debenture amounting to ` 6.57 crore (Previous year ` 6.57 f) Term loans of ` 1,013.45 crore (Previous year crore). ` Nil) for the refinery optimisation are secured by first ranking security interests (pari passu During the year, the Company refinanced its with loans for refinery, refinery expansion, rupee borrowings with one of its existing lenders Refinanced ECB Loan and Sales tax / General into an External Commercial Borrowing (ECB). purpose term loan) on all immovable assets This resulted in conversion of debentures (except certain leased out assets), all movable having face value of ` 32.03 crore also into the assets other than current assets and second ECB loan. Further, as per the Common Loan ranking security interests on current assets, Agreement (“the CLA”) entered with lenders present and future, security interest on rights, post exit from the Corporate Debt Restructuring title and interests under project documents, (CDR) Scheme, the Company has agreed to trust and retention accounts, insurance policies pay interest on a monthly/quarterly basis, on in relation to the refinery, refinery expansion and debentures held by the erstwhile CDR lenders refinery optimisation and pledge of shares of at a floating rate linked to the base rate of the the Company. respective bank prevailing on August 8, 2012, with effect from January 1, 2012, resulting in g) Term loans of ` 534.07 crore (Previous year the interest rates ranging from 12.32% p.a. ` 306.21 crore) is secured by first charge to 12.75% p.a. The Company is also in the on immovable assets and movable assets process of sending offer letters to the remaining (present and future), first charge over book debenture holders (i.e. other than lenders) debts, operational cash flows, receivables, giving them, inter alia, an option for prepayment trust and retention account, Debt Service of debentures along with accumulated interest Reserve account, participating interest under in full. The principal amount of debentures is CBM contract, security interest on rights, title otherwise payable from December 2014 to June and interests under the project documents, 2018 and accumulated interest from December insurance policies, clearances, rights under 2014 to March 2027, with an option to prepay letter of credit, guarantee, performance bond, certain portion of interest at a discounted rate. corporate guarantee and bank guarantees, all As an alternative, these debenture holders in relation to a CBM Project. can opt for revising the terms and conditions h) Term loan from a Bank of ` 1.20 crore (Previous applicable to debentures in line with the terms year ` 6.00 crore) is secured by hypothecation contained in the CLA. of current assets of an oilfield, bank escrow
92 Annual Report 2012-13 93 Company Overview Management Discussion and Analysis Sustainability Governance Financials 34.95 crore 34.95 crore ` 1,707.61 crore) pertains to Buyers’ ` 1,707.61 crore) 599.50 crore to the financial institutions). ` 599.50 crore 1,037.48 crore to the financial institutions) to the financial institutions) ` 1,037.48 crore AS 30, Financial Instruments, Recognition and AS 30, Financial Instruments, upon signing the FS loan has, Measurement, since inception, of the CLA, been re-measured of cash flows value considering present the gross Accordingly, inclusive of interest. of the FS loans and liability of ` 3,163.84 crore 31, 2013 as at March thereon funded interest to the banks (comprising of ` 2,126.36 crore and 1,833.84 crore at ` have been measured to the banks (comprising of ` 1,234.34 crore and cost of ` 536.71 borrowing Consequently, attributable to construction of the Refinery crore has on such re-measurement based Project Assets been capitalised as part of cost of Fixed crore 110.94 of ` cost borrowing balance and profit of the statement in recognised been has and loss. is repayable The FS Loans of ` 2,471.63 crore 2021 to March in various installments from as thereon and the Funded Interest 2026 March 31, 2013 amounting to ` 692.19 crore at March in 40 equal quarterly installments is repayable beginning June 30, 2015. loan of ` 206.88 crore A funded interest is payable in a year ` 206.88 crore) (Previous single bullet payment in 2031 and is continued with the in accordance to be measured at principles aforementioned year ` 31.67 crore). (Previous Loans amounting to ` 4,563.97 crore Term carry interest year ` 4,071.90 crore) (Previous banks’ prime lending rate linked with respective rate / base rate / LIBOR plus margin / liquidity in installments repayable and are premium December 2012 ending in March starting from (Previous 2020. Out of above ` 948.45 crore Loan. year which will be ultimately converted into Credit Term loans amounting to ` 534.07 crore Term rate interest carry year ` 306.21 crore) (Previous banks prime lending rate/ linked with respective d) e) to financial statements for the year ended March 31, 2013 year ended March statements for the to financial The Hon’ble High Court of Gujarat has, in The Hon’ble High response to the Company’s petition, ruled vide to the Company’s response 2006 and August dated August 04, its orders certain categories on 11, 2006 that the interest on cash should be accounted of debentures the said petition with basis. In accordance liabilities funded / accrued interest / order, year (Previous amounting to ` 417.72 crore 31, 2013 have as at March ` 428.24 crore) This amount carries for. not been accounted of 5% to a fixed rate rate ranging from interest repayable from floating rate of 12.75% and is 2027. December 2014 to March Agreement Loan Common for rates Interest The (“the CLA”) (earlier Master Restructuring Banks and (“the MRA”)) loans from Agreement 5,459.20 to ` amounting institutions Financial will year ` 7,070.04 crore) (Previous crore rate / based on their prime lending rate / base 2.12% LIBOR plus margin (margin ranges from installments repayment different 3.00%) with to 2026. December 2009 to March starting from the Company exited Corporate During the year, in Debt Restructuring Scheme resulting MRA dated December 17, termination of the into a CLA dated March 2004 and entered 25, 2013 with the lenders for the loan facilities hitherto being governed the which were by to MRA. The MRA gave an option, subject prepay consent of lenders, to the Company to loans (the FS loans) of certain funded interest April 24, 2012 or before on ` 2,471.63 crore The FS loan has not been without interest. 24, 2012 and is now April before prepaid governed by the CLA. to reflect to give accounting effect In order substance of the transaction, the FS loan was, by the Company since inception, measured of IAS with the principles in accordance 39, Financial Instruments, Recognition and guidance specific of absence in Measurement, in Indian GAAP to cover the specific situation. In continuance of the above said principle and applying the principle of Accounting Standard
b) c) Notes Notes to financial statements for the year ended March 31, 2013
base rate/LIBOR plus margin and are repayable j) General purpose term loan amounting to in installments starting from March 2014 and ` 3,143.00 crore (Previous year ` Nil) carry ending in June 2021. Out of above ` 67.62 interest rate at banks’ prime lending rate / base crore (Previous year ` 32.47 crore) pertains to rate plus 3.00% (margin / liquidity premium) Buyers’ credit which will be ultimately converted and is repayable in installments from December into term loan. 2012 to September 2018. f) Term loans amounting to ` 1.20 crore (Previous k) The pilot project for coal bed methane gas year ` 6.00 crore) carry 12.80% interest rate was partially financed by a conditional grant with repayments ending in April 2013. of USD 0.89 million (Previous year USD 0.89 million) and ` 2.31 crore (Previous g) ECB Loan amounting to ` 439.90 crore year ` 2.31 crore) received from a bank. (Previous year ` 490.13 crore) carry interest rate The conditional grant, in terms of the agreement, of LIBOR + 2.75% are repayable in installments will be repayable in the event the Company puts ending in October 2018. the project to commercial use, and repayments to the bank will be based on gross annual sales h) ECB Loan amounting to ` 1,466.93 crore derived from the commercial exploitation of (Previous year ` Nil) carry interest rate of 6 the project, subject to a maximum repayment months LIBOR + 5.00% are repayable in of 200% of the conditional grant. Commercial installments starting from March 2015 ending exploitation of the project is dependent in March 2023. upon getting necessary approvals from the i) Corporate term loan amounting to ` 1,000.00 Government of India. crore (Previous year ` 500.00 crore) carry l) Unsecured loans from related parties includes interest rate at banks’ prime lending rate / base ` Nil (Previous year ` 1,109.00 crore) carrying rate plus 3.75% (margin / liquidity premium) interest rate 9.5% and Rupee loan amounting and is repayable in installments from June 2014 to ` 45.75 crore (Previous year ` 70.20 crore) to March 2017. carrying interest rate 10.25% repayable by April 25, 2014 in various installments. 8. Deferred tax liabilities (Net) (` in crore) As at As at Particulars March 31, 2013 March 31, 2012 Deferred tax liability Fixed asset (excess net book value over written down value as per (2,191.43) (1,731.99) the provisions of the Income Tax Act, 1961) (A) (2,191.43) (1,731.99) Deferred tax assets (restricted to the extent of deferred tax liability considering virtual / reasonable certainty, as applicable) Disallowance u/s 43B of The Income Tax Act, 1961 1,826.24 1,366.73 Unabsorbed depreciation carried forward as per provisions of the 365.11 365.11 Income Tax Act, 1961 Others 0.08 0.15 (B) 2,191.43 1,731.99 Net deferred tax liabilities (net) (A) + (B) - -
94 Annual Report 2012-13 95 Company Overview Management Discussion and Analysis Sustainability Governance Financials ------3.23 99.04 173.72 4,795.55 4,519.56 (` in crore) (` in crore) Long term Long term - 1.79 1.62 36.45 31.52 16.74 57.46 27.92 13.51 451.96 174.18 417.84 Current Current As at March 31, 2012 As at March 4,912.49 2,021.47 1,661.82 As at March 31, 2012 As at March 10,808.25 Short term 10,810. 04 ------5.56 117.32 156.23* 2,216.07 1,936.96 Long term Long term - 2.51 7.51 64.75 29.53 22.66 15.26 73.54 32.58 855.10 349.71 As at March 31, 2013 As at March Current Current 11,353.59 11,356.10 9,122.71 3,085.63 2,263.56 2,322.88 Short term As at March 31, 2013 As at March ables y a to financial statements for the year ended March 31, 2013 year ended March statements for the to financial Temporary overdrawn bank balances *** overdrawn Temporary Other liabilities Liabilities Other Current Unclaimed debenture interest and interest Unclaimed debenture principal (secured)** notes under {For security details refer note 7(i)(a)} Other Long term Liabilities Advances received from customers from Advances received Security deposits Statutory dues Bills Payable for capital creditors Bills Payable for capital creditors Capital creditors Capital creditors Current maturities of finance lease Current note 7(B)} obligations {refer but not due on loans/ accrued Interest borrowings accrued and due on loans/ Interest borrowings Current maturities of unsecured long- maturities of unsecured Current note 7(B)} term debts {refer Current maturities of secured long-term of secured maturities Current note 7(A)} debts {refer current liabilities Other Long term liabilities / Other Particulars Total
Trade P Particulars note 43) and small enterprises (refer Micro goods and services raw materials, Towards into long term loans in line with the term loan agreements. due and outstanding) to be credited amount year ` 0.05 crore is no amount due and outstanding (Previous ** There Fund as at balance sheet date. to Investor Education and Protection 31, 2013 consequent bank balances as per books of Accounts as on March temporary overdrawn *** Represents to issue of cheques at year end. 10. 9. Represents bills payable for capital creditors as at March 31, 2013, with or without roll over, ultimately convertible over, with or without roll 31, 2013, as at March bills payable for capital creditors * Represents Notes Notes to financial statements for the year ended March 31, 2013
11. Provisions (` in crore) As at March 31, 2013 As at March 31, 2012 Particulars Short term Long term Short term Long term Provision for employee benefits (refer note 44) Earned leave 36.90 - 30.63 - Gratuity 3.16 - - - Other Provisions Site restoration - 5.14 - 1.00 Total 40.06 5.14 30.63 1.00
(` in crore) Movement in Provisions Provision for Site Restoration
2012-2013 2011-2012 Opening Balance 1.00 1.00 Add: Provision made during the year 4.14 - Closing Balance 5.14 1.00 Represents current cost of restoring the Exploration and Production sites on abandonment or decommissioning of Oil and Gas wells and facilities at the end of their economic life.
12. Short term borrowings (` in crore) As at As at Particulars March 31, 2013 March 31, 2012 Secured Borrowings Buyers’ credits and bills discounting and advance against LCs 7,357.68 3,620.28 Bank overdraft 92.53 198.09 Working capital demand loan 390.00 - Total 7,840.21 3,818.37
Security for short term borrowing: and second charge by way of mortgage over a property of Group Company. (i) Buyers’ credits, bills discounting, advance against LCs and working capital demand loan: b) ` 1,196.46 crore (Previous year ` Nil) are secured by charge over receivables. a) ` 6,491.93 crore (Previous year ` 3,286.65 crore) are secured by first charge on all current assets c) ` Nil (Previous year ` 327.65 crore) are secured (ranking pari passu with Corporate term loan) by first charge on all goods procured under the excluding that of Exploration and Production LCs opened by the banks and guarantee by the division, second charge by way of mortgage ultimate holding Company. of land and building and plant and machinery and other assets excluding certain category d) ` 59.29 crore (Previous year ` 5.98 crore) are of assets, personal guarantees of promoters, secured by fixed deposits maintained with a corporate guarantee by a Group Company, bank. other collaterals being second charge on (ii) Bank Overdraft from bank of ` 92.53 crore (Previous pledge of certain shares of the Company and year ` 198.09 crore) is secured by fixed deposits that of a Group Company held by promoters maintained with the bank.
96 Annual Report 2012-13 97
Company Overview Management Discussion and Analysis Sustainability Governance Financials
including capital work-in-progress and expenditure during construction have been capitalised during the year. year. the during capitalised been have construction during expenditure and work-in-progress capital including
ompany has completed the refinery expansion project to expand the refining capacity from 18 MMTPA to 20 MMTPA. All expenditure pertaining to the completed refinery project project refinery completed the to pertaining expenditure All MMTPA. 20 to MMTPA 18 from capacity refining the expand to project expansion refinery the completed has ompany c The 8
33.08 crore). 33.08 of loss year (Previous crore 1.87 of gain exchange includes work-in-progress Capital 7 ` `
The estimated useful life of softwares and licenses is estimated to be 5 years from the date of acquisition. of date the from years 5 be to estimated is licenses and softwares of life useful estimated The 6
23.77 crore) on duty draw back. draw duty on crore) 23.77 `
34.09 crore) interest on fund utilised for capex purpose and and purpose capex for utilised fund on interest crore) 34.09 year Nil) reduction of VAT input credit on exempted capital goods and gain of of gain and goods capital exempted on credit input VAT of reduction Nil) year (Previous crore 4.35 Nil (Previous year year (Previous Nil ` ` ` `
20.85 crore (Previous (Previous crore 20.85 exit, CDR of effect including crore) 131.58 year (Previous crore 547.52 of cost borrowing agreement), loan term with line in due becoming their on loans term long into ` ` `
132.75 crore) on long term monetary items (including buyers’ credit with roll over, convertible convertible over, roll with credit buyers’ (including items monetary term long on crore) 132.75 year (Previous crore 246.81 of differences exchange includes machinery and plant to Additions 5 ` `
Buildings include Gymnastic buildings being depreciated at the rate of 31.67 % under straight line method. IT assets are depreciated at the rate of 63 % per cent under WDV method. WDV under cent per % 63 of rate the at depreciated are assets IT method. line straight under % 31.67 of rate the at depreciated being buildings Gymnastic include Buildings 4
and Terminals Limited (VPTL) and Vadinar Properties Limited. A charge has been created against the land leased to VPCL and VOTL in favour of lenders of VPCL and VOTL respectively. VOTL and VPCL of lenders of favour in VOTL and VPCL to leased land the against created been has charge A Limited. Properties Vadinar and (VPTL) Limited Terminals and
34.52 crore) representing cost of land leased to Vadinar Oil Terminal Limited (VOTL), Vadinar Power Company Limited (VPCL), Vadinar Ports Ports Vadinar (VPCL), Limited Company Power Vadinar (VOTL), Limited Terminal Oil Vadinar to leased land of cost representing crore) 34.52 year (Previous crore 34.52 includes Land 3 ` `
(PGVCL) feeder, the ownership of which vests with PGVCL and is amortised over a period of 20 years. 20 of period a over amortised is and PGVCL with vests which of ownership the feeder, (PGVCL)
23.27 crore) incurred by the Company for a 220 KVA line from Paschim Gujarat Vij Company Limited Limited Company Vij Gujarat Paschim from line KVA 220 a for Company the by incurred crore) 23.27 year (Previous crore 23.27 of expenditure capital includes machinery and Plant 2 ` `
activities); (exploration work-in-progress capital to crore) 4.11 year (Previous crore 4.00 (iii)
` `
4.90 crore) to expenditure during construction; during expenditure to crore) 4.90 year (Previous Nil (ii) ` `
25.77 crore) to exceptional items; exceptional to crore) 25.77 year (Previous crore 0.54 and loss; and profit of statement to crore) 761.94 year (Previous crore 1,296.06 (i) ` ` ` `
796.72 crore) is charged / allocated as under : : under as allocated / charged is crore) 796.72 year (Previous crore 1,300.60 - year the for depletion / amortisation / depreciation Total 1 ` `
NOTES:
2,610.38 2,610.38 Capital work-in-progress (Including expenditure during construction) construction) during expenditure (Including work-in-progress Capital 1,760.47 1,760.47
21,319.92 21,319.92 3,026.46 24,346.38 0.76 0.76 796.72 2,230.50 1.79 10,373.58 13,974.59 Year Previous
21,274.15 21,274.15 4,325.86 25,600.01 (A+B+C+D) Total 21,319.92 21,319.92 1.20 1,300.60 3,026.46 1.46 1,255.09 24,346.38
18.02 41.99 60.01 - (D) assets Intangible Total 20.02 - 9.45 32.54 7.45 52.56
18.02 41.99 60.01 20.02 - 9.45 32.54 - 7.45 52.56 licenses and Softwares
Intangible assets Intangible D)
21,256.13 21,256.13 4,283.87 25,540.00 (A+B+C) assets Tangible Total 21,299.90 21,299.90 1.20 1,291.15 2,993.92 1.46 1,247.64 24,293.82
- 18.20 - - 18.20 - - (C) Total - 18.20 18.20
- 18.20 18.20 - - - 18.20 - - 18.20 Machinery and Plant
Tangible assets given on lease on given assets Tangible C)
9.63 70.44 - 80.07 - - (B) Total 13.27 3.64 66.80 80.07
0.10 0.57 0.67 Office Equipments Equipments Office 0.12 - 0.02 0.55 - - 0.67
0.30 0.58 0.88 Furniture and Fixtures Fixtures and Furniture 0.37 - 0.07 0.51 - - 0.88
4.13 1.49 5.62 Plant and Machinery Machinery and Plant 4.40 - 0.27 1.22 - - 5.62
4.93 67.80 72.73 Building Building 8.21 - 3.28 64.52 - - 72.73
0.17 - 0.17 Land Land 0.17 - - - - - 0.17
Tangible assets taken on lease lease on taken assets Tangible B)
Total (A) (A) Total 21,246.50 21,246.50 4,195.23 25,441.73 21,286.63 21,286.63 1.20 1,287.51 2,908.92 1.46 1,247.64 24,195.55
5.84 4.16 10.00 Aircraft Aircraft 6.97 - 1.13 3.03 - - 10.00
4.24 8.69 12.93 Vehicles Vehicles 4.73 0.22 1.59 7.32 0.26 1.14 12.05
14.89 44.05 58.94 Office equipments equipments Office 16.02 0.88 5.14 39.79 0.99 4.12 55.81
10.96 11.48 22.44 Furniture and fixtures fixtures and Furniture 6.96 0.09 1.52 10.05 0.11 5.54 17.01
190.34 7.39 197.73 Producing properties properties Producing 183.34 - 2.61 4.78 - 9.61 188.12
20,336.12 3,970.65 24,306.77 Plant and machinery machinery and Plant 20,353.74 0.01 1,228.27 2,742.39 0.10 1,210.74 23,096.13
531.11 148.81 679.92 Buildings Buildings 566.73 - 47.25 101.56 - 11.63 668.29
153.00 153.00 153.00 - Land Land 148.14 148.14 4.86 4.86 ------148.14
Tangible assets assets Tangible A)
2013 2013 2013 2012 2012 2012
to financial statements for the year ended March 31, 2013 year ended March statements for the to financial
Write Offs Offs Write Write Offs Offs Write year
March 31, 31, March March 31, 31, March 31, March Additions Additions 01, April April 01, 01, April March 31, 31, March
Deductions/ Deductions/ Deductions/ Deductions/ the During
Description of the assets assets the of Description at As at As at As at As at As at As
Gross block (at cost) (I) (I) cost) (at block Gross Depreciation / amortisation (II) amortisation / Depreciation Net block (III) = (I - II) - (I = (III) block Net
in crore) in (
Notes `
13. ED ASSETS ASSETS ED X FI Notes to financial statements for the year ended March 31, 2013
(` in crore) 9 Expenditure During Construction (EDC) includes: As at As at Particulars March 31, 2013 March 31, 2012 Opening Balances (A) 153.39 1,077.80 Add: Incurred during the year Interest and other finance charges 48.35 846.82 Interest income (0.98) (2.65) Consumption of chemicals 0.00* 2.78 Consumption of stores and spares 1.63 11.91 Power and fuel 14.98 210.16 Salaries, wages and bonus 12.36 55.54 Contribution to / provision for provident and other funds 0.30 2.51 Staff welfare expenses 0.03 3.89 Insurance 0.50 13.09 Professional fees 3.47 35.58 Rent 0.58 1.72 Repairs and maintenance 4.72 30.17 Sundry expenses 0.38 10.63 Depreciation - 4.90 (Gain) / Loss on foreign exchange fluctuation (Net) 8.01 11.10 Net value of intermediates / products transferred to - 9.36 / from new units Total (B) 94.33 1,247.51 Less: Capitalised (C) 47.82 2,171.92 Expenditure During Construction pending (A+B-C) 199.90 153.39 allocation
*Amount less than ` 0.01 crore
98 Annual Report 2012-13 99 Company Overview Management Discussion and Analysis Sustainability Governance Financials - - - - - 0.00* 0.00* 0.00* Current Current (` in crore) - 1.58 13.00 10.00 24.58 103.00 127.58 103.00 As at March 31, 2012 As at March Non Current Non Current ------Current Current - 1.58 13.00 10.00 24.58 103.00 127.58 103.00 As at March 31, 2013 As at March Non Current Non Current to financial statements for the year ended March 31, 2013 year ended March statements for the to financial Particulars
Investments Trade Investment Trade instrument Investment in equity (fully paid-up) Investment in subsidiary (unquoted) of of USD 1) year 1 equity share Nil (Previous as Essar Oil Mauritius Limited (formerly known Pitney Mauritius Holding Limited) (Face value USD 1)** Investment in associate (fully paid-up) (long- term, unquoted) year 102,999,994) 102,999,994 (Previous Power of ` 10 each of Vadinar equity shares Company Limited (VPCL) (Face value ` 10) Other Investments (Long term, unquoted) Investment in equity instrument year 13,000,000) equity 13,000,000 (Previous VK Limited ` 10 each of Petronet of shares (Face value ` 10) *** year 10,000,000) equity 10,000,000 (Previous India Limited ` 10 each of Petronet of shares (Face value ` 10) 1,584,000 (Previous year 1,584,000) equity 1,584,000 (Previous CI Limited ` 10 each of Petronet of shares (Face value ` 10) (company under liquidation) for diminution in value of Other Less : Provision Investments (Long term, unquoted) Total Refer note 3 (n) for basis of valuation. *Amount less than ` 0.01 crore formerly known its holding in Essar Oil Mauritius Limited (EOML, off the Company has disposed **During the year, as Pitney Mauritius Holdings Limited). pledged with a lender against the loan disbursed to the Company. are ***All the shares
14.
Notes Notes to financial statements for the year ended March 31, 2013
15. Inventories (` in crore) As at As at Particulars March 31, 2013 March 31, 2012 Raw material {including material in transit ` 3,453.97 crore (Previous 6,583.70 4,059.24 year ` 1,561.16 crore)} Work-in-progress 2,544.47 2,280.15 Finished goods 1,052.49 1,079.93 Stores and spare parts {including material in transit ` 17.19 crore 277.01 236.91 (Previous year ` 6.68 crore)} Other consumables including coal {including coal in transit ` 49.72 130.70 25.44 crore (Previous year ` Nil)} Total 10,588.37 7,681.67
Refer note 3 (i) for basis of valuation.
16. Trade receivables (Unsecured and considered good, unless otherwise stated) (` in crore) As at As at Particulars March 31, 2013 March 31, 2012 Outstanding for a period exceeding six months from due date of payment -Considered good 75.83 0.82 -Considered doubtful 0.14 - Others - considered good 4,623.28 3,958.07 Bills Receivable 17.38 38.04 4,716.63 3,996.93 Less : Provision for doubtful debts 0.14 - Total 4,716.49 3,996.93
` 391.26 crore (Previous year ` 1,139.50 crore) secured by bank guarantees and / or letters of credit.
100 Annual Report 2012-13 101 Company Overview Management Discussion and Analysis Sustainability Governance Financials ------0.79 0.00* (0.79) (` in crore) (` in crore) Non Current Non Current Non Current Non Current - 0.22 1.34 0.62 (0.62) 46.55 48.73 65.91 35.47 35.94 65.45 155.31 284.65 440.18 198.00 Current Current Current Current 1,519.37 1,620.76 2,060.94 As at March 31, 2012 As at March As at March 31, 2012 As at March ------9.21 38.41 38.41 (9.21) Non Current Non Current Non Current Non Current - 0.23 0.68 0.45 0.32 14.24 68.76 48.40 (0.45) 78.00 28.85 326.24 776.82 340.71 972.66 Current Current Current Current 2,060.78 2,089.95 2,430.66 As at March 31, 2013 As at March As at March 31, 2013 As at March (A) (A) (B) ances to financial statements for the year ended March 31, 2013 year ended March statements for the to financial Particulars nsecured and considered good, unless otherwise stated) and considered (Unsecured Loans and adv Particulars kind or in cash or in Advances recoverable for value to be received note 45) (refer parties related - From
Cash and bank balances Cash and cash equivalents in: Balances with banks accounts Current less than 3 months Deposits with maturities director - From expenses Prepaid Balances with government authorities good - Considered doubtful - Considered for doubtful advances Less: Provision Cash on hand Others Other bank balances: accounts - Balances with banks in Current Earmarked accounts (unclaimed debenture interest) Margin deposits and escrow accounts** Margin deposits and escrow Other deposits Amount disclosed under the head “Other Amount disclosed under the head “Other note 19) assets” (refer Non current / current Total (A+B) Total 1,520.16 crore) margin deposits mainly placed for ` 1,520.16 crore) year (Previous **Deposit accounts comprises ` 2,069.99 crore facilities, guarantees and short term borrowing. letters of credit 18.
17. Notes *Amount less than ` 0.01 crore Notes to financial statements for the year ended March 31, 2013
18. Loans and advances (Unsecured and considered good, unless otherwise stated) (` in crore) As at March 31, 2013 As at March 31, 2012 Particulars Current Non Current Current Non Current Advance on capital account -To related parties (refer note 45) - 937.71 - 75.84 -To other parties - 49.23 - 5.93 (B) - 986.94 - 81.77 Security deposits Deposit to related parties (refer note 45) 8.58 103.39 11.74 98.99 Deposit to others - Considered good 63.75 4.53 1.09 4.55 - Considered doubtful 0.35 - 0.35 - Less: Provision for doubtful deposits (0.35) - (0.35) - (C) 72.33 107.92 12.83 103.54 Advance income tax / Tax deducted at source - Considered good 231.30 4.87 17.19 225.62 (D) 231.30 4.87 17.19 225.62 Total (A+B+C+D) 1,276.29 1,138.14 228.02 410.93
19. Other current / Non current assets (` in crore) As at March 31, 2013 As at March 31, 2012 Particulars Current Non Current Current Non Current Other receivables* 1,869.26 993.86 538.93 1,735.45 Export incentive receivables - 89.95 76.93 - Unamortised Expenses - Ancillary cost for arranging borrowing 63.65 241.44 3.56 73.38 - Forward contract premium 70.29 - 37.17 - Interest accrued on deposits 90.64 0.07 63.51 0.02 Amount transferred from “cash and bank - 9.21 - 0.79 balances” (refer note 17) Total 2,093.84 1,334.53 720.10 1,809.64
*Other receivables include (i) ` 167.67 crore (Previous year ` 149.59 crore) due from government companies / agencies in respect of the Company’s erstwhile oil drilling and offshore construction activities for which the Company received favourable awards in arbitration proceedings. The awards have since been challenged by the parties. Pending outcome of the litigations, the receivables are considered as recoverable based on the arbitration awards and assessment of the management.
102 Annual Report 2012-13 103 Company Overview Management Discussion and Analysis Sustainability Governance Financials
2.63 0.08 6.31 88.25 21.36 43.05 353.96 375.32 424.76 3,703.78 1,387.36 2,085.47 (` in crore) (` in crore) 58,336.63 62,040.41 63,427.77 61,251.42 March 31, 2012March March 31, 2012 March For the year ended For the year ended
- 3.60 4.05 20.82 271.04 164.92 418.99 583.91 608.78 4,966.08 3,523.72 1,023.17 88,578.12 93,544.20 97,067.92 95,770.11 March 31, 2013 March March 31, 2013 March For the year ended For the year ended 176.11 crore) on the instruments for hedging of risk hedging for on the instruments 176.11 crore) ` 175.76 crore (Previous year net gain year (Previous crore 175.76 ` to financial statements for the year ended March 31, 2013 year ended March statements for the to financial On deposits Others 2,177.82 crore receivable from Essar House Limited (EHL) being the amount paid under the defeasment being the amount paid under the Essar House Limited (EHL) from receivable ` 2,177.82 crore to recover agreed note 36). The Company has by the scheme (refer covered of the sales tax liability agreement with the installment facility made coinciding quarterly installments along with interest, these dues in eight equal Gujarat Sales tax dues. To of the Court to the company for repayment Supreme available by the Hon’ble the parent an additional guarantee from of obtaining the company is in the process this amount further, secure company of EHL. Revenue from operations (net) Revenue from Less : Excise duty Revenue from operations before excise duty operations before Revenue from Less : Sales tax / VAT** Revenue from operations (gross) Revenue from Other operating revenue Sales - others Sale of traded goods - crude and petroleum products Sale of traded goods - crude and petroleum Particulars Other income Particulars Revenue from operations Sale of petroleum products* Sale of petroleum Interest a) b) on sale of fixed assets Profit Profit on sale of current investments on sale of current Profit Total Others of movement in prices of finished goods and margins. of movement in prices of finished goods liability amounting to ` 1,507.01 payment of sales tax /VAT the Company deferred year, **During the previous party at its present and defeased the same to a related for the period April 01, 2011 to December 31, 2011 crore shown above as deduction from amounting to ` 1,387.36 crore Sales tax/VAT value amounting to ` 528.42 crore. as per liability of ` 528.42 crore value of sales tax/VAT includes the defeased operations (gross)” “Revenue from liability sales tax/VAT pursuant to which the assignee has undertaken to discharge the the defeasance agreement January 17, 2012, the Company subsequently dated Court Order on the due dates. Pursuant to the Supreme 36). note as an exceptional item (refer amount of income recognized the entire reversed Revenue from operations (gross) includes sale of goods net of trade discount, duty draw back income, recoverable of trade discount, duty draw back income, recoverable includes sale of goods net operations (gross) Revenue from / cracks and excise duty. loss/gain on product customers, hedging from added tax (VAT) sales tax / Value loss of net includes * (ii) 21. 20.
Notes Notes to financial statements for the year ended March 31, 2013
22. Cost of raw materials consumed (` in crore) For the year ended For the year ended Particulars March 31, 2013 March 31, 2012 Cost of raw materials consumed {refer note 32(a)} 81,333.98 52,894.85
Includes net loss of ` 238.23 crore (Previous year net loss ` 147.06 crore) on the instruments for hedge of risk of movement in prices of crude oil.
23. Purchase of traded goods (` in crore) For the year ended For the year ended Particulars March 31, 2013 March 31, 2012 Traded crude and petroleum products 865.57 1,954.43 Others 1.15 2.73 Total 866.72 1,957.16
24. Changes in inventory of finished goods and work-in-progress (` in crore) For the year ended For the year ended Particulars March 31, 2013 March 31, 2012 Opening inventory: - Finished goods 1,079.93 891.83 - Work-in-progress 2,280.15 1,480.15 (A) 3,360.08 2,371.98 Closing inventory: - Finished goods 1,052.49 1,079.93 - Work-in-progress 2,544.47 2,280.15 (B) 3,596.96 3,360.08 Changes (Increase) / Decrease in Inventory Total (A) - (B) (236.88) (988.10)
25. Employee benefits expense (` in crore) For the year ended For the year ended Particulars March 31, 2013 March 31, 2012 Salaries, wages and bonus 163.68 117.88 Contribution to / provision for provident and other funds 10.06 8.30 Staff welfare expenses 11.92 8.38 Total 185.66 134.56 [Regarding accounting of stock option refer note 3(m)(iv) & 4(d)]
104 Annual Report 2012-13 105 Company Overview Management Discussion and Analysis Sustainability Governance Financials
- - 2.14 6.56 29.79 71.77 16.96 96.80 17.26 38.51 33.72 16.26 24.95 16.22 142.60 625.71 129.08 131.27 444.43 313.39 399.67 268.95 235.79 1,071.22 2,662.16 1,191.27 (` in crore) March 31, 2012March For the year ended
0.01 0.23 2.41 6.66 34.91 62.34 23.61 59.43 92.31 19.86 38.90 53.85 17.07 115.25 651.03 129.23 800.00 367.40 582.49 313.50 152.46 (15.95) 462.23 1,055.81 3,386.74 1,748.44 March 31, 2013March For the year ended (A) (B) (C) to financial statements for the year ended March 31, 2013 year ended March statements for the to financial Others Plant and machinery Buildings Sundry expenses Loss on sale of fixed assets (net) Exchange differences Provision / Write off of fixed assets off / Write Provision (A)+(B)+(C) Total c) b) Particulars
Other expenses Intermediate material handling charges Intermediate material Repairs and maintenance a) Operating Expenses: Operating Expenses: parts and spare Consumption of stores Consumption of fuel charges handling Product fees Professional Rent Power and Fuel {Net of consumed out of own production ` 733.80 of consumed out of own production Power and Fuel {Net year ` 700.11 crore)} (Previous crore outlets Adhoc compensation to retail Others selling and distribution expenses General and Administrative Expenses: Rates and taxes Insurance Excise duty (difference between duty on opening and closing stock) between duty on opening and closing Excise duty (difference note 37(b)} Other operating expenses {refer Selling and Marketing Expenses: charges Terminalisation outlets Rent / ROI for retail
26. Notes Notes to financial statements for the year ended March 31, 2013
27. Finance costs (` in crore) For the year ended For the year ended Particulars March 31, 2013 March 31, 2012 Interest a) On debentures {refer note 7(ii)(a)} 56.04 23.36 b) On fixed loans 1,739.66 664.09 c) On others 787.85 272.71 Change in present obligation of certain loans {refer note 7(ii)(c)} 120.65 58.35 Other finance charges 719.38 368.33
Total 3,423.58 1,386.84
28. Earnings per share
Year ended Year ended Particulars March 31, 2013 March 31, 2012 Profit / (Loss) after tax (` In crore) (1,180.44) (1,285.48) Profit / (Loss) attributable to ordinary shareholders for (A) (1,180.44) (1,285.48) Basic EPS (` In crore) Impact on Profit (Net of Tax) due to FCCB for Diluted EPS - 3.80 (` In crore) Profit / (Loss) attributable to ordinary shareholders for (B) (1,180.44) (1,289.28) Diluted EPS (` In crore) Nos. Nos. Ordinary shares at the beginning of the year for basic EPS 1,365,667,086 1,365,667,086 Add: Weighted average number of ordinary shares issued - - Weighted average number of ordinary shares for (C) 1,365,667,086 1,365,667,086 basic EPS Add:- Shares deemed to be issued 84,008,937 83,849,816 Weighted average number of ordinary shares for (D) 1,449,676,023 1,449,516,902 diluted EPS Nominal value of ordinary shares (`) 10/- 10/- Basic earnings per share (`) (A)/(C) (8.64) (9.41) Diluted earnings per share (`) (A)/(C) (8.64) (9.41)
106 Annual Report 2012-13 107 Company Overview Management Discussion and Analysis Sustainability Governance Financials
10.36 64.35 161.06 274.73 108.63 1,922.39 (` in crore) (` in crore) Year ended Year Year ended Year March 31, 2012 March March 31, 2012 31, March
67.49 125.67 508.01 258.87 670.04 1,054.17 ear ended ear ended Y Y March 31, 2013 March March 31, 2013 31, March
0.64 crore (Previous year (Previous 0.64 crore ` 3.28 crore), litigation for additional compensation additional for litigation crore), 3.28 ` The above includes certain arbitration matters ` 235.61 certain arbitration The above includes Rupee term loan year ` 80.73 crore), (Previous crore year ` 7.99 bank charges ` Nil (Previous and interest stamp duty on import of crude ` 246.24 crore crore), tax on demand of road year ` 174.94 crore), (Previous year (Previous certain heavy equipment ` 0.94 crore (Previous entry tax ` 3.28 crore Gujarat ` 0.89 crore), year matter acquisition land in services claims ` 20.15 crore E & P drilling ` 1.92 crore), other miscellaneous and year ` 3.64 crore) (Previous year ` 1.34 crore) (Previous claims of ` 1.15 crore Others In respect of custom duty / excise duty In respect In respect of sales tax / VAT In respect In respect of income tax In respect to financial statements for the year ended March 31, 2013 year ended March statements for the to financial The claims by parties in respect of which the management The claims by parties in respect frivolous and not has been legally advised that the same are as contingent liabilities as tenable, have not been considered embodying economic resources the possibility of an outflow of remote. benefits is highly Guarantees given by the Company on behalf of others (iv) (iii) (ii) Claims against the Company not acknowledged as debts Claims against the Company not acknowledged (i) b) Contingent liabilities Particulars a) commitments Capital Particulars Estimated amount of contracts remaining to be executed on capital contracts remaining Estimated amount of (net of advances) {including ` 0.28 for account and not provided {refer pertaining to joint ventures year ` 0.86 crore) (Previous crore note 38(c)} 19,153.39 crore (Previous year (Previous ` 19,153.39 crore does not include The above figures implementation of to the for contracts in relation ` 18,600.45 crore) as the work under these the Phase II of Refinery Expansion Project, financial commitments contracts will commence only after definitive into, and following which, if the Company has being entered by work is to commence that the not notified the counter-party September 2013, the contracts will terminate. 30. 29. Notes Notes to financial statements for the year ended March 31, 2013
31. CIF value of imports including goods in transit and project imports (on accrual basis) (` in crore) Year ended Year ended Particulars March 31, 2013 March 31, 2012 a) Raw materials - crude oil 68,139.36 47,361.22 b) Components and spare parts (including other consumable 459.19 112.81 spares and coal) c) Capital goods 112.32 662.46
32. Details of Cost of raw materials consumed and stores and spare parts consumption
Year ended March 31, 2013 Year ended March 31, 2012 Particulars ` in crore % ` in crore % a) Cost of raw materials consumed* (including expenditure during construction) (1) Imported 66,088.68 81.26 47,121.41 88.89 (2) Indigenous 15,245.30 18.74 5,892.31 11.11 Total 81,333.98 100.00 53,013.72 100.00 *Above figure includes cost of crude consumption during trial run ` Nil (Previous year ` 118.87 crore)
b) Consumption of stores and spare parts (including expenditure during construction) (1) Imported 8.75 14.33 26.96 24.80 (2) Indigenous 52.30 85.67 81.78 75.20 Total 61.05 100.00 108.74 100.00
33. Expenditure and earnings in foreign currency including expenditure during construction (on accrual basis) (` in crore) Year ended Year ended Particulars March 31, 2013 March 31, 2012 a) Expenditure in foreign currency including expenditure during construction (on accrual basis) (i) Interest 134.00 107.63 (ii) Travelling expenses 0.37 2.95
108 Annual Report 2012-13 109 Company Overview Management Discussion and Analysis Sustainability Governance Financials
- 7.20 14.73 69.36 19.85 31.85 343.51 314.45 141.35 1,255.51 1,246.50 (` in crore) 19,915.33 Year ended Year March 31, 2012 March
- - 6.53 0.68 22.29 87.61 47.15 10.10 250.22 1,252.01 1,666.00 ear ended 30,640.29 Y March 31, 2013 March consumption of raw materials would have been consumption of raw materials would would have after tax profit lower by ` 5.69 crore, would and receivables been higher by ` 24.17 crore have been lower by ` 80.73 crore. GDSs proceeds utilisation balance As at balance sheet date, the unutilized issue of global depository from of proceeds year (Previous amounting to ` 14.75 crore shares issue of global advance towards from ` 14.75 crore is lying in bank deposit proceeds) depository shares accounts. 35. Others Income from technical services Income from On commodity hedging Trading of crude / Petroleum products of crude / Petroleum Trading FOB value of exports Interest Others Traded crude / Petroleum products purchase products crude / Petroleum Traded Demurrage On commodity hedging Services Professional / consultancy fees Professional accouNTING to financial statements for the year ended March 31, 2013 year ended March statements for the to financial (vi) (v) (iv) (iii) (ii) Earnings in foreign currency including expenditure during expenditure including currency Earningsforeign in construction (on accrual basis) (i) (viii) (vii) (vi) (v) (iv) (iii) b) during y including expenditure earnings in foreign currenc Expenditure and accrual basis) construction (on Particulars Hedge hedge adopted ompany the c the year, During Financial accounting principles of AS - 30 – of accounting for Derivatives and Instruments ` 104.90 certain commodity hedges. Accordingly, (gain) has been carried over to cash flow crore 31, 2013 pertaining as of March hedge reserve If of sales proceeds. forecast to highly probable not had 30 AS of principles accounting hedge 2013, 31, ended March year for the adopted been sales would have been higher by ` 18.48 crore, 33. 34. Notes Notes to financial statements for the year ended March 31, 2013
36. Exceptional Items (` in crore) Year ended Year ended Particulars March 31, 2013 March 31, 2012 Reversal of defeased income* - 778.25 Interest on sales tax liability* - 83.39 CDR Exit impact {(refer note 7(ii)(c)} 111.48 375.82 Total 111.48 1,237.46 *The Hon’ble Supreme Court of India had vide its order dated January 17, 2012 set aside the order of the Hon’ble High Court of Gujarat dated April 22, 2008 which had earlier confirmed the Company’s eligibility to the Sales tax incentive Scheme (‘the scheme’) and accordingly the Company had reversed the net defeased income (net) of ` 778.25 crore recognized during April 1, 2011 to December 31, 2011 as exceptional items during the financial year 2011-12. ` 83.39 crore represents interest payable by the company on sales tax liability arising out of the Supreme Court order dated September 13, 2012.
37. Leases a) Finance lease:- (i) Future lease rental payable and reconciliation of minimum lease payments and its present value in respect of the assets:- (` in crore) Minimum Lease Interest Present value of payment/Future minimum lease lease rent payable payments Particulars As at As at As at As at As at As at March March March March March March 31, 2013 31, 2012 31, 2013 31, 2012 31, 2013 31, 2012 Future lease rental obligation payable: Not later than one year 14.61 14.61 7.10 1.10 7.51 13.51 Later than one year but 42.77 53.56 16.72 17.53 26.05 36.03 not later than five years Later than five years 36.63 40.32 16.80 30.01 19.83 10.31 Total 94.01 108.49 40.62 48.64 53.39 59.85
110 Annual Report 2012-13 111 Company Overview Management Discussion and Analysis Sustainability Governance Financials Block CB-ON/3 - existence of established in reserves commercial ESU field, held inside Pool. oilfield Ratna & R-Series - discovered but contract not executed and hence held outside Pool. AA-ONN-2004/3 - In exploration phase, held outside pool AA-ONN-2004/5 - In exploration phase, held outside pool On commencement of commercial ESU field forming from production part of CB-ON/3 block, the Pool to “Producing been transferred has Depletion on “Producing Properties”. is being charged on a Properties” basis. “Unit of Production” Madhya Pradesh, India)- in exploration phase, held outside pool TL-CBM-2008/IV (Talcher, Orissa, (Talcher, TL-CBM-2008/IV India)- in exploration phase, held outside pool Orissa, IB-CBM-2008/IV (IB Valley, India)- in exploration phase, held outside pool Jharkhand, India)- in exploration Jharkhand, India)- pool phase, held outside RG (East) 2001/1 Block – Commercial – Commercial RG (East) 2001/1 Block held not yet started and Production outside Pool. Mehsana Pilot Project held outside held Project Pilot Mehsana Pool.
b) c) d) India Oil & Gas Pool : a) e) f) SP(NE)-CBM-2008/4 (Sohagpur, d) RM-(E)-CBM-2008/IV c) RM-(E)-CBM-2008/IV (Rajmahal, India CBM (Coal Bed Methane) Pool: India CBM (Coal Bed a) b) (ii) (i) Leased Assets – Residential Leased Assets accommodation township, Transit and supply depot. payments are lease rental Future of quarterly / determined on the basis as provided payments lease monthly in the agreements. lease term, At the expiry of the an option to the Company has terms extend the lease on mutual and conditions. In case of the supply depot, the ownership gets to the Company at the transferred end of the lease term. taken on lease over a Assets are period of 10 to 20 years. March 31, 2013 31, March operating expenses” in the as “Other and loss under note 26 statement of profit - other expenses. arrangements where leases have arrangements where commenced upon assets becoming use. to ready General description of the leasing General description arrangements: - - - - Leased Assets (cancellable) – Power plants January 1, 2013 to Leased period - from recognised The lease payments are The above disclosures pertain to lease The above disclosures to financial statements for the year ended March 31, 2013 year ended March statements for the to financial As per the Company’s policy of Full Cost As per the Company’s in the method of accounting prescribed Guidance Note on “Accounting for Oil and Gas issued by the “Institute of Activities” Producing Company the of India”, Accountants Chartered has identified the following 2 Cost Pools: - - Operating lease:- - (iii) (ii) ities and production activ Exploration a) b) 38. Notes Notes to financial statements for the year ended March 31, 2013
b) Summary of Cost Pools: (` in crore) Cost in Pool Cost outside Pool Total
Cost Pool As at As at As at As at As at As at March March March March March March 31, 2013 31, 2012 31, 2013 31, 2012 31, 2013 31, 2012 India CBM Nil Nil 1,220.06 659.95 1,220.06 659.95 India Oil & Gas 197.73 188.12 111.83 111.21 309.56 299.33 Total 197.73 188.12 1,331.89 771.16 1,529.62 959.28
c) Company’s interest in Oil & Gas and CBM Joint Ventures as at March 31, 2013:
As at As at Sr. No. Name of the block March 31, 2013 March 31, 2012 1 CB-ON/3 (Gujarat, India) #100% #100% 2 Ratna & R-Series (Maharashtra, India) ##50% ##50% 3 AA-ONN-2004/3 (Assam, India) ###10% ###10% 4 AA-ONN-2004/5 (Assam, India) ###10% ###10% 5 RG (East) 2001/1 ( West Bengal, India) 100% 100% 6 RM-(E)-CBM-2008/IV (Rajmahal, Jharkhand, India) 100% 100% 7 TL-CBM-2008/IV (Talcher, Orissa, India) 100% 100% 8 IB-CBM-2008/IV (IB Valley, Orissa, India) 100% 100% 9 SP(NE)-CBM-2008/4 (Sohagpur, Madhya Pradesh, India) 100% 100% # Following commercial discovery in ESU field forming part of CB-ON/3 Block, and its subsequent approval by the Management Committee on August 4, 2006, ONGC has exercised its back-in rights of 30% for prospect ESU in financial year 2006-07, leaving the Company with a 70% Participating Interest in the ESU field. The Company continues to hold 100% interest in the rest of the CB-ON/3 Block. ## Balance 40% interest held by ONGC and 10% by Premier Oil. ### Balance 90% interest in block AA-ONN-2004/3 and AA-ONN-2004/5 are held by Essar Energy Holdings Limited (EEHL)
d) i) Company’s interest in Proved (1P) and Proved and Probable (2P) reserves of crude oil as on March 31, 2013 is as under:
Proved Proved and probable MT MT MT MT Area of operation As at As at As at As at March March March March 31, 2013 31, 2012 31, 2013 31, 2012 Essar South Unawa Opening 83,334 84,257 260,099 261,022 (ESU) field Block Additions - - - - CB-ON/3 - onshore Production 999 923 999 923 Cambay Basin Closing 82,335 83,334 259,100 260,099
112 Annual Report 2012-13 113 Company Overview Management Discussion and Analysis Sustainability Governance Financials
- 4 Buy Buy As at As at As at March March 3,199 3,203 March March 406.00 31, 2012 31, 2012 (` in crore) MMSCM
March 31, 2012 31, March -
14 Buy/Sell As at Sell Sell 3,199 3,185 Buy Buy March March
As at March March - 31, 2013 Proved and probable Proved 31, 2013 MMSCM As at
- 4
630 634 - - As at March March March 31, 2013 31, March As at 31, 2012 March March 99.54 850.00 MMSCM 31, 2012
- Proved 14 616 630
As at March Amount 31, 2013 As at 80.79 MMSCM March March 224.25 31, 2013 1,514.51 1,150.00 Closing Opening Additions Production est Bengal, Currency The Company uses forward exchange contracts, options and interest rate swaps to hedge its exposure rate swaps to hedge its exposure exchange contracts, options and interest The Company uses forward rate. The information on outstanding contracts is given below: and interest currency in foreign Forward contract : Forward US Dollar in million US Dollar in million Interest rate swap : Interest US Dollar in million Rupee in crore Area of operation Area Company’s interest in Proved (1P) and Proved and Probable (2P) reserves of coal bed (2P) reserves and Probable and Proved (1P) in Proved interest Company’s 2013 is as under: 31, March methane gas as on RG(East)-CBM-2001/1 RG(East)-CBM-2001/1 block W India e instruments and unhedged foreign currency exposures v ati to financial statements for the year ended March 31, 2013 year ended March statements for the to financial For hedging currency related risks: related For hedging currency (i) ii) Export Promotion Capital Goods Scheme (EPCG) Export Promotion obligations Export Obligation under Deriv into by the Company and outstanding as at balance sheet date: Derivative contracts entered a) 39. 40. Notes Notes to financial statements for the year ended March 31, 2013
(ii) The foreign currency exposure of the Company as at balance sheet date that have not been hedged by a derivative instrument or otherwise are given below:
Payable Receivable Loan Liabilities (Including LC Outstanding # Interest accrued) Currency ` in FC in ` in FC in ` in FC in ` in FC in crore Million crore Million crore Million crore Million 0.00** 0.07 ------JPY (0.00)** (0.02) - - - - (0.34) (5.45) 10,485.55 1,927.87 1,017.30 187.04 3,291.12 *** 605.11*** 1,433.19 263.51 USD (7,787.37) (1,522.26) (1,615.59) (315.81) (4,112.16)*** (803.84)*** (895.55) (175.06) 12.26 1.76 8.25 1.19 124.69 17.93 12.15 1.75 EURO (9.14) (1.34) (4.94) (0.72) (282.32) (41.31) (66.70) (9.76) 0.80 0.10 0.55 0.07 1.52 0.18 - - GBP (4.40) (0.54) (2.28) (0.28) (13.98) (1.71) (0.55) (0.07) ------CHF (0.01) (0.00)* ------0.05 0.01 ------AUD ------SEK (0.00)** (0.00)* ------SGD - - (0.00)** (0.00)* ------AED (0.00)** (0.00)* ------10,498.66 1,026.10 3,417.33 1,445.34 Total (7,800.92) - (1,622.81) - (4,408.46) - (963.14) -
# Other than in respect of recognised liability * Amount less than 0.01 million ** Amount less than ` 0.01 crore ***excludes currency swap of ` 1,955.10 crore (USD 378.75 million) {Previous year ` 727.69 crore (USD 142.25 million)} Previous year figures have been shown in brackets. (iii) Bank balance in foreign currency as at March 31, 2013 ` 0.03 crore (USD 0.00* million) & ` 0.00** crore (EUR 0.00* million){Previous year ` 0.53 crore (USD 0.10 million)}
114 Annual Report 2012-13 115 Company Overview Management Discussion and Analysis Sustainability Governance Financials
- - - 1.50 0.07 1.85 0.09 3.51 As at March March (1,425) 31, 2012 (` in crore) Year ended Year March 31, 2012 31, March
-
As at (340) March March purchases / (sale) purchases 2.40 0.06 1.12 0.02 3.60 (3,600) (5,025) Petroleum products products Petroleum ty. in Barrels (‘000) in Barrels Qty. 31, 2013 ear ended Y
- - - March 31, 2013 31, March As at March March (5,995)
31, 2012
- - Crude oil As at 2,543 March March (7,713) purchases /(sale) purchases 31, 2013 ty. in Barrels (‘000) in Barrels Qty. Nature of instrument Nature Net options Net forward swaps Net forward Spreads Margin hedging crore for reopening of accounts)(Previous year ` Nil) of accounts)(Previous for reopening crore To statutory auditors To for earlier year and ` 0.65 - Audit fees (including ` 0.10 crore - Taxation matters - Taxation - Other services - Reimbursement of expenses Total to financial statements for the year ended March 31, 2013 year ended March statements for the to financial Sr. No. Sr. For hedging commodity related risks: related For hedging commodity Company and outstanding into by the derivative contracts entered of commodity Category wise break-up date: as at balance sheet 1 2 3 4 Auditor’s remuneration Fees include payments to auditors for :- Professional Particulars (a) b) 41. Notes Notes to financial statements for the year ended March 31, 2013
42. Segment information (` in crore) Year ended Year ended Sr. No. Particulars March 31, 2013 March 31, 2012 1 Information about primary segment - business:- Segment revenue Refining including expansion and marketing 88,714.43 58,583.28 Exploration and production activities 15.91 13.71 Unallocated 29.98 107.27 Total segment revenue 88,760.32 58,704.26 Add : Interest income {Including ` Nil (Previous year 418.99 176.49 ` 155.13 crore) considered in exceptional items} Add : Profit on sale of investment 4.05 6.31 Add : Reversal of old liabilities / excess accrual 3.54 29.46 Total revenue 89,186.90 58,916.52 2 Segment result before interest, extraordinary items and tax Refining including expansion and marketing 1,363.49 67.20 Exploration and production activities (1.49) (5.75) Unallocated (154.40) (107.21) Total 1,207.60 (45.76) Less : Interest expense {Including ` 110.94 crore (Previous 2,814.62 1,451.98 year ` 433.45 crore) considered in exceptional items} Add : Interest income {Including ` Nil (Previous year 418.99 176.49 ` 155.13 crore) considered in exceptional items} Add : Profit on sale of Investments 4.05 6.31 Add : Reversal of old liabilities / excess accrual 3.54 29.46 Profit / (Loss) before tax (1,180.44) (1,285.48) Less : Taxes - - Profit / (Loss) after tax (1,180.44) (1,285.48) 3 Segment assets Refining including expansion and marketing 42,309.85 35,765.18 Exploration and production activities 2,426.76 1,351.96 Unallocated 651.42 904.46 Total 45,388.03 38,021.60 Add : Amount recoverable against defeasement 2,177.82 2,070.02 agreement Total assets 47,565.85 40,091.62
116 Annual Report 2012-13 117 Company Overview Management Discussion and Analysis Sustainability Governance Financials
8.97 2.75 7.14 2.14 (0.02) 73.52 16.50 212.77 125.85 777.82 787.71 210.65 6,295.72 (` in crore) 12,118.56 10,348.11 10,373.58 12,317.93 17,957.23 36,570.88 Year ended Year March 31, 2012 March
7.61 2.98 8.55 0.71 58.93 85.00 18.73 (4.76) 62.98 261.11 1,285.07 1,296.60 4,629.80 1,228.75 1,255.09 ear ended 15,327.66 15,673.77 24,815.45 45,119.02 Y March 31, 2013 March Total Particulars Segment liabilities and marketing Refining including expansion activities Exploration and production Unallocated activities Exploration and production Unallocated / Amortisation (excluding depreciation Depreciation during construction) accounted in expenditure {Including Refining including expansion and marketing in considered ` 25.77 crore) year (Previous ` 0.54 crore exceptional items} activities Exploration and production Unallocated Total activities Exploration and production Unallocated Total accrued due / not due) Add : Loan funds (Including interest sales tax including interest Add : Liabilities towards note 2 below) (refer thereon liabilities Total Additions to Fixed Assets Refining including expansion and marketing Total than Significant non-cash expenses other depreciation Refining including expansion and marketing to financial statements for the year ended March 31, 2013 year ended March statements for the to financial Segment information Sr. No. Sr. 4 6 5 7 The Company has disclosed Business Segment as the primary segment. Segments have been identified taking into The Company has disclosed Business Segment as the primary segment. Segments and internal system. The Company’s risks of services, differing reporting nature account the organizational structure, Oil & Gas products, to Refining including expansion and marketing of petroleum relates operation predominantly exploration. considered not is interest with 2, 2013 January w.e.f. installments quarterly eight payable in liability tax sales The as segment liability considering the substance of the terms. and excluding capital work in progress including exchange difference Additions to fixed assets shown above are during construction. and expenditure “outside India”. The Company operates in two geographical segments namely “within India” and 42. Notes: 1) 2) 3) 4) Notes Notes to financial statements for the year ended March 31, 2013
As at March 31, 2013 (` in crore)
Particulars Within India Outside India Segment revenue 61,219.69 27,540.63 Carrying amount of segment assets 43,492.08 1,895.95 Additions to fixed assets 1,255.09 -
As at March 31, 2012 (` in crore) Within India Outside India Particulars UAE Other Countries Segment revenue 37,847.66 6,071.20 14,785.40 Carrying amount of segment assets 36,438.43 - 1,583.17 Additions to fixed assets 10,373.58 - -
43. Details of dues to micro and small enterprises The information regarding principal and interest pertaining to micro and small enterprises based on available details is as under: (` in crore) As at As at Sr. No. Particulars March 31, 2013 March 31, 2012 1 Principal amount due and remaining unpaid - - 2 Interest due on (1) above and the unpaid interest - - 3 Interest paid by the Company in terms of Section 16 of Micro, 0.01 0.07 Small and Medium Enterprises Development Act, 2006 4 Payments made beyond the appointed day during the year 1.53 5.55 5 Interest due and payable for the period of delay - - 6 Interest accrued and remaining unpaid - - 7 Amount of further interest remaining due and payable in - - succeeding year
118 Annual Report 2012-13 119 Company Overview Management Discussion and Analysis Sustainability Governance Financials ------5.24 As at 9.19 7.48 5.24 6.75 6.75 5.24 6.75 (1.23) (5.24) March March 61.99 78.10 61.99 78.10 78.10 (11.32) 31, 2012 (` in crore) ------Company 6.82 3.62 6.82 7.33 7.33 6.82 7.33 established As at 78.10 95.95 10.21 (8.68) (1.45) 78.10 (6.82) 95.95 95.95 March March provident fund provident 31,2013 ------As at 2.28 2.62 2.28 (0.96) March March 30.63 11.25 28.97 11.25 30.63 (10.91) (10.91) (30.63) (30.63) 31, 2012 ------absences (Unfunded) 0.84 2.58 3.89 5.99 2.58 3.89 As at 36.90 (0.56) (0.48) 30.63 (0.48) 36.90 Compensated March March (36.90) (36.90) 31, 2013
------0.86 As at 9.13 0.75 1.96 9.74 2.17 0.18 0.14 0.75 1.96 (0.62) (0.12) (0.86) March March 11.71 11.71 11.71 31, 2012
- - - Gratuity (Funded) 0.98 0.36 1.01 0.65 0.94 2.08 3.01 0.97 0.94 2.08 As at 11.71 15.16 (1.23) 11.71 (0.98) (3.16) (3.16) 12.00 15.16 March March 31, 2013 Expected return on plan assets Expected return Acquisition adjustment/Transfer In/ Acquisition adjustment/Transfer Out)@ (Transfer Fair value of plan assets at the beginning of the year Defined benefit obligation at the end of the year Employees contribution Benefit payments Actuarial losses / (gain) Acquisition adjustment/Transfer In/ Acquisition adjustment/Transfer Out)@ (Transfer Plan Amendments Interest cost Interest Service cost Defined benefit obligation at beginning of the year Total expenses Total Actuarial losses/(gains) Past services cost Expected return on plan assets Expected return Interest cost Interest Current services cost Current Net assets / (liability) recognised in Net assets / (liability) recognised the balance sheet Funded status - surplus / (deficit) Fair value of plan assets Present value of defined benefit Present obligation 3 2 Change in fair value of assets 1 9 8 7 6 5 4 3 2 Change in obligation and assets Change in defined benefit obligation 1 6 5 4 3 2 Expenses recognised in statement of Expenses recognised during and loss or expenditure profit construction, as applicable for the year 31, 2013 ended March 1 4 3 2 Net assets / liability recognised in the Net assets / liability recognised note viii below) balance sheet (refer 1 Particulars to financial statements for the year ended March 31, 2013 year ended March statements for the to financial C2 C1 C B A Sr. Sr. No. Defined benefit plans / long term compensated absences – as per actuarial valuations as at March 31, 2013: 31, per actuarial valuations as at March / long term compensated absences – as Defined benefit plans absences / long term compensated Defined benefit plans a) 44. Notes Notes to financial statements for the year ended March 31, 2013
44. Defined benefit plans / long term compensated absences a) Defined benefit plans / long term compensated absences – as per actuarial valuations as at March 31, 2013: (` in crore) Gratuity Compensated Company (Funded) absences established Sr. (Unfunded) provident fund Particulars No. As at As at As at As at As at As at March March March March March March 31, 2013 31, 2012 31, 2013 31, 2012 31,2013 31, 2012 4 Actual employees / Company 0.13 2.64 - 0.96 21.16 23.42 contributions 5 Actuarial gain / (loss) 0.04 (0.30) - - (1.45) (1.23) 6 Benefits payments (1.23) (0.62) - (0.96) (8.68) (11.32) 7 Fair value of plan assets at the end 11.99 11.71 - - 95.95 78.10 of the year D Actuarial assumptions 1 Discount rate (per annum) 7.90% 8.50% 7.90% 8.50% 7.90% 8.60% 2 Expected rate of return on assets 8.50% 8.50% NA NA 8.75% 8.75% (per annum) 3 Mortality LIC LIC LIC LIC LIC LIC (1994-96) (1994-96) (1994-96) (1994-96) (1994-96) (1994- 96) ultimate ultimate ultimate ultimate ultimate ultimate E Percentage of each category of plan assets to total fair value of plan assets Administered by Life Insurance 100% 100% NA NA NA NA Corporation of India and SBI Life Insurance Government of India security - - - - 40.00% 40.00% Corporate bonds - - - - 60.00% 60.00% F Experience adjustment (refer note viii below): Plan liabilities loss/(gain) 0.38 0.27 (0.86) (9.76) NA NA Plan asset loss/(gain) (0.04) (0.08) - - NA NA Actuarial loss / (gain) due to change in 0.63 (0.37) 0.37 (1.14) NA NA assumption G Employer’s best estimate of 3.16 2.91 - - 8.07 7.43 contributions expected to be paid to the plan during the annual period beginning after the balance sheet date
@ Employees were transferred from/to group companies with credit for past services. Notes: (i) The expected rate of return on plan assets is based on market expectation, at the beginning of the year, for returns over entire life of the related obligation. (ii) The assumption of future salary increases, considered in actuarial valuation, takes account of inflation, seniority, promotion, supply and demand and other relevant factors.
120 Annual Report 2012-13 121 Company Overview Management Discussion and Analysis Sustainability Governance Financials
- - NA NA As at March March 43.18 43.18 31, 2009 (` in crore)
- - NA NA As at March March 50.83 50.83 31, 2010 0.61 crore) are are crore) 0.61 `
- - NA NA As at March March 61.99 61.99 31, 2011
- - NA NA As at March March 78.10 78.10 31, 2012
- - Company Established Provident Fund Company Established Provident NA NA As at 95.95 95.95 March March 31, 2013
0.66 crore (Previous year (Previous crore 0.66 ` As at 3.96 3.89 0.31 March March (0.07) (0.07) (0.16) 31, 2009
- As at 5.39 4.86 March March (0.53) (0.53) (0.28) 31, 2010
As at 9.74 9.13 0.19 March March (0.61) (0.61) (0.08) 31, 2011
- - Gratuity (Funded) As at 0.27 March March (0.08) 11.71 11.71 31, 2012
0.38 As at 15.16 12.00 (3.16) (3.16) (0.04) March March 31, 2013 to financial statements for the year ended March 31, 2013 year ended March statements for the to financial Present value of defined value Present benefit obligation Fair value of plan assets Funded status - surplus / (deficit) Net assets / (liability) in the recognised balance sheet Particulars Net assets / liability in the balance recognized sheet 1 2 3 4 Experience adjustment Plan liabilities loss/(gain) Plan assets loss/(gain) Defined contribution plans: to aggregating fund superannuation to contribution Company’s The employees gratuity fund scheme managed by Life Insurance Corporation of India / SBI Life Insurance is a Corporation of India / SBI Life Insurance fund scheme managed by Life Insurance The employees gratuity Projected the using valuation actuarial on based determined is obligation of value present The plan. benefit defined method. Unit Credit as defined benefit plan. fund is considered provident The employer managed Method. Unit Credit valued as per Projected long term absences has been actuarially Liability on account of on actual basis. absences have been provided Short term compensated Life SBI / India of (LIC Company Insurance the from assets plan of details the obtain to unable is Company The is not made; thereof the disclosure Insurance) and hence as follows: four years are previous and Amounts for the current is no obligation construction, as applicable. There during and loss / expenditure in the statement of profit recognised trusts. other than the contribution payable to the respective
Sr. No. a) b) b) (iv) (v) (vi) (vii) (viii) (iii) Notes Notes to financial statements for the year ended March 31, 2013
45. Related party disclosures I. Transactions with related parties (` in crore) Holding Subsidiaries Fellow Associates Companies Company/ Subsidiaries in which Intermediate promoters Nature of transactions Holding have Company significant influence Advance received from Customers - - 816.02 - - (EEOL - ` 816.02 crore) (Previous year - - - (414.48) - - EEOL - ` 414.48 crore) Expenses incurred on behalf of Joint - - 5.27 - - Venture (EEHL - ` 5.27 crore) ( Previous year - EEHL - - - (12.89) - - ` 12.89 crore) Loans / advances taken - - - - - (Previous year - EIL - ` 885.50 crore) - - (0.64) - (885.50) Purchase of fixed assets/intangible assets - - 560.16 - 4.03 (including CWIP) (EPIL - ` 497.44 crore) (Previous year - EPIL - - - (1,397.78) - (12.28) ` 1,293.72 crore) Advances given on capital account - - 761.37 - 107.63 (EPIL - ` 738.16 crore, VPL - ` 106.86 crore) - - (55.32) - - (Previous year - EPIL - ` 55.32 crore) Advances given to vendors for supplying - - 211.23 537.47 - services (VPCL - ` 537.47 crore, VPTL - ` 211.23 - - - - - crore) (Previous year - ` Nil) Deposits given by the Company - - 4.40 - 1.24 (EBPPL - ` 4.40 crore, EITL - ` 1.24 crore) - - - - (47.74) (Previous year - VPL - ` 35.00 crore, EISL - ` 12.74 crore) Present value of sales tax / VAT liability - - - - - assigned (Previous year - EHL - ` 528.42 crore) - - - - (528.42) Sale of goods net of cash discount - - 15,796.71 27.98 1.02 (including taxes) (EEOL - ` 15,457.06 crore) (Previous year - - - (6,830.37) - (0.87) EEOL - ` 6,662.70 crore) Interest income including reversal of break - - 71.91 32.54 310.60 up charges (EHL ` 307.73 crore, EPIL - ` 47.16 crore) - - - - (155.13) (Previous year - EHL - ` 155.13 crore)
122 Annual Report 2012-13 123 Company Overview Management Discussion and Analysis Sustainability Governance Financials - - - - - have 1.42 0.12 0.01 (0.11) (0.02) 15.27 35.73 (15.27) 150.86 in which (102.03) (207.23) influence significant promoters (` in crore) Companies ------5.89 5.69 0.02 (0.94) (0.02) 97.58 17.08 351.67 (255.14) Associates ------0.79 6.29 2.99 1.62 (8.04) (1.63) 69.86 Fellow (63.50) 958.07 (883.19) Subsidiaries ------0.00* (0.00)* Subsidiaries
------(0.02) Holding Holding Company Company/ Intermediate to financial statements for the year ended March 31, 2013 year ended March statements for the to financial 1.42 crore) ESIL - ` 1.42 crore) (EPIL - ` 0.79 crore, year - ` Nil) (Previous Assignment of provision/liability for Assignment of provision/liability employees benefit upon transfer of the EPIL to EOL employee from 15.27 crore) VPL - ` 15.27 crore) (VPCL - ` 97.58 crore, year - VPL - ` 15.27 crore) (Previous Lease rent charged to Company Lease rent 6.29 crore, VOTL - ` 6.29 crore, (ICSPL - ` 35.73 crore, year - EIL - (Previous VPCL - ` 5.89 crore) ` 102.03 crore) Interest / financial charges paid / funded Interest (Sale of Investment in EOML - USD 1) - EOML - USD 1) year purchase (Previous Sale in Investment in Subsidiary / Investment in Subsidiary 5.69 crore, ESTL - ` 2.99 crore) (VPCL- ` 5.69 crore, year - ` Nil) (Previous Purchase of goods/supply of material Purchase 588.37 crore, VPCL - ` 351.67 (VOTL - ` 588.37 crore, year (Previous VPTL - ` 253.52 crore) crore, VPCL - ` 255.14 - VOTL - ` 533.19 crore, VPTL - ` 215.36 crore) crore, Receiving of services 17.08 crore, - ` 17.08 crore, VPCL (VOTL - ` 36.56 crore, year - VOTL (Previous EEHL - ` 12.02 crore) EPIL - ESL - ` 7.68 crore, - ` 28.21 crore, ` 7.50 crore) Rendering of services 1.36 crore, VOTL - ` 0.25 crore) VOTL (VPTL - ` 1.36 crore, VOTL - year - VPTL - ` 1.31 crore, (Previous ` 0.25 crore) Transactions with related parties with related Transactions Lease income (including lease tax) Lease income (including Nature of transactions Nature y disclosures part Related I. 45. Notes Notes to financial statements for the year ended March 31, 2013
45. Related party disclosures I. Transactions with related parties (` in crore) Holding Subsidiaries Fellow Associates Companies Company/ Subsidiaries in which Intermediate promoters Nature of transactions Holding have Company significant influence Assignment of provision/liability for - - 0.72 - - employees benefit upon transfer of employees from EOL to EOSIL (EOSIL - ` 0.72 crore) (Previous year - ` Nil) - - - - - Cenvat / VAT charged - - - - - (Previous year -VPCL - ` 0.69 crore) - - - (0.69) - Guarantees given on behalf of the - - - 99.05 11,672.83 Company (ICSPL - ` 11,661.41 crore) (Previous year - - - (20.88) - - ESTL - ` 20.88 crore) Transactions with other classes of related parties a) Key management personnel (remuneration) (Shri L K Gupta - ` 3.01 crore, Shri C Manoharan - ` 1.99 crore) 5.00 (Previous year - Shri Naresh Nayyar - ` 1.63 crore, Shri L K Gupta - ` 1.55 crore) (3.18) b) Individuals having significant influence/control on the Company (Directors’ sitting fees) (Shri A.S.Ruia - ` 20,000, Shri P.S.Ruia - ` 60,000) 0.01 (Previous year - Shri A.S.Ruia - ` 80,000) (0.01)
124 Annual Report 2012-13 125 Company Overview Management Discussion and Analysis Sustainability Governance Financials ------have 0.06 (0.09) (0.71) 51.88 98.57 31.24 106.86 in which (101.73) influence 2,182.29 significant promoters (2,073.22) (1,167.08) (` in crore) Companies ------9.70 (0.02) 32.54 103.00 527.79 (103.00) Associates - - 9.11 (4.79) (9.00) 42.54 45.75 13.40 Fellow (75.84) (16.11) (70.20) (45.43) 255.79 830.85 (354.96) 1,340.00 1,205.02 (1,340.00) Subsidiaries ------(0.00)* Subsidiaries
------0.51 0.41 (0.12) (0.41) Holding Holding Company Company/ Intermediate to financial statements for the year ended March 31, 2013 year ended March statements for the to financial 814.23 crore, VPL - ` 106.86 crore) (EPIL - ` 814.23 crore, year - EPIL - ` 74.80 crore) (Previous Other receivables year - EHL (Previous (EHL - ` 2,177.82 crore) - ` 2,070.02 crore) balances Credit Security Deposits EPIL - ` 3.80 crore, (AEGIS - ` 4.29 crore, year - (Previous AGCNET - ` 1.00 crore) AEGIS - ` 4.29 crore) compulsory convertible currency Foreign bonds year - (Previous (EEHL - ` 1,340.00 crore) EEHL - ` 1,340.00 crore) loans - Unsecured Long term borrowing VPL ` 51.88 crore) (VOTL - ` 45.75 crore, year - ICSPL - ` 1,109.00 crore, (Previous VPL - ` 58.09 crore) VOTL - ` 70.20 crore, 12.98 crore, VPL - ` 63.00 crore) (EISL - ` 12.98 crore, EISL - year - VPL - ` 63.00 crore, (Previous EITL - ` 11.29 crore) ` 12.98 crore, Investments of VPCL - ` 103.00 (VPCL - Equity shares year - VPCL - Equity shares crore)(Previous of VPCL - ` 103.00 crore) Debit balances Security deposits Trade receivables Trade EPGL - ` 139.51 (EEOL - ` 926.06 crore, year - EEOL - ` 293.15 crore) crore)(Previous in cash or in kind Advances recoverable or for value to be received VPTL - ` 211.23 (VPCL - ` 527.79 crore, year - EEHL - ` 31.82 crore, (Previous crore) EEXPIL - ` 11.33 crore) Advance on capital account Balances with related parties : parties Balances with related Nature of balances Nature y disclosures part Related II. 45. Notes Notes to financial statements for the year ended March 31, 2013
45. Related party disclosures II. Balances with related parties : (` in crore) Holding Subsidiaries Fellow Associates Companies Company/ Subsidiaries in which Intermediate promoters Nature of balances Holding have Company significant influence Trade Payables / Other Liabilities - - 159.60 0.00 * 26.44 (EPIL - ` 91.90 crore, VOTL - ` 23.61 crore) - - (240.04) (44.21) (189.07) (Previous year - EPIL - ` 160.10 crore, ICSPL - ` 173.72 crore, VPCL - ` 44.21 crore, VOTL - ` 34.60 crore) Advance received from Customers - - 826.73 - - (EEOL - ` 826.72 crore)(Previous year - EEOL - - (414.48) - - - ` 414.48 crore) Other balances Advance to Directors - - - - 0.68 (Shri L K Gupta - ` 0.68 crore)(Previous year - - - - (1.34) - Shri L K Gupta - ` 1.34 crore) Outstanding guarantees given on behalf 6,160.79 - 128.00 99.05 12,434.09 of the Company (EIL - ` 12,434.09 crore#, EGL - ` 6,160.79 (10,225.72) - (535.44) - (12,409.84) crore) (Previous year - EIL - ` 12,409.84 crore, EGL - ` 10,225.72 crore) # Does not include parallel guarantees provided by ICSPL for ` 11,661.41 crore during the year towards working capital facilities. Outstanding guarantees given by the - - 125.67 - - Company (VOTL - ` 125.67 crore)(Previous year - VOTL - - (161.06) - - - ` 161.06 crore)
* Amount less than ` 0.01 crore
126 Annual Report 2012-13 127 Company Overview Management Discussion and Analysis Sustainability Governance Financials Shri S. N. Ruia, Chairman S. Ruia, Director Shri P. (Upto August 7, 2012) Shri A. S. Ruia, Director Consultancy Services Limited (AACSL), Aegis Limited (AEGIS), Aegis Aspire Power Limited (BPOL), Essar AGC Networks Limited(AGCNET), Bhandar (Salaya) Limited (EBTSL), Limited (EBTL), Essar Bulk Terminal Bulk Terminal Limited (EEPDCL), Essar Essar Electric Power Development Corporation India Exploration & Production Energy Overseas Limited (EEOL), Essar Limited (EEXPL), Essar Limited (EEXPIL), Essar Exploration & Production Energy Essar (EEXPSEAL), Limited Asia Southeast & Production Exploration International Transportation (EEHL), Energy Holdings Limited - Mauritius Limited (EGPL), Essar Logistics Limited (ETIL), Essar Gujarat Petrochemicals Essar Oilfields Subsea Limited (EOSL), Limited (ELL), Essar Offshore Services Limited (EOFSL), Services India Limited (EOFSIL), Essar Oilfields Gujarat Limited (EPGL), Essar Essar Oil UK Limited (EOLUK), Essar Power Consultants Management (India) Limited (EPIL), Essar Projects Projects August 26, 2011) India Limited w.e.f. Limited (Merged with Essar Projects & Infrastructure Reality Equinox (EPOL), Limited Power Essar (EPMCL), (Merger of Essar Steel Steel India Limited (ERIPL), Essar Private Limited Limited and Hazira Limited, Hazira Pipe Mills Essar Steel Orissa Limited, 1st Apr 2009) (ESTL), Essar Shipping & Logistics Hazira Plates Limited w.e.f Limited Oil Terminal Limited (ESLL), Essar Shipping Limited (ESL), Vadinar Limited (VPTL), Essar Exploration and Ports and Terminal (VOTL), Vadinar Limited - Nigeria (EEPLN) Production Essar Global Fund Limited (FKA Essar Global Limited) - Cayman (Ultimate (FKA Essar Global Limited) - Cayman Essar Global Fund Limited Holding Company)(EGL) Oil - Mauritius)(EEPLC) (Holding Company of Vadinar Essar Energy Plc - U.K (Holding Mauritius Oil), Vadinar as known (Formerly Ltd Gas & Oil Essar Company)(EOGL) known as Limited (Subsidiary Company) – (formerly Essar Oil Mauritius 7, 2012) Limited) (EOML) (Upto December Pitney Mauritius Holdings (VPCL) Power Company Limited Vadinar and CEO Shri Lalit Kumar Gupta, Managing Director - Refinery Shri C Manoharan, Director to financial statements for the year ended March 31, 2013 year ended March statements for the to financial Fellow Subsidiaries Names of related parties and description of relationship: parties and Names of related Holding Companies Subsidiaries Associate Key management personnel Individuals having significant influence on the Company (Promoters) Notes : 1) Notes Notes to financial statements for the year ended March 31, 2013
Companies in which promoters Arkay Holdings Limited (ARKAYHPL), Essar Agrotech Limited (EATL), have significant influence/control Bright Lamp Education Limited (BLEL) (Fka Essar Education Ltd), Essar Energy Services Limited (EESL), Essar Heavy Engineering Services Limited (EHESL), Essar House Limited (EHL), Essar Investments Limited (EIL), Imperial Consultants & Securities Private Limited (ICSPL) , Essar Information Technology Limited (EITL), Essar Infrastructure Services Limited (EISL), Essar Properties Limited (EPL), Essar Services India Limited (ESIL), Essar Steel (Jharkhand) Limited (ESTLR), Essar SEZ Hazira Limited (ESHL SEZ), Futura Travels Limited(FUTURA), Ibrox Estates Private Limited (IBROX), India Securities Limited (ISL), Kanak Communications Limited(KANAKCL), Kartik Estates Private Limited(KEPL), Neelkamal Traders Private Limited(NEELKAMAL), New Ambi Trading & Investments Private Limited (NEWAMBITPL), Paprika Media Limited, Sinter-Keramos & Composites Private Limited (SKCPL), The Mobilestore Limited (TMSL), Vadinar Properties Limited (VPL), SG Chemicals & Dyes Trading Limited (SGCHEMTL), Balaji trust (BALAJITR) 2) Names of related parties, where the transactions during the year with a single party are 10% or more, are disclosed under each nature of transaction. 3) Previous year figures have been shown in brackets.
46. Figures of previous year have been regrouped / rearranged, wherever necessary, to conform to those of the current year.
For and on behalf of the Board of Directors
Lalit Kumar Gupta Naresh Nayyar Managing Director and Deputy Chairman Chief Executive Officer
S. S. Shaffi Suresh Jain Company Secretary Chief Financial Officer Mumbai, May 10, 2013
128 Annual Report 2012-13 129 Notice Sheikh S. shaffi Company Secretary By Order of the Board of Directors of the Board By Order of the Company with effect from April 1, 2013 for 2013 1, April from effect Company with the of upon the in office period of his term the remaining as set out in the Explanatory terms and conditions to this Notice which is hereby Statement annexed of to the Board with authority specifically approved the Nomination (which term shall include Directors Committee constituted by the and Remuneration the terms and to alter and vary of Directors) Board as may be period in office conditions including Mr. and of Directors to between the Board agreed of the in the best interest Chakrapany Manoharan, Company.” of Directors the Board FURTHER THAT “RESOLVED steps as authorized to take such be and is hereby to this may be necessary or expedient to give effect resolution.” consider and, if thought fit, to pass the following To Resolution: as an Ordinary resolution Singh Jain, who Virendra Mr. THAT “RESOLVED by the was appointed as an Additional Director May 10, 2013 from with effect Directors of Board Act, pursuant to section 260 of the Companies upto the date of the 1956 and who holds office of whom the Annual General Meeting and in respect 257 section under notice a received has Company proposing of the Companies Act, 1956, in writing, be and is of director, for the office his candidature of the Company.” as a Director appointed hereby 6. Mumbai August 14, 2013 Office: Registered 24 Khambhalia Post, P.O.Box Dist. Jamnagar - 361305, Gujarat
To receive, consider, approve and adopt the Balance and adopt approve consider, receive, To Profit of Statement the 2013, 31, March at as Sheet date and & Loss for the financial year ended on that and Auditors of Directors of the Board the reports thereon. C Manoharan in place of Mr. appoint a Director To eligible, and being rotation by office from retires who for re-appointment. himself offers N K Mr. of place in Director a appoint To office from who retires Venkatasubramanian himself for and being eligible, offers by rotation re-appointment. appoint M/s. Deloitte Haskins & Sells, Chartered To Registration Accountants, Ahmedabad, having ICAI from hold office as Auditors to number 117365W, until the conclusion of this Annual General Meeting Meeting the conclusion of the next Annual General to fix their of Directors and to authorize the Board remuneration. consider and, if thought fit, to pass the following To as a Special Resolution: resolution in partial modification to special THAT “RESOLVED passed by the members at the Annual resolution General Meeting of the Company held on December of sections 20, 2012 and pursuant to the provisions if provisions, applicable other and 309 269, 198, or re- of the Companies Act, 1956 as amended any, with Schedule XIII time to time read enacted from the Company be and is hereby of approval thereto, of in the terms of remuneration given for revision (Refinery) Chakrapany Manoharan, Director Mr. Notice ORDINARY BUSINESS: ORDINARY 1. 2. 3. 4. SPECIAL BUSINESS: 5. Twenty Third Annual Annual Third the Twenty given that NOTICE is hereby OIL LIMITED General Meeting of members of ESSAR the Company at of Office will be held at the Registered Khambhalia Post (39th km. stone Refinery Complex, Dist. Jamnagar-361305, Highway), on Jamnagar-Okha 2013 at 11:00 a.m. September 27, Gujarat on Friday, without modifications, as may be to transact, with or business: permissible, the following Notice
NOTES: 1. A member entitled to attend and vote at the as director Marketing and Director Operations of meeting is entitled to appoint a proxy to attend IPCL, Chairman and Managing Director of Engineers and vote instead of himself and the proxy need India Ltd., Chairman and Managing Director of IOCL not be a member of the Company. The proxy, in and as Chairman of Gulf Oil Ltd. order to be effective, must be deposited at the The other companies in which Mr. K N Registered Office of the Company not less than 48 Venkatasubramanian is a Director are Gulf Carrosseri hours before the commencement of the meeting, India Ltd, Gulf Oil Corporation Ltd, Imperial i.e. before 11:00 a.m. of September 25, 2013. Corporate Finance & Services Pvt. Ltd, Royal 2. The Register of Members and Share Transfer Books Chemic Corporation Ltd, Time Technoplast Ltd, IDL of the Company will remain closed from Wednesday, Explosives Ltd and M&B Engineering Pvt. Ltd. He is the 25th day of September 2013 to Friday, the 27th a member of 6 committees including 4 committee day of September, 2013 (both days inclusive). positions in the Company. He holds 6,500 shares of the Company. Mr. K N Venkatasubramanian retires 3. All documents referred to in the accompanying by rotation at the Annual General Meeting and offers Notice are open for inspection at the Registered himself for re-appointment. Office of the Company on all working days, except Saturdays, Sundays and Bank holidays, between 7. The Securities and Exchange Board of India (SEBI) 11:00 a.m. and 1:00 p.m. upto the date of the has mandated submission of Permanent Account Annual General Meeting. Number (PAN) by every participant in securities market for transfer / transmission / transposition of 4. Members / proxies should bring the attendance slip securities and deletion of name. Members holding duly filled in for attending the meeting. shares in physical form are requested to submit 5. Members desiring any information with regard to their PAN details to the Company / Share Transfer Accounts / Reports are requested to write to the Agents (STA), M/s. Datamatics Financial Services Company atleast ten days before the date of the Ltd. Members holding shares in electronic form meeting, so as to enable the management to keep have to submit the PAN details to their Depository the information ready. Participants (DPs). 6. Directors retiring by rotation: 8. Facility for making nominations is available to Mr. C Manoharan was appointed as Director (Refinery) individuals holding shares in the Company. Members on March 29, 2012. He retires by rotation at the Annual holding shares in physical form may obtain the General Meeting and offers himself for re-appointment. prescribed nomination form 2B from the STA. A brief profile of Mr. C Manoharan is setout in the Members holding shares in electronic form are Explanatory Statement annexed to this Notice. requested to approach their DPs for the nomination. Mr. K N Venkatasubramanian was appointed to the 9. Pursuant to sections 205C of the Companies Act, Board of Directors on November 29, 2000. He is a 1956 all unclaimed principal amount on debentures Chemical Engineer from A.C. College of Technology, remaining unpaid or unclaimed for a period of seven Chennai and an M.Tech from IIT, Kharagpur, having years from the date they became due for payment over 51 years of experience in the oil & gas and during the financial year 2004-05, have been petrochemicals sectors having worked for IPCL, transferred to the Investor Education and Protection IOCL and Gulf Oil Limited. He has previously served Fund (IEPF) established by the Central Government.
130 Annual Report 2012-13 131 Notice
2013 4,218 3,650.68 (1,180.44) 96,796.88 (` in crore) * (5,545.40) 2012 2,100.76 (1,285.48) 63,339.52 * (4,367.08) 2011 Financial year ended March 31 Financial year ended March (251.69) 2,779.49 53,119.10 * (3,081.54) Export performance: 31, 2013, the year ended March During basis) was FOB value of exports (on accrual ` 30,640.29 crore. investments and collaborations, if any: Foreign Co-Promoter, Foreign Ltd. Holdings Energy Essar Investment of ` Direct has made Foreign acquisition in the Company and post inter-se crore companies Group other Promoter from of shares holds 211,805,815 (15.51%) equity presently Shares Depository Global 1,843,724 and shares (20.66%) underlying by 282,089,772 represented of the Company. equity shares C Manoharan: Information about Mr. is and (Refinery) the Director is C Manoharan Mr. for all the operations of the Refinery at responsible Under his leadership the District Jamnagar. Vadinar, the thru’put of the Company was able to increase recently and to 14 MMTPA MMTPA 10.5 from refinery Net profit / (loss) Net profit (as computed u/s 198) Net profit/(loss) after tax as per Statement of & Loss Profit Gross sale from sale from Gross operations Earnings before finance cost, and depreciation amortization, exceptional items and tax (EBIDTA) Financial performance: Financial parameters
(5) II *includes loss for the preceding financial year/s. *includes loss for the preceding (4) (3) roject in March, in March, project overnment will not be required for government will not be required irector since he is a professional possessing he is a professional since director General Information: Industry: of Nature It industry. The Company belongs to the oil and gas and exploration in engaged company existing an is of crude oil and of oil and gas, refining production products. marketing of petroleum commercial of commencement of date Expected production: With the The Company is an operating entity. completion of Refinery expansion in June, 2012, the 2012 and Optimisation Project Gujarat Vadinar, capacity of the Refinery at refining stands enhanced to 20 MMTPA. specialized knowledge in the field of his profession and he profession specialized knowledge in the field of his in the capital of the Company does not have any interest of / promoters to directors in / related nor is he interested the Company. to be given to members as per Information required is as under: Schedule XIII of the Companies Act, 1956 I the payment of increase in managerial remuneration to the to remuneration managerial in increase of payment the wholetime (1) (2) ANNEXURE TO NOTICE pursuant to section 173(2) Explanatory Statement Act, 1956 setting out all material of the Companies business mentioned in to special facts relating dated August 14, 2013. accompanying Notice Item No. 5 (Refinery) appointed as Director C Manoharan was Mr. from a period of 3 years with effect of the Company for the 22nd Annual at 29, 2012. The shareholders March 2012 approved 20, held on December General Meeting his appointment and terms of remuneration. activities business increased the consideration into Taking (Refinery), and also the contributions made by the Director the has deemed it fit to increase of Directors the Board (Refinery). C. Manoharan, Director of Mr. remuneration of the central Approval Notice Notice
expanded the refining capacity to 20 MMTPA with performance bonus depending on performance stabilization of Expansion units in record 3 months of the Company and his performance assessed time period. Further, the Refinery is maintaining an as per Company policy. He will also be covered excellent safety record of 1,825 LTI Free Days as of under Company’s Provident Fund / Gratuity / March 31, 2013. His brief profile is set out below: Hospitalisation / Health Insurance / Group Personal Mr. C Manoharan is 59 years old. He is a Graduate in Accident Scheme and mobile reimbursement policy. Chemical Engineering from Calicut University, Kerala. The total of salary / perquisites / allowances / other He joined the Company as Head of Refinery in May benefits and bonus as may be decided by the Board 2008 from Indian Oil Corporation Limited (IOCL). of Directors or the Nomination and Remuneration Committee during his tenure in office, will not exceed Mr. C Manoharan has extensive experience in the oil ` 3.00 crore per annum. The perquisite value of the and gas industry. He started his career as Engineer facilities / benefits / allowances and bonus shall be Trainee in 1977 at Indian Oil Corporation Limited evaluated, wherever applicable, as per the Income (IOCL), Gujarat Refinery, Baroda. He handled a Tax Act, 1961 and the Rules framed thereunder. The variety of key assignments in various positions in Employee Stock Options granted / to be granted to Refining Operations, Maintenance and Technical Mr. C Manoharan from time to time are not to be Services at Gujarat Refinery, Panipat Refinery as well included for the purpose of computation of overall as Head Office (Refinery Division). His last assignment with IOCL was at Panipat Refinery as Executive ceiling of remuneration. Director. He had the privilege of associating with the In the event of termination of employment, except in construction and commissioning of various Refinery circumstances of fraud or gross misconduct on his Projects including the first FCC unit in IOCL and first part, he will be entitled to be paid remuneration for a Hydrocracker Unit in the Country. Mr. Manoharan maximum period of three months. has also worked for 2 years on deputation to Nigeria providing technical assistance to the operating Subject to as aforesaid, he shall be governed by personnel at Port Harcourt Refinery of NNPC. He such of the existing service rules of the Company as was a Board member of Indian Oil Technologies may be in force from time to time. Limited from May 2004 and as Chairman of the The remuneration proposed to be paid to the Director Board from January 2007 to March 2008. He also (Refinery) is comparable with the remuneration being has the distinction of being the first Indian to be on paid for similar assignments in the industry. the panel of NPRA’s Q&A 2003 session held at New Orleans in U.S.A. The above may be treated as an abstract of the agreement between the Company and Mr. C The revised particulars of remuneration payable to Manoharan pursuant to section 302 of the Act. Mr. C Manoharan with effect from April 1, 2013 for the remaining period of his term in office as Director Mr. C Manoharan does not have direct or indirect (Refinery) are ` 2.25 crore per annum comprising pecuniary relationship with the Company or of basic salary, allowances and perquisites relationship with the managerial personnel other including house rent allowance / company provided than getting remuneration as Director (Refinery) of accommodation, special allowance, reimbursement the Company. He does not hold any shares in the of vehicle operating, entertainment, telephone, Company. He is a member of 2 Committees of the professional perquisite, leave travel allowance, Company. He is a Director on the Board of Vadinar medical expenses as per Company rules, annual Power Company Limited.
132 Annual Report 2012-13 133 Notice
100,500 crore during the financial year 2013 – 14 100,500 crore Expected increase in productivity and profits: and in productivity Expected increase With of the Refinery Expansion commissioning in and improvement projects and Optimisation in volume of will be increase complexity there and profile of the product improvement production, low cost sour and tough enhanced ability to process the margins, crudes, thus significantly improving the Company and cash flows. Further, profitability which has initiated dollarization of its balance sheet cost and reduction in interest in benefits like will result is Company position.The liquidity in enhancement of approximately revenue expected to generate gross ` depending on the international prices of petroleum products. on the cash flows of the Company. The Company of the Company. on the cash flows of number a implementing has also implemented/is Refinery and Gross cost optimization cost reduction, the to improve measures Margin (GRM) boosting profitability. is of the opinion that payment of of Directors The Board C Manoharan as Director to Mr. remuneration proposed of your interest (Refinery) of the Company would be in the Company. at the resolution recommend the Directors Accordingly, Item No.5 of the Notice for your approval. C Manoharan is except for Mr. of the Directors None at Item no.5. in the resolution concerned or interested Item No. 6 Singh Jain was appointed as an Additional Virendra Mr. of the Company on May 10, 2013. In terms of Director section 260 of the Companies Act, 1956 and Article S. V. Mr. 82 of Articles of Association of the Company, upto the date of the as a Director Jain would hold office ensuing Annual General Meeting. Under section 257 of appointment to the office S. Jain’s V. of the Act, Mr. at General of the shareholders approval requires director Meeting. He has worked with Indian Oil Corporation Limited for 26 for international negotiations years. He was responsible (3) he above are expected to have a positive effect a positive effect expected to have The above are
200 1,556 March 31, 2013 (in ` crore) 32 1,242 31, 2012 December
105 1,169 quarter ending 30, 2012 September
June (316) (1,518) 30, 2012
Other information: if any: of profit, Reasons for loss/ inadequacy financial performance of the The quarter wise 2012-13 is as follows: Company during FY The Company has incurred losses in the financial The Company has incurred 31, 2013 mainly on account of year ended March ended financial performance during the quarter depreciation June 30, 2012 due to higher interest, and Loss and operating expenses charged to Profit in Current increase Account without corresponding of stabilization for time taken GRM (due to Price with coupled projects) optimization and expansion in inventory loss. sharp fall in oil prices resulting to be taken for Steps taken or proposed improvement: Refinery its commissioned has Company The 2012 enhancing the in March, Expansion Project and improving capacity to 18 MMTPA refining 6.1 to 11.8. In addition, the complexity from was completed and an Optimization project commissioned four months ahead of schedule in capacity to 20 June 2012 enhancing the refining gives The commissioning of these projects MMTPA. much heavier the Refinery the capability to process mix have low cost crude oil. Crude mix and product substantially in line with increased also improved a coal based power plant set- Further, complexity. up for captive purpose has been fully synchronized USD1/bbl at to save costs of upto and is expected The Company has started dollarization the Refinery. Swap/ ECB /Currency of its balance sheet through cost. interest to reduce loans currency foreign Financial parameters Earnings before fnance cost, depreciation and amortization, exceptional items and tax (EBITDA) Net Profit / Net Profit (loss) after Tax (1) III Notice (2) Notice
for procurement of crude and petroleum products and The Directors recommend the resolution at Item No. 6 of implementation of financial strategies and financial the Notice for your approval. appraisal of projects. Thereafter, he served another None of the other Directors except for Mr. V. S. Jain is Maharatna – Steel Authority of India Limited (SAIL), first as in anyway concerned or interested in the resolution at Director – Finance and thereafter as the Chairman till his Item no. 6. retirement in 2006. After retirement, he served the Jindal Group as Managing Director and CEO of Jindal Stainless Limited. He also held the post of Member of the Public Enterprises Selection Board till July 2011. He a Fellow By Order of the Board of Directors member of the Institute of Chartered Accountants of India and Institute of Cost Accountant of India. Mumbai Sheikh S. shaffi August 14, 2013 Company Secretary Mr. V. S. Jain is a Director of Dalmia Bharat Ltd and Rashtriya Ispat Nigam Ltd. He is a member of 2 Registered Office: Committees including 1 in the Company. He holds 600 Khambhalia Post, P.O.Box 24 shares of the Company. Dist. Jamnagar - 361305, Gujarat
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134 Annual Report 2012-13 135 Oil & Gas
Essar Oil Limited ATTENDANCE SLIP Registered Office: Khambhalia Post, Post Box No. 24, Dist. Jamnagar - 361 305, Gujarat 23Rd ANNUAL GENERAL MEETING - SEPTEMBER 27, 2013 AT 11:00 A.M.
DP Id NAME & ADDRESS OF THE REGISTERED SHAREHOLDER
Client Id/ Regd. Folio No.
No. of Shares held
I certify that I am a registered shareholder/proxy for the registered shareholder of the Company. I hereby record my presence at the TWENTY third ANNUAL GENERAL MEETING of the Company at the Registered Office at Khambhalia Post (39th Km. stone on Jamnagar-Okha Highway), Dist. Jamnagar - 361 305, Gujarat on Friday, September 27, 2013 at 11:00 a.m...... Member’s/Proxy’s Signature Note: Please complete this and hand it over at the entrance of the hall.
Essar Oil Limited FORM OF PROXY Registered Office: Khambhalia Post, Post Box No. 24, Dist. Jamnagar - 361 305, Gujarat 23Rd ANNUAL GENERAL MEETING - SEPTEMBER 27, 2013 AT 11:00 A.M. I/We ...... TEAR HERE of...... in the district of ...... being a member/members of ESSAR OIL LIMITED hereby appoint ...... of...... in the district of ...... or failing him Shri ...... of ...... in the district of ...... as my/our proxy to vote for me/us on my/our behalf at the TWENTY THIRD ANNUAL GENERAL MEETING of the Company to be held on Friday, September 27, 2013 at 11:00 a.m. at the Registered Office of the Company at Khambhalia Post (39th Km. stone on Jamnagar-Okha Highway), Dist. Jamnagar - 361 305, Gujarat and at any adjournment thereof.
Signed this ...... day of ...... 2013
Affix DP Id Signature ...... 15 paise Revenue Client Id/ Stamp Regd. Folio No.
No. of Shares held
Note: This form of proxy in order to be effective, should be duly stamped, completed and signed and must be deposited at the Registered Office of the Company, not less than 48 hours before the commencement of the meeting.
Night view of the Vadinar Refinery
AWARDS AND RECOGNITIONS
FUNCTION AWARD CATEGORY AWARD INSTITUTED BY
Health Safety & Environment 5S Gold Category Quality Forum Circle of India – Gujarat State Health Safety & Environment Category 1 - Lowest Average Frequency Ministry of Labor and Rate over a period of three consecutive Environment, DGFASLI, years ending 2010, and Runner-up in Government of India Category 2 - Accident Free Year based on man hours worked during 2010.
Health Safety & Environment National Oil Industry Safety Award - Third OISD, Ministry of Petroleum & Natural Gas
Operational efficiency PetroFed Refinery of the year award Petroleum Federation of India
Carbon management Top Final Disclosure Score, Indian Energy Carbon Disclosure Project (UK) Sector – Carbon Disclosure leadership Index, 2012 Human Resource “Best HR Strategy” in the Oil & Gas Greentech Foundation category BOOK-POST
If undelivered, please return to: M/s. Datamatics Financial Services Ltd. Unit: Essar Oil Limited Plot No. B-5, Part B Cross Lane MIDC, Marol, Andheri (East) Mumbai - 400 093 INDIA