Nayara Energy Limited (Formerly known as Essar Oil Limited) Contents Corporate Overview Ushering in a New Era 01 We are Nayara Energy 02 Nayara Energy: The Brand 04 Year in Review 06 Message from the Chairman 08 From the CEO’s Desk 10 Corporate Information 13 Board of Directors 14 Management Committee 16 Reports Directors’ Report 17 Financial Statement Standalone Independent Auditor’s Report 49 Balance Sheet 56 Statement of Profit and Loss 57 Cash Flow Statement 58 Statement of Changes in Equity 60 Notes 62 Consolidated Independent Auditor’s Report 116 Balance Sheet 120 Statement of Profit and Loss 122 Cash Flow Statement 124 Statement of Changes in Equity 126 Notes 129 Form AOC-1 195 Notice AGM Notice 197 2 Annual Report 2017-18 Corporate Overview Reports Financial Statements Ushering in a New Era The world needs energy and more of it. As economies grow, the demand for energy keeps increasing at a rapid pace. At Nayara Energy, our pursuit of excellence continues as we usher in a new era with a new brand identity and vigour. In FY 2017-18, the Refinery processed crude higher than rated capacity with our SPM registering highest ever crude intake. Our High Speed Diesel (HSD) production surpassed our previous best. This has helped us enrich our product portfolio. We have also expanded the retail network further with over 1000 new outlets opened during the year. As we continue ushering into a new era, we have re-emphasised our focus on Health, Environment, and Safety (HSE) while looking at planning for fresh investments in new assets and good governance. We also plan to channelise our improved credit profile and finances towards building a good value proposition and an excellent brand value. In order to keep our employees aligned with the company’s long-term vision, the Company is seeking their active involvement in process improvement, development of new initiatives and future plans. Through all these initiatives, we continue to strive for excellence and a viable future that would help us in making this brand new era a remarkable one. Annual Report 2017-18 1 Nayara Energy Limited (Formerly known as Essar Oil Limited) We are Nayara Energy We are a downstream oil company with a strong presence in the hydrocarbon value chain. Our presence in refining and marketing makes us a truly integrated company of international repute. We own and operate India’s second largest single site refinery at Vadinar, Gujarat with a capacity of 20MMTPA, which is one of the world’s most complex refineries. We also own two oil depot terminals, a port, captive power plant and India’s fastest growing retail chain of fuel stations. Our major shareholders include Rosneft Singapore Pte. Ltd. (a subsidiary of PJSC Rosneft Oil Company) and Kesani Enterprises Company Limited (a consortium of international investors led by Trafigura and UCP). 2 Annual Report 2017-18 Corporate Overview Reports Financial Statements Night view of Refinery Annual Report 2017-18 3 Nayara Energy Limited (Formerly known as Essar Oil Limited) Nayara Energy: The Brand • Coined from “Naya” (new) and “Era” the name truly stands for the vision of starting a new era in the Energy sector with a fervent zeal for excellence in performance. The word also relates to “Nayan” (eye), which means always having an eye on the future • The guiding philosophy – delivering tomorrow’s potential today, represents the ambitions and conduct of the Company as it aims to explore the uncharted, deliver extraordinary outcomes for the stakeholders across the value chain • The brand philosophy is summarized in the acronym EXCEL – represents – Energetic, Xtraordinary, Courageous, Ethical and Lead With our new name, Nayara Energy, we aim to be one of the fastest developing companies in the country and globally. We plan to grow to a global scale, both in terms of size and excellence, thereby marking the beginning of a new era. We aim to explore the uncharted, deliver extraordinary outcomes for the stakeholders across the value chain. Our people are determined to achieve more. Our employees are innovative and working hard to turn tomorrow’s dreams into reality. 4 Annual Report 2017-18 Corporate Overview Reports Financial Statements Ethos Energetic A team of passionate individuals driven to perform. Xtraordinary Obsessed about the finest attention to detail and deliver excellence, global standards with rigour at every step. Courageous We stand firm and are relentless in what we believe in. We don’t shy away. We are courageous and have conviction. Ethical Always doing the right thing with integrity, transparency and have a high regard for the safety of our people, our community and the environment. Lead Taking bold steps in challenging the status quo and in shaping the future. Night view of Refinery Annual Report 2017-18 5 Nayara Energy Limited (Formerly known as Essar Oil Limited) The year that was … Operational / Strategic Highlights Process & Production Pan-India Retail Network* 20.7 MMT 4,473 Processed Crude Retail Outlet Network 19.1 MMT 1,043 Highest ever Crude intake Outlets added during the year through SPM * as on March 31, 2018 10.4 MMT Highest ever HSD production 6 Annual Report 2017-18 Corporate Overview Reports Financial Statements Key Performance Indicators Total Assets (` in crore) 85,018 67,991 68,845 57,842 52,064 Credit Rating From ‘A’ to AA Significant improvement Mar 31, Mar 31, Mar 31, Mar 31, Mar 31, by 3 notches 2014* 2015* 2016* 2017 2018 EBITDA (` in crore) Refinancing Impact 11,188 Significant Interest Saving 7,773 ($45 Million pa) 6,623 5,761 Loans with longer tenure 4,703 (upto 20 years) Relaxed Covenants FY 13-14* FY 14-15* FY 15-16* FY 16-17 FY 17-18 Throughput (MMT) 20.2 20.5 20.9 20.7 19.1 FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18 CP GRM (USD/bbl) 10.8 9.1 8.95 8.0 8.4 FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18 Aerial view of Nayara Hub & Refinery * As per previous IGAAP Annual Report 2017-18 7 Nayara Energy Limited (Formerly known as Essar Oil Limited) Message from the Chairman Dear Shareholders, Business Performance In FY18, the Company successfully overcame various I am very excited to connect with each one of you, as this is challenges in the external business environment in the form my first opportunity post-acquisition of our unique company, of oil price volatility, OPEC production cut for heavy oils, Nayara, by the new investors. I would call it unique, because Government policy changes as well as the internal challenges of the unparalleled nature of its strategically located assets in terms of change in management & acquisition by new and the fastest growing fuel retail chain in India. Adding to shareholders. Our refinery continued with its best-in-class that is the tremendous track-record of performance of the operating performance, while our retail network continued team members and the high demand business segments to remain the fastest growing petroleum retail chain in India. we operate in. Moreover, strong support from the new India is already the fastest growing energy market in the investors and the diverse experience of the new management world. The domestic demand for oil continues to be buoyant team further increases the already existing potential. A due to various macroeconomic factors coming into play – combination of these factors presents a rare opportunity for growing car ownership trend, high demand for two-wheelers, any shareholder, which we can be proud of. 8 Annual Report 2017-18 Corporate Overview Reports Financial Statements Our new brand opportunely describes our vision to succeed in the Indian and global energy markets, thereby ushering us into a new era. Nayara was a result of a detailed process that engaged many in the Company and beyond. improved road transport infrastructure to name a few. These Our Priorities factors help build confidence with respect to the future As we take on the helm of affairs of this unique company, we growth prospects of our business. have set our priorities clear in terms of our action plan. Health, Nayara Energy - New Brand – New Investors – Safety and Environment (HSE) would be our top priority. New Management We would grow and make this investment successful- being mindful of the health of our community, the safety of our The corporate brand for our Company underwent a change people and concern for the sustainability of the environment. to become “Nayara Energy” as part of the forward-looking strategy. The term ‘Nayara’, has been coined from the words Our aim is also to achieve the highest level of corporate ‘Naya’ (new) and ‘Era’. Our new brand opportunely describes governance and controls. It is also fundamental to inspire our vision to succeed in the Indian and global energy markets, confidence in our shareholders and the investor community. thereby ushering us into a new era. Nayara was a result of Several programmes ensuring the same have been initiated a detailed process that engaged many in the Company and and are in various stages of completion. beyond. We want to be a company that is deeply respected, by the investors, by Governments-, both in India and beyond, Another area where we have our clear focus is on the financial by the communities we work in and most importantly by side so as to achieve a stronger and stable balance sheet. you. We want this to be a company that people are delighted We would be channelizing this strength towards effectively to associate with and employees are proud to work for, a running the Company on a day-to-day basis, as well as with a company that has a culture where initiative, creativity & new asset development plan.