Corporate Information BOARD OF DIRECTORS BANKERS (As on August 24, 2015) State Bank of India Prashant Ruia, Chairman ICICI Bank Ltd. Naresh K. Nayyar, Deputy Chairman IDBI Bank Ltd. Lalit Kumar Gupta, Managing Director & CEO Punjab National Bank Chakrapany Manoharan, Director (Refinery) Axis Bank Ltd. Dilip J. Thakkar, Independent Director Indian Overseas Bank K. N. Venkatasubramanian, Independent Director HDFC Bank Ltd. Virendra Singh Jain, Independent Director Bank of India Deepak Kumar Varma, Independent Director Central Bank of India Dr. Sabyasachi Sen, Independent Director State Bank of Patiala Rugmani Shankar, Independent Director Oriental Bank of Commerce R. Sudarsan, Nominee of LIC of India Allahabad Bank Sudhir Garg, Nominee of IFCI Ltd. State Bank of Mysore Yes Bank Ltd. Indian Bank CHIEF FINANCIAL OFFICER Suresh Jain REGISTERED OFFICE Khambhalia Post, Post Box No. 24 Dist. Devbhumi Dwarka – 361305 Gujarat. COMPANY SECRETARY Tel: +91-2833-661444 Fax: +91-2833-662929 Sheikh S. Shaffi Email: [email protected] CORPORATE OFFICE TRANSFER AGENTS Equinox Business Park, 4th Floor, Tower-2, Off Bandra Kurla Complex M/s.Datamatics Financial Services Ltd. L.B.S. Marg, Kurla (W) Unit: Essar Oil Limited Mumbai – 400070. Plot No. B-5, Part B Cross Lane, Tel: +91-22-67335000 MIDC, Andheri (East), Mumbai – 400 093 Fax: +91-22-67082183 Tel: +91-22-66712151 to 66712156 Website: www.essaroil.co.in Fax: +91-22-66712209 Email: [email protected] Website: www.dfssl.com AUDITORS M/s Deloitte Haskins & Sells, Ahmedabad Contents 02 Company Overview Key Performance Indicators .......................... 3 Chairman’s Message .................................... 4 MD & CEO’s Message .................................. 6 Board of Directors ........................................ 10 Senior Management ..................................... 12 14 Management Discussion and Analysis 27 Governance Directors’ Report .......................................... 27 Report on Corporate Governance ................. 57 67 Financials (Standalone) Independent Auditors’ Report ....................... 67 Balance Sheet .............................................. 72 Statement of Profit & Loss ............................ 73 Cash Flow Statement ................................... 74 Notes to the Financial Statements ................ 76 117 Financials (Consolidated) Independent Auditors’ Report ....................... 117 Balance Sheet .............................................. 124 Statement of Profit & Loss ............................ 125 Cash Flow Statement ................................... 126 Notes to the Financial Statements ................ 128 Form AOC - 1 ............................................... 172 173 Notice Essar Oil Limited // Annual Report 2014-15 In many ways, the year under review, was one of several firsts. The Vadinar refinery set new benchmarks by Positivity. delivering a record throughput of 20.49 mmt, representing a 103% capacity utilisation. We significantly grew sales from our retail operations and intend to expand our Passion. network further to gain from the potential of the domestic retail market. On the exploration and production front, we established our position as the single largest producer of CBM gas in the country. In spite of our gross revenues Performance. declining due to a fall in crude prices, we improved our refining margins and profitability significantly, registering a At Essar Oil, we are infused with positivity. 12 times increase in profit after tax. Improving economic fundamentals, rising consumer aspirations and progressive government We have initiated measures to further enhance refinery initiatives have created an environment operations and are taking steps to refinance our rupee debt conducive to business performance. Despite the by completing our dollarisation programme. We are also unprecedented fall in crude prices, we are driven ensuring workplace safety remains a priority, minimising our by optimism. We are moving forward, purposefully. environmental impact and giving back to communities in Our passion to perform is underscored by our proximity to our facilities. commitment to our people. Our employees, who are key to our success as an organisation, remain Our positivity, passion and performance will enable us to skilled, engaged and motivated. create and deliver sustainable value to our stakeholders. 2 Key Performance Indicators Company Overview Throughput (MMT) CP GRM (USD/bbl) FY 2014-15 20.49 FY 2014-15 8.37 FY 2013-14 20.23 FY 2013-14 7.98 FY 2012-13 19.77 FY 2012-13 7.96 FY 2011-12 13.5 FY 2011-12 4.23 FY 2010-11 14.76 FY 2010-11 4.53 EBITDA (` Crore) PAT (` Crore) FY 2014-15 5,761 FY 2014-15 1,521 FY 2013-14 4,781 FY 2013-14 126 FY 2012-13 3,651 (1,180) FY 2012-13 FY 2011-12 2,101 (1,285) FY 2011-12 FY 2010-11 2,779 (252) FY 2010-11 Panoramic view of CDU/VDU and FCCU 3 Essar Oil Limited // Annual Report 2014-15 Chairman’s Message Diesel deregulation has opened up a great marketing opportunity for your Company, which has over 1,550 operational outlets and another 1,600 in various stages of implementation. Going forward, our expanding retail network will be a great value creator as we position ourselves to meet heightened customer expectations. 4 Company Overview DEAR SHAREHOLDERS, and LPG by 10.3% during the Gas production at our Raniganj FY 2014-15. We expect 5-6% per asset reached 0.67 mscmd, making I am very happy to present to you annum sustained growth in India’s us the largest CBM gas producer in the Annual Report for FY 2014-15. petro product demand in the medium the country. This was the best performance your to long term. This would imply India Company has delivered on all the requiring one new refinery of ~400k The gradual increase of ` 0.50 per litre operational and financial parameters. barrels per day (bpd) capacity every per month in diesel prices initiated by two years. India’s current excess the Government in January 2013 and Industry Overview capacity will get absorbed in the next reduction in crude oil prices during In FY 2014-15, global economy grew 3 to 4 years. Future expansion, unless the year led to full de-regulation of by a modest 3.4% with a pickup in they are brownfield, are going to be diesel prices. These factors enabled growth in advanced economies and extremely challenging given the issues your Company to enter the market, a slowdown in emerging market relating to land acquisition. hitherto unavailable to private players and developing economies. Lower due to the subsidy regime. Essar Oil’s oil prices contributed to improved Your Company is well-poised to meet marketing team has acted quickly and demand, boosting economic growth. this incremental demand. operationalised over 1,550 outlets, Going forward, it is expected that with another 1,600 in various stages global growth will gradually increase FY 2014-15 performance of implementation. Our network is during 2015 and is expected to reach This was a landmark year for us, with expected to reach 5,000 operational 3.8% in 2016. your Company outperforming itself outlets by the end of next year. Essar on several operational and financial Oil’s retail business has begun to After three continuous years of triple parameters. The Vadinar Refinery contribute to the bottom line and digit prices, oil prices began a sharp processed 20.49 MMT of crude promises to be a major value creator decline starting from USD 110/bbl in during the year, which was highest in the future. We are approaching this June 2014, reaching USD 52/bbl by ever. Smooth synchronisation of business with a new customer-oriented December 2014 before closing the our superior hardware, integrated mindset and have lined up exciting year at USD 53/bbl in March 2015. supporting infrastructure, and astute offerings for consumers and dealer- Global oil supply growth outpaced crude sourcing strategy, resulted in partners, both of whom are sure to find consumption growth and currently the Essar Oil reporting a USD 8.12/bbl value in associating with us. world is awash with supplies. GRM premium over benchmark IEA (old), which during the year stood I take this opportunity to once While several large refineries in the at USD 0.25/bbl. In FY 2014-15, again thank all our stakeholders— Middle East and India began supplying Essar Oil reported highest ever CP shareholders, employees, in the market during the fiscal, it is GRM at USD 8.37 per barrel, against vendors,government, regulators and expected that the refinery capacity USD 7.98/bbl in FY 2013-14. communities—for their continued rationalisation/closures in Far East Asia support and encouragement. and Australia coupled with increase In FY 2014-15, Essar Oil reported in demand may help absorb excess highest ever EBITDA at ` 5,761 Best Wishes, production. The domestic market has crore, up 20% compared to shown recovery in demand of key FY 2013-14. Profit after Tax (PAT) petroleum products. While gasoline was also highest ever at ` 1,521 Prashant Ruia grew by more than 11.4%, Gas oil, crore for FY 2014-15, up 12 times Chairman after two years of negative to zero compared to FY 2013-14. growth,registered a growth of 1.5%, 5 Essar Oil Limited // Annual Report 2014-15 MD & CEO’s Message DEAR SHAREHOLDERS, This was a landmark year for us. Vadinar It is my pleasure to present the Refinery’s throughput of 20.49 MMT performance of Essar Oil Ltd. for the fiscal year 2014-15, which saw your during the year, was highest ever. So Company report record operational was our CP GRM of USD 8.37/bbl, and financial performance. which was at a premium of USD 8.12/bbl The year saw several landmark events over the benchmark IEA margins. and developments, both global and domestic, which has the potential to shape the oil and gas sector for years to come. Due to various factors, crude prices fell to their lowest levels in about a decade in 2014. From 2010 until mid- 2014, world oil prices had been fairly stable, at around USD 110 a barrel. But from about the middle of 2014 till December of the same year, they fell by half to sub-USD 50 levels, bringing optimism to energy-importing countries like India.