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Directors Report of Essar Shipping Ltd.

Mar 31, 2015

To the Members of Essar Shipping Limited

The Directors are pleased to present the Fifth Annual Report and Audited Financial Statements of the Company for the financial year ended March 31,2015.

FINANCIAL RESULTS:

The Company's financial performance, for the year ended March 31,2015 is summarized below:

Rs. in Crore

Particulars Consolidated Standalone

For the For the For the For the year Year year Year ended ended 31- ended ended 31-03-2015 03-2014 31-03-2015 31-03-2014

Total Income 2153.29 2,006.59 998.90 1,026.39

Total Expenditure 1683.60 1,328.22 647.12 743.57

EBITDA 469.69 678.37 351.78 282.82

Less: Interest & 477.13 399.37 286.32 322.93

Finance charges

Less: Provision 424.06 477.88 143.96 185.56 for Depreciation

Less: Exceptional - - - 5.44 Item

Profit / (Loss) (431.50) (198.88) (78.50) (220.23) before Tax

Less: Provision (27.38) (44.89) (4.50) (8.92) for Tax

Loss for the (458.88) (243.77) (83.00) (229.15) year before share of profit of associate

Add: Share of (0.07) 0.05 - - (loss) / profit of associate

Loss for the (458.95) (243.72) (83.00) (229.15)

year

DIVIDEND

In view of accumulated losses, your Directors are unable to recommended any dividend for the year under review.

MANAGEMENT DISCUSSION AND ANALYSIS Overview of the World Economy

Global growth remains moderate, with uneven prospects across the main countries and regions. Growth rate is expected to be 3.5 percent in 2015, as estimated by International Monetary Fund. Relative to last year, the outlook for advanced economies is improving, while growth in emerging market and developing economies is projected to be lower, primarily reflecting weaker prospects for some large emerging market economies and oil- exporting countries.

Overview of the Indian Economy

The International Monetary Fund (IMF) and the Moody's Investors Service have forecasted that India will witness a gross domestic product (GDP) growth rate of 7.5 per cent in 2016, due to improved investor confidence, lower food prices and better policy reforms. Besides, according to mid-year update of United Nations World Economic Situation and Prospects, India is expected to grow at 7.6 per cent in 2015 and at 7.7 per cent in 2016.

As per the latest Global Economic Prospects (GEP) report by World Bank, India is leading The World Bank's growth chart for major economies. Initiatives such as 'Make in India' are expected to increase the purchasing power of an average Indian consumer, which would further boost demand, and hence spur development, in addition to benefiting investors.

BUSINESS PERFORMANCE, OPPORTUNITIES AND OUTLOOK

The business is based on the intrinsic demand for transportation services. Developing economies are facing two key transitions, logistics and cargo handling infrastructure required by steel, power generation and refining industry. With focus on crude and dry bulk carriers, port to plant logistics and oilfield services, your Company continues to provide end-to-end logistics solutions to its customers in a very cost effective manner.

a) Sea Transportation Business

The Company currently operates a diversified fleet of 15 vessels which includes Very Large Crude Carriers, Bulk carriers such as Capsize, Mini-capes, Supramaxes and Handy-size. Company's revenue have declined in the recent past due to reduction in number of vessels and decline in charters rates due to continuous slowdown in the Shipping industry. Shipping market is currently subdued due to both demand side constraints and oversupply of tonnage. While in the near term recovery is expected to remain subdued and uneven with freight rates likely to remain under pressure particularly in dry bulk segment. As per the report by Clarksons ("Dry Bulk Trade Outlook", April 2015), current downtrend in Shipping Industry is expected to offset by uptrend in commodities like coal and iron ore and supplemented by limited net addition of vessels due to scrapping of old fleet.

Company is taking a series of initiatives to weather the difficult market conditions on the operational front as well as on the financing end to make a sustainable business model for its shipping business. The initiative includes entering into long term contracts for deployment of vessels for ensuring assured returns.

Dry Bulk Market

Baltic Dry Index (BDI), the indicator of dry bulk cargo tariffs, had an all-time high value of 11793, in May 2008 and has reached to an all-time low value of 509 in Feb 2015. For last three years, the BDI hovered around 1000, and it declined in the period of Nov 2014 to Feb 2015. The BDI has since recovered to 634 by mid May 2015.

Dry bulk has significant share of worlds' seaborne trade. As per Crisil research in year 2000, dry bulk had 54% share of the total cargo volume transported in that year. In year 2014, dry bulk segment has even increased the market share to 55%. The global dry bulk transport grew steadily from 2794 million tons in year 2005 to 4545 million tons in year 2014 at CAGR of 5.56%. Therefore, notwithstanding some short- term challenges, the global dry bulk transportation segment is expected to perform well in the long run.

Steel industry is a major contributor to the dry bulk cargo, as iron ore forms 29% of the total dry cargo traded. Contribution of coal in dry cargo composition is 27%. Other bulk cargo includes cement, fertilizers, agri bulks, coke, anthracite etc.

As iron ore and coal combined contribute to 56% of the dry bulk shipping, the trends in iron ore, coking coal and thermal coal are likely to define the bulk carrier market in the long term. As mentioned in the Clarkson's Dry Bulk Trade Outlook (April, 2015), China's thermal coal and coking coal imports are likely to be weakened due to Chinese campaign to reduce air pollution in major cities, by slowing its steel production and coal-fired power generation. However, India's thermal coal imports are projected to grow, which may compensate the decline in coal transport caused by China's reduced coal import. Overall, coal trade is projected to remain steady in short term.

According to Clarkson, iron ore spot prices hit a ten-year low of less than $47/ton, caused by ramped up production by the Australian miners - BHP Billiton and Rio Tinto. They are expected to continue the expansion in year 2015. This reduction in spot prices has caused displacement of Chinese domestic iron ore by imported iron ore from Australia. Thus, Chinese iron ore imports may expand this year by about 6%, which will give big boost to worldwide iron ore bulk transport, which is expected to grow by 5% in year 2015.

The pace of bulk carrier scrapping in the year to date, particularly in the Capesize sector, has increased, thus helping to slow the pace of fleet expansion. The fleet expansion is likely to remain at slow pace, as orderbook- to-fleet ratio for Capesize, Panamax and Handymax are at low levels. However, bulk carrier deliveries are expected to reach 54m dwt in 2015 and 51m dwt in 2016, which is likely to result in continued supply-side pressure on the market.

Tanker Market

As per Crisil Research, as in year 2014, Petroleum Products and Oil Tankers have 29% share of volume transported that year. Crude oil tankers are classified according to their sizes as Ultra Large Crude Carriers (ULCC), Very Large Crude Carriers (VLCC), Suezmax, Aframax, Panamax, Long Range (LR) and Medium Range (MR) tankers.

The trend for last three years of Baltic Exchange Dirty Tanker Index (BCIY) shows that the index peaked in Dec- 14, at around 800 and bottomed at around 600. The index has been volatile for last three years.

According to Bloomberg, because of decline in oil prices, interest in floating storage is increasing. Therefore, demand for VLCC and Suezmax vessels may increase.

As per Crisil Research, crude trade is expected to grow in 2015 due to increased supply and elevated demand from refinery additions. Incremental crude demand from Asia is expected to offset the reduced crude imports into USA and Europe.

Increasing crude output will drive search for new markets for the produce, leading to expansion in trade routes. Reduced ordering continued slippages and sizeable scrappage of old vessels have caused net addition in fleet to remain at a moderate level. The net additions are expected to constitute around 2-3 per cent of the existing fleet.

Demand & charter rates for VLCCs are showing an uptrend and may continue in light of expanding trade rates & moderate net addition in existing fleet.

(b) Oilfields Services Business

In the oilfields services business the Company owns and operates a fleet of one semi-submersible Rig and 15 land Rigs. Oil prices fell sharply from the second half of 2014, bringing to an end a long period of stability around $105 per barrel, and since then the prices have been ranging between $50 and $60 per barrel. This sharp price decline has put severe economic stress on oil producers and the oil services industry around the world. While there is a growing concern that further steep declines in the prices of oil may threaten the economic and political stability of oil-producing countries, there is also hope that lower oil prices may add the much needed strength to the global economy. The decline has been welcomed by many in India as it is helping to reduce inflation, the fiscal deficit and the import bill. But the oil companies, be they in refining or exploration, or both, are suffering.

Exploration & Production (E&P) spending is one of the most important market indicators of the health of the Upstream Oil & Gas industry. This is true from seismic to drilling to subsea — and includes the charter hire for all marine assets and offshore support vessels (OSVs). Capital expenditures (CapEx) for global E&P spending are expected to fall by 20.2 percent in 2015 to approximately $590 billion - the first time that spending has dipped below $600 billion since 2011 - but is poised to rise in 2016 if oil prices stabilize at or above the $65 to $70 per barrel threshold.

Drilling activity continues to trend lower on the back of a challenging crude oil pricing environment. It is expected that Oilfield services companies will see weaker revenues over 2015-16, as spending cuts take effect and also as customers push for better pricing and terms on contract negotiations and renewals. This environment has resulted in a sharp decline in dayrates and utilization of the rigs. The marketed utilization in the worldwide semisubmersible market is expected to drop to an average of 75% in 2015 from the December 2014 level of 90%. The marketed utilization of the worldwide jackup market is expected to drop from 86% in December 2014 to an average of 79% in 2015. The dayrate for 2G/3G mid water floaters is expected to be in the range of $140,000 to $170,000 in 2015 against a range of $190,000 to $230,000 in 2014.

Given the present market scenario, there is tremendous competition for the limited number of new drilling contracts that are currently available. Presently, leading Indian operators such as ONGC and Oil India have a few tenders in both the offshore and onshore segments that are keeping contactors busy. Essar is committed to building long term relationships with these leading operators and is participating in these tenders to find deployment opportunities for its fleet of offshore and onshore rigs.

While the fact that operators are rapidly laying down rigs and curtailing CapEx is certainly a near-term dampener for oilfield services firms, it should prove positive for the broader oil markets. The weaker drilling and capital spending could suggest that there will be tighter supply of oil in the future, helping to bolster prices. Turning to 2016, a recovery in global demand is expected to begin once oil prices return to a level that the operators are comfortable with, when it comes to sanctioning new projects and hiring additional rig capacity.

SUBSIDIARIES

As on March 31,2015, your Company has four direct subsidiaries and one indirect subsidiary. Essar Oilfields Services Limited, Mauritius; Arkay Logistics Limited, India (Formerly known as Essar Logistics Limited); Energy Transportation International Limited, Bermuda; and Energy II Limited, Bermuda are direct subsidiaries of the Company. Essar Oilfield Services India Limited, India, is indirect subsidiary of the Company.

A report on the performance and financial position of each of the subsidiaries and associates companies as per the Companies Act, 2013 is provided as Annexure to the consolidated financial statement and hence not repeated here for the sake of brevity. The Policy for determining material subsidiaries is available on Company's website www.essar.com.

CONSOLIDATED FINANCIAL STATEMENTS

The Company's Subsidiaries are managed by respective Board of Directors and their accounts are duly audited by respective Statutory Auditors. The Consolidated Accounts should therefore be read in conjunction with the report of Directors' of these subsidiaries, their accounts, financial notes and Auditors' report thereon.

In accordance with the Companies Act, 2013 and Accounting Standard (AS) - 21 on Consolidated Financial Statements read with AS - 23 on Accounting for Investments in Associates, the audited Consolidated Financial Statements are provided in the Annual Report.

STATEMENT CONTAINING THE SALIENT FEATURES OF THE SUBSIDIARY(s) AS PER REQUIREMENT OF SECTION 129(3)

A separate statement containing the salient features of the subsidiary(s) as per requirement of section 129(3) is attached with this report as Annexure - H.

AWARDS AND RECOGNITIONS

In August 2014, your Company received the 'Bulk Operator of the Year' award at the Gateway Awards, for the third time consecutively, in appreciation of the impressive performance in dry bulk segment for the year 2013-14. This award is presented in appreciation of the impressive performance in dry bulk shipping. The award also recognises the Company's proactive initiatives in expanding its fleet.

Arkay Logistics Limited, a subsidiary of the Company has been ranked 27th in the Dollar Business Magazine's Logistics 50 list which ranks the top logistics companies in India on the basis of its turnover, fleet, geographical spread, manpower, technology, warehousing, clientele, vertical integration, and efficiency. In addition to this, Arkay Logistics Limited has also featured in the list of the top 10 companies in India for its value added services amongst logistics majors, Maersk, Hyundai Logistics, UPS and Gati.

Mr. A. K. Musaddy, Managing Director of Arkay Logistics Limited has bagged the Leading CEO of The Year 2015. The award committee has valued Mr. A. K. Musaddy, Managing Director of Arkay Logistics Limited's outstanding leadership in shaping the organization, delegation of responsibilities and nurturing young talent for key positions and conferred with Gold Awards in leading C.E.O. of the year category.

Arkay Logistics Limited has also bagged the Gold award in category for "Innovation in Retention Strategies".

SUSTAINABILITY REPORTING

Since the launch of the first sustainability report by the Company for the year 2010-11, the Company has demonstrated progress based on a systematic approach of integrating sustainability into the business. Over the years, the focus on energy efficiency has helped reduce the costs and made environmental footprint related to the shipping business.

The Company's fourth Sustainability Report titled, "Strengthening and Creating a Sustainable Maritime Industry" was released on April 24, 2015. Most of the sustainability indicators have shown improvement over the years. During the year, further steps have been initiated to strengthen the sustainability governance framework. The sustainability report is available at http://www. essar.com/upload/pdf/Essar_Sustainability_Report_Final.pdf.

Your Company is the first Indian Shipping Company to have published its Sustainability Report and all its reports conform to Global Reporting Initiative Current Generation of Guidelines Version 3.1 (GRI G3.1 Guidelines) DNV GL Business Assurance India Pvt. Ltd. has assured A application level.

HUMAN RESOURCE

Your Company believes that employee competence and motivation are necessary to achieve its business objectives. Your Company has undertaken many training initiatives to enhance technical and managerial competence of the employees and to further leverage their capabilities to enhance their performance. The Company has taken a series of initiatives to enhance emotional and intellectual engagement of employees. During the year under review, the Company held many employees engagement programs at the Company premises and outside. Families of employees were invited and attended these programs.

The Company has policies on conduct, sexual harassment of women at workplace, whistle blower, corporate governance, insider trading etc. guiding the human assets of the Company. For the year under review, there was no instance of the sexual harassment reported pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

DIRECTORS

In accordance with the provisions of the Companies Act, 2013 and the Article of Association of the Company, Mr. P. K. Srivastava retires by rotation at the ensuing Annual General Meeting and being eligible has offered himself for re-appointment. The Company has received requisite notice in writing from a member proposing Mr. P. K. Srivastava for appointment as Director.

During the year under review, Mr. Ankur Gupta, Director and Mr. A. R. Ramakrishnan, Managing Director, have resigned with effect from January 28, 2015 and March 31,2015, respectively.

Pursuant to the provisions of Section 161(1) of the Companies Act, 2013 and the Articles of Association of the Company, Ms. Gayathri Sukumar was appointed as an Additional Director (Non- executive Non-independent) with effect from March 30, 2015 and she shall hold office upto the date of the ensuing Annual General Meeting. The Company has received requisite notice in writing from a member proposing Ms. Gayathri Sukumar for appointment as Director. Mr. Michael P. Pinto and Mr. N. C. Singhal, Directors have resigned with effect from April 03, 2015 and April 06, 2015, respectively. The Board places its sincere appreciation for the valuable contribution made by Mr. A. R. Ramakrishnan, Mr. Michael P. Pinto, Mr. N. C. Singhal and Mr. Ankur Gupta, during their tenure as Directors of the Company.

The brief resume of the Directors being appointed/ re-appointed, the nature of their expertise in specific functional areas, names of companies in which they have held directorships, committee memberships/ chairmanships, their shareholding etc., are provided in the Notes to the Notice of the ensuing Annual General Meeting. Your Directors recommend their appointment / re-appointment at the ensuing Annual General Meeting.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under Clause 49 of the Listing Agreement with the Stock Exchanges.

The information on Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors; Separate meeting of Independent Directors; Familiarization programme for Independent Directors, etc. is provided under Corporate Governance Report annexed with this Report and the relevant policies are also available on the website of the Company www.essar.com.

BOARD MEETINGS

During the year ended on March 31, 2015, six (6) meetings of the Board were held on May 20, 2014, July 24, 2014, August 08, 2014, October 11, 2014, November 13, 2014 and February 13, 2015.

DIRECTORS' RESPONSIBILITY STATEMENT

Based on the Framework of Internal Financial Controls established by the Company, performed by the internal, statutory and secretarial auditors, reviewed performance by various board appointed committees, the Board with the concurrence of the Audit Committee states that

(a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards had been followed and there are no material departures from the same;

(b) the Directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31,2015 and of the loss of the Company for the year ended on that date;

(c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the Directors had prepared the annual accounts on a going concern basis;

(e) the Directors, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

(f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

RISK MANAGEMENT

Your Company has a Risk Management Policy that outlines the framework and procedures to assess and mitigate the impact of risks, and to update the Board and the senior management on a periodical basis on the risk assessed, actions taken for mitigation and efficacy of mitigation measures. With efficient Risk Management Framework, your Company is able to manage:

(a) Economic Risks by entering into long term contracts with reputed global majors in each of its divisions thereby ensuring long term profitability of the Company and assured cash flows;

(b) Interest Rate Risk by undertaking suitable hedging strategies to overcome any adverse interest rate risks. It has formulated internal target rates at which any open interest rate risk can be hedged;

(c) Control over the operational matrix of various vessels to reduce cost and reduce downtime of vessels; and

(d) Control over various OPEX cost of the organization.

During the year, your Directors have constituted a Risk Management Committee which shall assist the Board in framing, implementing and monitoring the risk management plan for the Company. The Risk Management Committee consists of one Whole-time Director, one Independent Director and Chief Financial Officer of the Company. The Risk Management Committee has been entrusted with the responsibilities of monitoring and reviewing of the risk management plan of the Company.

INTERNAL CONTROL SYSTEMS AND ITS ADEQUACY

Your Company has a well-established framework of internal operational and financial controls, including suitable monitoring procedures systems which are adequate for the nature of its business and the size of its operations. The policies and procedures adopted by the Company ensure the orderly and efficient conduct of its business, including adherence to Company's policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information. In addition to the external audit, the financial and operating controls of your Company are reviewed by Internal Auditors, who report their observations to the Audit Committee of the Board.

CORPORATE GOVERNANCE

The Company has complied with all mandatory provisions of Clause 49 of the Listing Agreement, relating to Corporate Governance. A separate report on Corporate Governance as stipulated under the Listing Agreement forms part of this Report. The requisite certificate from the Auditors of the Company regarding compliance with the conditions of corporate governance is attached to the report on Corporate Governance.

VIGIL MECHANISM

The Company has in compliance with Section 177 of the Companies Act, 2013 has established Vigil Mechanism by adopting the, 'Whistle Blower Policy', for Directors and Employees. The Whistle Blower Policy provides for adequate safeguards against victimization of persons who use such mechanism and have provision for direct access to the Chairperson of the Audit Committee in appropriate cases. A copy of the Whistle Blower Policy is available on the website of the Company www.essar. com.

CORPORATE SOCIAL RESPONSIBILITY

The Corporate Social Responsibility Committee comprises Captain B. S. Kumar - Chairman; Captain Anoop Kumar Sharma; Mr. A. R. Ramakrishnan (upto March 31,2015); Mr. Ankur Gupta (upto January 28, 2015) and Ms. S. Gayathri (With effect from May 06, 2015). During the year, one meeting of the Committee was held on December 18, 2014.

In view of the losses for last three years the Company is under no obligation to set apart funds for Corporate Social Responsibility expenses as contemplated under Section 135 of the Companies Act, 2013 and accordingly no contribution was made during the year. However, the Company is in association with the group companies has participated in various community activities. The Board of Directors of your Company authorized Essar Group Foundation, a Charitable Trust formed and registered for the purpose of undertaking and implementing social cause in line with the requirements stipulated under the Companies Act, 2013 and Rules made thereunder. The Company has nominated its officials on the Board of Trustee of Essar Group Foundation to act for and on behalf of the Company with full power to perform duties and responsibilities as may be required to effectively discharge the function of Corporate Social Responsibility of the Company.

Essar Group Foundation facilitates development initiatives in line with provisions under the Companies Act, 2013. Essar Group Foundation works in 8 states and 12 districts of India including very remote locations, under challenging circumstances and adverse local conditions. Essar Group Foundation mandated to work towards:

- Eradicating hunger and poverty and malnutrition, promoting preventive healthcare and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water.

- Promoting education; including special education and employment enhancing vocation skills especially among children, woman, elderly and the differently abled and livelihood enhancement projects.

- Promoting gender equality, empowering women; setting up homes and hostels for women and orphans, setting up old age homes, day care centres, and such other facilities for senior citizens and measures for reducing inequalities faced by socially and economically backward groups.

- Ensuring environmental sustainability, ecological balance, protection of flora and fauna, animal welfare, agroforestry, conservation of natural resources and maintaining of quality of soil, air and water including contribution to the Clean Ganga Fund set-up by the Central Government for rejuvenation of river Ganga.

- Protection of national heritage, art and culture including restoration of buildings and sites of historical importance and works of art; setting up of public libraries; promotion and development of traditional arts and handicrafts.

- Measures for the benefit of armed forces veterans, war widows and their dependents.

- Training to promote rural sports, nationally recognized sports, and Paralympics sports and Olympic sports.

- Contribution to the Prime Minister's National Relief Fund or any other fund set up by the Central Government for socio-economic development and relief and welfare of the Scheduled Castes, the Scheduled Tribes, other backward classes, minorities and women.

- Contributions or funds provided to technology incubators located within academic institutions which are approved by the Central Government.

- Rural development projects.

- Slum area development.

In view of the loss during the last three years, the Company was not required to spend on Corporate Social Responsibility activities during the year under review. Accordingly, the Company did not contribute towards Corporate Social Responsibility activities undertaken by Essar Group Foundation during the year under review. However, the Company voluntarily participated in the noble cause in following manner:

Shipping Essarites support Home for Aged in Mumbai - On

May 31,2014, a group of Essarites from Essar Shipping, Mumbai visited the Home for the Aged Poor, at Andheri, a suburb of Mumbai, run by a non-profit, the Little Sisters of the Poor, a charitable institution that receives men and women of 65 years of age and above, who are really in need of care and shelter. The Home which was set up in 1961, had dented with time and required restoration.

Essar Shipping presents annual Search and Rescue awards 2014 - Every year since 2005 Essar Shipping has been recognising the brave men and women in uniform, who perform the task of Search-and-Rescue along the Indian coast. This year there were two joint winners for the award which went to ICGS (Indian Coast Guard Ship) Priyadarshini, which rescued five crew member of MV Kornank II off Vizag on 22 July 2013. The award was received Comdt SZ Hussain, CO ICGS Priyadarshini. The second award was given to Chetak Flight Port Blair for saving eleven lives of FB Bhaskar off Port Blair on 26/27 November 2013. The award was received by Comdt (JG) R Ramesh, Flt Cdr Chetak Flight Port Blair. Capt. Anoop Sharma, Chief Executive Officer of the Company presented the awards at XIII National Maritime Search and Rescue (NMSAR) board meeting on 12th August at Mumbai.

Essar Shipping joined hands with Coast Guard for International Coastal Cleanup Day - Essar Shipping, Essar Ports and other Essarites came together to lend a hand cleaning up two of the most popular and frequented beachfronts, the Juhu and Girgaum Chowpatty on September 20, 2014, International Coastal Cleanup Day, in Mumbai.

Essar Shipping spend a fun-filled afternoon with abandoned and destitute street kids - On Children's Day November 14, 2014, Essar Shipping Limited employees celebrated 125th anniversary of Chacha Nehru in a special way with the Children of Vatsalya trust. Employees gathered funds, volunteered to organize games for the children and presented a delightful afternoon of magic show, games, music, dance, snacks and sweets to the street children associated with Vatsalya Foundation, an NGO that has been working with street children in Mumbai since past many years and forces on the holistic development of the street children through a range of activities.

The Corporate Social Responsibility Policy and activities can be accessed on the website of the Company viz. www.essar.com. The annual report on CSR activities as required under Rule 9 of the Companies (Accounts) Rules, 2014 read with Rule 9 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed as Annexure - A.

EMPLOYEE STOCK OPTION SCHEME

The Company has implemented the "Essar Shipping Employees Stock Option Scheme-2011" ("Scheme") in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ("the SEBI Guidelines"). The Nomination and Remuneration Committee of the Board of Directors of the Company administers and monitors the Scheme. The applicable disclosures as stipulated under the SEBI Guidelines as at March 31, 2015 are provided in the Annexure - B to this Report.

AUDITORS

Your Company's Statutory Auditor, M/s. Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad (Registration No. 117365W) will retire at the conclusion of the ensuing Annual General Meeting.

M/s. Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad were Auditors of the Company for last five financial years since the financial year 2010-11. . The Board of Directors in consultation with Audit Committee has decided to fall in line with requirements of Companies Act, 2013 and accordingly didn't recommend the re-appointment of M/s. Deloitte Haskins & Sells. The Audit Committee and the Board of Directors of the Company recommend M/s CNK & Associates LLP, Chartered Accountants, Mumbai, (Registration No. 101961W) for appointment as Statutory Auditors of the Company by the Members at the ensuing Annual General Meeting. The Company has received letter from M/s CNK & Associates, Chartered Accountants, Mumbai to the effect that if their appointment is made , would be within the prescribed limits laid down under Section 141 (3)(g) of the Companies Act,2013 and they are not disqualified for such appointments under the provisions of applicable laws.

SECRETARIAL AUDIT

The Board has appointed M/s. Martinho Ferrao & Associates, Practising Company Secretaries, to conduct Secretarial Audit for the financial year 2014-15. The Secretarial Audit Report for the financial year ended March 31,2015 is annexed herewith marked as Annexure - C to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

EXPLANATIONS BY THE BOARD ON AUDITOR'S QUALIFICATION, RESERVATION OR ADVERSE REMARK

The Board refers to the observation in the Statutory Auditor's Reports and as required under Section 134(3) of the Companies Act, 2013, provides the following explanation:

We refer to Note 13(a)(ii) of the standalone financial statements with respect to assessment of the carrying value of Investment

in Essar Oilfields Services Limited, Mauritius, a wholly owned subsidiary of the Company, amounting to ' 4,747.78 Crore as at March 31,2015, pertaining to the Oilfields services business. Having regard to the changes in the off-shore drilling markets world-wide and the expected impact of the same on the possible business scenarios applicable to the subsidiary, the management had initiated an exercise of assessing the value of the said investment during the last financial year in terms of Accounting Standard (AS 13), "Accounting of Investments". In view of recent volatility in crude oil prices, considering the current economic scenario and evaluation of possibility of upgradation and utilization of rigs, assumptions for long-term projections are being assessed in detail by the management. Pending conclusion of the aforesaid exercise, no provision for diminution in the carrying value, if any, of the aforesaid investment has been recognised. With regards to the emphasis of matter mentioned in Audit Report with relevant financial notes states that the strategy of the management to re- align the debts will not significantly impact the future cash flows.

APPOINTMENT AND REMUNERATION POLICY FOR DIRECTORS AND SENIOR MANAGEMENT

The Board of Directors on recommendation of the Nomination & Remuneration Committee has adopted a policy for appointment of Directors, remuneration of Directors, Key Managerial Personnel and other employees. The brief details on the above are provided in Corporate Governance Report and the policy is available on the website of the Company www.essar.com. The details of remuneration as required to be disclosed pursuant to the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as Annexure - D to this Report.

PARTICULARS OF EMPLOYEES

In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules together with disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annexure - E to this Report.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arm's length basis. During the year, the Company had entered into one contract / arrangement / transaction with Essar Steel India Limited, a Fellow Subsidiary which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website www.essar.com. The information on each of the transactions with the related party as per the Companies Act, 2013 is provided in note 33 of notes forming part of the financial statement and hence not repeated. The disclosure required pursuant to clause (h) of sub-section (3) of Section 134 of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014 in Form AOC-2 is annexed herewith as Annexure - F to this Report.

EXTRACT OF ANNUAL RETURN

The extract of the Annual Return in Form MGT 9 is annexed herewith as Annexure - G to this Report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Particulars of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO

Conservation of energy and Technology absorption

Your company is committed for continual environmental improvement. The Company has taken several initiatives towards conservation of energy. The Company initiated the process of monitoring carbon emissions as per IMO GHG Guidelines and also explored opportunities to improve energy efficiency onboard the ships. Due to the nature of the business (transportation), fuel and lubricants are necessary to deliver the services.

Following are few steps taken towards conservation of energy and use of alternate source of energy:

Ship Energy Efficient Management Plan (SEEMP): In line with current guidelines that have been established by IMO, this plan has been implemented all across fleet vessels. The capturing and monitoring of the data on regular basis prompts to take appropriate corrective measures on a timely basis. Onboard performance monitoring systems will give a holistic approach to ship operations with the aim of reducing fuel consumption and emissions while achieving optimum vessel performance. The Company have already completed energy efficiency evaluation on our assets and are now in the process of implementing fuel efficiency measures. These include trim, speed reduction and weather routing. These fuel efficiency measures will not only reduce energy consumption but also benefit customers through lower fuel cost, where applicable.

Alternate source of energy: In order to reduce fuel consumption, the Company's vessels utilize shore power during repair lay-up period and thereby reduce carbon foot print. Periodical cleaning of ship's hull and propellers apart from routine dry-docking of floating assets is another step which has been taken towards conservation of energy with insignificant investment or expenses.

Technology Absorption

The Company has successfully implemented SAP in its financial and budget management systems. The Company has also now implemented various methods of automation so as to have greater visibility and control over its assets and further improve the turnaround time thereby increasing asset utilisation and profitability. Planned maintenance and purchase management system of all the vessels are now being integrated with SAP in order to have uniform platform. The Company has implemented a robust Document Management System thus improving the availability of critical information in e-mode thereby reducing the use of paper. Ship-staff payroll system has been developed and implemented successfully.

In-house developed software EIS system has now been upgraded to monitor all the above energy conservation measures and is now available online. Various energy and cargo related data are available in e-mode and helps in close monitoring and control of energy conservation related matters. Due to in- house developed software, your company has not only saved on investment towards purchase of third party software but also reduced dependency on third party service provide.

Foreign Exchange Earnings and Outgo

The details of Foreign Exchange Earnings and Outgo during the year are as follows:

Foreign Exchanged Earned (including loan : Rs. 515.77 crore receipts, sale of ships, freight, charter hire earnings, interest income, etc.)

Foreign Exchanged Used (including cost : Rs. 988.03 crore of acquisition of ships, loan repayments, interest, Operating expenses, etc.)

PUBLIC DEPOSITS

Your Company has not accepted any public deposits under section 73 of the Companies Act, 2013, during the Financial Year.

APPRECIATION AND ACKNOWLEDGEMENTS

Your Directors express their appreciation of commendable teamwork of all employees. Your Directors express their thanks to all the offices of the Ministry of Shipping, Directorate General of Shipping, Ministry of Petroleum and Natural Gas, Indian Navy, Indian Coast Guard, Mercantile Marine Department, State Government and Central Government, Classification societies, Oil Companies and Charterers for the valuable support, help and co-operation extended by them to the Company.

Your Directors also thank its Bankers, vendors, other business associates and Members of the Company for their continued co- operation and understanding extended to the Company.

For and on behalf of the Board

Captain Anoop Kumar Sharma P. K. Srivastava

Whole Time Director & Chairman

Chief Executive Officer

Mumbai

August 14, 2015


Mar 31, 2014

Dear members,

The Directors take pleasure in presenting the Fourth Annual Report of your Company together with Audited Accounts for the Year Ended March 31, 2014. The Financial Statements have been presented on lines similar to previous year in view of clarification issued by the Department of Corporate Affairs in its Circular No. 8 dated April 4, 2014.

FINANCIAL RESULTS:

The summary of the Standalone and Consolidated Financial Results of your Company for the Year Ended March 31, 2014 are furnished below:

Rs. in Crore

Particulars Consolidated Standalone

For the For the For the For the Year Year Year Year Ended Ended Ended Ended 31-03-2014 31-03-2013 31-03-2014 31-03-2013

Total Income 2,006.59 3,298.08 1,026.39 1,556.24

Total Expenditure 1,328.22 2,433.02 743.57 1,149.82

EBITDA 678.37 865.06 282.82 406.42

Less: Interest & 399.37 365.72 322.93 307.26 Finance charges

Less: Provision for 477.88 369.31 185.56 139.01 Depreciation

Less: Exceptional - 50.20 5.44 50.20

Item

Profit / (Loss) (198.88) 79.83 (220.23) (90.05)

before Tax

Less: Provision (44.89) 44.03 (8.92) 3.20 for Tax

Profit / (Loss) for (243.77) 35.80 (229.15) (93.25) the year before share of profit of associate

Add: Share of profit 0.05 - - - of associate

Profit / (Loss) for (243.72) 35.80 (229.15) (93.25) the year

Opening balance of 95.69 59.89 (14.26) 78.99 Surplus/Deficit

Deficit/Surplus at (148.03) 95.69 (243.41) (14.26) the end of the year

DIVIDEND

In view of losses during the year 2013-14, the Board of Directors is unable to recommend any dividend for the year under review. Your Company which comprises of Sea Transportation, Oilfield Services and Logistics Businesses is currently expanding the capacities in shipping and in oilfields businesses through acquisition of suitable assets. These assets are highly capital intensive in nature and therefore require substantial investment. This necessitates the operating profits to be ploughed back towards capital expenditure.

EMPLOYEE STOCK OPTION SCHEME

The Company has implemented the ''Essar Shipping Employees Stock Option Scheme-2011'' (the Scheme) in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (the SEBI Guidelines). The Nomination and Remuneration Committee of the Board of Directors of the Company administers and monitors the Scheme. The applicable disclosures as stipulated under the SEBI Guidelines as at March 31, 2014 are provided in the Annexure to this Report.

SUBSIDIARIES:

Following are the subsidiaries of your Company as on March 31, 2014:

1. Essar Logistics Limited

2. Essar Oilfields Services Limited

3. Essar Oilfield Services India Limited

4. Energy Transportation International Limited and

5. Energy II Limited

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Statement of Profit & Loss and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company in view of the Company providing consolidated accounts. The Company will make available the Annual Accounts of the subsidiary companies and the related information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of the subsidiary companies.

DIRECTORS

As per Section 149(5) of the Companies Act, 2013 (''the Act'') the Company is required to appoint Independent Directors under Section 149(4) of the Act within a period of one year from April 1, 2014 i.e. the date of commencement of the said Section and Rules made thereunder. The Company had already appointed Mr. N. Srinivasan with effect from September 9, 2011 and, Mr. Michael P. Pinto, Captain Bhupinder Singh Kumar and Mr. N. C. Singhal with effect from August 7, 2013, as an Independent Non-Executive Directors of the Company, in terms of Companies Act, 1956 and the Listing Agreement. The Board of Directors in their meeting held on August 8, 2014 has recommended to reappoint all the aforesaid four Directors as Independent Non-Executive Directors within the meaning of Sections 149 and 152 [including Section 149(10)] of the Act, read with Schedule IV attached thereto and Rules made thereunder, for a term of 3 (Three) consecutive years with effect from the date of ensuing Annual General Meeting upto the conclusion of Annual General Meeting of the Company to be held in the calendar year 2017.

Further, pursuant to Section 152(6) and other applicable provisions, if any, of the Act, one-third of such of the Directors as are liable to retire by rotation, shall retire every year and, if eligible, offer themselves for re-appointment at every Annual General Meeting. Consequently, Mr. P. K. Srivastava, Director retires by rotation at the ensuing Annual General Meeting, and being eligible, offer himself for re-appointment in accordance with the provisions of the Act.

Your Directors have re-appointed Mr. A. R. Ramakrishnan, as Managing Director for a period from May 23, 2014 to May 22, 2017 and Captain Anoop Kumar Sharma, as Wholetime Director designated as Chief Executive Officer for a period from May 23, 2014 to May 22, 2017, subject to Members approval. Accordingly, resolutions are being proposed for their re-appointment at the ensuing Annual General Meeting for the approval of the Members.

The brief resume of the Directors being appointed/ re-appointed, the nature of their expertise in specific functional areas, names of companies in which they have held directorships, committee memberships/ chairmanships, their shareholding etc., are provided in the Explanatory Statement and Annexure to the Notice of the ensuing Annual General Meeting.

Your Directors recommend their appointment /re-appointment at the ensuing Annual General Meeting.

AUDITORS

Your Company''s Statutory Auditor, M/s. Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad (Registration No. 117365W) will retire at the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment as Statutory Auditor for the financial year 2014-15. Pursuant to Sections 139, 141 and other applicable provisions of the Companies Act, 2013 and relevant Rules prescribed thereunder, the Company has received certificate / consent letter from M/s Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad (Registration No.117365W) to the effect that their reappointment, if made, would be within the prescribed limits laid down by the Act and shall be as per the term provided under the Act and that they are not disqualified for such reappointment under the provisions of applicable laws. The Audit Committee and Board of Directors recommended their reappointment as Statutory Auditor of your Company.

CORPORATE GOVERNANCE

The Company is committed to maintain the highest standard of Corporate Governance and comply to the Corporate Governance requirements as required under the Listing Agreement entered with the Stock Exchanges. The disclosures as required in Clause 49 of the Listing Agreement have been furnished in the Annexure to the Directors'' Report under the head, "Corporate Governance". The requisite Certificate from the Statutory Auditors of the Company confirming the compliances with the conditions of the Corporate Governance as stipulated in Clause 49 of the Listing Agreement entered with the Stock Exchanges, is attached and forming part of this Annual Report. The Directors refer to the auditor''s observation on compliance of conditions of Corporate Governance relating to appointment of one Independent Director of the Company on the Board of material non-listed Indian Subsidiary Company. Mr. R. N. Bansal, Independent Director of the Company who was Director on the Board of material non-listed Indian Subsidiary Company has resigned w.e.f. August 8, 2013 and the Company is in the process of identifying the suitable Independent Director for future compliance.

Conservation of Energy:

Your company plays a great role in reducing the overall environmental impact due to its activities. We are committed for continual environmental improvement and during the last year we have taken several initiatives at both corporate and business level to demonstrate our commitment for being an environmentally conscious organization.

We initiated the process of monitoring our carbon emissions as per IMO GHG Guidelines. We also explored opportunities to improve energy efficiency onboard our ships. Due to the nature of our business (transportation), we consider fuel and lubricants as materials necessary to deliver our services. We are certified to ISO 14001 and efforts are on to raise awareness about environmental issues through online and class room training.

Following are few steps taken towards conservation of energy and use of alternate source of energy:

* Ship Energy Efficient Management Plan (SEEMP): In line with current guidelines that have been established by IMO, this plan has been implemented all across fleet vessels. The capturing and monitoring of the data on regular basis prompts to take appropriate corrective measures on a timely basis. Onboard performance monitoring systems will give a holistic approach to ship operations with the aim of reducing fuel consumption and emissions while achieving optimum vessel performance. We have already completed energy efficiency evaluation on our assets and are now in the process of implementing fuel efficiency measures. These include trim, speed reduction and weather routing. These fuel efficiency measures will not only reduce our energy consumption but also benefit our customers through lower fuel cost, where applicable.

* Alternate source of energy: Your company vessels utilize shore power during repair -lay up period in order to reduce fuel consumption and thereby reducing carbon foot print.

Periodical cleaning of ship''s hull and propellers apart from routine dry-docking of floating assets is another step which has been taken towards conservation of energy with insignificant investment or expenses.

Technology Absorption:

Your Company has successfully implemented SAP in its financial and budget management systems. The Company has also now implemented various methods of automation so as to have greater visibility and control over its assets and further improve the turnaround time thereby increasing asset utilisation and profitability. Planned maintenance and purchase management system of all the vessels are now being integrated with SAP in order to have uniform platform. Your Company has implemented a robust Document Management System thus improving the availability of critical information in e-mode thereby reducing the use of paper. Ship-staff payroll system has been developed and implemented successfully.

In-house developed software EIS system has now been upgraded to monitor all the above energy conservation measures and is now available online. Various energy and cargo related data are available in e-mode and helps in close monitoring and control of energy conservation related matters.

Due to in-house developed software, your company has not only saved on investment towards purchase of third party software but also reduced dependency on third party service provider.

DIRECTORS RESPONSE TO AUDITOR’S OBSERVATIONS/QUALIFICATIONS

The Directors refer to the auditor’s observation in the Auditors Report and as required under Section 217(3) of the Companies Act, 1956, provide their explanation as under:

We refer to Note 12(a)(ii) of the standalone financial statements with respect to assessment of the carrying value of Investment in Essar Oilfields Services Limited, Mauritius, a wholly owned subsidiary of the Company, amounting to Rs. 4,748 Crore as at March 31, 2014 and Note 37 of the consolidated financial statements with respect to assessment of the resultant Goodwill on consolidation in the financial statements, amounting to Rs. 5,492.88 Crore as at March 31, 2014, pertaining to the Oilfields services business. Having regard to the changes in the off-shore drilling markets world wide and the expected impact of the same on the possible business scenarios applicable to the subsidiary, the management of the Company has initiated an exercise of assessing the carrying value of the said investment in terms of Accounting Standard (AS) 13, by engaging independent valuers to assess the valuation of the subsidiary. Pending conclusion of the aforesaid exercise, no provision for diminution in the carrying value, if any, of the aforesaid investment has been recognised. The auditors have made observation in their report that they are unable to comment on the carrying amount pending completion of the aforesaid exercise.

STATEMENT OF DIRECTORS RESPONSIBILITIES

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956 the Board of Directors hereby state that:

(i) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(ii) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;

(iii) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(iv) the directors had prepared the annual accounts on a going concern basis.

FIXED DEPOSITS

Your Company has not accepted any public deposits under section 73 of the Companies Act, 2013, during the financial year under report.

APPRECIATION AND ACKNOWLEDGEMENTS

Your Directors express their appreciation of commendable teamwork of all employees.

Your Directors express their thanks to all the offices of the Ministry of Shipping, Directorate General of Shipping, Ministry of Petroleum and Natural Gas, Indian Navy, Indian Coast Guard, Mercantile Marine Department, State Government and Central Government, Classification societies, Oil Companies and Charterers for the valuable support, help and co-operation extended by them to the Company.

Your Directors also thank its Bankers and other business associates, including the Members of the Company for their continued co-operation and support extended towards the Company.

For and on behalf of the Board

Mumbai P. K. Srivastava August 8, 2014 Chairman


Mar 31, 2013

TO THE MEMBERS OF ESSAR SHIPPING LIMITED

The Directors take pleasure in presenting the Third Annual Report of your Company together with Audited Accounts for the year ended March 31, 2013.

FINANCIAL RESULTS:

The summary of the Standalone and Consolidated Financial Results of your Company for the year ended March 31, 2013 are furnished below:

(Rs. in Crore) Consolidated Standalone For the For the For the For the Particulars year year year year ended ended ended ended 31-03-2013 31-03-2012 31-03-2013 31-03-2012

Total Income 3298.08 2854.51 1556.24 1304.86

Total Expenditure 2433.02 2102.01 1149.82 804.13

EBITDA 865.06 752.50 406.42 500.73

Less: Interest & 365.72 329.43 307.26 266.90

Finance charges

Less: Provision for 369.31 362.94 139.01 136.36

Depreciation Less: Exceptional 50.20 - 50.20 -

Item Proft before Tax 79.83 60.13 (90.05) 97.47

Less: Provision for 44.03 23.30 3.20 1.65

Tax Proft after Tax /(loss) 35.80 36.83 (93.25) 95.82

Appropriations:

Opening balance of 59.89 88.06 78.99 48.17

Surplus

Add: Proft of the 35.80 36.83 (93.25) 95.82 current year

Less: Transfer to - (20.00) - (20.00)

Debenture

Redemption

Reserve

Less: Transfer to - (45.00) - (45.00)

Tonnage

Tax Reserve

Surplus at the end of 95.69 59.89 (14.26) 78.99 the year

DIVIDEND

Your Company which comprises of Sea Transportation, Oilfeld Services and Logistics Businesses is currently expanding the capacities in shipping and oilfelds businesses through acquisition of suitable assets. These assets are highly capital intensive in nature and therefore require substantial investment. This necessitates the operating profts to be ploughed back towards capital expenditure. With a view to conserving resources for these requirements, your Directors have not recommended any dividend for the year ended March 31, 2013.

COMPLIANCE WITH SEBI REGULATION WITH RESPECT TO MINIMUM PUBLIC SHAREHOLDING

In compliance with directive of the Securities and Exchange Board of India (SEBI), the Promoter Group''s Shareholding has been reduced to 75% on May 30, 2013.

AWARDS AND RECOGNITIONS

Your Company has won ''Bulk Operator of the Year'' at the Annual Gateway Awards, the benchmark of Indian Maritime Industry. The nominations were evaluated and ratifed by KPMG and subsequently a 10 – Member jury led by Mr. K Mohandas, IAS, Former Secretary, Ministry of Shipping and Chairman, Kerala Shipping and Inland Navigation Corporation fnalized the awards. The Gateway Awards is the most coveted award in the maritime industry honoring individuals, organizations and companies from across India''s maritime industry. This year the 6th Annual award ceremony was held on 18th April, 2013

Your Company has won the ''Bulk Operator of the Year Award'' at the Annual Seatrade Middle East & Indian Subcontinent Awards, part of Dubai Maritime Week. The awards were judged by a 12 - strong panel of esteemed international judges, led by Koji Sekimizu, Secretary General of the International Maritime Organisation (IMO). Known as the ''Oscars'' of the maritime world, the Awards were presented at a glittering gala dinner at the Atlantis, The Palm, Dubai attended by more than 900 of the who''s

who of the region''s maritime and shipping industry. Individuals, organisations and companies from across the region''s maritime and shipping industry were honoured for their excellence at the award ceremony. We were awarded this on November 26, 2012 Dubai.

Your Company had participated in Shipping Line of the Year – Coastal Operator at Gujarat Star Awards. It was awarded First Runner''s up for the same.

CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITY

As per SEBI Guidelines your Company has been engaged in various CSR Activities. Key Highlights are:

1. Donation of Grains to Children''s Aid Society (Umerkhadi) on February 20, 2013;

2. Coast Guard Motorcycle Rally held on December 11, 2012;

3. Visit to Vatsalya Trust Balikashram at Sanpada, Navi Mumbai for Diwali Celebrations on November 9, 2012;

4. Coastal Clean-up drive launched by Essar Shipping & Ports on September 15, 2012;

5. Essar Shipping recognizes bravery at Sea on July 24, 2012.

CSR ACTIVITY HIGHLIGHTS

1. Donation of Grains to Children''s Aid Society (Umerkhadi) on February 20, 2013

Your Company employees participated in the Foundation''s employee volunteering programme, by collecting contributions for a ''Handful of Grain'' campaign for the beneft of underprivileged Members of the community. On February 20, 2013, a group of Essarites from ESL based in Kurla visited the Children''s Observation Home, Umerkhadi, in central Mumbai, which is run by CAS. The Home supports destitute, delinquent and victimized children who have been abandoned, or rescued from streets. In all there were around 280 boys and girls below the age of 18 years.

2. Coast Guard Motorcycle Rally held on December 11, 2012

In December 11, 2012 your company organized a motorcycle rally to create awareness about security and vigilance among the fshing communities along the north Maharashtra coast. The rally was organised by the Indian Coast Guard in close association with the Indian Navy, Marine Police, Department of fsheries and the local police.

3. Visit to Vatsalya Trust Balikashram at Sanpada, Navi Mumbai for Diwali Celebrations on November 9, 2012

In a very special and meaningful way, your company organized an employee volunteering event at Vatsalya Trust Balikashram at Sanpada, Navi Mumbai, on November 9, 2012. The Balikashram (children''s home) accommodates about 60 girls who stay and study there, under the aegis of Vatsalya Trust. The idea was to create a memorable Diwali for these young girls.

4. Coastal Clean-up drive launched by Essar Shipping on September 15, 2012

We participated in the Coastal Cleanup drive organised by Indian Coast Guard on the Occasion of International Coastal Cleanup Day. Students of various colleges, schools and NGO''s also joined hands to clear the debris from various beaches in Mumbai.

5. Essar Shipping recognizes bravery at Sea on July 24, 2012

Every year the recognizes acts of bravery both in the Indian Coast Guard (ICG), who are the primary Search and Rescue (SAR) organization, and also those from the fshing community who have assisted another in distress. The Essar SAR Award is given in honor of young men and women in uniform who to help rescue people in danger at sea. The Essar SAR (Search and rescue) award for government owned SAR unit was presented by Captain Anoop Kumar Sharma, CEO in Chennai July 24, 2012

SUSTAINABILITY REPORTING

Your Company has released its second Sustainability Report titled, "Measurable, Manageable, Sustainable",

This Report was launched on February 8, 2013 by Captain L. K. Panda - Nautical Advisor to The Government of India. This Report is a sequel to our First Sustainability Report, 2011, "Our propelling force".

The Report captures the Environment, Social and Governance Performance of the Essar Shipping Group comprising Sea Transportation, Oilfeld Services and Logistics, and also outlines our Short, Mid and Long-Term Strategy for addressing material issues regarding the same.

Sustainability Performance Highlights 2012

Governance

Sustainability is adopted as a Board Room Agenda. Whilst the Board provides Direction and Guidance, the Ownership for the Sustainability Initiative and Execution lies with the Managing Director and the Chief Executive Offcers. Sustainability Performance is evaluated on a quarterly basis by the Board.

Environment

- Ship Energy Effciency Management Plan (SEEMP) and Energy Effciency Operational Index (EEOI) developed for the entire feet by the Sea Transportation Business. The plan is currently under implementation

- 4.47% increase in Modal Shift i.e., moving greater volumes of cargo by seas that were once handled by trucks on the road thereby greatly reducing the carbon emissions due to cargo transportation.

Social

- Information consolidated for last three years for additional safety indicators including property damage incident, fre incidents, high potential incidents and restricted work cases. Enterprise Resource Planning (ERP) solution for incident monitoring extended to cover these indicators;

- Zero Loss Time Injury Frequency Rate achieved by Oilfeld Services for second year in a row;

- 86.36% reduction in Lost Time Injury Frequency Rate by Logistics Business;

- 42.86% increase in near miss reporting by Sea Transportation Business;

- 188.64% increase in near miss reporting by Oilfeld Services;

- 21% reduction in overall employee turnover;

- 44.4% reduction in employee turnover by Sea Transportation Business;

- 8.22% reduction in employee turnover by Logistics Business;

- 61.96% increase in employee training days;

Essar Shipping Limited is the frst Indian Shipping Company to have published its Sustainability Report and both our Reports conform to Global Reporting Initiative Current Generation of Guidelines Version 3.1 (GRI G3.1 Guidelines) and have been assured by Det Norske Veritas (DNV) achieving an application level of A . Our First Report can be accessed from our website.

International Maritime Organisation (IMO) and International Chamber of Shipping (ICS) have declared – Sustainability - as the focus area for the Year 2013. The Leadership team at Essar had the vision to embark upon Sustainability initiative way back in 2009 and have begun to reap its benefts as we engrain Sustainability Principles into all areas of our Businesses.

EMPLOYEE STOCK OPTION SCHEME

The Company has implemented the "Essar Shipping Employees Stock Option Scheme-2011" ("Scheme") in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ("the SEBI Guidelines"). The Compensation Committee of the Board of Directors of the Company administers and monitors the Scheme. The applicable disclosures as stipulated under the SEBI Guidelines as at March 31, 2013 are provided in the Annexure to this Report.

INFORMATION TECHNOLOGY

Your Company has successfully implemented SAP in its fnancial and budget management systems. The Company is also exploring various methods of automation so as to have greater visibility and control over its assets and further improve the turnaround time thereby increasing asset utilisation and proftability. All the vessels are undergoing upgradation of systems in terms of hardware and software. Your Company has implemented a robust Document Management System thus improving the availability of critical information in e-mode thereby reducing the use of paper.

SUBSIDIARIES:

Following are the subsidiaries of your Company as on March 31, 2013:

1. Essar Logistics Limited

2. Essar Oilfelds Services Limited

3. Essar Oilfeld Services (India) Limited

4. Energy Transportation International Limited

5. Energy II Limited

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Proft & Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company in view of the Company providing consolidated accounts. The Company will make available the Annual Accounts of the subsidiary companies and the related information to any Member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept for inspection at the Registered Offce of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the fnancial results of the subsidiary companies.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr. N. Srinivasan and Mr. Ankur Gupta retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

During the year under consideration, Mr. P. K. Srivastava was appointed on the Board of the Company with effect from November 6, 2012 and Mr. Anshuman Ruia stepped down from the Board of the Company with effect from May 27, 2013. We also record with deep upset the sad demise of Mr. K. V. Krishnamurthy on January 16, 2013.

The Company has further reconstituted its Board of Directors by appointing three industry stalwarts, Mr. Michael P. Pinto, Captain Bhupinder Shingh Kumar and Mr. N. C. Singhal as Independent Directors with effect from August 7, 2013. This will enable to strengthen the Company''s corporate governance capabilities and provide focused guidance to the management for sustained growth. Mr. R. N. Bansal and Mr. Deepak Kumar Varma, stepped down from the Board of the Company with effect from August 8, 2013.

AUDITORS

Your Company''s Statutory Auditors, M/s. Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad (Firm Registration No. 117365W) retire at the ensuing Annual General Meeting and are eligible for reappointment. The Company has received consent letter from M/s Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad (Firm Registration No.117365W) to the effect that their appointment, if made, would be within the prescribed limits under Section 224 (1B) of the Companies Act, 1956 and that they are not disqualifed for reappointment within the meaning of Section 226 of the Companies Act, 1956.

CORPORATE GOVERNANCE

The Company is committed to maintain the highest standard of Corporate Governance and comply to the Corporate Governance requirements as required under the Listing Agreement entered with the Stock Exchanges. The disclosures as required in Clause 49 of the Listing Agreement have been furnished in the Annexure to the Directors'' Report under the head "Corporate Governance". The requisite Certifcate from the Statutory Auditors of the Company confrming the compliances with the conditions of the Corporate Governance as stipulated in Clause 49 of the Listing Agreement entered with the Stock Exchanges, is attached and forming part of this Annual Report.

PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988

Pursuant to Notifcation No. GSR 1029 dated 31.12.1988 your Company is not required to furnish prescribed information regarding conservation of energy and technology absorption, as Shipping Industry is not covered in the schedule to the said rules. The details of Foreign exchange earnings and outgo are summarised below:

Total Foreign Exchange:

(1) Earned (including loan receipts, : Rs. 996.83 sale of ships, freight, charter hire earnings, interest income, etc.)

(2) Used (including cost of acquisition : Rs. 1104.49 of ships, loan repayments, interest, operating expenses, etc.)

PARTICULARS OF EMPLOYEES

As per the provisions of Section 219(1)(b)(iv) of the said Act, the Report and Accounts are being sent to all the shareholders of the Company excluding the Statement of particulars of employees under u/s 217 (2A) of the Companies Act 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended. Any shareholder interested in obtaining a copy of this statement may write to the Company Secretary for the same at the Registered Offce of the Company.

STATEMENT OF DIRECTORS RESPONSIBILITIES

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956 the Board of Directors hereby state that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed and there have been no material departures;

b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the fnancial year and of the proft or loss of the Company for that period;

c) the Directors have taken proper and suffcient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors have prepared the annual accounts on a going concern basis.

FIXED DEPOSITS

Your Company has not accepted any public deposits under section 58A of the Companies Act, 1956, during the fnancial year under report.

APPRECIATION AND ACKNOWLEDGEMENTS

Your Directors express their appreciation of commendable teamwork of all employees.

Your Directors thank its bankers, Mercantile Marine Department, State Government and Central Government and other business associates for their continued support and co-operation during the year.



For and on behalf of the Board

A. R. Ramakrishnan Deepak Kumar Varma

Managing Director Director

Mumbai August 7, 2013


Mar 31, 2012

To the Members of Essar Shipping Limited

The Directors take pleasure in presenting the Second Annual Report of your Company together with Audited Accounts for the Year Ended March 31, 2012.

FINANCIAL RESULTS:

The summary of the Standalone and Consolidated Financial Results of your Company for the year ended March 31, 2012 are furnished below:

(Rs. in crore)

Consolidated Standalone

For the For the For the For the Particulars year period year period ended 16-04-2011 ended 16-04-2011 31-03-2012 to 31-03-2012 to 31-03-2011 31-03-2011

Total Income 2854.51 1,342.80 1304.86 546.95

Total Expenditure 2102.01 1,005.81 804.13 287.27

EBITDA 752.50 336.99 500.73 259.68

Less: Interest & Finance charges 329.43 139.37 266.90 123.11

Less: Provision for Depre- ciation 362.94 162.23 136.36 56.90

Profit before Tax 60.13 35.39 97.47 79.67

Less: Provision for Tax (23.30) (2.09) (1.65) 1.50

Profit after Tax 36.83 33.30 95.82 78.17

Appropriations:

Opening balance of Surplus 88.06 - 48.17 -

Add:Transfer on Demerger - 84.76 - -

Add: Profit of the current year 36.83 33.30 95.82 78.17

Less: Transfer to Debenture Redemption Reserve (20.00) (10.00) (20.00) (10.00)

Less: Transfer to Tonnage Tax Reserve (45.00) (20.00) (45.00) (20.00)

Surplus at the end of the year 59.89 88.06 78.99 48.17

DIVIDEND

Your Company engaged in of Sea Transportation, Oilfield Services and Logistics Business is currently expanding the capacities in these businesses through acquisition of suitable assets. These assets are highly capital intensive in nature and require substantial investment. This necessitates the operating profits to be ploughed back into the business. With this view, your Directors have not recommended any dividend for the Financial Year Ended March 31, 2012.

MANAGEMENT'S DISCUSSION AND ANALYSIS

(a) Overview of the World Economy

The global economy has been through a very difficult phase during the year which was marked by increased borrowing costs, inflationary pressures and plummeted investor confidence. The major concern of the countries is to stimulate growth with moderate inflation. Improved financial conditions, accommodative monetary policies and similar pace of fiscal tightening as in 2011 are expected to drive the growth in 2012. In major advanced economies a weak recovery is expected as compared to a modest growth in emerging economies like Asia and BRICS where the growth is expected to be led by robust domestic consumption and strong demand for oil and mineral resources.

The IMF predicts the global GDP to grow at 3.5% in 2012 lower than the growth of 4% registered in 2011. The advanced economies growth is projected at a meager 1.5%, mainly due to the fiscal uncertainty, weak internal demand and potential spillover of Europe crisis. The developing economies are expected to grow at a relatively strong 5.5-6%. The developing economies around the world fight rising domestic inflation and are taking steps to avoid overheating. In the MENA region the near term outlook is bit challenging as unrest has spread leading to heightened domestic uncertainty and difficult external conditions.

The Euro zone is still battling out the financial crisis and is now expected to go into a mild recession in 2012 as a result of the rise in sovereign yields, the effects of bank deleveraging on the real economy, and the impact of fiscal consolidation. In the Euro area the real GDP is forecasted to contract at 0.5% p.a. for the first half of 2012 and improve thereafter. The growth in the latter half of 2012 is expected to come from advanced economies in Europe which are seeing improved financial conditions, and external demand from other regions is likely to strengthen. Economic growth in Europe is expected to strengthen during the course of 2012 and the real GDP is expected to grow at 0.25% in 2012. The key concern for Euro area is despite the progress in strengthening the crisis management, a renewed escalation of Euro crisis remains a possibility as long as various underlying issues are not resolved.

The US economy is on the recovery path with growth improving in 2011 and the job market showing signs of improvement. The US economy is expected to grow at 2% in 2012, but the risk to over come are uncertainty, weakness in the housing market, and potential spillovers from Euro area. The key focus areas for the high-income countries especially US going forward will be deficit reduction and employment generation.

(b) Overview of the Indian Economy

The Indian economy grew at an average annual GDP growth of over 9% during the period 2005 to 2008, before slowing down to 6.1% due to the global financial crisis. After growing at 10.4% in 2010, the real GDP had registered a growth of 6.9% in 2011, marking a significant gap as compared to the pre-crisis level. The RBI revised India's growth rate for 2012 downwards by 0.5 percentage points and expects it to grow at 7.5% this fiscal year. India's fiscal deficit is expected to fall in the coming years, though the major concerns to be addressed would be to curb inflation in longer run and capital outflows.

Inflation remains the biggest concern in the Indian economic industries as economists warn of high food and global oil prices. With global economic scenario expected to remain sluggish, internal demand and domestic consumption would be key drivers of growth.

BUSINESS PERFORMANCE, OPPORTUNITIES AND OUTLOOK

The business model adopted by your Company is unique in nature with no peer group comparison. The business is based on the intrinsic demand for transportation services, logistics & cargo handling infrastructure required by steel, power generation and refining industry. With focus on crude and dry bulk carriers, port to plant logistics and oilfield services, your Company continues to provide end-to-end logistics solutions to its customers in a very cost effective manner.

(a) Sea Transportation Business:

Shipping industry has been plagued by overcapacity and poor cash generation since 2009, and may only improve moderately as tonnage addition to the global fleet slows down. The Baltic Dry Index continues to be at historic lows indicating that it will take some time before the industry fully recovers.

With broader market fundamentals in the Dry Bulk trade expected to remain under stress due to demand supply mismatch, increase in scrapping activities is required to offset the new building pressure. On back of tough financing environment, order cancellations and slippages in deliveries are also likely to remain high easing some pressure on the supply side. On the demand side, global seaborne commodity movement is expected to improve as a result of increased imports into Asia. But a slowdown in China or prolonged recession in Europe could possibly result in downward revision of demand, which can have a significant negative impact on freight rates.

In the Wet Market, the freight rates remain volatile with crude spot rates being under pressure from decline of fixture activity of Middle East, West Africa and Mediterranean. The increased supply of super tankers competing for load the limited cargoes of Persian Gulf crude has put pressure on the daily earnings of tankers. The risk of Iranian oil output coming off line supports higher freight rates disrupting supply with demand. However, the crude tanker freight market remains in downward momentum with investors seem to have more faith in the U.S. product demand. Analysts have raised forecast of shipping rates for very large crude oil tankers to $25,000 per day during 2012 and to $30,000 per day during 2013 up from the previous estimate.

A significant shift is being witnessed in the global sources of oil and minerals. With depleting coal supplies at home, China and India are now importing coal from as far as South America, and countries like Brazil and Russia are increasing their production of oil, this shift would lead to increase ton-miles and will necessitate newer sea routes and contracts.

Despite tough market conditions the Sea Transportation business had done well based on the strategy of deploying vessels on long-term contracts, which not only provides us visibility of revenues over a longer horizon but also hedges us from spot market volatility. Your Company is completely shielded against the current downturn in the shipping industry because of its long term employment contracts with Charters focused in Steel, Power and Oil & Gas industry.

(b) Oilfields Services Business:

This year has seen the drilling market forge towards the peak levels of 2008 with the revival in crude prices. Though the global macroeconomic environment gives cause for concern, at the current stage there are few signs of this affecting day rates. In addition, it is notable that historically the oil/drilling market has remained rather robust even during several years of significant economic turmoil.

As off-shore drilling stretches out to newer regions, older rigs will face a pressure to upgrade to newer technologies or be phased out. Over the previous year, the supply of assets has waned with many cold stacked rigs being scrapped, especially in the shallow and mid water segments. In the jack-up segment alone, 20 older, cold stacked rigs have been scrapped in the past year, which is more than the previous 15 years combined. This signals that a very limited number of currently cold stacked assets will be adding to the working fleet.

Given that most additions to the current rig fleet will be new builds, availability will be severely limited till 2014. Day rates currently look to have stabilized at USD 300,000 per day for standard midwater floaters.

Global E&P spending in 2012 have seen an increase of 10% to $598bn, versus $544bn in 2011. By region, exploration and production spending is expected to rise most meaningfully in Latin America, Africa, Europe, the Middle East and Russia. Latin American E&P spending is projected to rise by 21% in 2012. Spending gains are expected to be led by significant pickups in activity in Brazil (Petrobras up 13%), Venezuela (PDVSA up 62%), Colombia (Ecopetrol up by 25%) and Mexico (a 17% increase slated for PEMEX). Following a disappointing 2011 where political instability in several countries, government overhauls and administrative issues resulted in significantly curtailed spending, Exploration and Production expenditures in Africa are expected to increase by 14% in 2012 to $30bn from $26bn in 2011. Spending by companies in India, Asia and Australia are expected to increase by 11% in 2012 led by a ramp up in expenditures by CNOOC, Petronas, and Inpex Corp. Petronas Carigali alone has slated expenditures of over $1.5bn in the coming year, reflecting strengthening shallow water and deepwater activity in Malaysia.

During the 11th five year plan period, the total sedimentary basin area to be brought under exploration coverage is being targeted at 80%. Under NELP- VIII, the highest numbers of blocks were awarded for exploration, covering an area of 1.63 lakh sq. km. Further, the Government's Hydrocarbon Vision 2025 envisages a program for a comprehensive appraisal of all of India's basins by 2025, which augurs well for the offshore drilling industry. Hence strong domestic demand and relatively improved market conditions are likely to favor Indian rig owners going forward.

With an increase in demand for oil as envisaged, the demand-supply deficit is bound to increase. Thus, tightening of oil supply, combined with a long term growth in demand, imply stable to increasing oil prices.

The outlook for oilfields business is positive and your Company is well poised to cater to the growing opportunities. Going forward the oilfields business will contribute significantly to the profitability of your Company.

Your Company, through its wholly owned subsidiary, Essar Oilfield Services India Limited (EOSIL), has recently received LOA from NSOC Brunei and BG Shirke for LR#4 and LR#3 respectively. The semi- submersible rig, Essar Wildcat, is currently deployed with Conocophillips in Indonesia for an 18 month contract starting from October 2011.

(c) Logistics Business:

Road transportation dominates the logistics market as it enables point-to-point transportation, effective tracking of cargo and limited multiple handling of consignments. Indian trucking sector contributes about 4.5 - 5% of GDP and accounts for -55% of freight transportation by volume. Moreover, improved road infrastructure and higher capacity trucks (multi axle vehicles) have reduced transit times, thereby further improving the competitiveness of road transportation for shorter lead distances (<500 kms). The outlook for the road freight transport sector heavily depends on the outlook for other sectors such as agriculture and industry. If the current share in GDP is maintained the growth in the sector is likely to be in the range of 1-1.5x the GDP growth. The overall cargo traffic is expected to grow at a CAGR of 14% between FY11 - 14, which will result in increased volumes to be handled, giving an opportunity to existing players to capitalize on scale and scope of operations.

The total share of organized players is estimated to be not more than 5-10% of the sector; hence it has enough scope for consolidation. While the industry has been growing at almost 10 percent in the past few years, the organized players have witnessed a much higher growth. Though infrastructure has witnessed slight improvement, there is still lot of scope for improvement in infrastructure and any favorable push from the Government towards construction of national highways and expressways will act as a strong impetus for growth with reduced costs. Further improved infrastructure would allow fleet owners to continue their drive to replace their fleets with newer and more powerful vehicles.

Your Company through its wholly owned subsidiary Essar Logistics Limited (ELL) provides project cargo, transshipment, lighterage and trucking services to steel mills, power plants and oil refineries.

RISK MANAGEMENT

Your Company has a Risk Management Policy that outlines the framework and procedures to assess and mitigate the impact of risks, and to update the Board and the senior management on a periodical basis on the risk assessed, actions taken for mitigation and efficacy of mitigation measures.

With efficient Risk Management Framework, your Company able to manage (a) Economic Risks by entering into long term contracts with reputed global majors in each of its divisions thereby ensuring long term profitability of the Company and assured cashflows (b) Interest Rate Risk by undertaking suitable hedging strategies to overcome any adverse interest rate risks. It has formulated internal target rates at which any open interest rate risk can be hedged.

INTERNAL CONTROL FRAMEWORK

Your Company has a well established framework of internal controls in operation, including suitable monitoring procedures. In addition to the external audit, the financial and operating controls of your Company at various locations are reviewed by Internal Auditors, who report their observations to the Audit Committee of the Board.

HUMAN RESOURCE

Your Company has introduced contemporary Human Resource practices to enhance technical and managerial competence of the employees and to further leverage their capabilities to enhance the performance. Further the Company has taken a series of initiatives to enhance emotional and intellectual engagement of employees.

AWARDS AND RECOGNITIONS

Your Company won the award for Bulk Operator of the year, at the Gateway Awards of Excellence: Ports and Shipping 2010-11, in New Delhi on January 19, 2012. Instituted in 2008 by leading Indian magazine Maritime Gateway, the Gateway Awards of Excellence felicitates the best industry players annually for outstanding performance in their respective fields. The award was presented to your Company for excellence in operations and in recognition of its proactive initiatives towards fleet expansion.

Your Company has also won the SHIPPING LINE OF THE YEAR (BULK) Award at Samudra Manthan Awards 2011. The award ceremony was part of International Maritime Offshore Logistics (IMOL 2011) Conference organized by Bhandarkar Shipping Events, in Mumbai, on December 7-8, 2011.

Your Company, in order to ensure highest standard of safety, has implemented and initiated various measures with respect to Quality, Safety and Environment

Management Systems. The initiatives by your Company have been rewarded with several recognitions. Some of the noticeable ones amongst the many are as follows:

a) OHSAS 18001 certified by American Bureau of Shipping (ABS); first and only shipping Company in India to obtain this certification.

b) ISO 9001:2000 and ISO 14001:2004 certification to the Sea Transportation business by ABS Quality Evaluations Inc.

c) Essar Wildcat awarded by the International Association of Drilling Contractors (IADC) for achieving 3 years without LTI (Lost Time Incident).

d) Essar Wildcat received positive recommendations on its external HSE audit conducted by ABS.

e) Land Rig MR#1 recorded zero LTI since its inception in Schlumberger's India shale gas project.

SUSTANABILITY REPORTING

Your Company has released its first Sustainability Report titled 'Sustainability - Our Propelling Force'.

Your Company is the first Indian shipping Company and among few in the international maritime sector to report as per the GRI Generation 3 guidelines.

Your Company is also among the few to report its alignment with the National Voluntary Guidelines of Social, Environmental and Economic Responsibilities of Business issued by the Ministry of Corporate Affairs.

With the world focussing on the many challenges facing the planet, companies across the globe are adopting a structured sustainable approach towards issues pertaining to Corporate Governance, People, Health & Safety, Environment, Product Responsibility and Community. Essar Shipping's report covers all these aspects and outlines the achievements, challenges and progress for the year ending March 31, 2011.

The report has been checked by Global Reporting Initiative (GRI) for adherence to its Generation 3.1 (G3.1) Guidelines and has been awarded with an A application level against its sustainability reporting framework, becoming the first Indian Shipping Company to be so awarded. An A rating denotes that the report has been externally assured; ESL's report was independently assured by international agency, DNV, using the AA1000 Account Ability Principles Standard and DNV's Sustainability Verification Protocol - VeriSustain

EMPLOYEE STOCK OPTION SCHEME

The Company has implemented the "Essar Shipping Employees Stock Option Scheme-2011" ("Scheme") in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 ("the SEBI Guidelines"). The Compensation Committee of the Board of Directors of the Company administer and monitors the Scheme. The applicable disclosures as stipulated under the SEBI Guidelines as at March 31, 2012 are provided in the Annexure to this Report.

INFORMATION TECHNOLOGY

Your Company has successfully implemented SAP in its financial and budget management systems. The Company is also exploring various methods of automation so as to have greater visibility and control over its assets and further improve the turnaround time thereby increasing asset utilisation and profitability. All the vessels are undergoing upgradation of systems in terms of hardware and software. Your Company has implemented a robust Document Management System thus improving the availability of critical information in e-mode thereby reducing the use of paper.

SUBSIDIARIES:

Following are the subsidiaries of your Company:

1. Essar Logistics Limited

2. Essar Oilfields Services Limited

3. Essar Oilfield Services India Limited

4. Energy Transportation International Limited

5. Energy II Limited

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit & Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company in view of the Company providing consolidated accounts. The Company will make available the Annual Accounts of the subsidiary companies and the related information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of the subsidiary companies.

DIRECTORS

In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company Mr. Ankur Gupta and Mr. R. N. Bansal retire by rotation at the ensuing Annual General Meeting and being eligible offers themself for re-appointment.

AUDITORS

Your Company's Statutory Auditors, M/s. Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad (Registration

No. 117365W) retire at the ensuing Annual General Meeting and are eligible for reappointment. The Company has received consent letter from M/s Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad (Registration No.117365W) to the effect that their appointment, if made, would be within the prescribed limits under Section 224(1 B) of the Companies Act, 1956 and that they are not disqualified for reappointment within the meaning of Section 226 of the Companies Act, 1956.

CORPORATE GOVERNANCE

The Company is committed to maintain the highest standard of Corporate Governance and comply to the Corporate Governance requirements as required under the Listing Agreement entered with the Stock Exchanges. The disclosures as required in Clause 49 of the Listing Agreement have been furnished in the Annexure to the Directors' Report under the head "Corporate Governance". The requisite Certificate from the Statutory Auditors of the Company confirming the compliances with the conditions of the Corporate Governance as stipulated in Clause 49 of the Listing Agreement entered with the Stock Exchanges, is attached and forming part of this Annual Report.

PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988

Pursuant to Notification No. GSR 1029 dated 31.12.1988 your Company is not required to furnish prescribed information regarding conservation of energy and technology absorption, as Shipping Industry is not covered in the schedule to the said rules. The details of Foreign exchange earnings and outgo are summarised below:

Total Foreign Exchange:

(1) Earned (including loan receipts, Rs. 750.90crore sale of ships, freight, charter hire earnings, interest income, etc.)

(2) Used (including cost of acquisition Rs.867.91crore of ships, loan repayments, interest, operating expenses, etc.)

PARTICULARS OF EMPLOYEES

Information as per Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975, as amended, is given in the Annexure forming part of this Report. However, as per the provisions of Section 219(1 )(b)(iv) of the said Act, the Report and Accounts are being sent to all the shareholders of the Company excluding the statement of particulars of employees u/s 217 (2A) of the said Act. Any shareholder interested in obtaining a copy of this statement may write to the Company Secretary for the same at the Registered Office of the Company.

STATEMENT OF DIRECTORS RESPONSIBILITIES

Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956 the Board of Directors hereby state that:

a) in the preparation of the annual accounts, the applicable accounting standards have been followed and there have been no material departures;

b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit or loss of the Company for that period;

c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors have prepared the annual accounts on a going concern basis.

FIXED DEPOSITS

Your Company has not accepted any public deposits under section 58A of the Companies Act, 1956, during the financial year under report.

APPRECIATION AND ACKNOWLEDGEMENTS

Your Directors express their appreciation of commendable teamwork of all employees.

Your Directors thank its bankers, Mercantile Marine Department, State Government and Central Government and other business associates for their continued support and co-operation during the year.

For and on behalf of the Board

A. R. Ramakrishnan K. V. Krishnamurthy

Managing Director Director

May 17, 2012

Mumbai

 
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