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Directors Report of Petronet LNG Ltd.

Mar 31, 2016

Dear Shareholders,

On behalf of the Board of Directors, it is our privilege and honour to present the Eighteenth Annual Report and the Audited Accounts of your Company for the financial year ended 31st March, 2016.

PHYSICAL PERFORMANCE

The financial year 2015-16 saw the Company operate its Dahej Terminal at 111% capacity utilization inspite of the challenges faced in the long term supply agreements. The demand for LNG was robust, albeit at the current market prices, which led to a discussion and reworking of the pricing under the long term LNG Contract. The Company was successfully able to feed the market by processing LNG under spot/short term deals inspite of the reduction in volumes under the long term Contract.

During the financial year 2015-16, the Dahej Terminal handled 170 LNG Cargoes and supplied 566 TBTUs of RLNG. 2224 LNG Road Tankers were also loaded and dispatched.

The utilisation of Kochi Terminal remained extremely low in the absence of pipeline network for gas evacuation.

10 Cargoes (including reload) were handled at the Kochi Terminal during the full year.

FINANCIAL PERFORMANCE

During the year, your Company achieved a turnover of Rs. 27,133 Crore as against Rs. 39,501 Crore in 2014-15. Inspite of an increase in quantity, the reduction of turnover in value term is primarily due to reduction in LNG prices and increase in regas service cargoes. The net profit during the year stood at Rs. 914 Crore as against Rs. 883 Crore in the previous year. A summary of the comparative financial performance in the fiscal 2015-16 and 2014-15 is presented below:

(Rs. in crore)

Particulars 2015-16 2014-15

Revenue from operations 27,133 39,501

Other Income 170 155

Total Revenue 27,303 39,656

Cost of LNG imports 25,076 37,611

Gross Margin 2,227 2,045

Salary & other operating expenses 466 452

Finance charges 239 293

Depreciation 322 315

Profit before Tax 1,200 985

Tax expenses, including deferred tax 286 102

Profit after Tax 914 883

Amount Transferred to Reserves:-

General Reserve 92 89

Debenture Redemption Reserve 78 78

Earnings (Rs.) per Share 12.19 11.77

DIVIDEND

Keeping in view the performance and dividend policy of the Company, the Directors are pleased to recommend a dividend of 25% on the paid-up share capital of the Company for the year ending 31st March, 2016.

FINANCING OF PROJECTS

The Company managed its finances well during the financial year 2015-16. The strong cash flows helped your Company to fund the ongoing capital expenditure from its internal accruals without any need to draw on the credit lines approved by the banks and financial institutions.

Your Company continues to enjoy good rapport with the lending agencies.

The credit rating of your Company continues to remain unchanged both from domestic as well as international agencies.

LNG SOURCING

Your Company has long-term supply contracts for LNG imports with RasGas, Qatar and Mobil Australia Resources Company (MARC), Australia for 7.5 MMTPA & 1.44 MMTPA respectively. While the LNG supplies from Qatar commenced in 2004, the Australian LNG from Gorgon is expected to hit the Indian shores by the end of 2016 or early 2017.

Due to sharp decline in crude prices, the price of LNG under RasGas long term contract was on the higher side vis-a-vis other term LNG and spot LNG, leading to lower off-take by consumers. With a view to mitigate the impact of high priced LNG, your Company along-with off-takers GAIL, IOCL and BPCL, under the guidance of Ministry of Petroleum & Natural Gas, undertook the task of price restructuring with RasGas, Qatar. After a series of meetings, a new pricing mechanism was agreed to between the parties. Your Company worked relentlessly to accomplish the goal within a pre-defined time frame and executed the amendments to the upstream and downstream sale and purchase agreements with the revised price formula. New prices have become effective w.e.f. January, 2016. In fact, such price restructuring under a long term contract is a very unique accomplishment, which your Company could achieve with its very own strong team as well as guidance from the Government. Such price reopening is very rarely done in the global LNG trade.

In the middle of difficulty lies opportunity, as part of the price restructuring exercise your Company signed another long term deal with RasGas, Qatar for 1 MMTPA, for a period of about 12 years from 2016 to 2028. The volumes under this contract have been sold to GAIL, IOCL, BPCL and GSPC and supplies have started w.e.f. January, 2016.

Besides the long-term LNG contracts, your Company also buys LNG on spot and short-term basis from many international players It is in touch with the major suppliers and producers to secure LNG at a competitive price for the Indian markets.

EXPANSION OF DAHEJ TERMINAL

Your Company is further expanding the regasification capacity of its Dahej Terminal from 10 MMTPA to 15 MMTPA. As on 31st March, 2016, the expansion project achieved a progress of 94%. Subsequently, the expansion project is on track and in August, 2016, the Company has started commissioning activities of the project with certain incremental send-out of RLNG to its customers, though the full commissioning of the expanded facility would be completed in the last quarter of 2016.

FURTHER EXPANISON OF DAHEJ TERMINAL

Your Company is looking at further expansion of Dahej terminal from 15.00 MMTPA to 17.50 MMTPA with addition of one LNG Storage Tank and 2.5 MMTPA Regasification facilities. The Company is in the process of awarding EPC contracts for both Regasification facilities and LNG Storage Tank Project.

SHIPPING ARRANGEMENTS

Three LNG ships, namely ''Disha'', ''Raahi'' and ''Aseem'' carry the entire LNG volume from RasGas under a long- term contract to Dahej. Shipping Corporation of India (SCI) is an equity partner in the ship-owning companies and all three ships are manned, managed, maintained and operated by SCI. The ships operate on a long-term time charter basis.

During FY 2015-16, the overall shipping operations at Dahej LNG terminal have run smoothly and the jetty utilization has been very good without any downtime. However, due to low offtake under long-term contract for certain period during 2015-16, the ship(s) remained underutilized and consequently, the Company was not able to fully recover the charter hire payments under the long term contract as of now. Time Charter costs being pass-through cost to offtakers in the long run, the Company would be able to recover fully such costs which would not be recovered this year due to low LNG offtake.

Construction of a ship to carry LNG from Australia under a long-term agreement is in progress as per schedule. A consortium of companies, namely, MOL, NYK, K-Line and The Shipping Corporation of India (SCI), will jointly own this ship. PLL has a right to subscribe upto 26% equity in this LNG ship. The ship will be delivered to PLL in November 2016 and will be used primarily to transport LNG from Gorgon, Australia to Kochi.

As is the case with the first three ships, the fourth ship will also be manned, managed, maintained and operated by SCI.

LNG TERMINAL AT KOCHI

During the year Kochi terminal operated at very minimum levels due to lack of evacuation pipelines to Bangalore and Mangalore. Only Phase I pipeline was operational and for most part of the year, BPCL-Kochi Refinery was the only major consumer.

The average capacity utilization during the year was only 3%. Some value added services like storage & reloading, GUCD (Gassing Up and Cooling Down) as well as LNG bunkering services were also provided during this year. There has been very little physical progress in KKBMPL Phase II pipeline activities in the year as the pipeline to connect to Bangalore via Tamil Nadu was under litigation and the pipeline to connect to Mangalore, which is to be laid entirely within Kerala by GAIL, is under re-tendering stage.

NEW BUSINESS INITIATIVES

Having gained extensive experience in LNG handling capabilities, the Company is taking steps to develop a small scale LNG market in the Country. The initiatives undertaken by your Company towards this new concept are briefly explained below:

(a) LNG Bunkering: Your Company has already showcased its ability for providing LNG as bunker fuel to LNG powered ships from the Kochi LNG terminal.

(b) LNG through trucks: Your Company is supplying LNG through trucks from Dahej as well as Kochi. Your Company is in further discussions with various potential industrial customers who are not connected with pipeline for supplies of LNG by road tankers.

(c) LNG as automotive fuel: For land transportation, your Company plans to provide LNG as automotive fuel for heavy duty trucks by setting up LNG dispensing stations on major highways.

(d) LNG as marine fuel: In relation to water transportation, PLL plans to provide LNG as marine fuel to LNG powered inland waterway barges, especially for National Waterway 1.

(e) LNG powered locomotive: Your Company is also in discussion with railway authorities to introduce LNG powered locomotive in India.

Possibility of utilizing the cold energy by setting up cryogenic ware house for refrigerated storage of various products is being worked out. Your Company has also initiated pre-project activities in this regard and has made provision in process plant to install equipment in future.

The Company has prepared a Feasibility Report for setting up a satellite LNG regasification terminal, alongwith a power generation plant, at Port Blair. The facility may also have provision to supply regasified LNG for city gas distribution and industrial ancillary units. An MoU in this regard has been signed with Andaman & Nicobar Administration.

The Company is also exploring possibility of setting up of LNG Terminal outside India and is in discussion with a few of our neighboring countries viz. Srilanka and Bangladesh.

Training Center at Kochi

LNG is expanding its footprint as a fuel of choice in the Indian sub-continent and, going forward, there will be a huge demand for skilled and trained manpower in this niche technological area. Therefore, your Company is planning to use infrastructure at Kochi Terminal for setting up a Centre of Excellence in LNG Training, one of its kind in this part of World to develop a talented skilled pool of professionals. The Company has already completed several activities like Training Curriculum, Faculty Development, Infrastructure Planning etc. and it is expected to commission the Training Centre during the next financial year.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS

The Company has developed adequate internal control systems commensurate to its size and business. PLL has appointed M/s Ernst & Young as Internal Auditors, who conduct regular audits for various activities. The reports of the Internal Auditors are submitted to the Management and the Board''s Audit Committee. There is a thorough review of the adequacy of internal control system.

DETAILS OF JOINT VENTURES/ASSOCIATE COMPANIES

A Solid Cargo Port through a Company namely Adani Petronet (Dahej) Port Private Ltd., had commenced its operations in August 2010 at Dahej Port. Solid Cargo Port Terminal has facilities to import/export bulk products like coal, steel and fertilizer. PLL has 26% equity in this Solid Cargo Company and the balance equity is held by the Adani Group.

PERFORMANCE AND FINANCIAL POSITION OF SOLID CARGO JOINT VENTURE (JV) COMPANY

The financial highlights of solid cargo JV Company for the year ended 31st March, 2016 are as under:

(Rs. In Crore)

Particulars 31st March, 31st March, 2016 2015

Revenue from Operations 344.31 484.68

Other Income 8.36 6.44

Total Income 352.67 491.12

Operating Expenses 104.05 154.27

Employee benefits expenses 11.98 10.50

Depreciation and 67.91 52.70 amortization expense

Finance Cost 63.35 55.14

Other expenses 15.89 17.33

Total Expenses 263.18 289.94

Profit Before Tax 89.49 201.18

Tax expenses 33.72 115.54

Net Profit for the year 55.77 85.64

The cargo handling operations at the port are fairly mechanized and port is well connected with road and railway. The cargo handled comprises steam coal, rock phosphate and project cargo etc. Due to challenging developments in the domestic coal mining sector, there has been a major decrease in import of coal into the Country. This has affected the throughput of the port which has experienced a decline.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

All possible measures have been undertaken successfully by your Company to achieve the desired objective of energy conservation and technology upgradation. In order to ensure optimum conservation of energy and absorption of technology, your Company''s engineers have been interacting with industry peers, technology providers and EPC Contractors. They have also been nominated to important national and international seminars. A team has closely worked with Project Consultant and EPC Contractors in all phases of designing and construction of Dahej and Kochi LNG Terminals.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Company has incurred outgo in foreign exchange to the extent of Rs. 23,165 Crore during the year under review. Foreign exchange earnings during the year were Rs. 350 Crore.

EXTRACT OF THE ANNUAL RETURN

The extract of the annual return in Form No. MGT - 9 is attached herewith as Annexure A and is a part of the Board''s report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Your Company fully understands its responsibility towards the society and has been constantly contributing its bit towards various causes. In its endeavour to be more focused towards its social goals, the Company is developing a more structured approach to enhance access to quality healthcare, enrich the lives of people in the rural communities, environmental causes and enhance the educational quotient in the country.

The Company is in process of finalizing short-term, medium- term and long-term strategy to channelize the resources in manner so as to derive maximum socio-economic impact from targeted approach. In line with its social goals as enumerated above, the Company has already identified several projects in the areas of Healthcare, Education, Environment, River Surface Cleaning, Agriculture, Swatch Bharat etc. where your Company will spend the annual CSR budget in a progressive manner.

In terms of provisions of Section 135 of Companies Act, 2013 and rules made thereunder, an amount of Rs. 25.06 Crore was required to be utilized on CSR activities. However, only Rs. 5.96 Crore was utilized on account of CSR activities during the financial year. The guidelines for the expenditure on CSR activities are fairly recent and the Company has been transitioning and adopting the new CSR policies/guidelines which lead to the lower expenditure. The disclosure as per Rule 9 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached herewith as Annexure B and form part of Board Report.

DIRECTORS

A) Changes in Directors and Key Managerial Personnel

During the year under review, following are the changes among the Directors:

Directors Resigned

Name Date of Resignation

Dr. A. K. Balyan 15th July, 2015

Shri B. C. Tripathi, Nominee of GAIL 19th November, 2015

Shri Atanu Chakraborty, Nominee 11th April, 2016 of GMB

The Board placed on record its appreciation for the contributions made by Dr. A. K. Balyan, Shri B. C. Tripathi and Shri Atanu Chakraborty.

Directors Appointed

Name Date of Appointment

Shri Prabhat Singh 14th September, 2015

Shri Subir Purkayastha, Nominee 1st December, 2015 of GAIL

B) Declaration by Independent Directors

Three Independent Directors namely Shri Arun Kumar Misra, Shri Sushil Kumar Gupta and Dr. Jyoti Kiran Shukla were appointed to the Board. Declaration by all the Independent Director(s) has been obtained stating that they meet the criteria of independence as provided in sub- section (6) of Section 149 of the Companies Act, 2013.

An Independent Director may hold office for a term up to a period of three years on the Board of a Company from their respective date of appointment.

C) Formal Annual Evaluation of the Board

The Board adopted a formal mechanism for evaluating its performance and as well as that of its Committees and individual Directors, including Chairman of the Board. The exercise would be carried out through a structured evaluation process considering various aspects of the Board''s functioning such as composition of Board and Committees, experience and competencies, performance of specific duties and obligations, contribution at the meetings and otherwise, independent judgment, governance issues etc. The Independent Directors evaluated the performance of the entire Board. However, the Company is in process of adopting all the requirements as stated in SEBI (LODR) Regulations, 2015.

D) INDEPENDENT DIRECTOR''s MEETING

A meeting of the Independent Directors was held on 28th March, 2016 without the attendance of Non- Independent Directors and members of the management. The Independent Directors reviewed the performance of the non-independent Directors and the Board as a whole, the performance of the Chairperson of the Company, taking into account the views of executive Directors and non- executive Directors and assessed the quality, quantity and timeliness of flow of information between the Company''s management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

KEY MANAGERIAL PERSONNEL

Shri Prabhat Singh, MD&CEO, Shri R. K. Garg, Director (Finance) and Shri K. C. Sharma, Company Secretary are the Key Managerial Personnel of the Company in terms of Section 203 of the Companies Act, 2013.

NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS

During the year, six Board Meetings were held on 25th April, 2015, 30th July, 2015, 19th October, 2015, 10th December, 2015, 10th February, 2016 and 28th March, 2016. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and also as per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

AUDIT COMMITTEE

The Company has duly constituted an Audit Committee of the Board. The Audit Committee comprises the following Directors as on 31st March, 2016:

1 Shri Arun Kumar Misra, Chairman

2 Shri D. K. Sarraf, Member

3 Shri Sushil Kumar Gupta, Member

All the Members of the Audit Committee are non-executive Directors and two out of three Members are Independent Directors namely Shri Arun Kumar Misra and Shri Sushil Kumar Gupta. The quorum of the Audit Committee is two Members.

The Chairman of the Audit Committee also attended the last Annual General Meeting of the Company held on 24th September, 2015.

NOMINATION AND REMUNERATION COMMITTEE

In terms of provisions of Section 178 of Companies Act, 2013 as well as the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors has constituted a Nomination and Remuneration Committee. As on 31st March, 2016, the Nomination and Remuneration Committee comprises of the following Directors:

1. Shri Arun Kumar Misra, Chairman

2. Shri D. K. Sarraf, Member

3. Shri Sushil Kumar Gupta, Member

All the Members of Nomination and Remuneration Committee are non-executive Directors and two out of three Members are Independent Directors namely Shri Arun Kumar Misra and Shri Sushil Kumar Gupta.

Policy on Whole-time Directors'' Appointment and Remuneration

Pursuant to Article no. 109 and 111 of the Articles of Association of the Company, the Board may appoint Managing Director & CEO and other whole-time Directors subject to provision of Section 203 and other applicable provisions of the Act.

The Search Committee, as constituted by the Board from time to time, finalizes the qualification, age, experience and other relevant criteria for the position under consideration and the notification for the vacant position is circulated in advance. Based on the suitability of the candidates, the Search Committee of the Board shortlists candidates for personal interaction and recommends potential candidates in order of merit to Nomination and Remuneration Committee which in turn makes its recommendations to the Board. The final recommendation, with suitable compensation and other terms for appointment, is then approved by the Board, subject to confirmation by the Shareholders in the General Meeting.

Such appointment is for an initial term not exceeding five years at a time, upon such terms and conditions as approved by the Shareholders.

Compensation Policy

A Compensation Benchmarking Survey is periodically done to assess the competitiveness of total remuneration which is being paid to Directors, Key Managerial Personnel and Senior Management.

The outcome of the same is presented before Nomination and Remuneration Committee to assess the reasonableness to attract, retain and motivate Directors and other senior managerial personnel. Based on the latest exercise conducted during this year, a revised compensation structure has been implemented w.e.f 01.04.2015 for all the employees including Directors, Key Managerial Personnel and Senior Management Team.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013

No loans, investment / guarantee have been given by the Company under Section 186 of the Companies Act, 2013.

Insurance

The Company has taken appropriate insurance for all assets against foreseeable perils.

Significant and Material orders passed by or courts

There are no significant and material orders passed by the Regulators, courts or Tribunals which would impact the going concern status and the Company''s future operations.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of every contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto is disclosed in Form No. AOC -2 attached as Annexure C.

PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 197 OF THE COMPANIES ACT, 2013

Pursuant to provisions of Section 197 of the Companies Act, 2013, read with the Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of employees are set out in Annexure D to the Directors'' Report.

SECRETARIAL AUDIT REPORT

A Secretarial Audit Report submitted by M/s A. N. Kukreja, a Company Secretary in practice, is annexed with the report as Annexure E. Regarding inadequate number of Independent Directors as stated in the Secretarial Audit Report, it is stated that the Company is in the process of finding suitable candidates to be appointed as Independent Directors and the requisite number of Independent Directors will be appointed shortly.

DISCLOSURES PURSUANT TO SECTION 197(12) OF THE COMPANIES ACT, 2013

The ratio of remuneration of each Director to the median employees remuneration and such other details in terms of Section 197 (12) of Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of Directors'' Report and is attached herewith as Annexure F.

DISCLOSURE UNDER SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

During the year ended 31st March, 2016, no complaint(s) of Sexual Harassment has been received by the Company.

CORPORATE GOVERNANCE CERTIFICATE

As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Report on Corporate Governance, together with Auditors'' Certificate regarding Compliance of the SEBI Code of Corporate Governance, is annexed herewith.

MANAGEMENT DISCUSSION AND ANALYSIS

The Annual Report contains a separate section on Management Discussion and Analysis which is a part of the Directors'' Report.

INDUSTRIAL RELATIONS

Your Company continued to enjoy cordial and smooth relations amongst all its employees at Dahej and Kochi terminals.

RISK MANAGEMENT POLICY

The Company has laid down policies and procedures to inform the Members of the Board about the Risk Assessment and Minimization Procedure. A Risk Management Committee consisting of an Independent Director and all the Whole-time Directors periodically reviews the procedures to ensure that Executive Management controls risk through properly defined framework. The risk assessment framework encompasses, inter-alia, methodology for assessing risks on an ongoing basis, risk prioritization, risk mitigation, monitoring plan and comprehensive reporting system.

DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES

The Board of Directors of the Company has approved the Vigil Mechanism in terms of provisions of Section 177 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for Directors and employees of the Company to report, to the management, concerns about unethical behavior, actual or suspected fraud or violation of the policy. The same has also been hosted on the website of the Company. During the year ended 31st March, 2016 no complaint has been received under Vigil Mechanism.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions of clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, Directors hereby confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to 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 and 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;

(e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

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

DEPOSITS

During the year, your Company did not accept any deposits from the public under Section 73 of the Companies Act, 2013.

STATUTORY AUDITORS

M/s T R. Chadha & Co., Chartered Accountants, will retire at the ensuing Annual General Meeting (AGM) of your Company and being eligible, offer themselves for re-appointment. The re-appointment, if made, for the financial year 2016-17, will have to be approved by Ordinary Resolution as required under Section 139 of Companies Act, 2013.

AUDITORS'' REPORT

Auditor has submitted an unqualified report for the financial year 2015-16.

COST AUDITOR

The Board of Directors has appointed M/s K. L. Jaisingh & Co. as the Cost Auditor of the Company for the Financial Year 2016-17.

The Cost Audit Report for the year 2014-15 has been filed under XBRL mode on 6th October, 2015.

ACKNOWLEDGEMENTS

The Board of Directors sincerely thanks and wishes to place on record its appreciation of the Ministry of Petroleum and Natural Gas, Government of India, State Governments of Gujarat and Kerala, Promoters of the Company, Engie (erstwhile GDF Suez), RasGas, Exxon Mobil and other LNG suppliers, gas off-takers and consumers of re-gasified LNG, Auditors, Lenders and the Employees of the Company for their whole-hearted co-operation and unstinted support. The Directors want to express their deep-felt thanks and best wishes to all the Shareholders for the continued support and the trust they have reposed in the Management. The Directors look forward to a better future and further growth of your Company.



For and on behalf of the Board of Directors

Place : New Delhi (K.D. Tripathi)

Date : 19th August, 2016 Chairman


Mar 31, 2015

Dear Members,

On behalf of the Board of Directors, it is our privilege and honour to present the seventeenth Annual Report and the Audited Accounts of your Company for the financial year ended 31st March, 2015.

PHYSICAL PERFORMANCE

Inspite of challenges being faced in the international LNG markets due to a sharp decline in the prices of crude oil, your Company was able to achieve the utilization of the Dahej terminal at its nameplate capacity of 10 MMTPA. The LNG prices in the spot markets declined sharply due to the declining crude prices. However, the prices under the long-term contract, which have benefitted the Indian consumers for the past decade, will take longer time to align with the current market prices due to the formula of the contract. This has led to a decline in the RLNG off-take by the Petronet off-takers - GAIL, IOCL and BPCL - citing low acceptability of the RLNG prices among their consumers. This low off-take situation is expected to continue in the next year. Company is, therefore, urgently working on plans to alleviate the situation. During the financial year 2014-15, Dahej Terminal handled 154 LNG cargoes and supplied 520.78 TBTUs of re-gasified LNG, 2666 LNG road tankers were loaded and dispatched during the year under review.

A highlight of the year was berthing of a Q-Max cargo at the Dahej Terminal. A Q-Max cargo is the largest available LNG vessel in the World today and can carry upto 260,000 cubic meters of LNG which is almost double of the conventional cargo size. With the receipt of a Q-Max cargo at Dahej during December 2014, your Company established another benchmark demonstrating versatile technical capability to handle cargos of a variety of sizes. Prior to this, the Dahej terminal had been regularly receiving the Q-Flex cargos carrying 210,000 cubic meters of LNG.

Kochi Terminal completed its first full year of operations since commissioning. Limited availability of the pipeline network for gas evacuation remains a concern leading to the plant operating at very low capacity utilization. 6 cargoes (including 2 re-load cargoes) were brought to the Kochi Terminal during the full year.

FINANCIAL PERFORMANCE

During the period 2014-15, your Company achieved its highest ever turnover of Rs. 39,501 Crores as against Rs. 37,748 Crores in 2013-14, the net profit during the year stood at Rs. 883 Crores as against Rs. 712 Crores in the previous year. The capacity utilization at the Dahej Terminal was 102.1% during the year under review, while the Kochi Terminal operated at a capacity utilization of 2.1%. A summary of the comparative financial performance in the fiscal 2014-15 and 2013-14 is presented below:

(Rs. in crore)

Particulars 2014-15 2013-14

Revenue from operations 39,501 37,748

Other Income 155 84

Total Revenue 39,656 37,832

Cost of LNG imports 37,611 35,849

Gross Margin 2,045 1,983

Salary & other operating expenses 452 400

Finance charges 293 220

Depreciation 315 308

Profit before Tax 985 1055

Tax expenses, including deferred tax 102 343

Profit after Tax 883 712

Amount Transferred to Reserves:- General Reserve 89 72

Debenture Redemption Reserve 78 15

Earnings (Rs.) per Share 11.77 9.49

DIVIDEND

Keeping in view the performance and dividend policy of the Company, the Directors are pleased to recommend a dividend of 20% on the paid-up share capital of the Company for the year ending 31st March, 2015.

FINANCING OF PROJECTS

Petronet has been able to raise the required debt for its large capital expenditure since its formation. The initial Dahej project of 5 MMTPA capacity, its expansion to 10 MMTPA, the Kochi LNG Terminal, the second jetty and now further expansion of the Dahej terminal to 15 MMTPA have required substantial borrowings - both in Indian Rupees as well as in foreign currency.

Best CFO Award being received by Shri R. K. Garg, Director (Finance)

Taking advantage of the availability of cheaper options in the markets, your Company refinanced its Rupee term loans by substituting these with low cost Rupee Bonds in the Indian markets for an amount of Rs. 1,000 crore. These initiatives show the strength of the balance sheet of your Company, its credibility and the good relationship it enjoys with the lending community.

Inspite of the challenging times, your Company has maintained its high credit rating with the domestic as well as international rating agencies.

LNG SOURCING

You are aware that your Company has signed long-term supply contracts for LNG imports with RasGas, Qatar and Mobil Australia Resources Company (MARC), Australia. While the LNG supplies from Qatar commenced in 2004, the Australian LNG from Gorgon is expected to hit the Indian shores in 2016. Due to sharp decline in crude prices, the price of LNG under RasGas long term contract having linkage to 60 months JCC average is on the higher side vis- a-vis other term LNG and spot LNG leading to lower off-take by consumers. Your Company is working to mitigate impact of high priced LNG due to sharp decline of crude oil prices along-with off-takers GAIL, IOCL and BPCL.

Visit of MD & CEO of Ras Gas at Kochi Terminal

Besides the long-term LNG contracts, your Company also buys LNG on spot and short-term basis from many international players. It is always in touch with the suppliers to secure LNG at an affordable price for the Indian markets.

FURTHER EXPANSION OF DAHEJ TERMINAL

You are aware that the Dahej LNG Terminal is being further expanded from 10 MMTPA to 15 MMTPA. As on 31st March, 2015, the expansion project has achieved 56.05% progress. The construction activities continue as planned and the project is expected to be completed by end 2016.

Your Company is looking at further expansion of Dahej terminal to 17.50 MMTPA and is in process of finalising business model for the same. Detailed Feasibility Report has been prepared and Front End Engineering design is under progress.

SHIPPING ARRANGEMENTS

Three LNG ships, namely 'Disha', 'Raahi' and 'Aseem' carry the entire LNG volume from RasGas under a long-term contract to Dahej. Shipping Corporation of India (SCI) is an equity partner in the ship-owning companies and all three ships are manned, managed, maintained and operated by SCI. The ships operate on a long-term time charter basis.

During FY2014-15, the overall shipping operations at Dahej LNG terminal have run smoothly and the jetty utilization has been very good without any downtime.

Construction of a ship to carry LNG from Australia under a long-term agreement is in progress as per schedule. A consortium of companies, namely, MOL NYK, K-Line and The Shipping Corporation of India (SCI), will own this ship. PLL has right to subscribe upto 26% equity in this LNG ship. The ship will be delivered to PLL in November 2016 and will be used primarily to transport LNG from Gorgon, Australia to Kochi.

As is the case with the first three ships, the fourth ship will also be manned, managed, maintained and operated by SCI.

LNG TERMINAL AT KOCHI

Kochi terminal continued to operate at low loads due to lack of evacuation pipelines with no substantial progress in Phase II pipelines work. There are very few customers being serviced as of now with Phase I of the pipeline network, limited to only about 45 Kms. Until Phase II segment of the pipeline is completed, the terminal capacity will continue to be grossly underutilized.

To enhance the capacity utilization at Kochi, your Company has been trying to offer innovative solutions to international LNG players. During the year under review, the Company offered and undertook new value added activities relating to unload and re-export of LNG, cool down, gassing up and bunkering fuel.

A total of four cargoes were unloaded during the year. Two such cargoes were re-exported during the year. As part of providing more value added activities, Kochi terminal also successfully provided LNG as bunker to a small vessel. Gassing up and Cooling down activities have also been carried out in the month of April 2015.

EAST COAST TERMINAL AT GANGAVARAM

Your Company initiated the process to revalidate the demand and the commercial structure for the proposed terminal at Gangavaram. Primary market assessment has been carried out. Discussions on pipeline connectivity with the pipeline owners have continued. Many international LNG suppliers have shown interest to participate in this project. Your Company is in the process to have a robust commercial structure in place before seeking approval of the Board to committing funds to this project. The Company is, however, bullish on the demand potential of that region and believes that it is best suited to set up the terminal and serve the consumers in that region.

DIRECT MARKETING OF LNG THROUGH ROAD TANKERS

The first direct customer of your Company for supply of LNG by road tankers is Hindustan Lifecare Ltd (HLL), Trivandrum and supplies have commenced from September 2014. Your Company is in discussions with other potential industrial customers who are not connected with pipeline for supplies of LNG by road tankers.

Inaugration of LNG supply by road to HLL

WIND POWER PROJECT IN GUJARAT

The Company is making efforts to reduce and optimize the power consumption which is the major operating cost in re-gasification terminal at Dahej. At the same time, PLL is promoting renewable energy for the reduction of carbon footprints and envisages environment friendly energy generation. The Company is in the process of implementing a 40 MW Wind Power Project in Gujarat for captive use of Dahej LNG terminal.

The pre-project activities have already begun. The project will reduce the expenses on power consumption and is likely to be a profitable investment with a shorter payback period.

FUTURE PLANS

Your Company is looking at innovative ways to integrate along the LNG value chain. It is seen that a significant amount of energy is spent at the Natural Gas liquefaction plants for converting natural gas into LNG by the LNG producing countries. There is a potential for recovery of such energy at LNG re-gasification terminals. Your Company has also initiated steps in this regard and has begun pre-project activities for setting up of an Air Separation Unit (ASU) to produce liquid gases such as Liquid Nitrogen, Liquid Oxygen and Liquid Argon. An ASU integrated with an LNG re-gasification terminal consumes 50% less energy vis-a-vis a stand- alone ASU. Another possibility of utilizing the above cold energy is by setting up cryogenic ware house for refrigerated storage of various products. Your Company has also initiated pre-project activities in this regard.

Signing of C2-C3 Extraction Agreement between GAIL, ONGC & PLL

The Company has prepared a Detailed Feasibility Report for setting up a satellite LNG regasification terminal, alongwith a power generation plant, at Port Blair. The facility will also have provision to supply regasified LNG for city gas distribution and industrial ancillary units. It will sign a Memorandum of Understanding with Government of Andaman & Nicobar for joint venture formation and Power Purchase Agreement.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS

The Company has developed adequate internal control systems commensurate to its size and business. PLL has appointed M/s Ernst & Young as Internal Auditors, who conduct audits for various activities. The reports of the Internal Auditors are submitted to the Management and the Board's Audit Committee. There is a thorough review of the adequacy of internal control system.

DETAILS OF JOINT VENTURES / ASSOCIATE COMPANY(S)

A Solid Cargo Port through a Joint Venture Company namely Adani Petronet (Dahej) Port Private Ltd., had commenced its operations in August 2010 at Dahej Port. Solid Cargo Port Terminal has facilities to import/export bulk products like coal, steel and fertilizer. PLL has 26% equity in this Joint Venture along with the Adani Group.

PERFORMANCE AND FINANCIAL POSITION OF JOINT VENTURE COMPANY

The financial highlights of solid cargo company for the year ended 31st March, 2015 was as under:

(Rs. In Crore)

Particulars 31st March, 31st March, 2015 2014

Revenue from Operations 484.68 288.83

Other Income 6.44 9.64

Total Income 491.12 298.47

Operating Expenses 155.37 101.35

Employee benefits 10.50 9.28 expenses

Depreciation and 52.70 48.75 amortization expense

Finance Cost 55.14 83.99

Other expenses 16.23 10.58

Total Expenses 289.94 253.95

Profit Before Tax 201.18 44.52

Tax expenses 115.54 31.79

Net Profit for the year 85.64 12.73

The cargo handling operations at the port is fairly mechanized and port is well connected with road and railway. The cargo handled comprises of steam coal, rock phosphate and project cargo etc. The key aspects of company's performance during the financial year 2014-15 are as follows:

* Solid Cargo volume increased by 57% from 7.89 mmt in FY 2013-14 to 12.42 mmt in FY 2014-15.

Solid Cargo Port of Adani Petronet at Dahej

* Total number of vessels handled at Dahej Solid Cargo Port was 182 during FY 2014-15 as against 123 for FY 2013-14; a growth of 48% year on year.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

All possible measures have been undertaken successfully by your Company to achieve the desired objective of energy conservation and technology upgradation. In order to ensure optimum conservation of energy and absorption of technology, your Company's engineers have been interacting with industry peers, technology providers and EPC Contractors. They have also been nominated to important national and international seminars. A team has closely worked with Project Consultant and EPC Contractors in all phases of designing and construction of Dahej and Kochi LNG Terminals.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Your Company has incurred expenditure in foreign exchange to the extent of Rs. 37,653 Crore during the year under review. Foreign exchange earnings during the year were Rs. 441 Crore.

EXTRACT OF THE ANNUAL RETURN

The extract of the annual return in Form No. MGT - 9 is attached herewith as Annexure A and is a part of the Board's report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

Petronet Limited Ltd., as responsible Corporate has been undertaking Socio-Economic Development Projects/ Programs and also supplementing the efforts of the local institutions/NGOs/local Government/implementing agencies in the field of Education, Healthcare, Community Development, Entrepreneurship etc. to meet priority needs of the marginalized and underserved communities with the aim to help them to become self-reliant. These efforts are being undertaken preferably in the local area and areas around our work centers/ project sites.

In terms of provisions of Companies Act, 2013, an amount of Rs. 28.84 Crore was required to be utilized on CSR activities. However, only Rs. 4.24 Crore was utilized on account of CSR activities during the financial year. You are aware that the guidelines for the expenditure on CSR activities are fairly recent and the Company has been transitioning and adopting the new CSR policies / guidelines which lead to the lower expenditure. The Company is in a continuous process of finding and evaluating various large projects for taking up/spending required amount on account of CSR activities.

The disclosure as per Rule 9 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached herewith as Annexure B and form part of Board Report.

DIRECTORS

A) Changes in Directors and Key Managerial Personnel

During the year under review, following are the changes among the Directors:

Directors Resigned

Name Date of Resignation

Shri B. C. Bora, Independent Director 29th June, 2014

Shri Ashok Sinha, Independent Director 29th June, 2014

Shri A M K Sinha, Nominee of IOCL 1st August, 2014

Shri R. Ram Mohan, Nominee of 25th August, 2014 Lenders

Shri Tapan Ray, Nominee of GMB/GOG 8th October, 2014

The Board placed on record its appreciation for the contributions made by Shri B. C Bora, Shri Ashok Sinha, Shri A. M. K. Sinha, Shri R. Ram Mohan and Shri Tapan Ray.

Directors Appointed

Name Date of Appointment

Shri Arun Kumar Misra, 14th August, 2014

Independent Director

Shri Debasis Sen, Nominee of 21st October, 2014 IOCL

Shri Sushil Kumar Gupta, 15th January, 2015 Independent Director

Shri Atanu Chakraborty, Nominee 23rd February, 2015 of GMB/GOG

Dr. Jyoti Kiran Shukla, 31st March, 2015 Independent Director

B) Declaration by Independent Directors

During the year, three Independent Directors namely Shri Arun Kumar Misra, Shri Sushil Kumar Gupta and Dr. Jyoti Kiran Shukla were appointed to the Board. Declaration by all the Independent Director(s) has been obtained stating that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013.

An Independent Director will hold office for a term up to a period of three years on the Board of a Company from their respective date of appointment.

C) Formal Annual Evaluation of Board

As required under the relevant provisions of the Companies Act 2013, Company has a process for evaluation of the Board, its committees and individual Directors. However, Company is in the process of laying down the specific criteria for evaluation of performance of the entire Board and members.

The evaluation is proposed to be made on the following parameters;

1. Composition & Quality

2. Understanding the Business, including Risks

3. Process & Procedures

4. Oversight of the Financial Reporting Process, including Internal Controls

5. Oversight of Audit Functions

6. Ethics & compliance

7. Monitoring Activities

8. Overall evaluation

KEY MANAGERIAL PERSONNEL

Dr. A. K. Balyan, MD & CEO, Shri R. K. Garg, Director (Finance) and Shri K. C. Sharma, Company Secretary are the Key Managerial Personnel of the Company in terms of Section 203 of the Companies Act, 2013.

NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS

During the year, four Board Meetings were held on 30th April 2014, 4th August 2014, 7th November, 2014 and 5th February, 2015. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and also as per Listing Agreement.

AUDIT COMMITTEE

The Company has duly constituted an Audit Committee of the Board. The Audit Committee comprises of the following Directors as on 31st March, 2015:

1 Shri Arun Kumar Misra, Chairman

2 Shri D. K. Sarraf, Member

3 Shri Sushil Kumar Gupta, Member

All the Members of the Audit Committee are Non-executive Directors and two out of three Members are Independent Directors namely Shri Arun Kumar Misra and Shri Sushil Kumar Gupta. The quorum of the Audit Committee is two Members.

The then Chairman of the Audit Committee also attended the last Annual General Meeting of the Company held on 18th September, 2014.

NOMINATION AND REMUNERATION COMMITTEE

In terms of provisions of Section 178 of Companies Act, 2013 as well as the Listing Agreement, Board of Directors has constituted a Nomination and Remuneration Committee. As on 31st March, 2015, the Nomination and Remuneration Committee comprises of the following Directors:

1. Shri Arun Kumar Misra, Chairman

2. Shri D. K. Sarraf, Member

3. Shri Sushil Kumar Gupta, Member

All the Members of Nomination and Remuneration Committee are Non-executive Directors and two out of three Members are Independent Directors namely Shri Arun Kumar Misra and Shri Sushil Kumar Gupta.

Policy on Directors' Appointment and Remuneration

Pursuant to Article no. 109 and 111 of the Articles of Association of the Company, the Board may appoint Managing Director & CEO and other Whole-time Directors subject to provision of Section 203 and other applicable provisions of the Act.

The Search Committee, as constituted by the Board from time to time, finalizes the Qualification, Age, experience and other relevant criteria like experience etc. for the position under consideration and the notification for the vacant position is circulated. Based on the suitability of the candidates, the Search Committee of the Board shortlists candidates for personal interaction and recommend potential candidates in order of merit to Nomination and Remuneration Committee which in turn makes its recommendation to the Board. The final recommendation with suitable compensation and other terms for appointment is then approved by the Board subject to confirmation by the shareholders in the general meeting.

Such appointment is for a fixed term not exceeding five years at a time, upon such terms and conditions as approved by the shareholders.

Compensation Policy

A Compensation Benchmarking Survey is done to assess the competitiveness of total remuneration which is being paid to Directors, key managerial personnel and senior management.

The outcome of the same is presented before Nomination and Remuneration Committee to assess the reasonableness to attract, retain and motivate Directors and other senior managerial personnel.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186

No loan, investment / guarantee have been given by the Company under Section 186 of the Companies Act, 2013.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of every contract or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto is disclosed in Form No. AOC -2 attached as Annexure C.

PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 197 OF THE COMPANIES ACT, 2013

Pursuant to provisions of Section 197 of the Companies Act, 2013, read with the Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of employees are set out in Annexure D to the Directors' Report.

SECRETARIAL AUDIT REPORT

A Secretarial Audit Report submitted by M/s A. N. Kukreja & Co., Company Secretaries, is annexed with the report as Annexure E. Regarding inadequate number of Independent Directors as stated in the Secretarial Audit Report, it is stated that Company is in the process of finding suitable candidates to be appointed as Independent Directors and shortly the requisite number of Independent Directors will be appointed.

DISCLOSURES PURSUANT TO SECTION 197(12) OF THE COMPANIES ACT, 2013

The ratio of remuneration of each Director to the median employees remuneration and such other details in terms of Section 197 (12) of Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of Directors' Report and is attached herewith as Annexure F.

DISCLOSURE UNDER SEXUAL HARRASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

During the year ended 31st March, 2015, no complaint(s) of Sexual Harassment has been received by the Company.

CORPORATE GOVERNANCE CERTIFICATE

As required under Clause 49 of the Listing Agreement with the Stock Exchanges, the Report on Corporate Governance, together with Auditors' Certificate regarding Compliance of the SEBI Code of Corporate Governance, is annexed herewith.

MANAGEMENT DISCUSSION AND ANALYSIS

The Annual Report contains a separate section on Management Discussion and Analysis which is a part of the Directors' Report.

INDUSTRIAL RELATIONS

Your Company continued to enjoy cordial and smooth relations amongst all its employees at Dahej and Kochi terminals.

RISK MANAGEMENT POLICY

The Company has laid down policies and procedures to inform the Members of the Board about the risk assessment and minimization procedure. A Risk Management Committee consisting of Whole-time Directors periodically reviews the procedures to ensure that Executive Management controls risk through properly defined framework. The risk assessment framework encompasses, inter-alia, methodology for assessing risks on ongoing basis, risk prioritization, risk mitigation, monitoring plan and comprehensive reporting system.

DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM FOR DIRECTORS AND EMPLOYEES

The Board of Directors of the Company has approved the Vigil Mechanism in terms of provisions of Section 177 of Companies Act, 2013 and Clause 49 of the Listing Agreement for Directors and employees of the Company to report, to the management, concerns about unethical behavior, actual or suspected fraud or violation of the policy. The same has also been hosted on the website of the Company.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the provisions of clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, Directors hereby confirm that:

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to 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 and 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;

(e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

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

DEPOSITS

During the year, your Company did not accept any deposits from the public under Section 73 of the Companies Act, 2013.

STATUTORY AUDITORS

M/s T R. Chadha & Co., Chartered Accountants, will retire at the ensuing Annual General Meeting (AGM) of your Company and being eligible, offer themselves for re-appointment. The re-appointment, if made, for the financial year 2015-16, will have to be approved by Ordinary Resolution as required under Section 139 of Companies Act, 2013.

AUDITORS' REPORT

Auditor has submitted an unqualified report for the financial year 2014-15.

COST AUDITOR

The Board of Directors has re-appointed M/s Sanjay Gupta & Associates as the Cost Auditor of the Company for the Financial Year 2014-15.

The Cost Audit Report for the year 2013-14 has been filed under XBRL mode on 25th September, 2014.

ACKNOWLEDGEMENTS

The Board of Directors sincerely thanks and wishes to place on record its appreciation of the Ministry of Petroleum and Natural Gas, Government of India, State Governments of Gujarat, Kerala and Andhra Pradesh, Promoters of the Company, Engie (erstwhile GDF Suez), RasGas, Exxon Mobil and other LNG suppliers, gas off-takers and consumers of re-gasified LNG, Auditors, Lenders and the Employees of the Company for their whole-hearted co-operation and unstinted support. The Directors want to express their deep-felt thanks and best wishes to all the shareholders for the continued support and the trust they have reposed in the Management. The Directors look forward to a better future and further growth.

For and on behalf of the Board of Directors

(R. K. Garg) (Dr. A. K. Balyan) Director (Finance) MD & CEO

Place : New Delhi Date : 15th July, 2015


Mar 31, 2014

Dear Shareholders,

On behalf of the Board of Directors, it is my privilege and honour to present the Sixteenth Annual Report and the Audited Accounts of Petronet LNG Limited (PLL) for the year ended March 31, 2014.

PHYSICAL PERFORMANCE

During financial year 2014 (FY14), there was an overall decline in demand for gas in India. This impacted the operations of the Dahej terminal with marginal dip in the terminal utilization at a capacity lower than nameplate capacity of 10 MMTPA. In FY14, the Dahej Terminal handled 149 LNG cargoes and supplied 488.75 TBTUs of re-gasified LNG.

The Kochi terminal was commissioned in August, 2013. However, due to limited availability of the pipeline network for gas evacuation, the terminal operated at low capacity utilization. 3 cargoes have been brought to the Kochi terminal since it was commissioned.

FINANCIAL PERFORMANCE

During the period 2013-14, while the company achieved the highest ever turnover of Rs. 37,748 Crore as against Rs. 31,467 Crore in 2012-13, the net profit during the year declined to Rs. 712 Crore as against Rs. 1,149 Crore in the previous year. Lower capacity utilization, coupled with the commissioning of the Kochi terminal, resulted in lower profits for PLL for FY14. The capacity utilization at the Dahej Terminal was at 96%, while the Kochi terminal operated at minimal capacity.

A summary of the comparative financial performance of PLL for FY14 and FY13 respectively is presented below:

(Rs. in Crore)

Particulars 2013-14 2012-13

Revenue from operations 37,748 31,467

Other Income 84 89

Total Revenue 37,832 31,556

Cost of LNG imports 35,849 29,212

Gross Margin 1,983 2,344

Salary & other operating expenses 400 319

Finance charges 220 118

Depreciation 308 187

Profit before Tax 1,055 1,720

Tax expenses, including deferred tax 343 571

Profit after Tax 712 1,149

Earnings per Share (Rs.) 9.49 15.32

DIVIDEND

Keeping in view the performance and dividend policy of PLL, the Directors are pleased to recommend a dividend of 20% on the paid-up share capital of the company for the year ending March 31, 2014.

FINANCING OF PROJECTS

PLL has successfully raised the required debt for its large capital expenditure since formation. Over time, the company has borrowed substantial funds in Indian Rupees as well as foreign currency to finance multiple expansion plans. These include initial Dahej project of 5 MMTPA capacity, its expansion to 10 MMTPA, the Kochi LNG Terminal, and the second jetty at Dahej, and now further expansion of the Dahej terminal to 15 MMTPA.

For the first time during FY14, the company tapped the Rupee-bond market and raised Rs. 300 Crore to fund the second jetty at Dahej.

Simultaneously, PLL signed Rupee loan agreements aggregating Rs. 2,250 Crore with State Bank of India and HDFC Bank Ltd. to fund the Dahej expansion project. Further, Asian Development Bank sanctioned an amount of USD 150 million for the Dahej expansion project. These developments are symbolic of the strength of the balance sheet of PLL and the good relationship it enjoys amongst the lending community.

The company undertook an international rating exercise during FY14. After a rigorous exercise, M/s Moody''s Investor Service ("Moody''s") assigned Petronet LNG Limited with a Baa3 Corporate Family Rating. The outlook on the rating is stable. PLL has been assigned a rating equivalent to that of the Sovereign. With this rating, PLL has joined the elite group of companies that are similarly rated by the Moody''s. Namely, Indian companies such as Bharat Petroleum Corporation Limited, Bharti Airtel Limited, Indian Oil Corporation Limited and NTPC Limited.

LNG SOURCING

The company has signed long-term supply contracts for LNG imports from Qatar and Australia. While the LNG supplies from Qatar commenced in 2004, the LNG from Australia is expected to arrive by the end of 2015. Besides the long- term LNG contracts, PLL also buys LNG on spot and short- term basis from many international players. The company is closely connected with multiple suppliers to be able to secure LNG at an affordable price for the Indian market.

SECOND LNG JETTY AT DAHEJ

This year, the construction work of the second jetty at Dahej was completed. Gujarat Maritime Board (GMB) issued the necessary completion certificate. Post the completion certifications and approvals like declaration of Jetty as an import landing place, PLL obtained the Navigational Safety Port Committee (NSPC) approval and the approval as Custodian of imported goods amongst others. The first LNG Cargo at Second Jetty at Dahej was berthed on April 18, 2014.

The second Jetty at Dahej is very versatile. It is capable of berthing Q-Max LNG vessels (with a capacity of 266,000 cubic meters) during non-monsoon period and Q-flex LNG vessels (with a capacity of 216,000 cubic meters) in all seasons.

Completion of this project has reduced dependency on one Jetty. It has mitigated the risks associated with receipt of high number of ships on a single jetty. The company will also be able to cater to a higher number of cargoes.

FURTHER EXPANSION OF DAHEJ LNG TERMINAL

As mentioned, the Dahej LNG Terminal is being expanded from 10 MMTPA to 15 MMTPA. The expansion project involves construction of two additional storage tanks, additional regasification facilities of 5 MMTPA capacity, four LNG Truck loading bays, utilities and offsites.

The company has obtained all statutory clearances for the expansion project. These include the no objection certificate from Petroleum & Explosives Safety Organization (PESO), and CRZ & Environmental clearance from the Ministry of Environment & Forest (MOEF). PLL has already obtained the possession of requisite land after completion of the stipulations of diversion of forest land.

The EPC contract for the two LNG storage tanks has been awarded to M/s IHI of Japan and the contract for regasification facilities has been awarded to the consortium of M/s Toyo Engineering India Limited (TEIL) & M/s Toyo Engineering Corporation (TEC), Japan. M/s Engineers India Limited has been appointed as the Project Management Consultant for this project. The target is to complete the project by end of 2016.

Following a different business model, PLL has signed contracts where the expanded capacity at Dahej would be offered on a "Use or Pay" basis. This would ensure healthy revenues right from the day of completion of the expanded capacity. For twenty years, the major part of the expanded capacity has already been contracted on "Use or Pay" basis. This expansion would make the Dahej terminal one of the biggest and amongst the most utilized terminals in the world.

SHIPPING ARRANGEMENTS

The volumes under the long-term contract of 7.50 MMTPA of LNG with RasGas were brought to Dahej by three LNG ships, namely ''Disha'', ''Raahi'' and ''Aseem.'' The Shipping Corporation of India (SCI) is an equity partner in the ship-owning companies and all three ships are manned, managed, maintained and operated by SCI. The ships operate on a long-term time charter basis.

During FY14, the overall shipping operations at Dahej LNG terminal have run smoothly. The jetty utilization has been optimum without any downtime.

PLL has executed an agreement for a long-term time charter of a fourth LNG ship to import LNG from Australia. Construction of ship is in progress as per schedule. A consortium of companies, namely, MOL, NYK, K-Line and Shipping Corporation of India (SCI), will own this ship. PLL has right to subscribe upto 26% equity in this LNG ship.

As is the case with the first three ships, the fourth ship will also be manned, managed, maintained and operated by SCI.

LNG TERMINAL AT KOCHI

Kochi LNG terminal was commissioned on August 20, 2013 with the berthing of the first LNG carrier at the terminal. Commissioning activities were completed and the terminal became commercially operational on September 10, 2013. Since only Phase-1 of the pipeline network is complete, the off-take from the terminal is low. As on date, the length of the pipeline is 44 kilometers only, which is being used for evacuation of R-LNG for servicing a limited number of consumers. Completion of Phase- 2 is the key to enhanced capacity utilization of the terminal as the pipeline then connects several consumers enroute Bangalore and Mangalore.

The Honorable Prime Minister of India dedicated the terminal to the Nation at a ceremony at the terminal on January 4, 2014.

To date, three LNG cargoes have been imported in Kochi. PLL supplied volumes under these cargoes to two major consumers – FACT and BPCL refinery. This was executed through the gas marketing companies, BPCL, GAIL and IOC. Currently, a volume of only around 0.35 MMSCMD is supplied to the refinery.

The Government of India had given permission to GAIL to lay the pipelines to connect Kochi LNG terminal to Mangalore and Bangalore markets. Certain constraints are being faced by GAIL in laying these pipelines. The pipeline to Bangalore passes through the State of Tamil Nadu and has become a subject matter of litigation due to a decision of the State Government that the pipeline be aligned with National highways. The Mangalore section of the pipeline is awaiting ROU (Right of Use) acquisition from State Government in certain districts of Kerala. Your Company is hopeful for the resolution of these issues in the near future.

EAST COAST TERMINAL AT GANGAVARAM

The company has proposed setting up a third regasification terminal at Gangavaram in Andhra Pradesh. A binding term sheet to this effect was signed with Gangavaram Port Ltd.

Various pre-project activities of the proposed terminal, including the Detailed Feasibility Report (DFR) and Front End Engineering and Design (FEED), have been completed. The Environment & CRZ Clearance for the project has been obtained from MOEF, New Delhi. Approval from PESO has also been obtained. The process for pre-qualification of prospective EPC bidders is in progress. The project awaits the clearance from the State Government, for consumer tie-up, pipeline connectivity and sourcing of LNG.

DIRECT MARKETING OF LNG

PLL continues its efforts for development of the concept to supply LNG by road with the use of receiving stations/ hubs. This concept is prevalent in several countries and is gaining traction. The concept is ideally suited for consumers who are not connected to the gas pipelines and have a small requirement.

Steps are underway to market LNG directly to consumers across India through overland transportation. The company has concluded LNG sales agreements with a few consumers in this regard. To meet the natural gas demand of isolated small and mid- scale centers, PLL is exploring the potential of small-scale LNG terminals at certain coastal locations. These areas can be fed from the main LNG terminals at Kochi and Gangavaram by reloading the LNG into small LNG vessels/ barges. PLL is engaged in various pre- project activities for supply of LNG through small barges and creating LNG hub in the Island of Andaman & Nicobar. The company has signed an MOU with Andaman & Nicobar administration in this regard.

In light of increasing concerns over release of green house gases, conversion of shipping industry from conventional fuel to LNG is a matter of time. PLL has kept provisions for reloading of small ships from Kochi Terminal for future requirement of coastal trade of LNG and bunkering.

PLL has created a direct marketing brand. All retail marketing shall be under the brand name ''aroli''

WIND POWER PROJECT IN GUJARAT

The Company is making efforts to reduce and optimize the power consumption which is the major operating cost in regasification terminals. At the same time, PLL is promoting renewable energy for the reduction carbon footprint. It envisages environment friendly energy generation, and is in process of implementing a 40 MW Wind Power Project for captive use in Gujarat for the Dahej LNG terminal.

The pre-project activities have already begun. The project shall be implemented by 2015. The project will reduce the expenses on power consumption and is likely to be a profitable investment with a shorter payback.

FUTURE PLANS

The company is looking at innovative ways to integrate along the LNG value chain. Currently, LNG production countries spend a significant amount of energy at the Natural Gas liquefaction plants to convert natural gas into LNG. There is a potential for recovery of such energy at LNG regasification terminals. PLL has initiated steps in this regard. The company is in a pre-project activities phase to set up an Air Separation Unit (ASU). This will produce liquid gases such as Liquid Nitrogen, Liquid Oxygen and Liquid Argon. An ASU integrated with an LNG regasification terminal consumes 50% less energy vis-à-vis a stand- alone ASU.

Another possibility of utilizing the above cold energy is by setting up cryogenic warehouse for refrigerated storage of various products. PLL has initiated pre-project activities in this regard as well.

UPGRADATION OF IT SYSTEM LANDSCAPE THROUGH PROJECT "SANKALP"

To take PLL to greater heights, the project "SANKALP" was undertaken to upgrade the existing ERP landscape. The company has successfully completed the software and hardware upgrade to combine all business processes around the LNG value chain on a single IT platform. Besides the upgradation of the existing modules, many new modules have been implemented.

A high level of interaction, coordination and synchronization across all business functions that cover core processes of contract management, planning and optimization, terminal operations along with the enterprise processes of finance, procurement, and human resources has been established. This will help PLL make greater use of analytics, robust and accurate business information, better and quick decision making, improved financial reporting, through easy- to- use interfaces with end-to-end IT enablement.

This enterprise software will not only enhance existing functionalities, but will bring the industry best practices of new functionalities in the company''s systems.

INDUSTRIAL RELATIONS

PLL continued to enjoy cordial and smooth relations amongst all employees at Dahej and Kochi terminals.

DEPOSITS

During the year, PLL did not accept any deposits from the public under Section 58A of the Companies Act, 1956.

EMPLOYEE PARTICULARS

Pursuant to provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (particulars of employees) Rules 1975, the names and other particulars of employees are set out in the annexure to the Directors'' Report.

CORPORATE GOVERNANCE

As required under Clause 49 of the Listing Agreement with the Stock Exchanges, the Report on Corporate Governance together with Auditors'' Certificate regarding Compliance of the SEBI Code of Corporate Governance is annexed herewith.

MANAGEMENT DISCUSSION AND ANALYSIS

The Annual Report contains a separate section on Management Discussion and Analysis, which is a part of the Directors'' Report.

HEALTH, SAFETY AND ENVIRONMENT (HSE)

Health Safety and Environment (HSE) continues to remain top priority for the company. PLL operates its LNG terminals with the highest level of safety standards. During the financial year the company performed exceedingly well without occurrence of any loss time incident. Continued efforts are made to further strengthen the HSE system by upgrading standard operating procedures, External Audits, close monitoring & upgrading of fire, gas & spill detection & suppression systems and adherence to regulatory compliances. Training on safe operations and fire fighting remains on focus. Exclusive LNG Fire fighting training is also provided to fire fighting team and key operation persons at GDF, France.

CONSERVATION OF ENERGY & TECHNOLOGY ABSORPTION

All possible measures have been undertaken successfully by PLL to achieve the desired objective of energy conservation and technology upgradation. In order to ensure optimum conservation of energy and absorption of technology, the engineers at PLL continue to interact with industry peers, technology providers and EPC Contractors. They have also been nominated to important national and international seminars. Teams have worked closely with Project Consultants and EPC Contractors in all phases of designing and construction of Dahej and Kochi LNG Terminals.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm:

a) That the company had followed the applicable accounting standards along with proper explanations relating to material departures in the preparation of the annual accounts;

b) That the company had selected such accounting policies and applied them consistently and made judgment 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 account of the company for that period;

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

d) That the accounts of the company have been prepared on a going-concern basis.

CHANGE IN THE BOARD OF DIRECTORS

During the year under review, following are the changes among the Directors:

Directors Resigned

Date of Name Resignation

Shri R. K. Singh, Nominee of BPCL October 1, 2013

Shri Vivek Rae, Chairman March 1, 2014

Shri Sudhir Vasudeva, Nominee of March 1, 2014 ONGC

Shri Dominique Pelloux-Prayer, March 15, 2014

Nominee of GDFI

The Board placed on record, appreciation for the contributions made by Shri Vivek Rae, Shri R. K. Singh, Shri Sudhir Vasudeva and Shri Dominique Pelloux-Prayer.

Directors Appointed

Name Date of Appointment

Shri S. Varadarajan, Nominee of October 11, BPCL 2013

Shri D. K. Sarraf, Nominee of ONGC March 10, 2014

Shri Saurabh Chandra, Chairman March 25, 2014

Shri Philip OLIVIER, Nominee of GDFI April 22, 2014

FOREIGN EXCHANGE EARNING AND OUTGO

PLL has incurred expenditure in foreign exchange to the extent of X 33855.64 Crore during the year under review. Foreign exchange earnings during the year were X 1.51 Crore.

COST AUDITOR

The Board of Directors has re-appointed M/s Sanjay Gupta & Associates as the Cost Auditor of the Company for the Financial Year 2014-15.

The Cost Audit Report for FY13 has been filed under XBRL mode on October 24, 2013.

AUDITORS

M/s T. R. Chadha & Co., Chartered Accountants, will retire at the ensuing Annual General Meeting (AGM) of the company and being eligible, offer themselves for re-appointment. The re-appointment, if made, for the financial year 2014-15, will have to be approved by Ordinary Resolution as required under Section 139 of Companies Act, 2013.

ACKNOWLEDGEMENTS

The Board of Directors sincerely thanks and wishes to place on record its appreciation of the Ministry of Petroleum and Natural Gas, Government of India, State Governments of Gujarat, Kerala and Andhra Pradesh, Promoters of the Company, GDF Suez, RasGas, Exxon Mobil and other LNG suppliers, gas off-takers and consumers of re-gasified LNG, Auditors, Lenders and the Employees of the Company for their whole-hearted co-operation and unstinted support.

The Directors want to express their heart- felt gratitude and thank all the shareholders and debenture holders for the continued support and the trust they have reposed in the Management. The Directors look forward to a better future and further growth.

For & on behalf of the Board of Directors

Place: New Delhi (Saurabh Chandra)

Date: 24th July, 2014 Chairman


Mar 31, 2013

Dear Shareholders,

The behalf of the Board of Directors, it is my privilege and honour to present the Fifteenth Annual Report and the Audited Accounts of your Company for the year ended 31st March, 2013.

Being the first and leading LNG importing Company in India, your Company has created a niche for itself in the gas business. The Company''s main thrust is on catalyzing the growth of the Indian gas sector. It has firmly established itself as an international player having relationships with major LNG exporters in the world. The Dahej Terminal has received LNG cargoes from all across the world and serves as an important energy provider to the Nation by supplementing the dwindling domestic gas production.

Physical Performance

During the year under review, the operations of Dahej Terminal surpassed its name plate capacity of 10 MMTPA. During the financial year 2012-13, Dahej Terminal handled 164 LNG cargoes and supplied 525 TBTUs of re- gasified LNG. 2,400 LNG road tankers were loaded and dispatched during the year under review.

Financial Performance

While making sincere efforts to further leverage the potential of imported LNG in the Indian market and striving to be a key energy provider, your Company continues to set new benchmarks for growth in its financial performance. During the period 2012-13, your Company achieved its highest ever turnover of Rs. 31,467 Crores as against Rs. 22,696 Crores in 2011-12. Net profit during the year was also the highest ever at Rs. 1,149 Crores as against Rs. 1,058 Crores in the previous year. Your Company continues to achieve high-capacity utilization at the Dahej Terminal. A summary of the comparative financial performance in the fiscal 2012-13 and 2011-12 is presented below:

(Rs. in Crores)

Particulars 2012-13 2011-12

Revenue from operations 31,467 22,696

Other Income 182 85

Total Revenue 31,649 22,781

Cost of material consumed 29,305 20,587

Gross Margin 2,344 2,194

Salary & other operating expenses 319 280

Finance charges 118 177

Depreciation 187 184

Profit before Tax 1,720 1,553

Tax expenses, including deferred tax 571 495

Profit after Tax 1,149 1,058

Earnings (Rs.) per Share 15.33 14.10

Dividend

Keeping in view the good performance and sound financial position of the Company, the Directors are pleased to recommend a dividend of 25% on the paid- up share capital of the Company for the year ending 31st March, 2013.

Financing of Projects

The strength of its balance sheet has allowed your Company to successfully raise debt in the past years - both in foreign currency as well as Indian Rupees - from a number of banks and financial institutions. A consortium led by State Bank of India has provided Rupee Term loans and non-fund-based facilities. For its various projects, foreign currency debt has been raised from International Finance Corporation, Asian Development Bank and Proparco (France). The average cost of borrowing compares well with some of the best companies in the country. The lenders are eager to support the Company in its future expansion projects.

Credit rating agencies have assessed the long-term credit rating of the Company as AA with a positive outlook which depicts the Company''s strong fundamentals and inherent business strength.

LNG Sourcing

Your Company has executed long-term LNG supply contracts with Qatar and Australia. With the aim to quench India''s growing gas demand and to alleviate the gas shortage in the country, the Company is negotiating with a number of other international suppliers for bringing more volumes of LNG into the country. This will help to broad-base the LNG supply sources.

Second LNG Jetty at Dahej

The construction of second jetty at Dahej is progressing well. The overall progress is nearly 70%. The Marine facilities are being built by M/s Afcons Infrastructure Ltd. The approach trestle (2.4 km) and unloading plateform are almost complete. This will provide working fronts for erection of equipment and construction of piping. The Breasting/Mooring Dolphins shall be constructed after the monsoon season. The Topside facilities work is under construction and is being built by M/s Toyo Engineering India Ltd. All major equipment has been ordered and supply of the same is in progress as per requirement. Piping works is in progress in the first 1,500 meters of the approach trestle. M/s Engineers India Limited (EIL) is the Project Management Consultant (PMC) for the project. The jetty is likely to be commissioned by the first quarter of 2014.

With the completion of the above project, your Company will be in a position to mitigate the risks associated with receipt of very high number of ships at the existing jetty. The Company will also be able to cater to higher number of cargoes as well as larger size (Q-flex & Q-max) of LNG ships. This will enhance the flexibility of cargo receipt.

Expansion of Dahej Terminal

The activities related to expansion of Dahej LNG Terminal from 10 MMTPA to 15 MMTPA are progressing well. The Company, through global press notification, has completed pre-qualification of prospective bidders for selection of contractors for the lump sum EPC contracts. The bid document has been issued to pre-qualified bidders and the contracts are likely to be finalized by the third quarter of this year. The expansion project involves construction of two additional storage tanks, additional Re-gas facilities of 5 MMTPA capacity and four LNG Truck loading bays, at an estimated project cost of USD 590 million.

For Dahej expansion, the activities regarding acquisition of land on south side of the existing plant are at an advanced stage. Stage-1 clearance for diversion of 22.62 hectares of forest land has been received. The stipulated conditions for Stage-1 clearance are being complied with. The activities relating to acquisition of data for preparation of Environmental Impact Assessment (EIA) report are complete. The draft EIA report has been submitted to the Gujarat Pollution Control Board for further clearances. The project is expected to be completed in 2016.

Shipping Arrangements

Your Company has efficiently managed the transportation of 7.50 MMTPA of LNG from RasGas, Qatar, to Dahej. Three LNG ships, namely ''Disha'', ''Raahi'' and ''Aseem'', are operating on a long-term charter basis. The Shipping Corporation of India (SCI) is equity partner in the ship- owning companies. Disha and Raahi have been manned, managed, maintained and operated by SCI since December, 2008, and the management of Aseem has also been transferred to SCI in March, 2013.

On 25th February, 2013, your Company received the 1000th LNG cargo at the Dahej Terminal. This was indeed an unprecedented feat. These 1,000 ships were received during a period of 9 years and 26 days, which indicates that the overall shipping operations have been smooth. The jetty utilization has been optimum and without any downtime.

Your Company is in the process of finalizing the ship charter on long-term basis for the fourth LNG ship for transporting LNG from Australia. Tenders have been invited and are likely to be finalized by the third quarter of 2013-14.

LNG Terminal at Kochi

The Kochi LNG Terminal is nearing completion. The construction of tanks by EPC contractor, M/s IHI, is complete and the tanks are Nitrogen purged. Similarly, the re-gas facilities have been completed by the EPC contractor, M/s CTCI. Utilities are already commissioned and process facilities are Nitrogen purged. The marine facilities (LNG Jetty) have also been

Your Company is synchronizing the preparedness of facilities at the consumer end. The plant is presently connected to two major consumers, namely FACT and Kochi Refinery through Phase I pipeline. After the completion of Phase II twin pipe lines of GAIL from Kochi to Mangalore and Kochi to Bengaluru, other consumers will be connected. The Kochi Terminal is likely to be commissioned by July/August 2013, initially with FACT & Kochi Refinery consumers.

East Coast Terminal at Gangavaram

Your Company assessed the market demand of natural gas of various regions and prepared a Detailed Feasibility Report (DFR) for building an LNG Terminal at Gangavaram Port in the State of Andhra Pradesh. In view of the increasing gap between demand and supply of domestic gas, particularly in eastern, central and southern parts of the country, your Company has decided to build a -LNG Terminal of 5 MMTPA capacity at Gangavaram. Your Company has signed a binding term sheet with Gangavaram Port Ltd. for setting up a LNG Terminal.

The option of early commencement of supplies through a Floating Storage and Re-gassification Unit (FSRU) is being analyzed.

The Detailed Feasibility Report (DFR) of the proposed Gangavaram Plant has been completed by M/s Tractabel. Front End Engineering and Design (FEED) have been completed by M/s Engineers India Limited (EIL). The Public hearing for environmental clearance was conducted in January, 2013. The Final EIA report has been submitted to MOEF, New Delhi, for grant of environmental clearance. The process for qualification of prospective EPC bidders for construction shall commence shortly. The target date for completion of the terminal is end-2016.

Direct Marketing of LNG

The concept of supply of LNG through road transportation using receiving stations/hubs is prevalent in several countries. However, it is new in India. The concept is ideally suited for consumers who are not connected with gas pipelines and have small requirement. The hubs can be used to supply PNG for domestic consumption, CNG for vehicles and RLNG for industrial use. Steps are underway to market LNG directly to consumers across the country through overland transportation.

Future Plans

With the objective to achieve the strategic goal of developing storage and re-gassification capacity of 30 MMTPA by 2020, your Company is keeping provision for further enhancement of Dahej Terminal from 15 to 20 MMTPA. In addition, your Company is discussing with the concerned authorities of Andaman & Nicobar Islands regarding feasibility of supply of LNG through small barges and creating LNG hubs in the Island. In view of increasing concerns about release of greenhouse gases, the time is not far off for the conversion of shipping industry from conventional fuel to LNG. Your Company has kept provision for reloading of small ships from Kochi Terminal for future requirement of coastal trade of LNG and bunkering.

Deposits

During the year, your Company did not accept any deposits from the public under Section 58A of the Companies Act, 1956.

Employee Particulars

Pursuant to provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (particulars of employees) Rules 1975, the names and other particulars of employees are set out in the annexure to the Directors'' Report.

Corporate Governance

As required under Clause 49 of the Listing Agreement with the Stock Exchanges, the Report on Corporate Governance together with Auditors'' Certificate regarding Compliance of the SEBI Code of Corporate Governance is annexed herewith.

Bussiness Responsibility Report

SEBI vide its Circular CIR/CFD/DIL/8/2012 dated August 13, 2012,mandated the top 100 listed entities, based on market capitalsation at BSE and NSE, to include Business Responisibiity Report as part of the Annual Report describing the initiatives taken by the companies from Environmental, Social and Governance perspective.

Accordingly, the Business Responsibility Report is attached and forms part of the Annual Report.

Management Discussion and Analysis

The Annual Report contains a separate section on Management Discussion and Analysis which is a part of the Directors'' Report.

Conservation of Energy & Technology Absorption

All possible measures have been undertaken successfully by your Company to achieve the desired objective of energy conservation and technology upgradation. In order to ensure optimum conservation of energy and absorption of technology, your Company''s engineers have been interacting with industry peers, technology providers and EPC Contractors. They have also been nominated to important national and international seminars. A team has closely worked with Project Consultant and EPC Contractors in all phases of designing and construction of Dahej and Kochi LNG Terminals.

Directors'' Responsibility Statement

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956, the Directors hereby confirm:

That your Company had followed the applicable accounting standards along with proper explanations relating to material departures in the preparation of the annual accounts;

a) That your Company had selected such accounting policies and applied them consistently and made judgment 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 account of the Company for that period;

b) That your Company had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities; and

c) That the accounts of your Company have been prepared on a going-concern basis.

Industrial Relations

Your Company continued to enjoy cordial and smooth relations amongst all its employees. No mandays were lost due to strikes, lock out, etc.

Change in the Board of Directors

During the year under review, following are the changes among the Directors.

Directors Superannuated Name Date of Superannuation

Shri C. S. Mani, 19th October, 2012 Director (Technical)

Shri G. C. Chaturvedi, 31st January, 2013 Chairman

The Board placed on record its appreciation for the contributions made by Shri C. S. Mani and Shri G. C. Chaturvedi.

Directors Appointed

Name Date of Appointment

Shri R. Ram Mohan, 19th October, 2012 Lender''s Nominee

Shri Rajender Singh, 14th November, 2012 Director (Technical)

Shri Vivek Rae, 21st February, 2013 Chairman

Foreign Exchange Earning and Outgo

Your Company has incurred expenditure in foreign exchange to the extent of Rs. 27,924 Crores during the year under review. Foreign exchange earnings during the year were Rs. 1.26 Crores.

Cost Auditor

The Board of Directors has re-appointed M/s Sanjay Gupta & Associates as the Cost Auditor of the Company for the Financial Year 2012-13.

Auditors

M/s T. R. Chadha & Co., Chartered Accountants, will retire at the ensuing Annual General Meeting (AGM) of your Company and being eligible, offer themselves for re-appointment. The re-appointment, if made, for the financial year 2013-14, will have to be approved by Special Resolution as required under Section 224A of Companies Act, 1956.

Acknowledgements

The Board of Directors sincerely thanks and wishes to place on record its appreciation of the Ministry of Petroleum and Natural Gas, Government of India, State Governments of Gujarat and Kerala, Promoters of the Company, GDF Suez, RasGas, Exxon Mobil and other LNG suppliers, gas off-takers and consumers of re-gasified LNG, Auditors, Lenders and the Employees of the Company for their whole-hearted co-operation and unstinted support. The Directors want to express their deep-felt thanks and best wishes to all the shareholders for the continued support and trust they have reposed in the Management. The Directors look forward to a bright future and further growth with confidence.

For & on behalf of the Board of Directors

Place : New Delhi (Vivek Rae)

Date : 29th May, 2013 Chairman

 
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