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Directors Report of Essar Shipping Ltd.

Mar 31, 2023

Your Directors are pleased to present the Thirteenth Annual Report and Audited Financial Statements of the Company for the financial year ended March 31,2023.

FINANCIAL HIGHLIGHTS:

The Company’s financial performance, for the year ended March 31,2023 is summarized below: -

Particulars

Rs. in Crore

Consolidated

Standalone

For the year ended 31-03-2023

For the Year ended 31-03-2022

For the year ended 31-03-2023

For the Year ended 31-03-2022

Total Income

164.59

553.18

38.86

302.09

Total Expenditure

28.46

265.36

16.52

101.18

EBITDA

136.13

287.82

22.34

200.91

Less: Interest & Finance charges

131.57

356.47

94.65

180.22

Less: Provision for Depreciation

41.14

105.92

0.22

45.26

Profit / (Loss) before Tax

(36.58)

(174.58)

(72.53)

(24.57)

Less: Provision for Tax

26.46

(0.26)

26.46

(0.26)

Profit / (Loss) for the year before share of profit of associate

(10.12)

(174.84)

(46.07)

(24.83)

Add: Exceptional item

1,660.33

93.81

1,738.78

(225.15)

Add: Share of profit of associate

0.24

3.00

-

Add: Other Comprehensive Income/loss

0.17

0.23

0.17

0.23

Profit / (Loss) for the year

1,650.62

(77.80)

1,692.88

(249.75)

DIVIDEND

In view of accumulated losses from the previous financial years and with a view to conserve the resources, your Board of Directors have not recommended any dividend for the year ended 31st March, 2023.

CHANGE IN THE NATURE OF BUSINESS ACTIVITIES:

During the year under review, there was no change in the nature of the business activities of the Company

Overview of the World Economy & Shipping Industry

The general worsening in the global economic situation and macroeconomic indicators has caused the international economy to slow down due to Ukraine war, with apprehensions of an impending recession.

Certainty has been in short supply in the world of shipping in recent years. Shippers, manufacturers, and carriers have all had to adapt to rapidly changing circumstances, from the lingering impacts of COVID to geopolitical conflicts, from stocking trends to industrial action.

The hard pill to swallow is that 2023 will present its own set of challenges across every level of the industry. Shippers and carriers alike will need to be prepared for the implications of shifting capacity levels, an industry-wide shift to a more sustainable future, and a challenging global economic climate.

Indeed, this has already become a reality in some countries, with organisations such as the World Trade Organisation and the International Monetary Fund suggesting that certain economies

in western Europe have already entered a mild recession and are further cautioning that the debilitating effects thereof will inevitably spill over to other underdeveloped economies and perhaps result in a worldwide recession, akin to what was witnessed in 2009.

Globally, the anticipation is that the recession’s severity will be mild but long-term. Consequently, consumer confidence in developed countries has already taken a hit, and discretionary spending is being curbed. The withdrawal of Covid-related fiscal stimulus by most Governments will also add to the recessionary effect.

The lower demand for goods and products will result in fewer factory orders and manufacturing activity in China and other manufacturing locations, resulting in a decline in EXIM volumes - thus covering the entire supply chain.

In 2023, Carriers are expected to have surplus capacity and will likely drop rates to attract volumes, benefitting cargo owners and end consumers.

Sustainability in the Shipping Industry:

As we look forward to an era without fossil fuels and fastrack energy transition, sustainability becomes the most important factor for assessing any industry.

As a sector contributing significantly to GHG emissions, the industry as a whole is aiming to reduce its environmental impact and contribute to global efforts to combat climate change. Key aspects of sustainability in the shipping industry include reducing greenhouse gas (GHG) emissions, complying with environmental regulations, managing waste and recycling,

ESSAR SHIPPING LIMITED

protecting biodiversity and marine conservation, practicing corporate social responsibility (CSR), promoting sustainable supply chain management, and driving innovation and technology.

The International Maritime Organization (IMO), the principle policy making body, has set ambitious targets to reduce GHG emissions from shipping, and the industry is exploring measures such as using cleaner fuels, adopting energy-efficient technologies, optimizing vessel design and operations, and investing in alternative propulsion systems.

Compliance with environmental regulations such as the Ballast Water Management Convention and MARPOL is crucial, and waste management, recycling, and biodiversity conservation are also important aspects of sustainability. Corporate social responsibility principles are being incorporated into shipping companies’ operations, and sustainable supply chain management is gaining prominence.

How sustainability is set to transform the industry

The drive towards a more sustainable future in shipping has been gaining momentum in recent years reflected not only in legislation but also in the carrier order books. 2023 marks the first year where ships will be required to collect and report on emissions data, mandated by new IMO (International Maritime Organisation) regulations.

In 2024, this data will then be used to issue ratings to ships, with poorly performing vessels required to improve or face being idled. This new reporting and rating framework represents the latest regulatory updates from the IMO. The new frameworks aim to achieve their overall goal of reducing the carbon intensity of all ships by 40% by 2030, compared to the 2008 baseline.

This industry shift is also evident in order books for new vessels, with more sustainable dual-fuel ships accounting for an increasing proportion of new orders. Dual fuel engines can operate on both conventional fuel sources and more sustainable forms of energy such as LNG, preparing carriers for the transition from traditional fossil fuels.

The CSSC (Chinese State Shipbuilding Corporation) reported that 31.6% of vessels completed in 2022 were dual-fuel ships. The proportion of dual fuel ship orders is expected to continue to rise in 2023 and grow exponentially in the future as carriers look for more sustainable fuel sources.

Biofuels also presents a unique opportunity to the industry for a more sustainable future. Created from biomass, some biofuels, such as dimethyl Esther, are able to ‘drop in’ and replace existing fuel sources without requiring extensive modifications to engines.

Therefore they can be considered the most readily available low emissions fuel option. However, they are substantially more expensive than traditional sources.

While biofuels may be considered a costly alternative to traditional fuel sources and will require investment, the onus cannot just lie on carriers to make adjustments and bear costs.

Creating a more sustainable future requires action across the industry. Not only by carriers, but also by ports, manufacturers, and shippers to support this investment in a greener future.

The role of digitization in 2023

Along with the drive for capacity management, sustainability and efficiency from carriers, we are likely to see an increased role for supply chain technology in 2023.

Disruptions in 2022 highlight the importance of implementing new technologies into the shipping industry, including:

• Monitoring and anticipating disruptions, to help build supply chain resilience.

• Using real-time information to improve forecast accuracy, and better plan ship utilisation.

• Implementing purchase order management to better gauge arrival times for specific products, and reduce origin dwell times.

• Reporting and analysis of scope 3 emissions to ensure compliance with recognised standards such as the GHG Protocol and ISO 14000.

BUSINESS PERFORMANCE, OPPORTUNITIES AND OUTLOOK

Freight rates and Maritime trade by Cargo type

According to UNCTAD, the increase in global dry bulk freight rates and grain prices will increase global consumer food prices by 1.2 per cent. The effects would be greater in the middle-income economies that import more primary food products than in the low-income economies that import more processed food. The world can also expect regular disruption in supply chains which will need to be more resilient and agile. Freight rates are likely to fluctuate in the face of the ongoing COVID-19, the war in Ukraine, economic policy uncertainties, geopolitical risks, energy and food security, energy and sustainability regulations and decarburization. Soaring freight rates will drive up food and energy.

In 2021, seaborne oil-trading volume remained below prepandemic levels, with a sharp decline in long-haul crude oil exports from the Middle East and the United States. But at the same time, tanker supply continued to grow, with more vessels delivered than scrapped, particularly for larger crude carriers. As a result, there has been a steep fall in freight rates. Between 2020 and 2021, average annual daily tanker earnings fell from $24,877 to $6,416, the lowest

level ever, though they started to rise towards the end of the year with increases for crude oil. In 2021, supply capacity was reduced by increased scrapping. The war in Ukraine boosts tanker freight rates. Earnings remained low into early 2022, but in February 2022 the war in Ukraine led to major spikes on some routes, and some prices were also pushed up by shifts in oil trade fows. Between January and March 2022, the cost of moving crude oil, as tracked by the Baltic dirty tanker index (BDTI), increased by more than 80 per cent. The war in Ukraine is having a range of impacts. The economic and other restrictive measures have cut crude oil flows from the Russian Federation to Europe, to be replaced by oil from the United States and the Middle East. This has reduced the demand for very large crude carriers (VLCCs) but increased the demand for the smaller Aframax and Suezmax tankers. At the same time the Russian Federation has increased crude oil exports from the Black Sea and Baltic Sea ports to Asia, replacing oil from the United States, Latin America, and the Middle East. This too has reduced demand for VLCCs and increased the use of smaller vessels. There were also huge premiums for ship-owners willing to take the risk of transporting Russian oil. Geopolitical tensions that increased imports to Europe from the United States, the Middle East and Asia boosted freight rates for oil product tankers. In the near future, freight rates may continue to increase in the crude oil and product tanker markets. This would partly be due to a recovery in oil demand and the reshuffling of global oil flows in the aftermath of the war in Ukraine, but also to a tightening of supply with slow growth of vessel supply and the removal of old tankers following the entry into force of the IMO’s EEXI and CII regulations.

b. Dry cargo trade:

Market changes and congestion push dry bulk freight rates to new levels. Robust demand and limited supply have driven up dry bulk freight rates. Steady economic recovery and fiscal stimuli have boosted industrial activity and increased demand for most dry bulk commodities such as grains, iron ore and coal. But vessel availability has been constrained by COVID-19 restrictions and port congestion. In 2021, the time spent in port increased by 2.3 per cent for dry bulk carriers and 2.1 per cent for dry break-bulk carriers. There was also a 21 per cent decline in the delivery of new vessels. The average cost to ship raw materials such as grains, coal and iron ore is tracked by the Baltic Exchange dry index (BDI) which from October 2019 to October 2021 tripled to a record high of almost 5,000 points .The surge in freight rates in October coincided with the growth in coal demand and prices. Ports also became more congested as a result of quarantine requirements and the ban on the import of Australian coal by the Government of the China which blocked coal-carrying vessels at China’s ports for months. In October 2021, the Clarksons dry bulk port congestion index increased to 35 per cent.

Towards the end of 2021 bulker freight rates fell steeply -reflecting seasonal variations, and the economic situation in China as well the spread of COVID-19. From the end of October 2021 to the end of December 2021, the BDI declined by 40 per cent to 2,832 points and in January 2022 fell to 1,760 points, with the downturn continuing through the early months of 2022. Exports of coal from Indonesia when the export ban was lifted and demand from Europe increased. Increased dry bulk freight rates and consumer food prices Grain prices and shipping costs have been on the rise since the onset of the war in Ukraine. Between February and May 2022, the BDI increased by 60 per cent. Since then it has declined but in July 2022 was still 13 per cent higher than in February 2022. According to UNCTAD, the increase in global dry bulk freight rates and grain prices will increase consumer food prices by 1.2 per cent globally.

Looking ahead the dry bulk freight market will continue to be affected by the war in Ukraine and the COVID-19 pandemic, especially in China which accounts for around 35 per cent of global dry bulk cargo demand. Demand will also be affected by a slower global economic recovery, commodity price fluctuations, and limited feet deliveries which for 2022 are estimated at only 3.6 per cent. The war in Ukraine could in addition affect port calls and dry bulk shipping patterns and the use and positioning of vessels. Moreover, sourcing cargos from further afield will increase transport ton-miles, all of which add to freight rates.

Outlook and policy considerations

The COVID-19 pandemic has increased freight rates due to the surge in seaborne trade combined with disruptions at ports, and reduced landside transport, warehouse and storage capacity. This has reduced capacity, tied up ships for longer than usual and increased delays and surcharges. Shippers and governments are concerned about rising costs and the increases in blank sailings, port call cancellations, and rising demurrage and detention charges. They have called for public authorities to monitor and regulate shipping and carrier behavior, to ensure transparency, fairness and competitiveness in maritime transport. But the core problems are inefficiency and disruptions. Longer-term solutions would be to boost port performance and

productivity, and improve transport infrastructure, landside transport and connectivity, and storage facilities, while reducing Labour shortages, and making supply chains more robust and resilient.

Policy recommendations

• Supply chains - Developing countries will need support to invest in more robust, resilient and sustainable supply chains. Transport and trade facilitation solutions should accelerate the transition to smart and green trade logistics and enhance transport infrastructure, including port and hinterland, and logistics services.

• Finance - Increased finance and investment and resource mobilization should be based on a long term vision for resilient and sustainable maritime transport supply chains.

• Mitigating impact on vulnerable countries - High shipping costs hit hardest at import-dependent countries. There is a need for a response mechanism to mitigate the impact on the most vulnerable countries, including net food importing countries, SIDS, LLDCs, and LDCs.

• Regional solutions - High transport costs can be addressed by feet and shipping services at the regional and subregional levels. This could include regional maritime indices, and regional freight observatories to collect data and monitor key performance indicators.

• Technical assistance - Vulnerable countries will need technical assistance and support to mitigate the impact of rising prices and to develop sustainable and resilient transport systems and value chains.

ESSAR SHIPPING OPERATIONS & BUSINESSDEVELOPMENT

Business Operation:

The company is continuously monitoring the market to enter into purchase of assets and operations thereby. Currently the company owns a Tug that is employed with for a long term charter of at market rates.

The company is looking at various market segments including the LNG segment for possible business opportunities. Currently, the new build asset prices across segments of Bulk Carriers, Tankers, LNG is very high due to increase in steel prices globally, gap between supply and demand of tonnage, and changes in trade routes to longer hauls.

MANAGEMENT DISCUSSION AND ANALYSISOILFIELD BUSINESSA. GLOBAL INDUSTRY OUTLOOK

Considered to be the biggest sector in the world in terms of dollar value, the Oil and Gas industry is a global powerhouse employing hundreds of thousands of workers worldwide as well as generating hundreds of billions of dollars globally each year. In regions which house the National

Oil Companies (NOC), these Oil and Gas companies are so vital they often contribute a significant amount towards national GDP.

The Oil and Gas industry can be broken down into three key areas:

• Upstream;

• Midstream; and

• Downstream

The largest volumes of products of the Oil and Gas industry are fuel oil and gasoline (petrol). Petroleum is the primary material for a multitude of chemical products, including pharmaceuticals, fertilizers, solvents and plastics. Petroleum is therefore integral to many industries, and is of critical importance to many nations as the foundation of their industries.

In Oil markets, the depths of the post-2014 downturn seem to be behind us. Oil prices have recovered from the 2016 annual average WTI price low of $40. It breached $50 in 2017 and through September 2018 it averaged just shy of $67. This recovery has been the result of various factors, including sustained success of the production restraint agreement between OPEC and non-OPEC countries in force since the beginning of 2017.

[Source: Westwood Global Energy Group: Global Offshore Drilling Rig Dayrate Forecast 2023-27]

B. RIG MARKET OUTLOOK

• Rig Market Conditions have continued to improve in 2023: Day rates have risen further this year, amidst increasingly limited availability, following significant demand-side gains across the last 18 months. Moreover, notable growth in rig deployment is expected moving forward, as units fixed in 2022/early-2023 continue to commence their contracts. Overall, though some concerns remain surrounding the impacts of macroeconomic headwinds on oil demand and pricing, the rig sector outlook is positive.

• Rig Demand has increased by 6% Y-O-Y: Jack Ups: 5% & Floaters: 9%, standing at 520 units at start-June (85% utilisation). In 2023 so far, floater demand has grown by 3% with gains concentrated in the ‘Golden Triangle’, where 66 units are currently active (96% utilisation), up by 5 units ( 8%) in the YTD and standing 27% above start-22 levels. Meanwhile, though global jack-up deployment has softened slightly this year (-1% in the YTD), demand in the Middle East reached a new record level at start-June (151 units, 92% utilisation) while activity elsewhere has shown signs of improvement in recent months.

• Global Rig Deployment is likely to Strengthen Further Moving Forward: Jack-up demand is

projected to grow by 6% in the rest of 2023, as units in the Middle East continue to commence their contracts. Meanwhile, floater demand is expected to increase by 10% across the rest of the year, underpinned by significant incremental demand growth in the ‘Golden Triangle’ out to end-2023. In 2024, harsh requirements are likely to increase considerably, supporting overall rig demand, as development drilling work commences at recently sanctioned projects in NW Europe, and also driven by rising harsh Deepwater exploration / appraisal activity in the Orange Basin off West Africa. Overall, global rig demand is projected to grow by 7% this year, reaching 557 units at end-23 (90% utilisation), before growing by a further 7% next year, reaching 595 units at end-2024 (93% utilisation, 3pp below start-14).

• Rig Supply-Side limitations are likely to Persist:

Active rig supply stood at 611 units at start-June, up by 5 units (1%) in the ytd, but still 6% below start-20 levels. The pace of supply-side growth has continued to be limited by challenges in resolving ‘stranded’ assets as well as constraints on reactivation activity, owing to cost inflation and supply chain disruption, with delivery volumes also limited by issues in securing finance and increasing yard quotes. As these factors persist, active rig supply growth is expected to remain moderate; marketable supply is expected to grow by 2% and 3% across 2023 and 2024 respectively, reaching 641 units at end-24 - still 2% below start-20 levels.

• Rig Dayrates have continued to improve in 2023 so far: Rig Rate Index stood at 127 points at end-May, up by 5% in the ytd, and standing 26% above the 2012-22 average (though still 25% below start-14). ‘Leading edge’ high-spec jack-up rates have now risen to $160,000/day, the highest level since early-2015, whilst the average UDW floater dayrate currently stands at $391,000/day, up by 6% in 2023 so far and 66% above start-22.

Supply, demand and utilisation have been rising across the three rig segments since 2020/2021, which is expected to continue over the coming years, further driving day rate increases.

[Source: Clarksons Research]

Key Market Indicators

Particulars

Details

Jack Up Utilisation (June ’23)

86%

Jack Up Utilisation (Forecast End 2023)

90%

High Spec Jack Up Day Rate

US$ 125,000 / day

[Source: Clarksons Research]

Particulars

Details

Floater Utilisation (June ’23)

83%

Floater Utilisation (Forecast End 2023)

90%

UDW Floater Day Rate Brazil

US$ 437,500 / day

[Source: Clarksons Research]

SUPPLY AND DEMAND UTILISATION

D. JACKUP DAYRATES: FORECAST

Demand outlook very bright for Jackup segment as NOCs maintain laser focus on domestic security. As global marketed utilisation continues its upward trajectory, so too will day rates.

• The 350ft> Jackup segment is forecast to see more rises in day rates over the next half decade too, due to continued emphasis on energy security from NOCs in areas such as the Middle East, Mexico, India and China. With marketed utilisation of this segment already at 93.4% more supply will be needed to meet this growing demand. This could lead to some number of new rig orders in the short-term.

• It is expected that there will continue to be more of a divergence in the low and high end of day rates in the <349ft Jackup segment over the next few years but this gap will tighten as this and the 350ft> market sells out,

which should lead to rate increases within this fleet.

[Source: Westwood Global Energy Group: Global Offshore Drilling Rig Dayrate Forecast 2023-27]

E. SEMISUB DAYRATES: FORECAST

Demand increases in Norway, Australia and the Golden Triangle will continue to drive further day rate increases, especially for those top tier units.

• Standard harsh-environment semi day rates are anticipated to increase over the coming years, but at a slower pace than the other segments due to an expected lack of demand from the UK. However, those units traditionally used in the North Sea have potential to be relocated to other regions where demand and day rates are higher. That potential supply reduction could ultimately help sustain or even improve day rates in the UK sector.

• Progress will continue to be seen for day rates in the international benign semi segment, driven mainly by higher demand from the Golden Triangle and Southeast Asia. The quickly tightening drillship market may also result in further operators looking to the top-tier, ultra-Deepwater semi market to meet their supply needs. All of this will result in day rates moving higher over the forecast period.

[Source: Westwood Global Energy Group: Global Offshore Drilling Rig Dayrate Forecast 2023-27]

F. DAYRATE FORECAST FIGURES: 2023-2027

RigLogix forecasts continued day rate increases across the board over the next five years, as market activity carry’s on ramping up.

G. ROAD AHEAD

Rapid economic growth is leading to greater outputs, which in turn is increasing the demand of oil for production and transportation. Crude oil consumption is expected to grow at a CAGR of 5.14% to 500 million tonnes by FY40 from 202.7 million tonnes in FY22. In terms of barrels, India’s oil consumption is forecast to rise from 4.05 MBPD in FY22 to 7.2 MBpD in 2030 and 9.2 MBPD in 2050. Diesel demand in India is expected to double to 163 MT by 2029-30, with diesel and petrol covering 58% of India’s oil demand by

2045. Demand is not likely to simmer down anytime soon, given strong economic growth and rising urbanisation.

Natural Gas consumption is forecast to increase at a CAGR of 12.2% to 550 MCMPD by 2030 from 174 MCMPD in 2021.

India is planning to double its oil refining capacity to 450500 million tonnes by 2030.

Energy demand of India is anticipated to grow faster than energy demand of all major economies globally on the back of continuous robust economic growth. Moreover, the country’s share in global primary energy consumption is projected to increase to two-fold by 2035.

SUBSIDIARIES & ASSOCIATES

Your Company has three direct subsidiaries and two step-down subsidiaries. OGD Services Holdings Limited, Mauritius, Energy II Limited, Bermuda and Essar Shipping DMCC are direct subsidiaries of the Company. OGD Services Limited, India and Starbit Oilfields Services India Limited, India, are step down subsidiaries 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 G to this report and hence not repeated here for the sake of brevity. The Policy for determining material subsidiaries as approved by the Board is available on Company’s website https://www.essar.com/wp-content/ uploads/2020/06/EssarShip Material Subsidiary Policv.pdf

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) and Indian Accounting Standard (IND-As) - 110 on Consolidated Financial Statements read with InD-AS-28 on Accounting for Investments in Associates, the audited Consolidated Financial Statements are provided in the Annual Report. The audited Consolidated Financial Statements together with Auditors’ Report thereon form part of the Annual Report.

HUMAN RESOURCE

Your Company believes that employee competence and motivation are necessary to achieve its business objectives. ESL has undertaken many training initiatives to enhance technical and managerial competence of the employees. ESL has even undertaken a series of initiatives to enhance emotional and intellectual engagement of employees. Your Company has always aspired to build a culture that demonstrates world-class standards in safety, environment and sustainability. People are Company’s most valuable asset and ESL is committed to provide all their employees, a safe and healthy work environment. ESL’s culture exemplifies its core values and nurtures innovation, creativity and diversity. ESL ensures alignment of business goals and individual goals to enable their employees to grow on personal as well as professional front.

1. Times of Essar : A monthly newsletter that not only gives business and workforce updates but also received contributions from ESL employees, hosts engagement

activities ranging from fun quizzes around Independence Day, IPL, Holi, etc, to featuring each and every achievement of our employees. The medium is used to showcase the creative side of our employees and their families.

2. Essar Radio: Used as a key medium to communicate important updates about the different projects that were going on at different sites. Leaders from every location including founders took the opportunity to connect with employees, discussing the strategies about how they aim to overcome the pandemic without hampering or jeopardising anyone’s health, shared their daily routine to motivate the employees to stay healthy and stress-free.

3. Manpower Optimization: As we believe in working in open mind culture, we do take care of employee’s wellbeing and skill set. As an integral part of manpower planning, the company effectively places the employees within the other business entity and assigned them roles equivalent to their skill sets, rather than closing their employment/contract.

4. Beach cleaning drive: On International Coastal Cleanup Day dated September 17, 2022, employees of Essar shipping volunteered themselves towards mass cleanliness and sanitation drive of ‘Swachh Bharat Abhiyan’ The aim was to conduct cleanliness drive with special emphasis on Plastic Free Ocean to commemorate 75 years of Independence. It was a drive which got awareness among the employees towards safe & clean beaches

In addition to the above mentioned initiatives, engagement programs like Health webinars, Yoga classes, and online counselling programme were also conducted. This transformation made it possible to scale learning efforts in a more cost-effective way and permits greater engagement during the locked in scenarios. Hence, initiatives like these taken during the year helped employees and their families to stay motivated and healthy.

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.

DIRECTORATE AND KEY MANAGERIAL PERSONNEL

The Board of Directors of the Company provide entrepreneurial leadership and plays a crucial role in providing strategic supervision, overseeing the management performance, and long-term success of the Company while ensuring sustainable shareholder value. Driven by its guiding principles of Corporate Governance, the Board’s actions endeavor to work in the best interest of the Company.

The Directors hold a fiduciary position, exercises independent judgment, and plays a vital role in the oversight of the Company’s affairs. Our Board represents a tapestry of complementary skills, attributes, perspectives and includes individuals with financial experience and a diverse background.

DIRECTORS

During the year under review there were following changes in the Board of Directors of the Company:

1. Mr. Sunil Modak and Ms. Raji Chandrashekar: -

During the FY 2022-23, Mr. Sunil Modak and Ms. Raji Chandrashekar were appointed in the Board Meeting held on May 30, 2022. Pursuant to SEBI (LODR) Regulation, 2015 the Company was required to convene a General Meeting within three months from date of Board Meeting for regularization of their appointment. However, due to some unavoidable circumstances the Company was unable to convene its General Meeting within three months from the date of its appointment. Hence, Mr. Sunil Modak and Ms. Raji Chandrashekar ceased to be the Director of the Company w.e.f August 31,2022.

Their appointments were proposed directly for the shareholder’s approval in the Annual Meeting held on September 08, 2022. Therefore, Mr. Sunil Modak and Ms. Raji Chandrasekhar were appointed as Independent Director on the Board of the Company by the members of the Company in the 12th Annual General Meeting held on September 08, 2022.

2. Late. Natesan Srinivasan and Capt. Bhupinder singh: -

In the 12th Annual General Meeting held on September 08, 2022, Capt. Bhupinder singh and Late. Natesan Srinivasan retired on completion of their tenure from the post of Independent Directors by the members of the Company. The Members of the Company noted and recorded the appreciation for assistance and guidance provided to the company by Late. Natesan Srinivasan and Capt. Bhupinder singh during their tenure.

Mr. Natesan Srinivasan passed away on December 16, 2022.

3. Ms. Saraswathy Subramanian and Ms. Raichel Mathew:

In the 12th Annual General Meeting held on September 08, 2022, Ms. Saraswathy Subramanian retired by Rotation from the post of Non - Executive Director (Women Director) and in place of her Ms. Raichel Mathew was appointed as a Non - Executive Director (Women Director) by the members of the Company w.e.f September 08, 2022.

The Members noted and recorded the appreciation for assistance and guidance provided to the company by Ms. Saraswathy Subramanian during her tenure.

As per Regulation 17(1)(c) of SEBI (LODR) Regulations, 2015, Board of top 2000 listed entities w.e.f. April 01,2020 shall comprises of at least six Directors, as such, on March 31,2023, there were six directors on the Board of Company with Independent Director as Chairman of the Board .

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed under sub-Section (6) of Section 149 of the Companies Act, 2013 and under Regulation 16 (b) (iv) of SEBI (LoDR) Regulations, 2015.

Pursuant to Sections 134 and 178 of the Act and the Regulations 17 and 19 of the Listing Regulations, Nomination and Remuneration Committee (‘NRC’) has set the 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 https://www.essar.com/wp-content/uploads/2022/06/EshipL Policy Familirisation-Programme.pdf

Based on the criteria set by NRC, the Board has carried out the annual evaluation of its own performance, its committees and individual Directors for FY 2022-2023. The questionnaires on performance evaluation were prepared in line with the Guidance Note on Board Evaluation date January 5, 2017, issued by SEBI

The performance of the Board and Individual Directors were evaluated by the Board seeking inputs from all the Directors. The performance of the Committees was evaluated by the Board taking input from all the Committee members. NRC reviewed the performance of individual Directors, separate meetings of Independent Directors were also held to review the performance of Non-Independent Directors and performance of the Board as the whole. Thereafter, at the board meeting, performance of the Board, its committees and individual Directors was discussed and deliberated.

Further the evaluation of the Independent Directors was done by the entire board of directors of the Company. Their evaluation included performance of directors and fulfillment of the Independence criteria as specified in these regulations and their independence from the management.

KEY MANAGERIAL PERSONNEL

In terms of section 203 of the Companies Act, 2013, As on March 31,2023 the Key Managerial Personnel of the Company are Mr. Rajesh Desai, Executive Director, Mr. Vipin Jain, Chief Financial Officer and Ms. Nisha Barnwal, Company Secretary & Compliance Officer.

During the year under review, Mr. Ranjit Singh President & Chief Executive Officer (CEO) retired from the Board and Mr. Ketan Shah, Chief Financial Officer (CFO) tendered his resignation w.e.f September 30, 2022 due to personal reasons.

Further, in the Board meeting held on September 29, 2022 Mr. Vipin Jain was appointed as a Chief Financial Officer (CFO) of the Company.

BOARD MEETINGS

During the year ended March 31,2023, eight (8) meetings of the Board were held May 30, 2022, August 10, 2022, September 28, 2022, November 03, 2022, November 12, 2022, December 08, 2022, February 07, 2023, March 30, 2023 .

COMMITTEES OF THE BOARD

Currently the Board has 5 Committees viz. Audit Committee, Nomination & Remuneration Committee, Stakeholders

Relationship Committee, Share Transfer Committee and Corporate Social Responsibility Committee.

A detailed note on the composition of the Board and its Committees and other related particulars are provided in the Report of Directors on Corporate Governance forming part of this Annual Report.

CHANGES IN SHARE CAPITAL

There was no change in the Share Capital during the year under review.

During the year under review, the Company received the request from M/s. Arcelor Mittal Nippon Steel India Limited and M/s. Imperial Consultants & Securities Limited for Reclassification from Promoters category to Non-Promoters category. Therefore, Company has filed an application with the BSE Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”) for Reclassification of M/s. Arcelor Mittal Nippon Steel India Limited and M/s. Imperial Consultants & Securities Limited from Promoters category to Non-Promoters category pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The Company has received approval for Reclassification of M/s. Arcelor Mittal Nippon Steel India Limited from Promoters category to Non-Promoters category on July 06, 2023 from both the Stock Exchanges.

However, the approval is still awaited from BSE and NSE for Reclassification of M/s. Imperial Consultants & Securities Limited from Promoters category to Public category.

DIRECTORS’ RESPONSIBILITY STATEMENT

Your Directors state that:

(a) in the preparation of the annual accounts for the year ended March 31, 2023, the applicable accounting standards had been followed and there are no material departures from the same;

(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 as at March 31, 2023 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. The auditors have expressed an emphasis of matter on Going Concern in their Consolidated Audit Report relating to a step down subsidiary.

(e) the Directors, had laid down internal financial controls followed by the Company and that such internal financial controls are adequate and were operating effectively as endorsed by Statutory Auditor in their separate report annexed to the Annual Report

(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 managed:

(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.

As per LODR, Regulation 2015, Risk Management Committee is required to be constituted by top 1000 Companies based on market capitalisation, since your Company does not fall in that category, the constitution of Risk Management Committee is not required for your company. However, Company do believe and had put best efforts to minimise/mitigate the risk.

INTERNAL CONTROL SYSTEMS AND ITS ADEQUACY

Your Company has a well-established framework of internal operational and financial controls, including suitable monitoring procedure systems which are adequate for the nature of its business and the size of its operations. The detailed report is given in Corporate Governance Report. Based on the performance of the internal financial control, work performed by internal, statutory and external consultants and reviews of Management and the Audit Committee, the board is of the opinion that the Company’s internal financial controls were effective and adequate during the FY 2022-2023 for ensuring the orderly efficient conduct of its business including adherence to the Company’s policies, safeguarding of its assets, the prevention and detection of fraud and errors, the accuracy and completeness of accounting records an timely preparations of reliable financial disclosures.

CORPORATE GOVERNANCE

The Company has complied with all mandatory provisions of SEBI (LODR) Regulations 2015, relating to Corporate Governance. A separate report on Corporate Governance as stipulated under the SEBI (LODR) Regulations, 2015 forms part of this Report. The requisite certificates from the Auditors of the Company regarding compliance with the conditions of corporate governance are attached to the report on Corporate Governance.

VIGIL MECHANISM

The Company is in compliance with Section 177 of the Companies Act, 2013 and Regulation 18 and Regulation 22 of the Listing Regulations 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 https://www. essar.com/wp-content/uploads/2018/03/ESL Whistle Blower Policy.pdf

CORPORATE SOCIAL RESPONSIBILITY

The Corporate Social Responsibility Committee comprises of the following members:

Sr.No

Name of Member

Designation

1.

Mr. Sunil Modak*

Chairman

2.

Mr. Rajesh Desai

Member

3.

Ms. Raichel Mathew*

Member

*Mr. Sunil Modak and Ms. Raichel Mathew were appointed as member of the Committee w.e.f September 24, 2022 owing to retirement of Capt. Bhupinder Singh and Ms. Saraswathy Subramanian.

Since the Company has incurred losses in proceeding three financial years, it was not required to spend on CSR Activities Further, in terms of provisions of Section 135 read with The Companies (Corporate Social Responsibility Policy) Rules, 2014 CSR Report is annexed to this Report 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 31,2023 are provided in the Annexure - B to this Report.

The term of scheme of Employee Stock Option was for a period of seven years which got completed in the year 2018. As the objective of the trust is attained, process of winding up of the ESOS trust is in process.

AUDITORS

M/s. C N K & Associates LLP, Chartered Accountants - Statutory Auditors (Registration No. 101961 W/W - 100036) were reappointed at 10th AGM of the Company held on September 30, 2020 to hold the office up to the conclusion of 15th AGM of the Company to be held in the year 2025.

AUDITORS’ REPORT:

Further with regard to the observations made in Annexure A to the Auditors’ Report, the management explanation is as under:

1. As on 31st March 2023, the Company has accumulated losses of Rs. 6,821.80 crore as against capital and reserves of Rs. 5,218.33 crore. The Company has also defaulted on several loans and lenders have initiated recovery proceedings as mentioned in Note No. 28 of the Standalone Financial Statements. The Company has disposed off most of its assets with a view to pay off its outstanding dues to lenders / vendors. The value of the security offered in connection with various borrowings as at 31st March 2023 is substantially lower than the amounts outstanding to the lenders. The Company’s current liabilities exceeds its current assets as on 31 March, 2023

The company has monetized its assets in the past and settled most of lenders in the also. The Company is still in process of settling the remaining lenders and management is hopeful of the same. The Company also trying to manage deficit between current assets and liabilities.

2. The Company has certain significant open legal proceedings including under arbitration for various matters with the Lenders & Customers, continuing from earlier years

The company is contesting all the open legal matters. During fY 2023, three number of legal cases were settled / withdrawn.

3. Note No. 9(A) of the Standalone statements relating to recognition of gain on settlement with one of the banks. Standby Letter of Credit (SBLC) issued by the Company with the said bank for Rs.303.37 crore in earlier years to secure a loan availed by a subsidiary, were invoked in an earlier year. In the preceding year, the Company had settled the loan with the said bank and paid the dues through monetisation of assets. Pending outstanding bank guarantee, ‘no due certificate’ has not been received from the said bank. The Company does not expect any additional liability to devolve in this regard. During the year, the Company has accounted for the gain of Rs. 340.80 Crore on One Time Settlement and included the same under Exceptional Items

The Company had done the payment as per the settlement agreement signed by all the concerned parties and as per the view of the management, only contingent no liability persists.

4. Note No. 6(C) of the Standalone Financial Statements relating to recognition of revenue amounting to Rs. 369.81 crore (including accrued interest up to 31st March 2018) in the financial year 2017-18 based on compensation granted to the Company in the arbitration proceedings for breach of contract terms by a charterer of which Rs. 305.81 crore remains outstanding receivable as on 31st March 2023. The Company is confident of full recovery of its claims. However, pending conclusion of the said proceedings, no interest is accrued on the same for the period 1st April 2018 till 31st March 2023

The Company is pursuing matter legally in the High Court and we will recognize the balance interest income, if any once the matter gets settled in the court. During FY 2022 , ESL drew Rs 64 cr against the SAIL arbitration award proceeds from the Delhi High Court by submitted a bank guarantee from its lenders.

5. Note No.6 (B) and 11 of the Standalone Financial Statements, relating to netting off of Rs. 331.26 Crore payable to a wholly owned overseas subsidiary with the amount receivable from the said subsidiary. This is subject to pending application and approval from the regulatory authorities

The Company have receivables from the subsidiary company and payable to same subsidiary company, for presentation purpose same has been shown as net-off in financials due to pending approval from regulatory authorities. Once we will get the approval for set-off, net amount will be shown as receivables from the subsidiary company.

6. In an earlier year, loan of Rs. 25 Crore taken by the Company from an Alternate Investment Fund (AIF) was assigned to Environ Energy Corporation India Private Limited (EECIPL). The NCLT vide its order dated 19th May, 2021 has ordered EECIPL to be liquidated in terms of Section 33(2) of IBC Code, 2016. The Company does not expect any claim from the liquidator and hence, during the year, the Company has written back Rs. 35.41 Crore (Comprising principal of Rs. 25 Crore and interest of Rs. 10.41 crore) and included the same under Exceptional Items

In an earlier year, loan of Rs. 25 Crore taken by the Company from an Alternate Investment Fund (AIF) was assigned to another entity. The entity was referred to CIRP vide order dated March 16, 2020 from NCLT, Mumbai. The liquidator appointed pursuant to this order, did not raise any claim or demanded funds from the company The NCLT vide its order dated 19th May, 2021 has ordered the entity to be liquidated in terms of Section 33(2) of IBC Code, 2016. The Company does not expect any claim from the liquidator and hence, during the year, the Company has written back the amount payable to lender along with interest and included the same under Exceptional Items.

7. Borrowings from various lenders are subject to confirmation/ reconciliation

The company’s account was categorized as substandard during fY 2019-2020 and pursuant to RBI Master Circular DCBR.BPD. (PCB) MC No.12/09.14.000/2015-16 dated July 1, 2015 and November 01, 2017, the bank does not accrue any interest on such loan it has granted. Accordingly, no lender’s confirmation was sought / received.

8. We draw attention to our observations in paragraph 4 above whereby, in spite of several factors mentioned therein, the results are prepared on “Going Concern” basis; in case of a subsidiary, the respective auditors have pointed out that the concerned f inancial statements I results have been prepared on going concern basis,

in view of the representation by the management that the Company has a positive net worth and management has plans to restart the operating activities in the near future.

The company has commenced providing consultancy services to related parties in the offshore drilling sector. It will continue to explore opportunities in the shipping and oilfields sector.

9. Note No. 9 of the Consolidated Financial Results relating to recognition of revenue amounting to Rs. 369.81 crore (including accrued interest up to 31st March 2018) in the financial year 2017-18 based on compensation granted to the Holding Company in the arbitration proceedings for breach of contract terms by a charterer of which Rs. 305.81 crore remains outstanding receivable as on 31st March 2023. As informed to us, the Holding Company is confident of full recovery of its claim. However, pending conclusion of the said proceedings, no interest is accrued on the same for the period 1st April2018 till 31st March 2023.

Explained vide note number 4 above

10. Note No.7 of the Standalone Financial Results relating to recognition of gain on settlement with one of the banks. Standby Letter of Credit (SBLC) issued by the Company with the said bank for Rs.303.37 crore in earlier years to secure a loan availed by a subsidiary, were invoked in an earlier year. In the preceding year, the Company had settled the loan with the said bank and paid the dues through monetisation of assets. Pending outstanding bank guarantee, ‘no due certificate’ has not been received from the said bank. The Company does not expect any additional liability to devolve in this regard. During the year, the Company has accounted for the gain of Rs. 340.80 Crore on One Time Settlement and included the same under Exceptional Items

Explained vide note number 3 above

11. Attention is drawn to netting off of Rs. 331.26 Crore payable to a wholly owned overseas subsidiary with the amount receivable from the said subsidiary. This is subject to pending application and approval from the regulatory authorities

Explained vide note number 5 above

12. In case of the Holding Company and two subsidiaries, borrowings from various lenders are subject to confirmation / reconciliation

In case of the Holding Company and subsidiaries, the account was categorized as substandard during the bank does not accrue any interest on such loan it has granted. Accordingly, no lender’s confirmation was sought / received.

13. The Financial Result of one subsidiary (which has been admitted to NCLT and undergoing CIRP Process) have not been consolidated.

During the year, one of Indian sub-subsidiary got admitted to Corporate Insolvency Resolution Process (CIRP) and

management of the company took over by Resolution Professional and hence the said subsidiary not considered for consolidation purpose.

INTERNAL AUDITOR AND THEIR REPORT

The Board has appointed M/s. DMKH & Co, Chartered Accountants, as Internal Auditor of the Company to conduct Internal Audit for the financial year 2022-2023. During the year under review M/s. DMKH & Co, Chartered Accountants, Internal Auditor has submitted their Report for the said quarters/period to the Audit Committee for its review and necessary action.

SECRETARIAL AUDIT

The Board has appointed M/s. Martinho Ferrao & Associates, Practising Company Secretaries, to conduct Secretarial Audit for the financial year 2022-2023. The Company has received no observations in Secretarial Auditors’ Report for FY 2022-2023. The Secretarial Audit Report for the financial year ended March 31, 2023 is annexed herewith marked as Annexure - C to this Report.

Further for FY 2023-24, the Board of Directors has appointed M/s. Mayank Arora & Co., Company Secretaries as the Secretarial Auditor of the Company.

SECRETARIAL STANDARDS OF ICSI

The Directors state that proper systems have been devised to ensure compliance with the applicable laws. Pursuant to the provisions of Section 118 of the Act, 2013 during FY 2023, the Company has adhered with the applicable provisions of the Secretarial Standards (“SS-1” and “SS-2”) relating to ‘Meetings of the Board of Directors’ and ‘General Meetings’ issued by the Institute of Company Secretaries of India (“ICSI”) and notified by MCA.

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 https://www.essar.com/wp-content/ uploads/2017/10/ESL Directors appointment policy.pdf. 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.

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 https:// www.essar.com/wp-content/uploads/2022/06/EShipL Policy Related-Party-Transactions.pdf. The information on each of the transactions with the related party as per the Companies Act, 2013 is provided in note 27 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.

WEBLINK OF ANNUAL RETURN

The Annual Return of the Company as on 31st March, 2023 in Form MGT - 7 in accordance with Section 92(3) of the Act read with the Companies (Management and Administration) Rules, 2014, is available on the website of the Company at https:// www.essar.com/investors/essar-shipping-limited/annual-return-mgt-7/.

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.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

In accordance with the provisions of the Act and IEPF Rules, as amended from time to time, the Company is required to transfer the following to IEPF:

1. Dividend amount that remains unpaid/unclaimed for a period of seven (07) years; and

2. Shares on which the dividend has not been paid/claimed for seven (07) consecutive years or more.

Additionally, pursuant to Rule 3(3) of IEPF Rules, in case of term deposits of companies, due unpaid or unclaimed interest shall be transferred to the Fund along with the transfer of the matured amount of such term deposits.

As on date, there are no unpaid and unclaimed amounts to be transferred to the investor education and protection fund.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

Vide order dated 05.07.2023, NCLT ordered dismissing the application filed by IL&FS Financial Services Ltd under Section 7 of the Insolvency and Bankruptcy Code, 2016 for initiation of Corporate Insolvency Resolution Process (CIRP) proceedings.

The petition has also been withdrawn.

ILFS which had filed a Summary Suit in Bombay High Court in light of the Settlement reached between the parties (i.e. ILFS & ESL) - ILFS advocates appeared and stated that they are withdrawing the Suit. Vide order dated August 10, 2023 Order was passed and the Suit is dismissed as withdrawn.

The Insolvency Petition was filed by Corporate Creditor of OGD Services Limited (OGD), a step down Subsidiary of ESL. The Company (OGD) is admitted under the Corporate Insolvency Resolution Process (“CIRP”) by Hon’ble National Company Law Tribunal (“NCLT”), Mumbai Bench by Order dated February 09, 2023.

The Company has received Notice from Registrar of Companies, Ahmedabad (herein referred as “ROC”) dated April 11,2023 for Adjudication of penalty under Section 454 of Companies Act, 2013 under u/s 297 of the Companies Act, 2013. Further, the Company has paid an amount of Rs. 5,00,000/- to ROC as the penalty was imposed on the Company and Rs. 1,00,000/- each was paid by Mr. Ranjit Singh and Mr. Rahul Bhargav who were Directors of the Company.

L&T had filed a Petition under Section 7 of the IBC against ESL ( the Guarantor) arising out of certain financial facilities granted to OGD ( the Borrower) Subsequently this debt was assigned to Phoenix ARC who filed a substitution application in these proceedings. The ARC , ESL and OGD came to settle the subject debts. Pursuant to payment of the entire settlement amount the ARC, as L&T’s assignee, issued the No Dues Certificate to ESL and withdrew the aforementioned Petition.

The settlement reached between the Parties i.e. Life Insurance Corporation (‘LIC’) and ESL consent terms were filed in Bombay High Court and the court accepted the consent terms filed by the parties and passed the Order and the Suit was accordingly disposed of.

During the year, the Income Tax Appeallate Tribunal (ITAT) has passed orders in favour of the company for four assessment year.

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 I MO 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 layup period and thereby reduce carbon foot print. Periodical cleaning of ship’s hull and propellers apart from routine drydocking 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 receipts, sale of ships, freight, charter hire earnings, interest income, etc.): Rs. 1.87 cr

Foreign Exchanged Used (including cost of acquisition of ships, loan repayments, interest, operating expenses, etc.): Rs. 1.77 cr

PUBLIC DEPOSITS

During the year under review, your Company neither accepted any deposits nor there were any amounts outstanding at the beginning of the year which were classified as ‘Deposits’ in terms of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposit) Rules, 2014 and hence the

requirement for furnishing of details of deposits which are not in compliance with the Chapter V of the Companies Act, 2013 is not applicable.

PREVENTION OF SEXUAL HARASSMENT

The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at Workplace in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made thereunder for prevention and redressal of complaints of sexual harassment at workplace. Disclosures in relation to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 have been provided in the Report on Corporate Governance.

LISTING FEES

The listing fees payable for the financial year 2023-2024 is paid to BSE Limited and National Stock Exchange of India Limited within due date.

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, creditors, Banks and Financial Institutions for the valuable support, help and co-operation extended by them to the Company.

Your Directors also thanks its other business associates, including the Members of the Company for their continued cooperation and support extended towards the Company.


Mar 31, 2018

The Directors are pleased to present the Eighth Annual Report and Audited Financial Statements of the Company for the financial year ended March 31, 2018.

FINANCIAL RESULTS:

The Company’s financial performance, for the year ended March 31, 2018 is summarized below:.

Rs. in Crore

Particulars

Consolidated

Standalone

For the year ended 31-032018

For the Year ended 31-032017

For the year ended 31-032018

For the Year ended 31-032017

Total Income

1,287.23

2,125.38

703.55

790.66

Total Expenditure

961.66

1814.73

488.69

438.86

EBITDA

325.57

310.65

214.86

351.80

Less: Interest & Finance charges

386.80

466.98

265.24

352.63

Less: Provision for Depreciation

304.12

390.50

125.04

137.14

Profit 1 (Loss) before Tax

(365.35)

(546.83)

(175.42)

(137.97)

Less: Provision for Tax

(3.24)

(37.85)

(3.24)

(2.65)

Profit 1 (Loss) for the year before share of profit of associate

(368.59)

(584.68)

(178.66)

(140.62)

Add: Exceptional item

(1,280.50)

-

224.31

-

Add: Share of profit of associate

(35.77)

1.24

-

-

Add: Other Comprehensive Income/loss

0.88

(0.38)

0.75

(0.38)

Profit 1 (Loss) for the year

(1,683.98)

(583.82)

46.40

(141.00)

DIVIDEND

Due to inadequate operating profit, the Board of Directors has not recommended any dividend for the year under review.

MANAGEMENT DISCUSSION AND ANALYSIS

Overview of the World Economy & Shipping Industry

With over 80 per cent of global trade by volume and more than 70 per cent of its value being carried on board ships and handled by seaports worldwide, the importance of maritime transport for trade and development cannot be overemphasized. Thus, making ocean shipping the most important mode of transport for international merchandise trade. Seaborne trade continues to expand, bringing benefits for consumers across the world through low and decreasing freight costs. Thanks to the growing efficiency of shipping as a mode of transport and increased economic liberalization, the prospects for the industry''s further growth continues to be strong.

The International Monetary Fund (IMF) has published its World Economic Outlook for January 2018 and has subsequently revised its original forecast for global growth in 2018 and 2019 - up by 0.2 to 3.9% for both years. The development in global growth is driven by a higher growth from advanced economies than first anticipated. The IMF now expects the GDP for advanced economies to grow by 2.3% in 2018 and 2.2% in 2019, which is an upward revision of 0.3 percentage points for 2018 and 0.4 for 2019. This is the highest upward cumulative revision for advanced economies since January 2010, when we saw a false dawn for an improvement in the global economy. If this growth materializes, it will be highly beneficial for the shipping industry, as growth in advanced economies generates the highest trade-to-GDP multiplier.

To support this momentum , Ministries of transport and planning, and maritime and port authorities worldwide need to understand the determinants of maritime transport connectivity, as well as the associated opportunities and risks, to ensure informed policy and decision-making processes and adequate investment plans in shipping, ports and their hinterland connections.

Developments in International Seaborne Trade

In 2016, the maritime transport sector continued to face the prolonged effects of the economic downturn of 2009. Seaborne trade remained under pressure owing to continued weak global demand and heightened uncertainty stemming from factors such as trade policy and low commodity and oil prices. World seaborne trade expanded by 2.6 per cent, up from 1.8 per cent in 2015, which is below the historical average of 3 per cent recorded over the past four decades. Reflecting the state of the world economy, demand for shipping services increased moderately in 2016. World seaborne trade volumes expanded by 2.6 per cent, up from 1.8 per cent in 2015 reaching 10.3 billion tons, reflecting the addition of over 260 million tons of cargo, about half of which was attributed to tanker trade.

Strong import demand in China in 2016 continued to support world maritime seaborne trade, although overall growth was offset by limited expansion in the import demand of other developing regions.

In 2017 & 2018, the outlook for the world economy and merchandise trade is expected to improve somewhat. However, uncertainty and other factors, both positive and negative, continue to shape this outlook. In this context, it is estimated that seaborne trade will increase by 2.8 per cent, with total volumes reaching 10.6 billion tons. Volumes are set to expand across all segments, with containerized trade and major dry bulk commodities trade recording the fastest growth.

Seaborne dry cargo shipments totalled 7.23 billion tons in 2016, reflecting an increase of 2 per cent over the previous year .The share of the major bulk commodities (coal, iron ore, grain and bauxite/ alumina/phosphate rock) amounted to about 43.9 per cent of total dry cargo volumes, followed by containerized trade (23.8 per cent) and minor bulks (23.7 per cent)

In 2016, developing economies grew by 3.7 percent. However, there were considerable regional variations.

In 2017, the world fleet reached 1.9 billion dwt, twice the size as it had 12 years ago. Today, bulk carriers account for 43 percent of the fleet, followed by oil tankers (29 per cent) and container ships (13 per cent). The top five ship owners at the end of 2016 were Greece, Japan, China, Germany and Singapore; together they had a market share of 50 per cent in dead-weight tons. Only three economies, the Republic of Korea, China, and Japan, constructed 92 per cent of world tonnage in 2016. Four economies, India, Bangladesh, Pakistan and China, together accounted for 95 per cent of ship scrapping in 2016.

For the fifth year in a row, world fleet growth has been decelerating. The commercial shipping fleet grew by 3.15 per cent in 2016, compared with 3.5 per cent in 2015. Despite this further decline, the supply still increased faster than demand, leading to a continued situation of global overcapacity and downward pressure on freight rates. In the beginning of 2017, the average age of the commercial fleet was 20.6 years, representing a slight increase over the previous year. Fewer newbuildings than at the beginning of the decade, combined with similar scrapping levels, have led to an aging fleet.

In 2016, shipbuilding activity contracted by 1.7 per cent, while ship scrapping went up by 25.7 per cent. The higher growth of demolition led to a slowdown in world fleet growth.

Overview of the Indian Economy

India is the sixteenth largest maritime country in the world. The Indian government has initiated National Maritime Development Programme (NMDP), an initiative to develop the maritime sector; with a planned investment outlay of US$ 11.8 billion.

A consequence of strong GDP growth has been rising energy demand; the country currently meets about 75% of total crude oil demand by imports. India''s crude imports touched 214.9 MMT in FY17, implying a CAGR of 6.7% over FY07-17. Private ports have been especially good at attracting crude import traffic. - Petroleum, Oil, and Lubricants (POL) have been the major contributors to total traffic at ports.

The Central Government is planning to setup logistic hubs near seaports with the help of private sector players, to augment exports from the country. Cargo traffic is expected to witness growth and is said to reach 2,493.1 MMT by 2017. This is against 1,806.8 MMT recorded in 2015. The increase in India’s refining capacity will benefit the offshore shipping lines as demand for their services picks up. As a result of the commissioning of large domestic refining capacities, the imports are expected to jump in the future. This would benefit shipping majors operating in India. The dry bulk business segment in the shipping industry has been impacted by the global commodity slump. While China''s slowdown has led to a sharp moderation of imports like Iron ore, on the other hand, emphasis on the environment has led to the lower usage of coal. This has impacted coal imports. Further, India''s domestic coal production has also improved over the years leading to fewer coal imports. All these factors have led to decline in demand for commodities, thereby reducing commodity moments. The trend is quite visible from the Baltic Dry Index or BDI. If the slowdown in China widens and the movement of coal remain as it is now, the future prospects in this space seem unfavorable.

The shipping industry is impacted by numerous short term and regional factors such as political fallouts, weather changes, etc. This could result in great amount of volatility in the freight market.

BUSINESS PERFORMANCE, OPPORTUNITIES AND OUTLOOK

Freight rates and Maritime trade by Cargo type

(a) Tanker trade

In 2017, world seaborne tanker trade - crude oil, refined petroleum products and gas - continued to grow amid a surplus in oil market supply and low oil prices. Total volumes reached 1.8 billion tons, reflecting an increase of 4.2 per cent over the previous year. These positive trends were underpinned by strong demand for crude oil imports in China, India and the United States and a high level of exported petroleum products from China and India. However, overcapacity, political concerns in the Middle East , increase in production , sanctions by the US government led to a fall in rates

Market conditions were altered with the arrival of new vessels and a slowdown in oil demand growth. This led to steep declines in freight rates. These imbalances in markets fundamentals had a repercussion on earnings which came under further pressure, particularly in the last six months of the year. Overall, tanker earnings averaged about $17,917 per day in 2017-18, a 42 per cent decline, compared with 2016. This decline was affected by the rise in crude oil prices, which also had an impact on bunker (ship fuel) costs.

The outlook appears challenging in the short term, given expectations for continued strong supply growth and numerous risks to the demand side. However, one important regulatory development may reduce fleet supply and support freight rates in the future. New IMO ballast water management standards, which became effective in September 2017, require ships using ballast water in international trade to be retrofitted with a ballast water treatment system. This would come at an estimated cost ranging between $1 million and $5 million (Barry Rogliano Salles, 2017) that may push shipowners to increase scrapping of their old tonnage with low earnings potential, instead of incurring the additional cost. This may also lead to better balanced market fundamentals as supply may contract considerably, in particular in the very large oil carrier segment, which constitutes a big fraction of today''s older tonnage.

In the tanker business, companies are wary of a dent to oil demand as crude prices rise. Brent prices have more than doubled since the low of January 2016, with a proposed cut in supplies by the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC countries likely to keep prices elevated in the near term. Also, as prices rise, demand for offshore tankers will decline, as will the drive to increase strategic reserves.

(b) Dry cargo trade: Major and minor dry bulk commodities and other dry cargo

Overall, weak global investment and industrial activity have weighed down on the dry bulk trade segment,4 which continues to be heavily dependent on developments in China. In 2017, world demand for dry bulk commodities grew at a modest rate of 1.3 per cent, taking total shipments to 4.9 billion tons. China remained the primary source of growth, owing to the positive impact of the stimulus measures introduced during the year. Policy-driven support measures helped increase infrastructure and housing market investment and in turn, the demand for commodities and steel.

Within the dry bulk segment, trade in the major bulk commodities increased by 1.6 per cent. Iron ore trade showed the strongest growth with volumes expanding by 3.4 per cent, reaching 1.4 billion tons in 2016-17.

Imports into China increased by over 7 per cent, reflecting the country''s steel output growth, falling domestic iron ore production, growing stockpiling activity and access to affordable, high-quality iron ore from Australia and Brazil.

Coal trade diminished in 2017, owing to flat demand for coal. Total volumes were estimated at 1.14 billion tons. Declining imports of thermal coal into India, Japan, the Republic of Korea and Europe were offset by a 4 per cent increase in other Asian countries imports, notably China, where import volumes surged by over 28 per cent.

2017 was another difficult year for the dry bulk sector, which continued to face overcapacity and weak growth in demand. The industry continued taking steps to limit fleet supply growth through increased scrapping and postponing or reducing deliveries of new vessels during 2017.

As previously noted, the fleet capacity of bulk carriers grew by 2.22 per cent, one of its lowest rates of growth since 1999 (Clarksons Research, 2017).

(d) Opportunities

It has been quite some time since macro-economic development has looked this positive and as supportive of shipping. Political events can undermine the development, but 2018 appears to bring fewer economic growth “derailing” events compared to 2017. The most important factors to potentially derail growth are likely to be the US midterm elections in November, the renegotiation of the NAFTA and the negotiation of the Brexit deal. Notwithstanding, the sustainability of the all-important Chinese economy.

For sustained economic growth, the political deals resulting from these events need to decrease the number of trade barriers and ensure regulatory alignment. This will help to encourage potential growth as restrictive trade measures can discourage trade flows and have negative knock-on effects on economic growth and job creation.

The World Trade Organization (WTO) has asked all nations to resist from adopting inward-looking policies and urged its members to show leadership by committing to open and mutually beneficial trade. According to the most recent trade monitoring report this has been embraced. In the period from mid-October 2016 to mid-October 2017, 128 measures were implemented to facilitate trade, compared to 108 trade-restrictive ones.

According to the WTO, world merchandise trade has rebounded strongly as volumes grew by 3.6% in 2017 compared to 1.3% in 2016. It is expected that this will drop moderately to 3.2% in 2018 due to a downside risk arising from trade policy measures and geopolitical tensions.

(e) Outlook

The weak trade economy since the 2008 recession and the overcapacity of the shipping industry have continued to limit growth in shipping. As 2017 dawns, it is apparent that the shipping industry will continue to face headwinds. The global economy is in uncertain territory, with a new administration taking over in the United States, Europe still mired in weak growth, and economic activity in China not showing signs of picking up sharply. To top it all, international trade faces a rise in protectionist rhetoric, with events such as Brexit shaking the foundation of free movement of goods, services, and capital. Also, with Asian growth outpacing other regions, trade growth within Asia will rise, thereby impacting shipping distances.

Rates and demand levels remain low, which is why it is important to effectively manage overcapacity. Well-functioning, efficient, resilient freight transport systems are a prerequisite for successful trade and economic integration. They are also necessary to attract investment, develop business and build productive capacities.

There appears to be a rise in tailwinds of late. Metal prices are firming up: Copper is up more than 23 percent since the end of 2015. Fiscal stimulus focusing on infrastructure and investment in China and Japan is likely to aid demand for metals. This augurs well for freight rates, which have also been moving up in recent months, as is evident from the Baltic indices . Most importantly, the shipping industry can draw comfort from an expected rise in international trade growth in the near term. The advent of the United States as an energy exporter with products destined for Asia—a longer route—will aid sentiment. Also, the flow of US oil into the global market will likely keep a lid on prices, thereby ensuring a ceiling. This will ensure that demand does not falter much despite a recent rise in crude oil prices .With key emerging markets and Japan searching for fuels cleaner than coal, natural gas has seen an upsurge in demand. This is likely to continue, aiding demand for liquefied natural gas tankers.

Oilfields Services Business

Offshore Segment:

Looking into 2018 the outlook for the offshore industry is dramatically improved. Oil prices have recovered, the industry has significantly restructured, and the “obsession” with shale growth is finally waning. At long last an offshore up cycle is poised to begin.

The recovery has unfolded in a predictable manner: The international markets are staring to re-awaken, and now the last frontier - offshore- is showing signs of life. We currently expect global E&P spending to rise in the low double-digits this year compared to declines in 2015 and 2016, and flattish conditions throughout most of 2017.

We continue to have a contrarian view on the offshore markets. We believe rig supply/demand dynamics are better than they appear, especially for floaters and harsh-environment capable assets. On the demand side, fundamentals appear to have deteriorated with the working floater count falling below 100 near the end of 2017; however, the low working rig count ignores ~30 idle units that will commence new contracts imminently - the highest level since March 2012

Roughly 30 projects were approved in 2017; this is more than double the number of projects approved in 2016, and we believe the industry is likely to see another sizeable increase in offshore FIDs in 2018. All of the offshore companies are reporting an increase in “tire kicking,” inquiries, and tendering. With the recent move in Brent to above $60/bbl and another landmark OPEC agreement to limit production through 2018, the animal spirits are returning to offshore operators which have been dormant for several years

Onshore Segment:

Considering the market for onshore drilling services in India, it has been highly skewed towards the customers such as ONGC, Oil India Limited and Indian Oil Corporation Ltd. In the regime of 12th five year plan, the government is expected to focus majorly on E&P activities, including intensive exploration of existing hydrocarbon reserves and geographical focus on the east coast for exploring oil fields. While ONGC and IOC, both upstream companies, are expected to spend Rs 1.75 trillion (US$ 32.9 billion) and Rs 190 billion (US$ 3.6 billion), respectively, primarily in exploration activities, it is essential to capitalise upon key opportunities that are put forth to maximise deployment of land rig assets on longer duration with these companies. Apart from these two, in the private sector, the E&P companies like Cairn Energy & other marginal field operator in India are expected to increase their spending on exploration of wells. This apart, development of the unconventional energy sources such as shale gas & CBM poses larger opportunites for the deployment of land rig business.

With continuing uncertainty in macro-economic conditions and a relatively high level of market volatility, extending drilling and oilfield services, to reach a larger customer base is becoming very imperative to even out business risk, which may be achieved through vertical integration for e.g providing Integrated Project Management services. Considering the existing assets of Oilfields services business and their employability in the current market conditions, maximizing the asset utilization and providing greater efficiencies in the service is very crucial in terms of steady revenue generations without any significant idling ofassets. Moreover, to remain competitive, we have the objective to become more nimble to enhance the performance with the ability to scale resources up and to realize cost savings.

SUBSIDIARIES

As on March 31, 2018, your Company has four direct subsidiaries and four indirect subsidiaries. Essar Oilfields Services Limited, Mauritius; Energy Transportation International Limited, Bermuda; Energy II Limited, Bermuda; and Essar Shipping DMCC are direct subsidiaries of the Company. Essar Oilfield Services India Limited, India, StarBit Oilfields Services India Limited, Essar Oilfield Middle East DMCC, Dubai UAE, and Cosmic Drilling Services Limited are step down 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 this report and hence not repeated here for the sake of brevity. The Policy for determining material subsidiaries as approved by the Board is available on Company''s website www.essar.com.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Companies Act, 2013 and Indian Accounting Standard (IND-AS) - 110 on Consolidated Financial Statements read with IND-AS - 28 on Accounting for Investments in Associates, the audited Consolidated Financial Statements are provided in the Annual Report. The audited Consolidated Financial Statements together with Auditors'' Report thereon form part of the Annual Report.

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.

The brief resume of the Director being re-appointed, the nature of his expertise in specific functional areas, names of companies in which he hold directorships, committee memberships/ chairmanships, their shareholding etc., are provided in the Notes to the Notice of the ensuing Annual General Meeting. Your Directors recommend his reappointment 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) and (7) of Section 149 of the Companies Act, 2013 and under Regulation 16 (b) (iv) of SEBI (LODR) Regulations, 2015.

Pursuant to Sections 134 and 178 of the Act and the Regulations 17 and 19 of the Listing Regulations, Nomination and Remuneration Committee (‘NRC'') has set the 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.

Based on the criteria set by NRC, the Board has carried out the annual evaluation of its own performance, its committees and individual Directors for FY 2017-18. The questionnaires on performance evaluation were prepared in line with the Guidance Note on Board Evaluation date January 5, 2017, issued by SEBI

The performance of the Board and Individual Directors were evaluated by the Board seeking inputs from all the Directors. The performance of the Committees was evaluated by the Board taking input from all the Committee Members. NRC reviewed the performance of individual Directors, separate meetings of the Independent Directors was also held to review the performance of Non-Independent Directors and performance of the Board as the whole. Thereafter, at the board meeting, performance of the Board, its committees and individual Directors was discussed and deliberated.

BOARD MEETINGS

During the year ended on March 31, 2018, Seven (7) meetings of the Board were held on May 26, 2017, July 31, 2017, September 15, 2017, November 14, 2017, January 19, 2018, February 14, 2018 and March 28, 2018.

DIRECTORS'' RESPONSIBILITY STATEMENT

Your Directors state that:

(a) in the preparation of the annual accounts for the year ended March 31, 2018, the applicable accounting standards had been followed and there are no material departures from the same;

(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 as at March 31, 2018 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. The auditors have expressed an emphasis of matter on Going Concern in their Consolidated Audit Report relating to a stepdown subsidiary.

(e) the Directors, had laid down internal financial controls followed by the Company and that such internal financial controls are adequate and were operating effectively as endorsed by Statutory Auditor in their separate report annexed to the Annual Report

(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.

As per LODR, Regulation 2015, Compliance related with Risk Management Committee is required to be done only by top 100 Companies as per list released by NSE, since our Company doesn''t fall in that category hence the Compliance of Risk Management was not needed but our Company do believe in mitigation/minimisation of risk therefore the management had put its best effort to minimise/ mitigate the risk.

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 detailed report is given in Corporate Governance Report. Based on the performance of the internal financial control, work performed by internal, statutory and external consultants and reviews of Management and the Audit Committee, the board is of the opinion that the company''s internal financial controls were effective and adequate during the FY 2017-18 for ensuring the orderly efficient conduct of its business including adherence to the company''s policies, safeguarding of its assets, the prevention and detection of fraud and errors, the accuracy and completeness of accounting records an timely preparations of reliable financial disclosures.

CORPORATE GOVERNANCE

The Company has complied with all mandatory provisions of SEBI (LODR) Regulations 2015, relating to Corporate Governance. A separate report on Corporate Governance as stipulated under the SEBI (LODR) Regulations, 2015 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 and Regulation 18 and 22 of the Listing Regulations 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; Mr. Ranjit Singh; and Ms. Neelam Kapoor.

Since the Company has incurred losses in proceeding three financial years hence it is not required to spend on CSR Activities.

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, 2018 are provided in the Annexure - B to this Report.

AUDITORS

Your Company''s Statutory Auditor, M/s. C N K & Associates LLP, (Registration No. 101961 W/W - 100036) was appointed at 5th AGM of the Company held on September 23, 2015 to hold the office up to the conclusion of 10th AGM of the Company to be held on year 2010. subject to the ratification by the Members at every AGM held thereafter.

Section 139 of the Act has been amended vide the Companies (Amendment) Act, 2017 by the Ministry of Corporate Affairs on May 7, 2018 and has done away with the requirement of seeking the ratification of Members for appointment of auditors at Every AGM.

The Board of Directors of the Company recommend M/s C N K & Associates LLP, Chartered Accountants, Mumbai, (Registration No. 101961 W/W - 100036) for ratification of appointment as Statutory Auditors of the Company by the Members at the ensuing Annual General Meeting for their remaining tenure. The Company has received letter from M/s C N K & 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/ continue to act as statutory auditors under the provisions of applicable laws.

AUDITORS'' REPORT:

Further with regard to the observations made in Annexure A to the Auditors'' Report, the management explanation is as under:

a) TDS & Service Tax dues:

The Company is making all efforts to clear outstanding statutory dues at earliest.

b) Regarding the dues to the Bank/FI/Debenture-holders

The Company is continuing its negotiation with lenders to restructure the loan to ensure that earnings from operations matches with debt service commitments.

c) The Company''s Current Liabilities exceed its Currents Assets by Rs. 1,506.51 crores as at 31st March 2018. The following steps are be taken to rectify this mismatch:

1) Loan from public financial institution along with interest accrued thereon amounting to Rs.1,087 crores is not payble within one year .

2) Advance from a subsidiary for purchase of vessel amounting to Rs.330 crores is not payable within one year.

3) Loan from Alternate Investment Fund along with interest accrued thereon amounting to Rs.196 crores is not payable within one year

4) Loan from NBFC along with interest accrued thereon amounting to Rs.43 crores will not be repaid out of Company''s Currents Assets.

5) Certain loans classified as current owing to covenant defaults are expected to be rescheduled such that they will not be repayable within one year.

SECRETARIAL AUDIT

The Board has appointed M/s. Martinho Ferrao & Associates, Practising Company Secretaries, to conduct Secretarial Audit for the financial year 2017-18. The Secretarial Audit Report for the financial year ended March 31, 2018 is annexed herewith marked as Annexure- C to this Report. The Secretarial Audit Report does not contain any qualification, reservation oradverse remark.

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 or more 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 28 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 I MO, 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 receipts, sale of ships, freight, charter hire earnings, interest income, etc.) : Rs.184.52 Crore

Foreign Exchanged Used (including cost of acquisition of ships, loan repayments, interest, Operating expenses, etc.) Rs. 482.40 Crore

PUBLIC 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, creditors, Banks and Financial Institutions for the valuable support, help and co-operation extended by them to the Company.

Your Directors also thank its 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

Ranjit Singh P.K. Srivastava

Executive Director & C.E.O Chairman

(DIN :07021621) (DIN:00843258)

Mumbai May 30, 2018


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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