ESSAR PORTS LIMITED

36th Annual Report 2011-12

Contents
Notice Directors Report Governance Corporate Governance Report Financial Statements Standalone Auditors Report Standalone Financial Statements Consolidated Auditors Report Consolidated Financial Statements

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CORPORATE INFORMATION
BOARD OF DIRECTORS Anshuman Ruia Director R. N. Bansal Independent Director SHAREHOLDERS GRIEVANCE COMMITTEE Dilip J. Thakkar Independent Director K. V. Krishnamurthy Independent Director Deepak Kumar Varma Independent Director T. S. Narayanasami Independent Director Jan Adam Director Rajiv Agarwal CEO & Managing Director K. K. Sinha Chief Executive Officer Shailesh Sawa Director Finance COMPENSATION COMMITTEE R. N. Bansal Dilip J. Thakkar Deepak Kumar Varma REGISTRARS & TRANSFER AGENTS Data Software Research Company Private Limited 19, Pycroft Garden Road, Off Haddows Road Nungambakkam, Chennai 600006 Tel: (044) 2821 3738, 2821 4487 Fax: 2821 4636 e-mail: essar.ports@dsrc-cid.in REGISTERED OFFICE COMPANY SECRETARY Manoj Contractor Administrative Building Essar Refinery Complex Okha Highway (SH-25) Taluka Khambhalia AUDITORS Deloitte Haskins & Sells District Jamnagar, Gujarat 361 305 CORPORATE OFFICE Essar House 11, Keshavrao Khadye Marg Mahalaxmi, Mumbai 400 034 R. N. Bansal Deepak Kumar Varma Rajiv Agarwal Shailesh Sawa SHARE TRANSFER COMMITTEE Rajiv Agarwal K. K. Sinha Shailesh Sawa AUDIT COMMITTEE Anshuman Ruia R. N. Bansal K. V. Krishnamurthy Deepak Kumar Varma

NOTICE
NOTICE TO MEMBERS Notice is hereby given that the Thirty-Sixth Annual General Meeting of Essar Ports Limited will be held at the Registered Office of the Company at Administrative Building, Essar Refinery Complex, Okha Highway (SH25), Taluka Khambhalia, District Jamnagar, Gujarat 361 305 at 2.30 p.m. on Thursday, September 27, 2012, to transact the following business:

ORDINARY BUSINESS 1. To receive, consider and adopt the Profit and Loss Account for the year ended March 31, 2012 and the Audited Balance Sheet as on that date and the Reports of the Board of Directors and Auditors thereon. 2. To declare a dividend on equity shares. 3. To appoint a Director in place of Mr. Deepak Kumar Varma, who retires by rotation and being eligible, offers himself for re-appointment. 4. To appoint a Director in place of Mr. K. V. Krishnamurthy, who retires by rotation and being eligible, offers himself for re-appointment. 5. To appoint a Director in place of Mr. Rajiv Agarwal, who retires by rotation and being eligible, offers himself for re-appointment. 6. To re-appoint Messrs. Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad having Registration No. 117365W as Statutory Auditors of the Company to hold office from the conclusion of this Annual General Meeting until the conclusion of the next Annual General Meeting and to fix their remuneration. SPECIAL BUSINESS 7. To consider and if thought fit, to pass with or without modification, the following resolution as an Ordinary Resolution: RESOLVED THAT Mr. Jan Adam, who was appointed as an Additional Director by the Board of Directors pursuant to Section 260 of the Companies Act, 1956 and who holds office upto the date of this Annual General Meeting and in respect of whom the Company has received a notice in writing under Section 257 of the Companies Act, 1956, proposing his candidature for the office of Director be and is hereby appointed as a Director of the Company liable to retire by rotation. RESOLVED FURTHER THAT the Board of Directors be and are hereby authorised to take all such steps as may be necessary, proper or expedient to give effect to this resolution.

8. To consider and if thought fit, to pass with or without modification, the following resolution as a Special Resolution: RESOLVED THAT pursuant to the provisions of Sections 81, 81(1A) and other applicable provisions, if any, of the Companies Act, 1956 (including any statutory
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Annual Report 2011-12

modifications or re-enactments thereof, for the time being in force), enabling provisions of the Memorandum and Articles of Association of the Company, the Listing Agreements entered into by the Company with the Stock Exchanges where the shares of the Company are listed and in accordance with the guidelines issued by the Government of India (GOI), the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI) and / or any other competent authorities and clarifications thereof, issued from time to time, the applicable provisions of Foreign Exchange Management Act, 1999 (FEMA), Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000, Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depository Receipt Mechanism) Scheme, 1993, Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and subject to such approvals, permissions, consents and sanctions, as may be necessary from the GOI, RBI, SEBI and / or other competent authorities and subject to such conditions and modifications as may be prescribed or imposed by any of them while granting such approvals, permissions, consents and sanctions, which may be agreed to by the Board of Directors of the Company (hereinafter referred to as the Board, which term shall include any committee constituted / to be constituted by the Board for exercising the powers conferred on the Board by this resolution), the consent of the Company be and is hereby accorded to the Board to create, offer, issue and allot (including with provisions for reservation on firm and / or competitive basis, for such part of issue and for such categories of persons including employees of the Company as may be permitted), in one or more tranches, Equity Shares and / or Equity Shares through Global Depository Shares (GDSs) / Receipts (GDRs) and / or American Depository Receipts (ADRs) and / or Optionally / Compulsorily Convertible / Foreign Currency Convertible Bonds (FCCBs) and / or Convertible Bonds, Convertible Debentures, fully or partly and / or any other instruments/ securities, convertible into or exchangeable with Equity Shares and / or securities convertible into Equity Shares at the option of the Company and / or the holder(s) of such securities and / or securities linked to Equity Shares and / or securities with or without detachable / non detachable warrants and / or warrants with a right exercisable by the warrant holders to subscribe to Equity Shares and / or any instruments (hereinafter referred to as Securities which terms shall inter alia include Equity Shares) or combination of Securities, with or without premium as the Board may, at

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

its sole discretion decide by way of one or more public and / or private offerings in domestic and / or one or more international market(s), with or without green shoe option, and / or private placement or issue through Prospectus, Institutional Placement Programme (IPP), Qualified Institutions Placement in accordance with the Guidelines for Qualified Institutions Placement prescribed under Chapter VIII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 or by any one or more or a combination of the above modes / methods or by any other permissible modes / methods and at such time or kinds, with or without an over allotment offer, and in one or more tranches, aggregating to an amount not exceeding US$ 500,000,000.00 (United States Dollar Five Hundred Million only) or in equivalent Indian Rupees or any other currency to Domestic / Foreign Investors / Qualified Institutional Buyers / Institutional Investors / Foreign Institutional Investors / Members / Employees / NonResident Indians / Companies / Bodies Corporate / Trusts / Mutual Funds / Banks / Financial Institutions / Insurance Companies / Pension Funds / Individuals or otherwise, whether shareholders of the Company or not and on such terms and conditions, as the Board may, at its sole discretion, at any time hereinafter decide. RESOLVED FURTHER THAT for the purpose of giving effect to the above, the Board, in consultation with Lead Managers, Underwriters, Advisors, Merchant Bankers and / or other persons as appointed by the Company be and is hereby authorised to finalise the timing of the issue(s) / offering(s), including the investors to whom the Securities are to be allotted and accept any modifications to the terms of the issue as may be required and any other matter in connection with or incidental to the issue. RESOLVED FURTHER THAT the Company and / or any entity, agency or body, authorised and / or appointed by the Company, may issue depository receipts representing the underlying Securities issued by the Company in negotiable, registered or bearer form with such features and attributes as are prevalent in international capital markets for instruments of this nature and to provide for the tradability and free transferability thereof as per international practices and regulations (including listing on one or more stock exchange(s) inside or outside India) and under the forms and practices prevalent in the international market. RESOLVED FURTHER THAT: i. The Equity Shares issued and allotted directly or upon conversion, exchange, redemption or cancellation of other Securities when fully paid up, shall rank pari-passu with the existing Equity Shares of the Company; ii. The Relevant Date for determining the pricing of the Securities (whether on Qualified Institutions Placement to QIBs as per provisions of Chapter VIII of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 or issue of Equity Shares underlying the GDSs / GDRs / ADRs or IPP

or Securities issued on conversion of FCCB(s) is the date of the meeting in which the Board decides to open the proposed issue or such date as may be notified by SEBI or RBI or any other authority from time to time; and iii. For the purpose of giving effect to this resolution the Board be and is hereby authorised to do all such acts, deeds, matters and things as the Board may in its absolute discretion consider necessary, proper, expedient, desirable or appropriate for making the said issue as aforesaid and to settle any question, query, doubt or difficulty that may arise in this regard including the power to allot under subscribed portion, if any, in such manner and to such person(s) as the Board, may deem fit and proper in its absolute discretion to be most beneficial to the Company. RESOLVED FURTHER THAT such of these Securities to be issued, which are not subscribed, may be disposed off by the Board in such manner and on such terms including offering / placing them with Banks / Financial Institutions / Mutual Funds or otherwise as the Board may deem fit and proper in its absolute discretion. RESOLVED FURTHER THAT the Board be and is hereby authorised to delegate all or any of the powers herein conferred by this resolution on it, to any Committee or Directors or any person or persons, as it may in its absolute discretion deem fit in order to give effect to this resolution.

9. To consider and if thought fit, to pass with or without modification, the following resolution as a Special Resolution: RESOLVED THAT in partial modification of the approval granted by the members of the Company at the 35th Annual General Meeting of the Company held on September 9, 2011 approving the Essar Ports Employees Stock Options Scheme 2011 (the Scheme), the members of the Company do hereby approve the increase in the maximum number of Options to be issued per employee under the Scheme to the maximum limit as may be permissible under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 with effect from the date of implementation of the Scheme. RESOLVED FURTHER THAT the Board be and is hereby authorised to do all such acts, deeds, matters and things as the Board (including any Committee thereof) may, in its absolute discretion, consider necessary, proper, expedient, desirable or appropriate.

10. To consider and if thought fit, to pass with or without modification, the following resolution as a Special Resolution: RESOLVED that pursuant to the provisions of Section 31 and all other applicable provisions, if any, of the

Companies Act, 1956 and Rules made thereunder and the provisions of other applicable statutes and subject to such approvals, consents, permissions and sanctions as may be necessary from appropriate authorities or bodies, the existing Articles of Association of the Company be amended as under: i) The following Article be inserted after existing Article 52 as Article 52A: Participation through Electronic Mode: 52A. Notwithstanding anything contrary contained in the Articles of Association, the Company may provide video conference facility and / or other permissible electronic or virtual facilities for communication to enable the shareholders of the Company to participate in General Meetings or other Meetings of the Company. Such participation by the shareholders at General Meetings or other Meetings of the Company through video conference facility and / or use of other permissible electronic or virtual facilities for communication shall be governed by such legal or regulatory provisions as applicable to the Company for the time being in force.

by any electronic mode of communication and in such manner as is / may be permitted by any law. Where a document is served by any such electronic mode, the service thereof shall be deemed to be effected in the manner as is / may be provided by any law. RESOLVED FURTHER THAT the Board be and is hereby authorised to do all such acts, deeds, matters and things as the Board (including any Committee thereof) may, in its absolute discretion, consider necessary, proper, expedient, desirable or appropriate.

By Order of the Board Manoj Contractor Company Secretary Mumbai May 30, 2012 Registered Office: Administrative Building Essar Refinery Complex Okha Highway (SH25) Taluka Khambhalia Distrist Jamnagar, Gujarat 361 305

ii) The following Article be inserted after existing Article 96 as Article 96A: Participation through Electronic Mode: 96A. Notwithstanding anything contrary contained in the Articles of Association, the Director(s) may participate in the Meetings of the Board and Committees thereof, through video conference facility and / or other permissible electronic or virtual facilities for communication. Such participation by the Director(s) at Meetings of the Board and Committees thereof, through video conference facility and / or use of other permissible electronic or virtual facilities for communication shall be governed by such legal or regulatory provisions as applicable to the Company for the time being in force.

NOTES: 1. A MEMBER ENTITLED TO ATTEND AND VOTE AT THE MEETING IS ENTITLED TO APPOINT ONE OR MORE PROXIES TO ATTEND AND VOTE INSTEAD OF HIMSELF ON A POLL ONLY. THE PROXY NEED NOT BE A MEMBER OF THE COMPANY. 2. Proxy forms in order to be effective should be deposited at the Registered Office of the Company not less than 48 hours before the time fixed for the meeting. 3. Members / Proxies should bring the attendance slip duly filled in for attending the meeting. 4. The Register of Members and Share Transfer Books of the Company shall remain closed from Saturday, September 22, 2012 to Thursday, September 27, 2012, both days inclusive. 5. The Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956 relating to the Special Business at Item Nos. 7 to 10 of the accompanying Notice is annexed. 6. Members desiring any information regarding the accounts are requested to write to the Company at Essar House, 11, Keshavrao Khadye Marg, Mahalaxmi, Mumbai 400 034 atleast 7 days before the date of the Meeting to enable the Company to keep the information ready.

iii) The following Article be inserted after existing Article 97 as Article 97A: Attendance through video conference to be counted for quorum: 97A. Provided further that Directors participating in a Meeting through use of video conference or any other permissible electronic mode of communication shall be counted for the purpose of quorum, notwithstanding anything contrary contained in the Articles of Association. iv) The following Article be inserted after existing Article 123(2) as Article 123(3): 123(3). Notwithstanding anything contrary contained in the Articles of Association, a document may be served by the Company on any Member
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Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ANNEXURE TO NOTICE
Explanatory Statement pursuant to Section 173(2) of the Companies Act, 1956
Item No. 7 Mr. Jan Adam was appointed as an Additional Director of the Company with effect from May 30, 2012. In terms of Section 260 of the Companies Act, 1956 and in accordance with Article 73 of the Articles of Association of the Company, Mr. Adam holds office upto the date of the ensuing Annual General Meeting. Mr. Adam has studied Economics at the University of Antwerp and has specialised in Accountancy from the University of Gent. Presently Mr. Adam is the Chief Financial Officer of Port of Antwerp International UK Limited. Mr. Adam joined the Antwerp Port Authority as Chief Financial Officer in 2001 with overall responsibility over the finance departments, IT, port dues, in house logistics and car fleet. He was also responsible for the department of concessions upto 2005. He also supervised the HR department for a year and a half. After a stint with the military services, Mr. Adam was associated with Coopers & Lybrand (now Price Waterhouse Coopers) from 1986 to 2001 as financial auditor. He obtained professional qualification as Statutory Auditor for the period 1991 2001. Mr. Adam is also a Director on the Board of Port of Antwerp International UK Limited, Port of Antwerp International NV, Amaris NPO, Deurganckdoksluis NV and GZA NPO. Mr. Adam is also the Chairman of the Audit Committee of GZA NPO. Mr. Adam does not hold any shares in the Company. The Company has received a notice from a member under Section 257 of the Companies Act, 1956, with requisite deposit proposing the name of Mr. Adam as a candidate for the office of Director of the Company. The Board is of the opinion that the appointment of Mr. Adam would be in the best interest of the Company. The Board recommends the ordinary resolution at Item No. 7 of the accompanying notice for your approval. None of the Directors other than Mr. Adam are in any way concerned or interested in the proposed resolution. Item No. 8 Your Company develops and operates ports and terminals and is one of the largest private sector port by capacity and throughput. Your Company provides these services through its subsidiaries which provide port and terminal services for liquid, dry bulk, break bulk, general cargo and small volumes of container cargo for specialised project equipment, with an existing aggregate capacity of 88 million metric tons per annum (MMTPA) across two facilities located at Vadinar and Hazira in the State of Gujarat. Your Company is in the process of increasing its aggregate ports capacity to 158 MMTPA by FY2014 with expansion projects in progress at Vadinar and Hazira, a new port facility under development at Salaya in Gujarat and two terminals under development at Paradip in the State of Odisha. Execution of the aforementioned projects require considerable amount of equity. Also the Department of Economic Affairs, Ministry of Finance vide notifications dated June 4, 2010 and August 9, 2010 have amended Rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957 (the Rules), which requires a company which has less then 25% public shareholding to raise its public shareholding to 25% by June 3, 2013 in a manner as may be specified by the Securities and Exchange Board of India (SEBI). The public shareholding in your Company as on March 31, 2012 is 16.29%. Your Company is therefore required to increase its public shareholding to 25% by June 3, 2013 or such other time as may be specified by SEBI from time to time. In order to meet the funding needs for the expansion plans mentioned above, including but not limited to meeting the equity needs of the Company for further organic and inorganic expansions, reducing the debt and to bring the public shareholding to 25%, the Company proposes to raise fresh capital by issuance of either Equity Shares and / or Global Depository Receipts (GDRs), Foreign Currency Convertible Bonds (FCCBs) or any other security (Securities) of the Company either by way of a public issue or a private placement (including a Qualified Institutions Placement in accordance with Chapter VIII of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, Institutional Placement Programme or such other mode / methods as may be permitted). The detailed terms and conditions for the issue / offering will be determined in consultation with the lead managers, consultants, advisors and / or such other intermediaries as may be appointed for the issue / offer. Wherever necessary and applicable, the pricing of the issue / offer will be finalised in accordance with applicable guidelines in force, of the Government of India, Securities and Exchange Board of India, Reserve Bank of India and other appropriate authorities. The size of any of the above issue / offering of Securities is proposed to be upto an aggregate amount not exceeding US$ 500,000,000.00 (United States Dollars Five Hundred Million) or equivalent amount in Indian or any other currency (inclusive of such premium as may be determined) to be issued in one or more tranches. The Securities issued pursuant to the issue / offering may be listed on the Indian stock exchange(s) and / or internationally recognised stock exchange(s).

Section 81 of the Companies Act, 1956 provides, inter alia, that whenever the Company proposes to increase its subscribed capital by further issue / offer and allotment of shares, such shares shall be offered to the existing members of the Company in the manner laid down in the said Section, unless the members decide otherwise by a special resolution. Accordingly, the consent of the members is being sought pursuant to the provisions of Section 81(1A) and all other applicable provisions of the Companies Act, 1956 and in terms of the provisions of the Listing Agreement(s) executed by the Company with the stock exchange(s), authorising the Board of Directors and / or a Committee thereof to issue the Securities, as stated in the resolution, which would result in issuance of shares of the Company to persons other than the existing members of the Company. The Board recommends the special resolution at Item No. 8 of the accompanying notice for your approval. None of the Directors of the Company are in any way concerned or interested in the proposed resolution. Item No. 9 With a view to encourage value creation and value sharing with the employees and also to recognise the performance and incentivising the employees of your Company from time to time, your Company had implemented the Essar Ports Employees Stock Options Scheme 2011 (Scheme). The members had at the 35th Annual General Meeting held on September 9, 2011 approved the Scheme. Subsequent to the same, the Eligible Employees as per the Scheme were granted Stock Options. The approval of the members specified the maximum number of Options that can be granted to an individual Eligible Employee as 2,00,000. It is now proposed that the maximum number of Options that can be granted shall be as per the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 as amended from time to time. The Board recommends the special resolution at Item No. 9 of the accompanying notice for your approval. Mr. Rajiv Agarwal and Mr. Shailesh Sawa may be deemed to be concerned or interested in the resolution to the extent of Options that may be granted to them under the Scheme.

None of the other Directors are in any way concerned or interested in the proposed resolution. Item No. 10 The Ministry of Corporate Affairs (MCA), Government of India, New Delhi vide General Circulars No. 27/2011 and 28/2011 dated May 20, 2011 and Circular No. 35/2011 dated June 6, 2011 has permitted companies to hold Board Meetings and Shareholders Meetings through video conference facility, as part of the Green Initiatives under Corporate Governance. Further, MCA vide Circular No. 72/2011 dated December 27, 2011 has made the video conference facility at the Shareholders Meetings optional for listed companies. Section 53 of the Companies Act, 1956 and Articles 123 (1) and (2) provide for modes of service of documents on a Member of the Company. The MCA has vide Circular No. 17/2011 dated April 21, 2011 stated that a company would have complied with Section 53 if the service of a document has been made through electronic mode, provided the company has obtained e-mail addresses of its Members for sending Notices / Documents through e-mail by giving an advance opportunity to every Shareholder to register their e-mail addresses with the company. It is proposed to carry out necessary amendments in the existing Articles of Association of the Company by inserting appropriate enabling provisions as set out in the Special Resolution under Item No.10 to give effect to the above MCA circulars. In terms of Section 31 of the Companies Act, 1956, approval of the Members by way of a Special Resolution is required to amend the Articles of Association of the Company. A copy of the existing Memorandum and Articles of Association of the Company alongwith the proposed draft amendments to the Articles of Association will be available for inspection by the Members at the Registered Office of the Company between 10:00 a.m. to 12:00 noon on all working days (except Saturdays, Sundays and Public Holidays) upto the date of the ensuing Annual General Meeting. The Board recommends the special resolution at Item No. 10 of the accompanying notice for your approval. None of the Directors of the Company are in any way concerned or interested in the proposed resolution.
By Order of the Board Manoj Contractor Company Secretary

Mumbai May 30, 2012 Registered Office: Administrative Building Essar Refinery Complex Okha Highway (SH25) Taluka Khambhalia Distrist Jamnagar, Gujarat 361 305

Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

ANNEXURE TO NOTICE
Details of Directors seeking appointment / re-appointment at the Thirty-Sixth Annual General Meeting in pursuance of Clause 49 of the Listing Agreement
Mr. Jan Adam Mr. Jan Adam has studied Economics at the University of Antwerp and has specialised in Accountancy from the University of Gent. Presently Mr. Adam is the Chief Financial Officer of Port of Antwerp International UK Limited. Mr. Adam joined the Antwerp Port Authority as Chief Financial Officer in 2001 with overall responsibility over the finance departments, IT, port dues, in house logistics and car fleet. He was also responsible for the department of concessions upto 2005. He also supervised the HR department for a year and a half. After a stint with the military services, Mr. Adam was associated with Coopers & Lybrand (now Price Waterhouse Coopers) from 1986 to 2001 as financial auditor. He obtained professional qualification as Statutory Auditor for the period 1991 2001. Mr. Adam is also a Director on the Board of Port of Antwerp International UK Limited, Port of Antwerp International NV, Amaris NPO, Deurganckdoksluis NV and GZA NPO. Mr. Adam is also the Chairman of the Audit Committee of GZA NPO. Mr. Adam does not hold any shares in the Company. Mr. Deepak Kumar Varma Mr. Deepak Kumar Varma is B.E. (Mechanical) and MBA by qualification and is a Management Consultant and Arbitrator by profession and is a member of the Indian Council of Arbitrators. During his career Mr. Varma has held various senior management positions in Steel Authority of India Limited, Chairman and Managing Director of Hindustan Shipyard Limited, Chairman and Managing Director of Cochin Shipyard Limited, Managing Director of National Ship Design & Research Centre (NSDRC), Chairman and Managing Director of Rashtriya Chemical & Fertilizers Limited, Chairman and Managing Director of Fertilizers & Chemicals (Cochin), Director & Group Leader of Oman India Fertilizers (OMIFCO), Chairman of the Standing Conference of Public Enterprises, the Apex Body of all Central PSUs. Mr. Varma has rich experience in the fields of Construction, Project Implementation (Marine, Shipping, Shipbuilding & Offshore Construction), Oilfield Equipments Manufacturing (Steel, Chemical and Fertiliser / Petrochemical), Communication and Corporate Governance. Mr. Varma is also a Director on the Board of various other Indian public limited companies such as Essar Shipping Limited, Matix Fertilizers and Chemicals Limited and Essar Bulk Terminal Limited. Mr. Varma is also member of the Audit Committee of Matix Fertilizers and Chemicals Limited and member of Shareholders Grievance Committee of Essar Shipping Limited. Mr. Varma does not hold any shares in the Company. Mr. K. V. Krishnamurthy Mr. K. V. Krishnamurthy, a Chartered Accountant by profession is a fellow member of the Indian Institute of Bankers and was a member of its Governing Board. He has over 33 years of experience in Public Sector Banking. His areas of specialisation includes both domestic and international banking, treasury management, risk management, foreign exchange management and human resource management. He is credited with the remarkable turnaround of both Bank of India and Syndicate Bank, leading nationalised banks. He has been the Chairman / Director of nationalised banks like Bank of India, Bank of Baroda, Syndicate Bank and other financial institutions like Indo Hong Kong International Finance Company Limited, Export Credit Guarantee Corporation of India and Agricultural Finance Corporation of India Limited. Mr. Krishnamurthy is also on the Board of various public limited companies such as Centrum Direct Limited, Essel Propack Limited, Borosil Glass Works Limited, Essar Steel India Limited, Thirumalai Chemicals Limited, Centrum Capital Limited, Essar Oil Limited and Essar Shipping Limited. Mr. Krishnamurthy is also the Chairman of the Audit Committee of Borosil Glass Works Limited, Centrum Capital Limited, Centrum Direct Limited and Essar Shipping Limited and member of the Audit Committee of Essel Propack Limited, Essar Steel India Limited, Thirumalai Chemicals Limited and Essar Oil Limited. Mr. Krishnamurthy does not hold any shares in the Company. Mr. Rajiv Agarwal Mr. Rajiv Agarwal is a Chartered Accountant, Cost and Works Accountant and Company Secretary by qualification with over 25 years of rich and varied experience in industries like Retail, BPO, Telecom, Manmade fibres, Shipping and Logistics etc., and has successfully led businesses as CEO since 1992, mainly in telecom services and shipping, logistics and ports sectors. Mr. Agarwal has been associated with the Essar Group since 1997. In his previous assignments with the group, Mr. Agarwal has held various senior management positions as the CEO and Director of The Mobile Store Limited and is credited with creating a well recognised and strong Indian Telecom Brand in just two years. Prior to this Mr. Agarwal was associated with Telecom Towers and Infrastructure Limited as Director and established the business model for the industry, which today is valued at about USD 500 million. He has also served as Director of Aegis Communications, a startup venture in BPO, which has scaled up to be the 5th largest BPO in the country. He was also the Executive Director of Essar Shipping Limited from 1998-2002. Prior to joining the Essar Group Mr. Agarwal was the CEO and Director of Indo Rama Textiles Limited, Joint Managing Director of Modi Korea Telecom during 1994-97 and Chief Executive Officer of Modi Champion during 1992-94. Mr. Agarwal has won a series of accolades and awards including CEO of the Year Award 2009 Asia Retail Congress, Retail Professional of the Year:2008 at Franchise India and Best Retailer in Telecom Segment over two years in India Retail Forum. Mr. Agarwal is also a Director on the Board of various other Indian companies viz. Essar Bulk Terminal Limited, Vadinar Oil Terminal Limited, Vadinar Ports & Terminals Limited, Essar Bulk Terminal (Salaya) Limited, Essar Bulk Terminal Paradip Limited, Essar Paradip Terminals Limited, Essar Retail Holdings Limited and Essar Dredging Limited. Mr. Agarwal is also a member of the Audit Committee of Essar Bulk Terminal Limited and Vadinar Oil Terminal Limited, Vadinar Ports & Terminals Limited, Essar Bulk Terminal (Salaya) Limited and Essar Bulk Terminal Paradip Limited. Mr. Agarwal does not hold any shares in the Company.

DIRECTORS REPORT
To the Members of Essar Ports Limited
Your Directors take pleasure in presenting the Thirty-Sixth Annual Report of your Company together with Audited Accounts for the year ended March 31, 2012. 1. FINANCIAL RESULTS The summary of consolidated and standalone financial results of your Company for the year ended March 31, 2012 are furnished below: (Rs. in crore) Particulars Consolidated For the year ended March 31, 2012 Total Income Total Expenditure EBITDA Less: Interest & Finance charges Less: Provision for Depreciation Profit before exceptional item Less: Exceptional item Profit after exceptional item and before Tax Less: Provision for Tax Profit before Share of Minority Interest Less: Share of Minority Interest Profit after Tax 1,131.06 217.85 913.21 420.81 220.24 272.16 235.51 36.65 (62.19) 98.84 34.89 63.95 For the year ended March 31, 2011 2,086.12 1,174.10 912.02 473.75 320.83 117.44 117.44 34.60 82.84 12.69 70.15 Standalone For the year ended March 31, 2012 52.56 23.52 29.04 92.40 7.40 (70.76) (70.76) (0.23) (70.99) (70.99) For the year ended March 31, 2011 659.36 378.55 280.81 184.07 59.87 36.87 36.87 16.00 20.87 20.87

Note: The consolidated and standalone financial figures for the year ended March 31, 2011 include the figures attributable to the demerged shipping & logistics and oilfields services businesses upto September 30, 2010 and hence are not comparable with the figures for the year ended March 31, 2012.

Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

2. DIVIDEND Your Company proposes a dividend of 5% on the equity shares of the Company. 3. MANAGEMENT DISCUSSION & ANALYSIS Indian Economy and Infrastructure Sector The Indian Economy grew by a moderate 6.5% in FY12 compared to 8.4% in the last two years. In spite of this slowdown, India remains one of the fastest growing economies in the world. Manufacturing has showed signs of deceleration in FY12, with growth of Index of Industrial Production (IIP) slowing to 2.8% in FY12, as against a high of 8.2% in the previous year. On the other hand, fundamentals of the economy remain strong, backed by promising growth in external trade. Exports registered a growth of 21% in FY12 to USD 303.7 billion while imports registered a growth of 32.2% to USD 488.6 billion. India had the fastest growth in exports among major economies in 2011, with shipments rising 16.1% compared to global average growth of 5% and a 9.3% growth in China.

Indian Economy witnessed high inflation during the year and to control that Reserve Bank of India (RBI) introduced monetary controls. Recently, RBI relaxed its monetary control as is evident from the 50 basis point reduction in Repo rate in April 2012. Several banks have reduced their lending and deposit rates following the monetary policy announcement, this will fuel the investment in and growth of the economy. The focus of the Government is on growth of the infrastructure sector to ensure that earlier growth targets set in the ports, roads, steel and power sectors are achieved and the economy gets back to 8% plus growth rate trajectory. Ports Sector Indian ports have handled a total of 929 million metric tonnes (MMT) of cargo during FY12 registering a moderate growth of 5% compared to 884 MMT of cargo handled during FY11. The ports sector in India has grown at a CAGR of 10% in the last 10 years.

2500 2591

MMTPA

2000 1500 1000 500 570 660 0 884 1088 2019

2495

3126

3000

Traffic 2010-11 2016-17 2019-20

Capacity

2005-06

Source: Maritime Agenda 2010-2020, Ministry of Shipping

However, in the last 2 years, growth in the ports sector has been below its potential due to imposition of higher export duty on iron ore and higher railway charges for transportation of iron ore. Growth of the port sector has also been affected by rise in prices of imported coal. However, these issues are expected to be temporary in nature and the port sector growth story is expected to remain intact in the long run. Growth of the port sector is linked to the growth of Indian economy and external trade. The Indian economy is expected to achieve growth rates of 8-9% in the next few years. Similarly, the growth in trade is expected to be robust resulting in growth of traffic. As per Maritime Agenda 2010-20 published by the Ministry of Shipping, port traffic is expected to reach to 2,495 MMT by 2020 from 850 MMT in 2010. As the economy grows, port traffic will increase and more investment opportunities will be created in this sector. Considering high capacity utilisation of existing port assets and expected higher traffic growth in future, new capacity addition in ports will have good utilisation and the port sector will remain an attractive investment destination. Challenges faced by the port sector Several port projects have been affected due to procedural delays linked to approvals and clearances required for the

projects. Connectivity of ports is another major challenge as it is critical for the ports to operate at their optimum capacity. Government initiatives for development of port connectivity as linkages to the hinterland would provide necessary boost to the sector. Essar Ports performance Your Company is one of the largest private sector port and terminal companies in India and the year under review has been a good year for the Company. Strategic partnership with Port of Antwerp Your Company has entered into a Strategic partnership with the Port of Antwerp International which is an investment arm of the Port of Antwerp (POA). POA is the second largest port in Europe. The partnership envisages collaboration in the areas of training and consultancy services, port planning, traffic flow, quality and productivity improvement and will further build a mutually beneficial commercial relationship based on mutual business and investment preferences. Port of Antwerp International UK Limited has also invested approximately Rs. 175 crore in the Global Depository Securities of your Company.
9

Your Company has issued 52,666 Global Depository Securities representing 1,74,32,446 underlying equity shares of Rs. 10/- each at a premium of Rs. 90/- per share. Highlights: A 12 million metric tonnes per annum (MMTPA) handling capacity terminal has been commissioned on April 1, 2011 by Vadinar Ports & Terminals Limited. Cargo handled by your Company has increased by 9% from 39.55 MMT in FY11 to 43.23 MMT in FY12. Revenue increased by 51% from Rs. 746 crore in FY11 (for the port segment prior to demerger) to Rs. 1,131 crore in FY12. EBITDA increased by 65% from Rs. 550 crore in FY11 (for the port segment prior to demerger) to Rs. 913 crore in FY12. Net profit doubled from Rs. 28.5 crore in FY11 (for the port segment prior to demerger) to Rs. 63.9 crore in FY12. 3rd party cargo contributed about 4% of total revenue of Essar Bulk Terminal Limited. Continued focus on Quality, Health, Safety and Environment resulted in ISO 9001 certification for quality; ISO 14001certification for Environment and OHSAS 18001 certificates for occupational health and safety for the Companys Vadinar and Hazira facilities. Performance Update This was the first full year of operations for your Company post the demerger of shipping & logistics and oilfields services businesses. Despite global slowdown and several other challenges being faced by the Indian economy, your Company has performed exceptionally well in all areas of operations inter alia: 9% increase in cargo is due to higher capacity utilisation at Hazira and expansion of the port facilities at Vadinar for handling increased cargo. Your Company registered not only substantial increase in billed volume but also substantial increase in realisation per tonne. The realisation on billed volume increased by 26% during the year from Rs. 185/MMT in FY11 to Rs. 233/MMT in FY12. The increase in billed volume and realisation has led to 51% growth in revenue from Rs. 746 crore in FY11 (for the port segment prior to demerger) to Rs. 1,131 crore in FY12. Vadinar Ports & Terminals Limited commissioned its facilities on April 1, 2011, which has increased revenues substantially due to higher facility usage charges and higher throughput. At Hazira, billed volume increased substantially as per the cargo handling contract with customers. 3rd party cargo handling at Hazira contributed 4% to the total revenue at Hazira. Your Company has recorded EBITDA margin of 80%, one of the highest in the industry, an increase from 73% in FY11. The EBITDA of your Company increased by 65% from Rs. 550 crore in FY11 (for the port segment prior to demerger) to Rs. 913 crore in FY12. Your Company recognised a one time contingent liability of Rs. 235.5 crore as long term debt as per the agreement with the lenders of Vadinar Oil Terminal Limited, which will be paid between 2019 and 2023 and carries an interest of 5% p.a.

Progress of the project under implementation A 16 MMTPA capacity berth at Paradip for handling iron ore is close to commissioning and is expected to be completed during second quarter of FY13. Progress of the construction of a 20 MMTPA coal berth at Salaya is as per plan. All important equipment like ship unloader, ship loader and stacker cum reclaimer have been delivered at the site. Construction of a 14 MMTPA coal terminal at Paradip is expected to commence during second half of FY13. Environment clearance and stage I forest clearance have been received and final forest clearance is expected shortly. Revenue (Rs. Crore)
1131.0 432.9 FY12

1200.0 1000.0 800.0 600.0 400.0 200.0 0.0

R AG

63

746.5 244.9 698.9

427.4 427.4 502.9 FY11

FY10

Vadinar EBITDA (Rs. Crore)

900.0 800.0 700.0 600.0 500.0 400.0 300.0 200.0 100.0 0.0 326.5 427.4

Hazira
913.2 300.5 FY12

R AG

67

%
550.9 147.1

FY10

FY11 FY11 EBITDA Margin 74%

FY12 EBITDA Margin 81%

368.3

Vadinar

Risk and Concerns Implementation and operation of port and terminal facilities are dependent on various regulatory approvals and government policies. Changes in macro economic factors like inflation, interest rate, world trade and natural catastrophes also play an important role in the trade of goods and cargo. Any adverse change in the above may affect the performance of your Company. Your Company

10 Annual Report 2011-12

596.2

Hazira

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

periodically reviews the risks associated with the business and takes steps to mitigate and minimise the impact of risks. 4. QUALITY, SAFETY AND ENVIRONMENT 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 key recognitions are as follows: Vadinar Oil Terminal Limited (VOTL) has been certified by British Standard for Occupational Health & Safety Advisory Services (OHSAS) for, Zero Gas Release, Zero Fire Incident and Zero Loss Time Accident or No Loss Time Accident. VOTL completed 2,000 Lost Time Injury Free days during the year under review. In line with Environment Management initiatives, VOTL successfully achieved the Zero Spill / No Spill, target and Reduction of Emission. An Annual Audit was also successfully carried out for the following ISO certifications: - ISO 9001:2008 Quality Management System by ABS - ISO 14001:2004 Environment Management System by Det Norske Veritas (DNV) - ISO 18001:2007 OHSAS by DNV - ISO 28000:2007 Security Management System by ABS - OCIMF Terminal Baseline Criteria Certification by ABS Essar Bulk Terminal Limited (EBTL) also achieved Zero Loss Time Injury during the year. EBTL has been certified for the following: - ISO 18001:2007 OHSAS by IRQS for Health & Safety - ISO 14001:2004 Environment Management System by IRQS - ISO 9001:2008 Quality Management System by IRQS

6. HUMAN RESOURCE Human resources have always been the key to success of your Companys business. New teams were constituted to steer projects at Salaya Port near Jamnagar and Paradip Port in Odisha. A balance of internal and external talent was maintained to ensure right skills are available to initiate project activities. A large number of fresh talent comprising engineers and management graduates were deployed to nurture future Essar Ports facilities. At the existing ports of Hazira and Vadinar, special emphasis was laid on the training of employees with a combination of On the job and Off the job training. Your Company has introduced technology-enabled HR practices in Performance Management and Training to streamline and strengthen these practices.

7. INFORMATION TECHNOLOGY Your Company successfully implemented SAP in its financial and related systems. For dry bulk as well as oil terminals, systems have been implemented to capture end-to-end workflow covering all activities from pre-arrival intimations to actual departure of vessels. Expected berth occupancy is being plotted thereby optimising the berth utilisation and increasing berth efficiency. Various dashboard reports have been implemented in the system for berth performance and resource monitoring. 8. SUBSIDIARIES As on March 31, 2012, the following were the subsidiaries of your Company: 1. Vadinar Oil Terminal Limited (VOTL) 2. Vadinar Ports & Terminals Limited (a subsidiary of VOTL) 3. Essar Bulk Terminal Limited 4. Essar Bulk Terminal (Salaya) Limited 5. Essar Paradip Terminals Limited 6. Essar Bulk Terminal Paradip 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. 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.

The terminal of EBTL also has the Navigation Safety at Ports Committee (NSPC) approval from the Director General of Shipping, Mumbai.

5. INTERNAL CONTROL FRAMEWORK Your Company conducts its business with integrity and high standards of ethical behaviour and in compliance with the laws and regulations that govern its business. Your Company has a well-established framework of internal controls in its operations, including suitable monitoring procedures. In addition to an 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.

9. DIRECTORS In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company, Mr. Deepak Kumar Varma, Mr. K. V. Krishnamurthy and Mr. Rajiv Agarwal retire at the ensuing Annual General Meeting of the Company and being eligible, offer themselves for re-appointment.
11

Mr. Shashi Ruia resigned from the directorship of your Company on May 25, 2012. Your Board places on record their appreciation for the invaluable contribution made by Mr. Ruia in the growth and progress of the Company during his tenure as Director. Mr. Jan Adam has been appointed as an Additional Director on May 30, 2012. The Company has received a notice from a member proposing the appointment of Mr. Adam as a Director of your Company.

10. AUDITORS Your Companys Auditors, Messrs. Deloitte Haskins & Sells, Chartered Accountants, Ahmedabad, the Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a letter from them to the effect that their appointment, if made, would be within the prescribed limits under Section 224(1B) of the Companies Act, 1956 (the Act) and that they are not disqualified for re-appointment within the meaning of Section 226 of the said Act.

13. 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 under 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. 14. 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; and d) the Directors have prepared the annual accounts on a going concern basis. 15. APPRECIATION AND ACKNOWLEDGEMENTS Your Directors express their sincere thanks and appreciation to all the employees for their commendable teamwork and contribution to the growth of the Company. Your Directors also thank its bankers and other business associates for their continued support and co-operation during the year.

11. CORPORATE GOVERNANCE The Company has complied with the requirements under the Corporate Governance reporting system. The disclosures as required therein have been furnished in the Annexure to the Directors Report under the head Corporate Governance. 12. PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988 This does not apply to your Company as the Ports & Terminals industry is not included in the Schedule to the relevant rules. Foreign exchange earnings and outgo are summarised below: Total Foreign Exchange: (1) Earned (including freight, charter, : Rs. 7.98 crore hire earnings, interest income, etc.) (2) Used (including loan repayments, : Rs. 11.67 crore interest,operating expenses, etc.)

For and on behalf of the Board

Rajiv Agarwal Managing Director Mumbai May 30, 2012

Shailesh Sawa Director Finance

12 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Annexure to the Directors Report

Information required to be disclosed as per Securities and Exchange Board of India (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999

Sr. No. (a) (b)

Particulars Options granted The pricing formula

Details 7,40,334 The Options have been granted at a price which is equal to the closing price of the equity shares on the stock exchange having the highest trading volume a day prior to the meeting of the Compensation Committee. Nil Nil Not Applicable Nil None Nil 7,40,334 Mr. Rajiv Agarwal - 2,31,954 Mr. Shailesh Sawa - 1,23,285 Mr. Tej Nargundkar - 1,47,595 Capt. Rajen Sachar - 43,408 Capt. Rajesh Beri - 67,797 Mr. P. K. Srivastava - 49,568 Mr. S. Shanmugam - 45,952 Nil

(c) (d) (e) (f) (g) (h) (i) (j)

Options Vested Options Exercised Total number of shares arising as a result of exercise of Options (Equity shares of Rs. 10/- each) Options lapsed Variation of terms of Options Money realised by exercise of Options Total Number of Options in force Employee-wise details of options granted to i) Senior Managerial Personnel: ii) Any other employee who receives a grant, in any one year, of Options amounting to 5% or more of Options granted during that year

iii)

(k)

(l)

(m)

Identified employees who were granted Options, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the Company at the time of grant Diluted Earnings Per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with [Accounting Standard (AS) 20 Earnings per Share]. Where the Company has calculated the employee compensation cost using the intrinsic value of the stock Options, the difference between the employee compensation cost so computed and the employee conpensation cost that shall have been recognised if it had used the fair value of the difference on profits and on EPS of the Company shall also be disclosed Weighted-average exercise prices and weightedaverage fair values of Options shall be disclosed separately for Options whose exercise price either equals or exceeds or is less than the market price of the stock.

Not applicable as the Options are anti-dilutive.

If the compensation cost on account of stock Options was computed using the fair value method, the compensation cost and loss for the year would have been higher by Rs. 26.78 lakhs. The impact on EPS for the year would be Rs. 0.01.

Rs. 71.10 per Option

(n)

A description of the method and significant assumptions used during the year to estimate the fair values of Options, including the following weightedaverage information: (i) Risk-free interest rate (ii) expected life (iii) expected volatility (iv) expected dividends (v) the price of the underlying share in market at the time of Option grant

8.36% 5 - 7 years 64.81% Nil Rs. 71.10

13

CORPORATE GOVERNANCE REPORT

1. STATEMENT ON COMPANYS PHILOSOPHY ON CODE OF CORPORATE GOVERNANCE: Your Company believes that adhering to global standards of Corporate Governance is essential to enhance shareholder value and achieve long term corporate goals. The Companys philosophy on Corporate Governance stresses the importance of transparency, accountability and protection of shareholder interests. The Board oversees periodic review of business plans, monitors performance and ensures compliance of regulatory requirements including SEBI Regulations and Listing requirements. BOARD OF DIRECTORS: The Independent Directors constitute half the total number of Directors. A. Composition, Category, Attendance and Number of other Directorships of the Directors are furnished below: As at March 31, 2012, the Board consisted of ten members. The composition, category of directors and directorships held in other companies was as under: Name of Director Category of Director * No. of outside Directorships in other Indian public companies
2 2 8 8 13 3 8 8 8 7

2.

**No. of Committee positions held in other public companies Chairman Member

4 4 5 1 3 4 4 2 4 5 6 5

Mr. Shashi Ruia (Chairman) Mr. Anshuman Ruia Mr. R. N. Bansal Mr. K. V. Krishnamurthy Mr. Dilip J. Thakkar Mr. Deepak Kumar Varma @ Mr. T. S. Narayanasami Mr. Rajiv Agarwal (CEO & Managing Director) @ Mr. K. K. Sinha (Chief Executive Officer) Mr. Shailesh Sawa (Director Finance)

Promoter Non-Executive Promoter Non-Executive Independent Non-Executive Independent Non-Executive Independent Non-Executive Independent Non-Executive Independent Non-Executive Non-Promoter Executive Non-Promoter Executive Non-Promoter Executive

* excludes foreign companies, private limited companies, Section 25 companies and Alternate Directorships. ** includes
membership of Audit and Shareholders Grievance Committee only. @ Mr. T. S. Narayanasami has been appointed as an Independent Director and Mr. K. K. Sinha has been appointed as a Director in wholetime employment w.e.f. July 4, 2011.

Mr. N. Srinivasan, Independent Director and Mr. A. R. Ramakrishnan, Wholetime Director resigned from the Board of the Company w.e.f. May 22, 2011, Mr. V. Ashok, Director resigned from the Board of the Company w.e.f. June 14, 2011 and Mr. S. V. Venkatesan, Independent Director resigned from the Board of the Company w.e.f. July 5, 2011.

14 Annual Report 2011-12

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DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

B. Details of Board Meetings held during the year: Sr. No. 1 2 3 4 5 May 3, 2011 July 4, 2011 August 9, 2011 October 19, 2011 February 2, 2012 12 9 10 10 10 11 8 8 8 7 Date Board Strength No. of Directors present

C. Attendance of Directors at Board Meetings and at the last Annual General Meeting: Director Mr. Shashi Ruia Mr. Anshuman Ruia Mr. R. N. Bansal Mr. K. V. Krishnamurthy Mr. Dilip J. Thakkar Mr. Deepak Kumar Varma Mr. T. S. Narayanasami* Mr. Rajiv Agarwal Mr. K. K. Sinha* Mr. Shailesh Sawa Mr. N. Srinivasan** Mr. S. V. Venkatesan# Mr. A. R. Ramakrishnan** Mr. V. Ashok+ * were appointed as a Directors on July 4, 2011 **ceased to be Directors on May 22, 2011 #ceased to be Director on July 5, 2011 +ceased to be Director on June 14, 2011 The Chairman of the Audit Committee is an Independent Director. All the members of the Committee are financially literate and have relevant financial management and / or audit exposure. The Managing Director, Chief Executive Officer, Director Finance, Head - Accounts, Statutory Auditors and Internal Auditors attend the meetings. The Company Secretary is the Secretary to the Committee. No. of Board Meetings attended 3 4 4 5 2 5 2 5 3 5 1 2 1 Nil Attendance at last AGM N N Y N N N N Y Y Y NA NA NA NA

3.

AUDIT COMMITTEE: The Audit Committee inter alia performs all the functions specified under the Companies Act, 1956 and Clause 49 of the Listing Agreement.

Composition: As on March 31, 2012, the Committee comprised of four Directors of which three were Independent Directors. Details of Audit Committee Meetings held during the year: Sr. No. 1 2 3 4 5 Date May 3, 2011 July 4, 2011 August 9, 2011 October 19, 2011 February 2, 2012

Committee Strength 4 4 4 4 4

No. of Members present 4 4 3 3 3

15

Attendance at Audit Committee Meetings: Director Mr. R. N. Bansal, Chairman Mr. N. Srinivasan* Mr. S. V. Venkatesan** Mr. Anshuman Ruia Mr. Deepak Kumar Varma# Mr. K. V. Krishnamurthy+ 4. * resigned from the Audit Committee w.e.f. May 22, 2011 **resigned from the Audit Committee w.e.f. July 5, 2011 #appointed on the Audit Committee on May 3, 2011 +appointed on the Audit Committee on July 4, 2011 REMUNERATION TO DIRECTORS: Details of Remuneration paid to the Managing Director and Wholetime Directors during the year ended March 31, 2012 is as under: (Rs.) Name of Director Basic Salary Allowances, Perquisites and other benefits Mr. Rajiv Agarwal, CEO & Managing Director Mr. A. R. Ramakrishnan* Wholetime Director Mr. K. K. Sinha* Chief Executive Officer Mr. Shailesh Sawa Director Finance * was in the employment of the Company for part of the year. The services of the aforesaid Executive Directors can be mutually terminated by giving three months notice or three months salary in lieu thereof. Stock Options The following Stock Options have been granted to the Executive Directors: Name of Director Mr. Rajiv Agarwal Mr. Shailesh Sawa No. of Stock Options Granted 2,31,954 1,23,285 46,64,043 61,37,336 5,59,680 1,13,61,059 39,35,011 28,17,133 4,72,201 72,24,345 6,83,871 8,19,763 82,065 15,85,699 44,37,228 1,66,17,770 Contribution to Provident & Superannuation Fund 5,32,464 2,15,87,462 Total No. of meetings held 5 5 5 5 5 5 No. of meetings attended 4 1 2 3 4 3

These Stock Options have been granted on November 28, 2011. One third of the Options granted shall be vested at the end of the third, fourth and fifth years respectively from the date of grant. The vested Options can be exercised over a period of seven years from the date of vesting of the Options. One Option is equal to one Equity Share of Rs. 10/- each of the Company. The Options have been granted at a price of Rs. 70.10 per Option.

16 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Details of sitting fees paid to Non-Executive Directors for the meetings held during the year ended March 31, 2012: Non-Executive Directors Mr. Shashi Ruia Mr. Anshuman Ruia Mr. R. N. Bansal Mr. K. V. Krishnamurthy Mr. Dilip J. Thakkar Mr. Deepak Kumar Varma Mr. S. V. Venkatesan* Mr. T. S. Narayanasami* Sitting Fees paid for Board / Committee meetings (Rs.) 40,000.00 90,000.00 120,000.00 110,000.00 30,000.00 140,000.00 30,000.00 40,000.00

* were directors for part of the year Except for the Stock Options mentioned above, no shares or convertible instruments are held by any members of the Board. A. Shareholders Grievance Committee: Terms of Reference: To redress grievances and complaints of members on all matters pertaining to their shareholding in the Company. Composition: The Committee comprised of Mr. R. N. Bansal, Mr. Deepak Kumar Varma, Mr. Rajiv Agarwal and Mr. Shailesh Sawa. The committee met 2 times during the year ended March 31, 2012. Share Transfers and other related transactions on a regular basis under the supervision of the Committee. The committee met 4 times during the year ended March 31, 2012. Details of shareholders complaints received, solved and pending share transfers: There were no complaints pending at the beginning of the year. A total of 141 complaints were received during the year ended March 31, 2012, most of which being non-receipt of dividend and non-receipt of share certificates. All the complaints were redressed under the supervision of the Committee and no complaints were outstanding as on March 31, 2012. All the valid share transfer requests received during the year were duly attended to and processed in time. There were no valid requests pending for share transfers as on March 31, 2012.

5. SHAREHOLDERS GRIEVANCE COMMITTEE AND SHARE TRANSFER COMMITTEE:

B. Share Transfer Committee: Terms of Reference: To oversee the functioning of the Registrar & Share Transfer Agent and ensure that the process of share transfers, transmission and issue of duplicate shares is effective and efficient. Composition: The Committee comprised of Mr. Rajiv Agarwal, Mr. K. K. Sinha and Mr. Shailesh Sawa.

The Board has further authorised the Executive Directors and Company Secretary to approve the

6. GENERAL BODY MEETING: (a) Details of General Meetings held in last three years: Financial year 2008 - 09 2009 - 10 2010 - 11 Meeting AGM AGM EGM AGM Date 31-07-09 24-07-10 30-11-10 09-09-11 Time 3.30 PM 3.00 PM 10.00 AM 12.00 noon Location Administrative Building, Essar Refinery Complex, Okha Highway (SH-25), Taluka Khambhalia, District - Jamnagar, Gujarat 361 305

17

(b) Special Resolutions passed in the previous three Annual General Meetings: July 24, 2010: A special resolution enabling the Company to issue Equity Shares, Foreign Currency Convertible Bonds, Global Depository Receipts, etc. was passed: September 9, 2011: - Remuneration to be paid to Mr. Rajiv Agarwal, CEO & Managing Director. - - - Remuneration to be paid to Mr. Shailesh Sawa, Director Finance. Remuneration to be paid to Mr. K. K. Sinha, Chief Executive Officer. To issue Equity Shares, Foreign Currency Convertible Bonds, Global Depository Receipts, etc. Implement the Stock Option Scheme and grant of Options thereunder. Extend the Stock Option Scheme to employees of holding and subsidiary companies.

(c)  No resolutions are proposed to be passed at the ensuing Annual General Meeting which require approval of members through Postal Ballot. There are no materially significant related party transactions made by the Company with its Promoters, Directors or Management, their relatives, its subsidiaries, etc., that may have potential conflict with the interest of the Company at large. Transactions with related parties during the year are disclosed in Note No. 32 forming part of the financial statements in the Annual Report. During the last three years no penalty or stricture has been imposed on the Company by Stock Exchanges / SEBI /Statutory Authorities on matters related to Capital Markets.

7. DISCLOSURES:

- -

8. MEANS OF COMMUNICATION: Financial results and other information about the Company The quarterly and annual financial results are submitted to the BSE Limited and National Stock Exchange of India Limited which is uploaded on their websites. These results are also displayed on the Companys website: www.essar.com Publication of financial results Presentation to Institutional Investors and to the Analyst Published in major newspapers such as Business Standard and Jai Hind Press releases and presentations made to Institutional Investors and Analysts are displayed on the Companys website: www.essar.com Management Discussion & Analysis Forms part of the Annual Report, which is mailed to the shareholders of the Company 9. GENERAL SHAREHOLDERS INFORMATION: A. Annual General Meeting details: Date Venue September 27, 2012 Administrative Building, Essar Refinery Complex Okha Highway (SH-25), Taluka Khambhalia District Jamnagar, Gujarat 361 305 Time Book Closure 2.30 p.m. September 22, 2012 to September 27, 2012 (both days inclusive)

18 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

B. Financial Calendar: Financial year of Company First Quarter results Second Quarter results Third Quarter results Annual results for the year April 1, 2012 to March 31, 2013 On or before August 14, 2012 On or before November 14, 2012 On or before February 14, 2013 On or before May 30, 2013

C.

Registrars and Share Transfer Agents: Data Software Research Company Private Limited 19, Pycrofts Garden Road, Off Haddows Road Nungambakkam, Chennai- 600 006 Tel:(044) 2821 3738, 2821 4487 Fax: (044) 2821 4636 E-Mail: essar.ports@dsrc-cid.in

has delegated these powers to the Executive Directors and the Company Secretary. All valid share transfer requests received by the Company in physical form are registered within an average period of 15 days. The Company dematerialises the shares after getting the dematerialisation requests being generated by the Depository Participants.

D. Share Transfer System: To expedite the process of share transfers, transmission, etc., the Board of your Company

E.

Listing on Stock Exchanges: The Companys securities are listed on the following Stock Exchanges: BSE Limited Phiroze Jeejeebhoy Towers Dalal Street, Mumbai 400 023 Code: 500630 National Stock Exchange of India Limited Exchange Plaza, Bandra Kurla Complex Bandra East, Mumbai 500 051 Code : ESSARPORTS

Annual Listing fee for the year 2012-13 has been paid to both the exchanges. Market price data (High/Low) during each month in the year 2011-2012 on the BSE Limited and National Stock Exchange of India Limited: BSE Limited Month May 31, 2011 June July August September October November December January February March Highest 125.00 125.00 106.45 93.75 78.50 80.30 96.90 73.45 66.75 73.75 84.95 Scrip Code : 500630 Lowest 75.00 88.50 91.00 67.25 58.50 51.60 63.15 46.90 49.60 59.40 63.35 National Stock Exchange of India Limited Month May 31, 2011 June July August September October November December January February March Highest 128.20 125.00 107.40 95.90 78.40 80.40 96.90 73.05 66.85 73.70 85.00 Scrip Code : ESSARPORTS Lowest 77.50 88.75 85.70 67.05 58.00 51.55 63.50 46.65 49.00 59.25 63.10

* The shares of the Company were re-listed subsequent to the demerger of the shipping & logistics and oilfields services businesses w.e.f. May 31, 2011 and hence the share price data and movement given above is with effect from May 31, 2011.

19

Share Price performance in comparison to BSE Sensex Share Price Movement versus BSE Sensex 120.00 110.00 100.00 Share Price 90.00 80.00 70.00 60.00 50.00 40.00 Jun - 11 Jul - 11 Aug - 11 Jan - 12 May - 11 Sep - 11 Nov - 11 Dec - 11 Feb - 12 Oct - 11 Mar - 12 18500 18000 BSE Sensex 17500 17000 16500 16000 15500 15000 19000

Months Share price on BSE F. Shareholding Pattern as on March 31, 2012: Shareholding by Promoters Financial Institutions / Mutual Funds / Banks / Insurance Companies Other Corporate Bodies Non-Domestic Companies / Foreign Banks Foreign Institutional Investors Non-Resident Individuals Public Total G. Distribution of Shareholding as on March 31, 2012: No. of equity shares held Upto 5000 5001-10000 10001-20000 20001-30000 30001-40000 40001-50000 50001-100000 100001 and above Total Number of shareholders 105,335 226 96 37 23 14 33 44 105,808 % of shareholders 99.55 0.21 0.09 0.04 0.02 0.01 0.03 0.05 100.00 Total number of shares 16,266,563 1,623,526 1,377,932 921,497 780,098 629,566 2,484,872 386,371,498 410,455,552 % of holding 3.96 0.40 0.34 0.22 0.19 0.15 0.61 94.13 100.00 No. of Shares 34,35,87,159 5,11,928 96,04,924 15,115 3,41,73,275 6,30,617 2,19,32,534 41,04,55,552 % 83.71 0.12 2.34 0.01 8.33 0.15 5.34 100.00 BSE Sensex

20 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

H. Compliance Officer : Mr. Manoj Contractor Company Secretary I. Registered Office : Administrative Building Essar Refinery Complex Okha Highway (SH-25) Taluka Khambhalia District Jamnagar Gujarat 361 305 Corporate Office : Essar House 11, Keshavrao Khadye Marg Mahalaxmi, Mumbai 400 034 Tel: (022) 6660 1100 Fax: (022) 2354 4312 E Mail:epl.secretarial@essar.com

J.

K. Status of Dematerialisation of shares as on March 31, 2012 (POST DEMERGER): Mode Physical Demat TOTAL No. of shares 56,60,942 40,47,94,610 41,04,55,552 No. of folios 54,512 51,296 1,05,808 % 1.38 98.62 100.00

10. NOMINATION FACILITY: Shareholders holding shares in physical form and desirous of making a nomination in respect of their shareholding in the Company, as permitted under Section 109A of the Companies Act, 1956 are requested to submit to the R&T Agent of the Company the prescribed nomination form.

with the total number of shares in physical form and the total number of dematerialised shares held with NSDL and CDSL. 13. NON-MANDATORY REQUIREMENTS: 1. Remuneration Committee: The Committee comprises of three Non-Executive Directors with the Company Secretary as the Secretary of the Committee. The Committee is empowered to formulate and recommend to the Board from time to time, the compensation structure for Managing / Executive / Wholetime Directors and to administer and supervise the Employee Stock Option Schemes, whenever applicable. 2. Shareholders right: Quarterly financial results are available on the website of the Company i.e. www.essar.com. No separate financials are sent to shareholders of the Company. 3. Audit qualifications: There are no audit qualifications in the Auditors report on the financial statements to the Shareholders of the Company.

11. OUTSTANDING GDRS / ADRS / WARRANTS OR ANY CONVERTIBLE INSTRUMENTS, CONVERSION DATE AND LIKELY IMPACT ON EQUITY: As on March 31, 2012 there are 2,800 Foreign Currency Convertible Bonds (FCCBs) aggregating USD 40,000,000.00 which can be converted into equity shares of the Company at a conversion price of Rs. 91.70 per share. As per the terms of the offering, the USD - INR conversion rate has been fixed at 1 USD = 46.94 INR. These FCCBs are listed on the Singapore Exchange Securities Trading Limited. A qualified practicing Company Secretary carries out secretarial audit to reconcile the total admitted capital with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL) and the total issued and listed capital. The audit confirms that the total issued / paid up capital is in agreement

12. SECRETARIAL AUDIT:

21

Auditors Certificate on Corporate Governance

To the Members of Essar Ports Limited We have examined the compliance of conditions of corporate governance by Essar Ports Limited (formerly known as Essar Shipping Ports & Logistics Limited) (The Company) for the year ended March 31, 2012, as stipulated in Clause 49 of the Listing Agreement entered into by the said Company with Stock Exchanges in India. The compliance of conditions of Corporate Governance is the responsibility of the management. Our examination has been limited to review of procedures and implementation thereof, adopted by the Company for ensuring the compliance of conditions of the Corporate Governance. It is neither an audit nor an expression of opinion on the financial statements of the Company. In our opinion and to the best of our information and according to the explanations given to us, we certify that the Company
Mumbai May 30, 2012

has complied with the conditions of Corporate Governance as stipulated in the above-mentioned Listing Agreement. We further state that such compliance is neither an assurance as to the future viability of the Company nor the efficiency or effectiveness with which the management has conducted the affairs of the Company.

For Deloitte Haskins & Sells Chartered Accountants (Firm Regn. No. 117365W) Khurshed Pastakia Partner (Membership No. 31544)

Declaration on Compliance of the Companys Code of Conduct to the Members of Essar Ports Limited
The Company has framed a specific Code of Conduct for the members of the Board and the Senior Management Personnel of the Company pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges to further strengthen Corporate Governance practices in the Company. All the members of the Board and Senior Management Personnel of the Company have affirmed due observance of the said Code of Conduct in so far as it is applicable to them and there is no non-compliance thereof during the year ended March 31, 2012.
Rajiv Agarwal CEO & Managing Director Mumbai May 30, 2012

22 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Standalone Auditors Report

TO THE MEMBERS OF ESSAR PORTS LIMITED (Formerly known as Essar Shipping Ports & Logistics Limited) 1. We have audited the attached Balance Sheet of ESSAR PORTS LIMITED (formerly known as Essar Shipping Ports & Logistics Limited) (the Company) as at March 31, 2012, the Statement of Profit and Loss and the Cash Flow Statement of the Company for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. As required by the Companies (Auditors Report) Order, 2003 (CARO) issued by the Central Government in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 5 of the said Order. 4. Further to our comments in the Annexure referred to in paragraph 3 above, we report as follows: a. we have obtained all the information and Khurshed Pastakia Partner (Membership No. 31544) Mumbai May 30, 2012 c. the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in agreement with the books of account; d. in our opinion, the Balance Sheet, the Statement of Profit and Loss and the Cash Flow Statement dealt with by this report are in compliance with the Accounting Standards referred to in Section 211(3C) of the Companies Act, 1956; e. in our opinion and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: i. in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2012; ii. in the case of the Statement of Profit and Loss, of the loss of the Company for the year ended on that date; and iii. in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date. 5. On the basis of the written representations received from the Directors as on March 31, 2012 taken on record by the Board of Directors, none of the Directors is disqualified as on March 31, 2012 from being appointed as a director in terms of Section 274(1)(g) of the Companies Act, 1956. For DELOITTE HASKINS & SELLS Chartered Accountants (Firm Registration No. 117365W)

explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; b. in our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books;

23

Annexure to the Auditors Report

(Referred to in paragraph 4 of our report of even date) (i) Having regard to the nature of the Companys business / activities / result, clauses (vi), (viii), (xii), (xiii), (xiv), (xviii), (xix) and (xx) of CARO are not applicable. (ii) In respect of its fixed assets: (a) The Company has maintained proper records showing full particulars, including quantitative details and situation of the fixed assets. (b) The fixed assets were physically verified during the year by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification. (c) In our opinion and according to the information and explanations given to us, the Company has not made substantial disposals of fixed assets during the year and the going concern status of the Company is not affected. (iii) In respect of its inventory, as explained to us, the Company is not required to maintain any inventories for its operation. Hence the provisions of clause (ii) (a) to (ii) (c) of the Order is not applicable to the Company. (iv) In our opinion and according to the information and explanations given to us, the Company has neither granted nor taken any loans, secured or unsecured, to / from companies, firms or other parties listed in the Register maintained under Section 301 of the Companies Act, 1956. Hence, the provisions of clause (iii) (b) to (iii) (g) of the Order are not applicable to the Company. (v) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchases of inventory and fixed assets and the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system. (vi) In our opinion and according to information and explanation given to us, there are no contracts or arrangements that need to be entered into the register maintained in pursuance of Section 301 of the Companies Act, 1956. (vii) In our opinion, the Company has an adequate internal audit system commensurate with the size and the nature of its business. (viii) According to the information and explanations given to us in respect of statutory dues: (a) The Company has generally been regular in depositing undisputed dues, including Provident Fund, Income-tax, Tax Deducted at source, Sales Tax, Service Tax, Custom Duty, Cess and other material statutory dues applicable to it with the appropriate authorities. As informed to us, the provisions for Investors Education and Protection Fund, Employees State Insurance, Sales Tax, Wealth Tax and Excise duty were not applicable to the Company during the year. (b) There were no undisputed amounts payable in respect of above statutory dues in arrears as at March 31, 2012 for a period of more than six months from the date they became payable. (c) There were no due pending to be deposited on account of any dispute in respect of Income-tax, Service Tax, Custom Duty and Cess as on March 31, 2012. (ix) The Company does not have accumulated losses as at the end of the financial year. The Company has incurred cash losses in the financial year covered by the audit; however no cash loss were incurred in the immediately preceding financial year. (x) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to banks, financial institutions and debenture holders. (xi) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks and financial institutions are not prima facie prejudicial to the interests of the Company.

24 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Annexure to the Auditors Report

(xii) In our opinion and according to the information and explanations given to us, working capital loans of Rs. 30,000 lakhs have been applied by the Company for purchase of investment in the equity of subsidiary companies. (xiii) On the basis of an overall examination of the balance sheet as at March 31, 2012 and the cash flow statement of the Company for the year then ended and according to the information and explanation given to us, we report that funds raised on short-term basis amounting to Rs. 29,744.01 lakhs have, prima facie, been used for long term purpose. Mumbai May 30, 2012 Khurshed Pastakia Partner (Membership No. 31544) (xiv) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year. For DELOITTE HASKINS & SELLS Chartered Accountants (Firm Registration No. 117365W)

25

Standalone Balance Sheet as at March 31, 2012

(Rs. in lakhs) Particulars I. 1 2 3 EQUITY AND LIABILITIES Shareholders funds (a) Share capital (b) Reserves and surplus Non-current liabilities (a) Long-term borrowings (b) Deferred tax liabilities (Net) (c) Other long term liabilities (d) Long-term provisions Current liabilities (a) Short-term borrowings (b) Trade payables (c) Other current liabilities (d) Short-term provisions Note No. As at March 31, 2012 As at March 31, 2011

3 4

41,058.61 223,352.61 264,411.22 40,462.60 12,955.94 139.57 53,558.11 3,500.00 1,556.58 57,129.70 2,172.03 64,358.31 382,327.64

41,058.61 232,515.73 273,574.34 66,618.00 2,119.88 107.06 68,844.94 3,500.00 6,853.27 169.69 10,522.96 352,942.24

5 29 6 7

8 9 10 7

Total II. ASSETS 1 Non-current assets (a) Fixed assets i) Tangible assets (b) Non-current investments (c) Loans and advances (d) Other non - current assets 2 Current assets (a) Trade receivables (b) Cash and bank balances (c) Loans and advances (d) Other current assets 11 12 13 14b

8,890.70 365,942.00 1,217.92 1,662.72 377,713.34 730.97 212.86 2,143.07 1,527.40 4,614.30 382,327.64

4,639.70 331,296.60 585.67 336,521.97 3,867.08 12,454.19 99.00 16,420.27 352,942.24

14a 15 13 14b

Total

See accompanying notes forming part of the financial statements

In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Khurshed Pastakia Partner For and on behalf of the Board of Directors

Rajiv Agarwal Managing Director R. N. Bansal Director

Shailesh Sawa Director Finance Manoj Contractor Company Secretary

Mumbai May 30, 2012

Mumbai May 30, 2012

26 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Standalone Statement of Profit and Loss for the year ended March 31, 2012
(Rs. in lakhs) Particulars REVENUE FROM OPERATIONS Other income Total Revenue EXPENSES Employee benefits expense Operating expenses Establishment and other expenses Total Expenses Earning before finance cost, depreciation and amortisation and tax Finance costs Profit before depreciation and amortisation and tax Depreciation and amortisation expense Profit before tax Tax expense Current tax Deferred tax Tax adjustment for earlier years Profit / (Loss) for the year after tax Earnings per share: Basic and diluted (face value Rs. 10/- per share) See accompanying notes forming part of the financial statements
In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Khurshed Pastakia Partner For and on behalf of the Board of Directors

Note No. 16 17

For the year ended March 31, 2012 3,622.00 1,634.36 5,256.36 927.46 726.48 698.39 2,352.33 2,904.03

For the year ended March 31, 2011 48,686.69 17,249.35 65,936.04 4,780.35 31,275.89 1,797.39 37,853.63 28,082.41 18,407.52 9,674.89 5,987.41 3,687.48 (1,600.00) 2,087.48 0.51

18 19 20

21 11

9,239.93 (6,335.90) 740.33 (7,076.23) (0.20) (23.25) (7,099.68)

26 (1.73)

Rajiv Agarwal Managing Director R. N. Bansal Director

Shailesh Sawa Director Finance Manoj Contractor Company Secretary

Mumbai May 30, 2012

Mumbai May 30, 2012

27

Standalone Cash Flow Statement for the year ended March 31, 2012
(Rs. in lakhs) Particulars A CASH FLOW FROM OPERATING ACTIVITIES Profit / (Loss) before tax Adjustments for : Depreciation / impairment Interest and finance expenses Interest income from long term investment Interest income Interest on income tax refund Loss / (Profit) on sale of assets Profit on sale of long term investment Profit on sale of investments Dividend on investments Foreign exchange difference loss / (gain) Operating profit before working capital changes Adjustments for: Trade and other receivables Inventories Trade and other payables Cash generated from operations Income taxes refund / (paid) net Net cash flow from operating activities CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets including capital work-in-progress / advance Proceeds from sale of fixed assets Purchase of current investments Proceeds from sale of current investments Proceeds from sale of non - current investments Proceeds from sale of investments in subsidiaries Proceeds from maturity of fixed deposit Investment in shares of subsidiaries Advance towards share application money Fixed deposits placed for a period of more than three months, net Loans and advances given to subsidiaries and other body corporates Loans and advances repaid by subsidiaries and other body corporates Dividend on investments Interest income from long term investment Interest received Net cash used for investing activities Year ended March 31, 2012 (7,076.23) 740.33 9,239.93 (39.98) (1.48) (2.44) 402.74 3,262.87 (2,674.33) 12,613.38 13,201.92 (267.02) 12,934.90 Year ended March 31, 2011 3,687.48 5,987.41 18,407.52 (1,740.06) (5,576.36) (3,011.46) (5,259.71) (84.96) (108.84) (1,467.46) 10,833.56 (5,700.01) (431.19) 9,310.72 14,013.08 (1,595.00) 12,418.08

(433.97) 4.88 1,500.00 (5,677.00) (100.00) (160.00) 138.25 (4,727.84)

(11,709.47) 3,178.36 (105,881.25) 111,564.52 37,040.75 (29,228.88) (132,040.39) (1,460.75) (14,253.51) 37,339.25 108.84 1,740.06 5,799.28 (97,803.23)

28 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Standalone Cash Flow Statement for the year ended March 31, 2012
(Rs. in lakhs) Particulars C CASH FLOW FROM FINANCING ACTIVITIES Interest and finance expenses paid Proceeds from FCCB Proceeds from secured loan Proceeds from commercial papers Repayment of secured loan Repayment of finance lease obligations Repayment of commercial papers Repayment of unsecured loan Net cash flow from financing activities INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents given on demerger Cash and cash equivalents acquired on merger Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of the year NOTES : Cash and cash equivalents include : Cash and bank balances Total cash and cash equivalents Balances in fixed deposits (maturity period of more than 3 months) CASH AND BANK BALANCES AS PER NOTE 15 Note: 1. The above cash flow statement excludes assets / liabilities (other than cash balance) on merger from EIL and EPTL and transfer to ESL on demerger, as it is non cash transaction (refer note no. 22). 2. Cash flow statement has been prepared under the indirect method as set out in Accounting Standards 3 - Cash Flow Statement referred to in Section 211(3C) of the Companies Act, 1956. 3. During the year share application money of Rs.10,382.86 lakhs placed with subsidiaries has been converted into share capital of subsidiaries. See accompanying notes forming part of the financial statements
In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Khurshed Pastakia Partner For and on behalf of the Board of Directors

Year ended March 31, 2012 (8,021.28) 20,000.00 (22,500.00) (10,521.28) (2,314.22) 2,367.08 52.86

Year ended March 31, 2011 (16,995.59) 130,964.40 124,226.83 16,000.00 (59,339.41) (4,219.48) (16,000.00) (86,250.00) 88,386.75 3,001.60 (3,832.00) 9.99 3,187.47 2,367.08

52.86 52.86 160.00 212.86

2,367.08 2,367.08 1,500.00 3,867.08

Rajiv Agarwal Managing Director R. N. Bansal Director

Shailesh Sawa Director Finance Manoj Contractor Company Secretary

Mumbai May 30, 2012

Mumbai May 30, 2012

29

Notes forming part of financial statements

1. COMPANY PROFILE Essar Ports Limited (EPL / Company) develops and operates ports and terminals and is one of the largest private sector port company in India. EPL is Indias second-largest, private-sector port and terminal company by capacity and throughput. EPL is part of the multinational Essar Group, and holds the Groups entire ports business. It is listed on the BSE Limited and the National Stock Exchange of India Limited (NSE). The Company, which was previously named Essar Shipping Ports & Logistics Limited (ESPLL), recently went through a demerger process, following which the shipping, logistics and oilfield drilling businesses were demerged from ESPLL and transferred to another company, Essar Shipping Limited, which is also listed on Indian stock exchanges. EPL through its subsidiaries develops and operates ports and terminals for handling liquid, dry bulk, break bulk and general cargo, with an existing aggregate capacity of 88 MTPA across two facilities located at Vadinar and Hazira in the State of Gujarat on the west coast of India. The facilities at Vadinar and Hazira are used primarily by affiliated customers for the receipt of raw materials such as crude oil, iron ore / pellets, limestone, dolomite and coal, and for the dispatch of finished goods such as petroleum products and steel products. EPL is in the process of increasing its aggregate ports capacity to 158 MTPA with expansion projects at Vadinar and Hazira, a new port at Salaya in Gujarat, and two terminals at Paradip in the State of Odisha on the east coast of India. The ports expansion projects have been undertaken, in part, to accommodate the increase in traffic expected to arise from plant expansions planned to be carried out by the Companys affiliated customers, and in part to support the increase in business from non-affiliated customers being targeted by the Company. 2. SIGNIFICANT ACCOUNTING POLICIES: 2.1 Basis of Accounting These financial statements are prepared under the historical cost convention, except for the revaluation of fleet, on accrual basis of accounting, and are in accordance with generally Assets Tankers Bulk carriers Mini bulk carriers Tugs Plant & machinery SLM over balance useful life or 7% whichever is higher SLM over balance useful life or 4.75% whichever is higher SLM over balance useful life or 5% whichever is higher Method of depreciation Estimated useful life 14-25 years 3-26 years 20 years 20 years 20 years accepted accounting principles and in compliance with the applicable Accounting Standards (AS) referred to in subsection (3C) of Section 211 of the Companies Act, 1956. 2.2 Use of Estimates The preparation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported balances of assets and liabilities and disclosures relating to contingent liabilities as at the reporting date and the reported amounts of income and expenses during the reporting period. Differences between the actual results and estimates are recognised in the period in which the results are known / materialised. 2.3 Fixed Assets Fixed assets are recorded at cost of acquisition or at revalued amounts less accumulated depreciation and impairment loss, if any. Cost of acquisition of fleet includes brokerage, start up costs and cost of major improvements / upgradations. Assets acquired under finance leases are capitalised as fixed assets at lower of fair value at inception of the lease and the present value of minimum lease payments and a corresponding liability is recognised. The lease rentals paid (excluding operating expenses) are bifurcated into principal and interest components by applying an implicit rate of return. The interest is charged against income as a period cost and the principal amount is adjusted against the liability recognised in respect of assets taken on finance lease. Foreign exchange differences on conversion / translation / settlement in respect of long term monetary items used for acquisition of depreciable fixed assets are added to the cost of fixed assets. 2.4 Depreciation Depreciation on fleet, including second hand fleet, is provided by using the straight-line method based on a technical evaluation of the economic useful life of respective vessels or at the rates prescribed under the Schedule XIV to the Companies Act, 1956, whichever is higher as follows:

Depreciation on addition of assets due to exchange variation is provided over the remaining useful life of the asset.

30 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of financial statements

Depreciation on water circulation treatment plant and aircraft is provided by using the straight-line method at the rates prescribed in Schedule XIV to the Companies Act, 1956. All other assets are depreciated by using the written down value method at the rates prescribed in Schedule XIV to the Companies Act, 1956. Assets costing less than Rs. 5,000/are depreciated at 100% in the year of acquisition. Depreciation on the incremental value of fixed assets upon revaluation is recouped proportionately from fixed assets revaluation reserve. Depreciation on additions / deductions to fixed assets made during the year is provided on a pro-rata basis from / upto the date of such additions / deductions, as the case may be. Profit or loss on disposal of revalued fixed assets is recognised with reference to their revalued carrying values. The balance, if any, in the fixed assets revaluation reserve relating to revalued fixed assets that are sold / disposed is transferred to general reserve. 2.5 Impairment of Assets The Company assesses on each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The amount so reduced is treated as an impairment loss and is recognised in the statement of profit and loss, except in case of revalued assets, where it is first adjusted against the related balance in fixed assets revaluation reserve. If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is carried at the recoverable amount subject to a maximum of depreciated historical cost, except for revalued assets which are subject to a maximum of depreciated revalued cost. 2.6 Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction / development of qualifying asset are capitalised as a part of cost of such asset. A qualifying asset is one that necessary takes substantial period of time to get ready for the intended use. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of fixed assets are amortised and charged to the Statement of Profit and Loss, over the tenure of the loan. 2.7 Investments a) Long term investments are carried at cost less provision for other than temporary diminution in the fair / market value of these investments. b) Current investments are carried at lower of cost and fair value. 2.8 Inventory Inventory is valued at the lower of cost and net realisable value. Cost is determined on first-in-first-out basis. 2.9 Fleet Operating Earnings Fleet operating earnings represent the value of charter hire earnings, demurrage, freight earnings, fleet management fees and lighterage earnings, and are accounted on accrual basis. Freight earnings are recognised on a pro-rata basis for voyages in progress at balance sheet date after loading of the cargo is completed; revenues and related expenses for voyages where cargo has not been loaded as on the balance sheet date are deferred and recognised in the following year. Lighterage is recognised on the basis of unloading of entire cargo. 2.10 Interest Income Interest income is recognised on an accrual basis. 2.11 Dividend Income Dividend income is recognised when the right to receive the payment is established by the Balance sheet date. 2.12 Insurance Claims Insurance claims are recorded based on reasonable certainty of their settlement. 2.13 Fleet Operating Expenses All expenses relating to the operation of the fleet including crewing, insurance, stores, bunkers, dry docking, charter hire and special survey costs are expensed under fleet operating expenses on accrual basis. 2.14 Operating Leases Rentals are expensed with reference to the terms of the lease agreement and other considerations in respect of operating leases. 2.15 Employee Benefits a) The Company (employer) and the employees contribute a specified percentage of eligible employees salary- currently 12%, to the employer established provident fund Essar Staff Provident Fund set up as an irrevocable trust by the Company. The Company is generally liable for annual contributions and any shortfall in the fund assets based on government specified minimum rates of return currently @ 8.6%, and recognises such provident fund liability, considering fund as the defined benefit plan, based on an independent actuarial valuation carried out at every statutory year end. b) Provision for gratuity for floating staff is made as under: (i) For officers on actuarial valuation. (ii) For crew on accrual basis as per rules of the National Maritime Board and is charged to the Statement of Profit and Loss.
31

Notes forming part of financial statements

Contribution in respect of gratuity for on shore staff is made to Life Insurance Corporation of India based on demands made. The Company also accounts for gratuity liability based on an independent acturial valuation carried out at every statutory year end. 2.17 Taxes on Income a) Income tax on income from qualifying fleet is provided on the basis of the Tonnage Tax Scheme whereas income tax on other income and fringe benefit tax are provided as per other provisions of the Income Tax Act, 1961. b) The tax effect of timing differences relating to nontonnage tax activities that occur between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using the substantively enacted tax rates and tax regulations as at the balance sheet date. Deferred tax assets arising on account of brought forward losses and unabsorbed depreciation under tax laws are recognised only if there is a virtual certainty of realisation, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognised to the extent there is reasonable certainty of realisation.

c) Contribution towards superannuation, funded by payments to Life Insurance Corporation of India, is a fixed percentage of the salary of eligible employees under a defined Contribution plan, and is charged to the Statement of Profit and Loss. d) Provision for all compensated absences of eligible employees is based on an independent actuarial valuation. e) The Company has formulated Employee Stock Option Schemes (ESOSs) in accordance with Securities and Exchange Board of India (Employee Stock Option Scheme) Guidelines, 1999. The Schemes provide for grant of options to employees of the Group to acquire the equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period. In accordance with the SEBI Guidelines and the guidance note on Accounting for Employee Share based payments notified under the Companies (Accounting Standard) Rules, 2006, the excess, if any, of the market price of the share preceding the date of grant of the option under ESOSs over the exercise price of the option is amortised on a straight-line basis over the vesting period.

2.18 Provisions, Contingent Liabilities and Contingent Assets Provisions are recognised for present obligations arising out of past events if it is probable that an outflow of economic resources, the amount of which can be reliably estimated, will be required to settle the obligation. Contingent liabilities are disclosed in respect of possible obligations that arise from past events, the existence of which will be confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company, or a present obligation that is not recognised because a reliable estimate of the liability cannot be made, or the likelihood of an outflow of economic resources is remote. Contingent assets are neither recognised nor disclosed in the financial statements. 2.19 Segment Accounting Policies The company has only one reporting segment in current year. a) Segment assets and segment liabilities: Segment assets include all operating assets used by the segment and consist principally of fixed assets, inventories, sundry debtors, cash and bank balances. Segment assets and liabilities do not include share capital, reserves and surplus, income tax and unallocable assets and liabilities.

2.16 Foreign Currency Transactions Transactions denominated in foreign currencies are recorded at standard exchange rates determined monthly which approximates the actual rate on the date of transaction. The difference between the standard rate and the actual rate of settlement is accounted in the Statement of Profit and Loss. Monetary items denominated in foreign currency are translated at the rate prevailing at the end of the year. Gains / losses on conversion / translation / settlement of foreign currency transactions are recognised in the Statement of Profit and Loss, except gains / losses on conversion / translation / settlement in respect of long term foreign currency monetary items related to acquisition of a depreciable asset is adjusted to the carrying amount to those depreciable assets and depreciated over the balance life of the asset. Gains / losses on conversion / translation / settlement in respect of long term foreign currency items relates to other than an acquisition of depreciable assets are accumulated in a Foreign Currency Monetary Item Translation Difference Account and amortised over the balance period of such long term foreign currency item but not beyond March 31, 2020.

b) Segment revenue and segment expenses:

Segment revenue and expenses have been identified to its segment on the basis of relationship to its operating activities. It does not include interest income on investment, inter corporate deposits, interest expense and provision for taxes.

32 Annual Report 2011-12

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DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of financial statements

3 SHARE CAPITAL Particulars (a) Authorised Equity shares of Rs.10/- each Redeemable cumulative preference shares of Rs. 100/- each Issued, subscribed and fully paid up Equity shares of Rs.10/- each (refer note) Forfeited equity shares As at March 31, 2012 Number (Rs. in lakhs) 1,000,000,000 1,050,000 As at March 31, 2011 Number (Rs. in lakhs) 100,000.00 1,050.00 101,050.00 410,455,552 246,648 41,045.56 13.05 41,058.61

100,000.00 1,000,000,000 1,050.00 1,050,000 101,050.00

410,455,552 246,648

41,045.56 13.05 41,058.61

Note: Of above 17,18,87,182 (previous year 17,18,87,182) equity shares were allotted as fully paid up equity shares for consideration other than cash pursuant to scheme of amalgamation during financial year 2008-09.

(b) Reconciliation of the shares outstanding at the beginning and at the end of the reporting period Particulars a) Equity shares of Rs. 10/- each At the beginning of the year Add: Pending allotment of shares Add: Issue of shares Less: Extinguishment under the scheme of arrangement Outstanding at the end of the year As at March 31, 2012 Number (Rs. in lakhs) 410,455,552 410,455,552 41,045.56 41,045.56 As at March 31, 2011 Number (Rs. in lakhs) 615,683,320 (205,227,768) 410,455,552 41,045.56 41,045.56

(c) Terms / rights attached to equity shares The Company has one class of equity shares having a par value of Rs. 10/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

(d) Shares held by holding / ultimate holding company and/or their subsidiaries / associates and details of the shareholding more than 5% shares in the company Particulars a) Equity shares of Rs. 10/- each Essar Shipping & Logistics Limited, Cyprus the holding company Essar Global Limited, the ultimate holding company Essar Projects (India) Limited, subsidiary of the ultimate holding company Essar Steel India Limited, subsidiary of the ultimate holding company Essar Investments Limited, related party Imperial Consultants & Securities Private Limited, related party As at March 31, 2012 Number 284,503,711 66 56,396,995 2,547,223 134,338 4,826 343,587,159 % 69.31 0.00 13.74 0.62 0.03 0.00 83.71 As at March 31, 2011 Number 340,903,706 66 2,547,223 131,338 4,826 343,587,159 % 83.05 0.00 0.62 0.03 0.00 83.71

33

Notes forming part of financial statements

(i) 7,40,334 shares (as at March 31, 2011 NIL shares) of Rs. 71.10 each towards outstanding employee stock options granted / available for grant (refer note 28). (ii) 2,04,75,463 shares (as at March 31, 2011, 2,04,75,463 shares) of Rs. 91.70 each towards 5% Foreign Currency Convertible Bonds (Refer Note (ii) in Note 5 Long-term borrowings). 4 RESERVES AND SURPLUS Particulars a. b. c. d. e. f. g. h. i. General Reserves Opening balance Add: Transfer from tonnage tax utilised reserve Less: Adjustment on account of demerger Closing balance Capital Redemption Reserve Opening balance Less: Adjustment on account of demerger Closing Balance Securities Premium Account Opening balance Less: Adjustment on account of demerger Closing Balance Debenture redemption reserve Opening balance Less: Adjustment on account of demerger Closing balance Revaluation Reserve Opening balance Less: Depreciation on enhanced value of fixed assets Less: Adjustment on account of demerger Closing balance Tonnage Tax Reserve Opening balance Less: Adjustment on account of demerger Closing balance Tonnage Tax Utilised Reserve Opening balance Less: Transferred to general reserve Closing balance Capital Reserve on Amalgamation Opening balance Less: Transferred to general reserve Closing balance Surplus / (deficit) in the statement of profit and loss Opening balance Add: Net profit for the current year Add: Balance acquired on amalgamation Less: Proposed dividends on equity shares Net surplus in the statement of profit and loss Total reserves and surplus (Rs. in lakhs) As at March 31, 2012 64,485.74 64,485.74 105.50 (11.16) 94.34 5,550.00 5,550.00 162,374.49 (7,099.68) (2,052.28) 153,222.53 223,352.61 As at March 31, 2011 91,113.99 15,000.00 (41,628.26) 64,485.74 1,050.00 (1,050.00) 424,284.81 (424,284.81) 2,500.00 (2,500.00) 11,280.70 (1,924.72) (9,250.48) 105.50 20,550.00 (20,550.00) 20,550.00 (15,000.00) 5,550.00 16,559.00 (16,559.00) 110,991.14 2,087.48 49,295.87 162,374.49 232,515.73

34 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of financial statements

5 LONG TERM BORROWINGS Non current portion Paerticulars Secured from financial institution Rupee term loan [refer note (i) below] Total Secured Loan [A] Unsecured (a) 5% Foreign currency convertible bonds [refer note (ii) below]  Series B: US$ 18,571,428 (previous year: US$ 18,571,428 ) interest bearing bonds due on August 24, 2017.  Series A: US$ 21,428,572 (previous year: US$ 21,428,572 ) interest bearing bonds due on August 24, 2015. 5 LONG TERM BORROWINGS (CONTD...) Non current portion Particulars (b) Rupee term loan from banks (c) Rupee term loan from financial institutions Total unsecured loan Total Less: Amount disclosed under the head 'other current liabilities' (refer note10) Long term borrowings [A + B] As at March 31, 2012 20,462.60 40,462.60 40,462.60 As at March 31, 2011 18,750.00 30,000.00 66,618.00 66,618.00 66,618.00 30,000.00 30,000.00 30,000.00 (30,000.00) (Rs. in lakhs) Current maturities As at March 31, 2012 As at March 31, 2011 3,750.00 3,750.00 3,750.00 (3,750.00) 10,962.11 9,572.14 As at March 31, 2012 As at March 31, 2011 (Rs. in lakhs) Current maturities As at March 31, 2012 As at March 31, 2011

20,000.00 20,000.00

9,500.49

8,295.86

i) Secured rupee term loan from financial institution carries interest @ (base rate - 3.75%) per annum (as at March 31, 2012 - 13.75% p.a.) and is repayable in 12 monthly instalments of Rs. 1,666.67 lakhs each. Repayment starts from July 31, 2013. The loan is secured against movable fixed assets and all the cash flows including dividend and receivables of the Company.

ii) Foreign Currency Convertible Bonds carries interest @ 5% per annum payable semi annually. The bonds are convertible into equity shares of the Company, any time upto the date of maturity at the option of the bond holders at conversion price of Rs. 91.70 per share at a predetermined exchange rate of Rs. 46.94 per USD. The bonds if not converted till the maturity date will be redeemed at par.

iii) Unsecured rupee term loan from financial institutions carry interest rate of 13% per annum, repayable on April 1, 2012. Essar Shipping & Logistics Limited has given corporate guarantee of Rs. 30,000 lakhs.

iv) Unsecured rupee term loan of previous year from banks carry interest @ (base rate - 3.75%) per annum, repaid on July 1, 2011.

35

Notes forming part of financial statements

6 OTHER LONG TERM LIABILITIES Particulars As at March 31, 2012 (Rs. in lakhs) As at March 31, 2011

Others Advance from customers Total 7 PROVISIONS Particulars Long term provisions As at As at March 31, March 31, 2012 2011 7.80 131.77 5.58 101.48

12,955.94 12,955.94

2,119.88 2,119.88

(Rs. in lakhs) Short term provisions As at As at March 31, March 31, 2012 2011 5.14 5.28

(a) Provision for employee benefits Gratuity Compensated absences (b) Others Provisions for taxation (net of advance tax ) Proposed dividend on equity shares Total 8 SHORT TERM BORROWINGS Particulars

139.57

107.06

114.61 2,052.28 2,172.03

164.41 169.69 (Rs. in lakhs)

As at March 31, 2012

As at March 31, 2011

Unsecured 12.5 % Loans repayable on demand-from related parties (Refer note 32) Total

3,500.00 3,500.00

3,500.00 3,500.00 (Rs. in lakhs)

TRADE PAYABLES Particulars Trade payables (Refer note 32) Total As at March 31, 2012 1,556.58 1,556.58

As at March 31, 2011 (Rs. in lakhs)

10

OTHER CURRENT LIABILITIES Particulars Payable in respect of capital goods (Refer note 32) Advance from customers Current maturities of long-term borrowings (Refer note 5) Interest accrued but not due on borrowings Payable in respect of investment Other liabilities - Statutory dues - Payable in respect of demerger Total As at March 31, 2012 4,568.55 2,426.04 30,000.00 605.74 18,587.80 145.64 795.93 57,129.70

As at March 31, 2011 1,300.63 3,750.00 204.59 52.17 1,545.88 6,853.27

36 Annual Report 2011-12

11 DEPRECIATION / IMPAIRMENT As at April 1, 2011 1,583.12 1,583.12 1,583.12 90,368.00 440.17 311.32 751.49 751.49 7,912.00 11,993.89 84,703.00 2,023.29 311.32 2,334.61 2,334.61 1,583.11 4,199.52 4,691.18 8,890.70 8,890.70 4,639.70 4,639.70 4,639.70 4,639.70 For the year Sale / Adjustments deductions on demerger As at March 31, 2012 As at March 31, 2012 As at March 31, 2011 Sale / deductions As at March 31, 2012 6,222.81 5,002.50 11,225.31 11,225.31 6,222.81

FIXED ASSETS Details

GROSS BLOCK AT COST / VALUATION

(Rs. in lakhs) NET BLOCK

As at April 1, 2011 5,002.50 5,002.50 5,002.50 41,820.00 12,881.00

Additions for the year

Tangible fixed assets Fleet - owned Plant and machinery Total tangible fixed assets Grand total As at 31.03.2011

6,222.81 6,222.81 6,222.81 258,014.00

Notes:

a)

The Company revalued its fleet on March 31, 2008 on the basis of valuation done by approved valuers. The net difference between book value and revalued value as on March 31, 2008 amounting to Rs.

48.40 lakhs had been added to book value of fleet and corresponding credit was given to fixed assets revaluation reserve. Gross block as on March 31, 2012 includes Rs. 6,223 lakhs being an amount

Notes forming part of financial statements

added on revaluation of fleet.

b)

Out of the depreciation for the year, a sum of Rs. 11.16 lakhs (previous year Rs. 1,924.72 lakhs) relating to depreciation, to the extent it is charged on the increased value has been recouped from fixed

assets revaluation reserve and the balance of Rs. 740.33 lakhs (previous year Rs. 5,987.41 lakhs) has been debited to the statement of profit and loss.

NOTICE DIRECTORS REPORT GOVERNANCE

FINANCIAL STATEMENTS

37

Notes forming part of financial statements

12 INVESTMENTS (Rs. in lakhs) Non current Investments Particulars Trade investments (valued at cost) (a) Investments in equity shares (unquoted, fully paid up ) Investment in subsidiaries 45,000 (PY : 37,500) equity shares of Rs.10/- each of Essar Paradip Terminals Limited NIL (PY : 24,500) equity shares of Rs. 10/- each of Essar Bulk Terminal Paradip Limited 37,00,000 (PY : 9,98,88,850) equity shares of Rs. 10/- each of Essar Bulk Terminal Limited 7,86,54,397 (PY : 5,46,54,397) equity shares of Rs. 10/- each of Vadinar Ports & Terminals Limited 1,04,61,42,000 (PY : 1,04,61,42,000) equity shares of Rs. 10/- each of Vadinar Oil Terminal Limited 30,04,875 (PY : 30,04,875) equity shares of Rs. 10/- each of Essar Bulk Terminal (Salaya) Limited (b) Investments in preference shares (unquoted, fully paid up) Investment in subsidiaries 11,55,00,000 (PY : 66,00,000) 0.01% compulsorily convertible cumulative participating preference shares of Rs. 10/- each of Essar Bulk Terminal Paradip Limited 3,29,30,000 (PY : 3,29,30,000) 0.01% optionally convertible redeemable cumulative Preference Share of Rs.10/- each of Essar Bulk Terminal Limited 7,90,22,903 (PY : 7,90,22,903) 0.01% fully convertible cumulative preference shares of Rs. 10/- each of Essar Bulk Terminal Limited 12,99,84,850 (PY : NIL) 0.01% compulsorily convertible cumulative participating preference shares of Rs. 10/- each of Essar Bulk Terminal Limited 20,50,73,630 (PY : 12,70,00,000) 0.01% compulsorily convertible cumulative participating preference shares of Rs. 10/- each of Essar Bulk Terminal ( Salaya) Limited 90,00,000 (PY : NIL) 0.01% compulsorily convertible cumulative participating preference shares of Rs. 10/- each of Essar Paradip Terminals Limited Total As at March 31, 2012 As at March 31, 2011

4.50 373.66 7,527.87 122,921.01 320.04 131,147.08

3.75 2.45 10,087.72 5,127.87 122,921.01 320.04 138,462.83

11,550.00

6,600.00

57,546.72 116,136.22 28,303.72

57,546.72 116,136.22

20,358.26

12,550.84

900.00 234,794.92 365,942.00

192,833.77 331,296.60

38 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of financial statements

13 LOANS AND ADVANCES Non current loans and advances Particulars As at March 31, 2012 As at March 31, 2011 (Rs. in lakhs) Current loans and advances As at March 31, 2012 As at March 31, 2011

Advance recoverable in cash or kind or for value to be received Unsecured, considered good Advance towards allotment of shares (Refer note 32) Advance income-tax and Tax deducted at source (net of provision for taxation) Prepaid expenses Balance with excise authorities Insurance claim receivable Total 41.71 1,176.21 1,217.92 585.67 585.67 14.84 100.00 1,809.23 47.00 172.00 2,143.07 10,382.36 1,615.46 40.00 124.54 291.83 12,454.19

14

TRADE RECEIVABLES AND OTHER ASSETS Non current Particulars As at March 31, 2012 As at March 31, 2011

(Rs. in lakhs) Current As at March 31, 2012 730.97 730.97 As at March 31, 2011

a. Trade receivables Total b. Others (unsecured and considered good, unless stated otherwise) Interest accrued on fixed deposits Foreign currency monetary item translation difference account (FCMITDA) Others (receivable from service rendered & includes Rs. 148 lakhs towards interest on income tax refund) Total

1,662.72

0.73 529.11

99.00

1,662.72

997.56 1,527.40

99.00

39

Notes forming part of financial statements

15 CASH AND BANK BALANCES Particulars A. Cash and cash equivalents Balances with banks On current accounts [A] B. Other bank balances Margin money deposit [B] Total cash and bank balances [A+B] As at March 31, 2012 (Rs. in lakhs) As at March 31, 2011

52.86 52.86 160.00 160.00 212.86

17.08 17.08 3,850.00 3,850.00 3,867.08

16

Note: i) ii) Current year deposit is placed against bank guarantee facility. Previous year deposit includes guarantee in favour of DGFT Bangalore and cash margin against loan. (Rs. in lakhs) For the year ended March 31, 2012 3,622.00 3,622.00 For the year ended March 31, 2011 48,686.69 48,686.69

REVENUE FROM OPERATIONS Particulars Sale of services Fleet operating and chartering earnings Total

17

OTHER INCOME Particulars Interest income - from banks - from others Management fee income Profit on sale of fleet / assets Dividend from others Net gain on sale of long term investments Income on long term investments Net gain on sale of investments Net gain on foreign currency translation and transaction (other than considered as finance cost) Interest on income tax refund Miscellaneous Income Total For the year ended March 31, 2012 39.98 1,408.31 2.44 183.63 1,634.36

(Rs. in lakhs) For the year ended March 31, 2011 252.95 5,323.41 3,011.46 108.84 5,259.71 1,740.06 84.96 1,467.46 0.50 17,249.35

40 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of financial statements

18 EMPLOYEE BENEFITS EXPENSE Particulars Operating Salaries, wages and bonus Contribution to staff provident and other funds Staff welfare expenses Establishment Salaries, wages and bonus Contribution to staff provident and other funds Staff welfare expenses Total For the year ended March 31, 2012 255.80 3.64 0.95 621.20 24.38 21.49 927.46 (Rs. in lakhs) For the year ended March 31, 2011 2,317.39 77.11 374.51 1,803.56 128.01 79.77 4,780.35

19

OPERATING EXPENSES Particulars Consumption of stores and spares Consumption of fuel, oil and water Direct voyage expenses Commission, brokerage and agency fees Standing costs Dry docking expenses Insurance, protection and indemnity club fees Total For the year ended March 31, 2012 116.06 303.84 147.29 125.89 33.40 726.48

(Rs. in lakhs) For the year ended March 31, 2011 703.55 6,921.70 19,976.90 251.54 1,092.31 1,717.74 612.16 31,275.89

20

ESTABLISHMENT AND OTHER EXPENSES Particulars Rent Rates and taxes Repairs and maintenance - buildings - others Legal and professional fees Traveling and conveyance Auditors' remuneration (refer note below) Other establishment expenses Amortisation of foreign currency monetary item translation difference account (FCMITDA) Total For the year ended March 31, 2012 2.76 132.34 54.77 31.90 73.88 402.74 698.39

(Rs. in lakhs) For the year ended March 31, 2011 401.05 0.02 19.08 195.55 696.49 219.05 48.29 217.86 1,797.39

Auditors remuneration includes For audit For other assurance services For reimbursement of expenses Total 10.00 20.55 1.35 31.90 22.00 25.94 0.35 48.29

41

Notes forming part of financial statements

21 FINANCE COSTS Particulars Interest expense - on bank loans - on loan from financial Institution - on finance lease obligations - on foreign currency convertible bonds - on debentures - on others Other borrowing costs Total For the year ended March 31, 2012 727.71 5,951.92 1,106.27 788.73 665.30 9,239.93 (Rs. in lakhs) For the year ended March 31, 2011 7,734.95 966.29 3,047.22 1,129.78 4,044.40 827.12 657.76 18,407.52

22

COMPOSITE SCHEME OF ARRANGEMENT The Honble High Court of Gujarat at Ahmedabad vide order dated March 1, 2011 approved the Composite Scheme of Arrangement (Scheme) between Essar Shipping Ports & Logistics Limited (ESPLL), Essar Ports & Terminals Limited (EPTL) Mauritius, Essar International Limited (EIL) Mauritius and Essar Shipping Limited (ESL). The Scheme provided for the merger of EPTL and EIL with ESPLL and the demerger of the Shipping & Logistics Business and the Oilfields Services Business into ESL. Pursuant to the Scheme, all the assets and liabilities pertaining to the Shipping & Logistics Business and the Oilfields Services Business stood transferred to and became vested in ESL at the book values (ignoring revaluation) as appearing in the books of account of ESPLL with effect from October 1, 2010 being the Demerger Appointed Date, which are based on financial statements as on September 30, 2010. Foreign Currency Convertible Bonds aggregating to USD 2,400 lakhs (out of USD 2,800 lakhs) issued by ESPLL stood transferred to ESL. In consideration of the demerger, for every three equity shares held by a member as on the record date, the Company allotted two equity shares of Rs.10/- each as fully paid up to the eligible members of ESPLL whose name were recorded in the register of members as on May 21, 2011.

23

DEFERRAL / CAPITALISATION OF EXCHANGE DIFFERENCE Pursuant to notification issued by the Central Government under Companies (Accounting Standards) Amendment Rules, 2009 dated March 31, 2009; the exchange differences arising on conversion / translation / settlement of longterm foreign currency monetary items in so far as they relate to the acquisition of a depreciable capital asset, has been added to or deducted from the cost of the respective asset and has been depreciated over the remaining balance life of the asset. In case of exchange difference related to any other long-term foreign currency monetary item, the exchange difference is accumulated in the "foreign currency monetary item translation difference account", (FCMITDA) and is amortised over the balance period of such long term monetary item but not beyond accounting period ending on or before March 31, 2020 .The following is the effect of the option exercised:-

42 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of financial statements

(Rs. in lakhs) Particulars Net exchange (gain) / loss (deducted) / capitalised to the cost of the fixed assets / CWIP Net exchange (gain) / loss transferred to foreign currency monetary item translation difference account (FCMITDA) Amortisation of the above net exchange (gain) / loss for the year recognised in statement of profit & loss Balance in FCMITDA shown as trade receivables and other assets (Refer note 14) March 31, 2012 2,594.60 402.77 2,191.83 March 31, 2011 718.00

24

CONTINGENT LIABILITIES Particulars i) Guarantees given by banks on behalf of subsidiary ii) Corporate guarantees on behalf of subsidiaries Commitments to invest in subsidary companies As at March 31, 2012 1,600.00 201,160.00 23,467.15

(Rs. in lakhs) As at March 31, 2011 246,530.00 29,257.15

25

SEGMENT REPORTING a) Business Segment The Company has one primary business segment of fleet operations and chartering . b) Geographical segment The Companys fleet operations are managed on a worldwide basis from India. Fleet operating and chartering earnings based on the geographical location of customers: (Rs. in lakhs) Fleet operating and chartering earnings India China U.S.A U.K. Rest of the world Total Year ended March 31, 2012 3,622.00 3,622.00 Year ended March 31, 2011 35,577.30 1,508.20 2,496.19 2,017.20 7,087.80 48,686.69

26

EARNINGS PER SHARE Particulars The calculation of the basic and diluted earnings per share is based on the following data: Earnings for the purpose of basic earnings per share (net (loss) / profit for the year) (Rs. in lakhs) Equity shares at the beginning of the year (nos.) Equity shares reduced on account of demerger (nos.) Equity shares at the end of the year (nos.) Year ended March 31, 2012 Year ended March 31, 2011

(7,099.68) 410,455,552 410,455,552

2,087.48 615,683,320 205,226,773 410,455,552

43

Notes forming part of financial statements

26 EARNINGS PER SHARE (contd...) Particulars Weighted average equity shares for the purpose of calculating basic earnings per share (nos.) Weighted average equity shares for the purpose of calculating diluted earnings per share (nos.) Earnings per share-basic and dilutive (face value of Rs.10/- each) (Rs.) Year ended March 31, 2012 410,455,552 410,455,552 (1.73) Year ended March 31, 2011 410,455,552 410,455,552 0.51

FCCB and ESOP have not been considered for purpose of calculation of the weighted average number of equity shares for dilution purposes as they are anti-dilutive. 27 DERIVATIVE INSTRUMENTS AND UNHEDGED FOREIGN CURRENCY EXPOSURE A) Derivative contracts outstanding as at the Balance sheet are as follows: There were no forward / options contracts entered into by the Company during the financial year to hedge its foreign currency exposures. B) Unhedged foreign currency exposure The outstanding foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below: Particulars (a) Amount receivable in foreign currency on account of the following: i) Export of services ii) Bank balances (b) Amount payable in foreign currency on account of the following: Foreign Currency Convertible Bond (including interest accrued but not due) 28 798.00 5.46 USD 15.60 USD 0.12 5.00 USD 0.11

March 31, 2012 (Rs. in lakhs) (In lakhs)

March 31, 2011 (Rs. in lakhs) (In lakhs)

20,549.57

USD 401.70

17,943.94

USD 401.70

EMPLOYEE STOCK OPTION SCHEME a) The members of the Company at the Annual General Meeting held on September 9, 2011 have approved the issue of Employee Stock Options under the Essar Ports Employee Stock Options Scheme - 2011 (hereinafter referred to as the Scheme). The Scheme shall be operated and administered under the superintendence of the Remuneration Committee of the Board. Eligible Employees of the Company, its holding company and subsidiaries are entitled to Options under the Scheme. Each Option entitles the Eligible Employees to one underlying equity share of the Company. A trust will be formed for the administration of the Scheme. The Remuneration Committee is authorised to grant the Options to the Eligible Employees and the Exercise Price of the Options in terms of the Scheme. 1/3rd of the options granted will vest in the hands of the eligible employees over a period of 3 years commencing from the end of the 3rd, 4th and 5th year respectively of the date of grant of the Option. The Eligible Employees can exercise the options vested in them within a period of 7 years from the date of vesting.

44 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of financial statements

b) Employee stock options details for ESOP as on the balance sheet date are as follows: Particulars Year ended March 31, 2012 Options (numbers) Option outstanding at the beginning of the year Granted during the year Vested during the year Exercised during the year Lapsed during the year Options outstanding at the end of the year 740,334 740,334 Weighted average exercise price per option (in Rs.) 71.1 71.1 Year ended March 31, 2011 Options (numbers) NA NA NA NA NA NA Weighted average exercise price per option (in Rs.) NA NA NA NA NA NA

c) The impact on statement of profit and loss and earnings per share if the fair value of the options (on the date of the grant) were considered instead of the intrinsic value is as under: Particulars Net Profit / (loss) (as reported) Add / (Less): Stock based employee compensation (intrinsic value) Add / (Less): Stock based compensation expenses determined under fair value method for the grants issued Net Profit / (loss) (proforma) Basic and dilutive earnings per share (as reported) Basic and dilutive earnings per share (proforma) Year ended March 31, 2012 (7,099.68) 26.78 (7,126.46) (1.73) (1.74) (Rs. in lakhs) Year ended March 31, 2011 NA NA NA NA NA NA

d) The fair value of the Options granted is estimated on the date of grant using Black Scholes options pricing model taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used for calculating fair value: Assumptions Risk free interest rate Expected life Expected annual volatility of shares Expected dividend yield Year ended March 31, 2012 8.36% 58 64.81% 0.00% (Rs. in lakhs) Year ended March 31, 2011 NA NA NA NA

45

Notes forming part of financial statements

29 DEFERRED TAX LIABILITY The components of deferred tax liability are as follows: Particulars Deferred tax liability Depreciation of fixed assets (timing difference) A Deferred tax assets Tax on unabsorbed depreciation B Net deferred tax liability (A - B) 30 142.45 142.45 142.45 142.45 Year ended March 31, 2012 Year ended March 31, 2011

GOING CONCERN As on March 31, 2012, the Company's current liabilities exceeded its current assets by Rs. 59,744.01 lakhs due to classification as current of borrowings amounting to Rs. 30,000 lakhs repayable within the next one year, Rs. 4,568.55 lakhs payable for purchase of capital assets and Rs. 18,587.80 lakhs payable for purchase of investment. Subsequent to year end, the Company has rolled over loans of Rs. 30,000 lakhs for a period exceeding 12 months. The Company is also in discussion for raising additional funds through equity . As such, the excess current liabilities position will not affect the operations of the Company and therefore these financial statements have been prepared as a going concern.

31

EMPLOYEE BENEFITS The Company has classified the various benefits provided to employees as under: I. Defined contribution plans The Company has recognised the following amounts in the statement of profit and loss during the year: (Rs. in lakhs) Particulars a) Employers contribution to gratuity fund (offshore crew staff) b) Group accident policy premium (all employees) c) Contribution to pension fund (offshore crew staff) d) Employers contribution to superannuation fund e) Employers contribution to provident fund (offshore crew staff) 2011-12 0.60 2.39 0.87 2010-11 29.00 1.00 11.00 11.00 7.00

The above amounts are included in contribution to staff provident and other funds (refer note 18). II. Defined benefit plans a. Provident fund b. Gratuity c. Compensated absences (CA) In accordance with AS-15, the relevant disclosures are as under:

46 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of financial statements

(A) Changes in present value of defined benefit obligation: Particulars Provident fund (funded) 31.03.12 Present value of defined benefit obligation opening balance Current service cost Current service contributionemployee Interest cost Past service cost Acquisitions Benefits paid Actuarial (gain) / loss on obligations Present value of defined benefit obligation closing 1,408.24 19.26 36.26 15.92 68.52 (1,279.74) 268.46 31.03.11 1,668.75 119.80 132.93 86.52 (419.04) (259.60) 78.88 1,408.24 Gratuity-shore officers (funded) 31.03.12 30.37 4.65 2.43 (1.63) 35.82 31.03.11 79.20 16.72 6.05 66.92 (156.46) (3.22) 21.16 30.37 Gratuity-off shore officers (non funded) 31.03.12 31.03.11 194.70 15.00 8.00 (225.70) 8.00 (Rs. in lakhs) CA (non funded) 31.03.12 52.83 4.61 4.15 (13.66) (1.91) 46.02 31.03.11 115.77 18.08 8.94 (133.13) (2.38) 45.55 52.83

(B) Changes in the fair value of plan asset: Particulars Provident fund (funded) Gratuity-shore officers (funded) Gratuity-off shore officers (non funded)

(Rs. in lakhs) CA (non funded)

31.03.12 31.03.11 31.03.12 31.03.11 31.03.12 31.03.11 31.03.12 31.03.11 Fair value of plan assets as 1,408.24 1,668.74 opening Expected return on plan 15.92 86.52 assets Actual return on plan assets Acquisition adjustment (166.30) Actuarial gains / (losses) (1,279.74) 78.88 Contributions by the employer / 124.04 employees Benefits paid (259.60) Fair value of plan assets closing 268.46 1,408.24 24.79 2.21 0.04 2.35 29.39 78.73 8.35 (103.15) 1.74 42.34 (3.22) 24.79 2.00 (2.00)

(C) Amount recognised in balance sheet: Particulars Provident fund (funded) 31.03.12 Present value of defined benefit obligation Fair value of plan assets as at March 31, 2011 Liability / (asset) recognised in the balance sheet (included in current liabilities and provisions) (refer note 8) 268.46 268.46 31.03.11 1,408.24 1,408.24 Gratuity-shore officers (funded) 31.03.12 35.82 29.39 31.03.11 30.37 24.79 Gratuity-off shore officers (non funded) 31.03.12 31.03.11

(Rs. in lakhs) CA (non funded) 31.03.12 46.02 31.03.11 52.83

6.43

5.58

46.02

52.83

47

Notes forming part of financial statements

(D) Expenses recognised in the Statement of Profit and Loss: Particulars Provident fund (funded) 31.03.12 Current service cost Interest cost Expected return on plan assets Past service cost Net actuarial (gain) / loss recognised in the period Total expenses recognised in the statement of profit and loss
{(included in contribution to provident and other funds) (refer note 8)}.

(Rs. in lakhs) Gratuity-off shore officers (non funded) 31.03.12 31.03.11 15.00 8.00 8.00 31.00 CA (non funded) 31.03.12 4.61 4.15 (13.66) (4.90) 31.03.11 18.08 8.94 45.55 72.57

Gratuity-shore officers (funded) 31.03.12 4.65 2.43 (2.21) (1.66) 3.21 31.03.11 16.72 6.05 (8.35) 66.92 19.43 100.77

31.03.11 119.80 86.52 (86.52) 119.80

19.26 15.92 (15.92) 19.26

(E) Experience history: Particulars 31.03.12 Defined benefit obligation at the end of the year Plan assets at the end of the period Funded status Experience gain / (loss) adjustments on plan liabilities Experience gain / (loss) adjustments on plan assets Actuarial gain / (loss) due to change on assumptions Particulars Defined benefit obligation at the end of the year Plan assets at the end of the period Funded status Experience gain / (loss) adjustments on plan liabilities Experience gain / (loss) adjustments on plan assets Actuarial gain / (loss) due to change on assumptions Particulars Defined benefit obligation at the end of the year Plan assets at the end of the period Funded status Experience gain / (loss) adjustments on plan liabilities Experience gain / (loss) adjustments on plan assets Actuarial gain / (loss) due to change on assumptions (F) Category of plan assets: Percentage of each category of plan Provident fund assets to total fair value of plan assets: (funded) Particulars 31.03.12 31.03.11 Administered by Life Insurance Corporation of India Government of India security 25% 25% Public sector bonds / TDRs 60% 60% State government securities 15% 15%
48 Annual Report 2011-12

(Rs. in lakhs) Gratuity-shore officers (funded) 31.03.11 (30.00) 25.00 5.00 (21.00) 1.00 0.39 31.03.10 (79.00) 79.00 (29.00) 7.00 31.03.09 (53.00) 77.00 24.00 70.00 31.03.08 NA NA NA NA NA NA (35.82) 29.38 (6.44) 0.89 0.04 0.74

31.03.12

(Rs. in lakhs) Gratuity-offshore officers (non funded) 31.03.11 31.03.10 31.03.09 31.03.08 (190.00) (280.00) NA NA (190.00) (280.00) NA 90.00 59.00 NA NA 34.00 52.00 NA (Rs. in lakhs)

31.03.12 (46.02) (46.02) 12.41 12.41

CA (non funded) 31.03.11 31.03.10 (53.00) (116.00) (53.00) (116.00) (45.00) (91.00) 36.00 Gratuity-off shore officers (non funded) 31.03.12 31.03.11

31.03.09 (54.00) (54.00) 170.00 (54.00)

31.03.08 NA NA NA NA NA NA

Gratuity-shore officers (funded) 31.03.12 31.03.11 100% 100%

CA (non funded) 31.03.12 31.03.11

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of financial statements

(G) Actuarial assumptions In accordance with Accounting Standard (AS) 15 (revised), actuarial valuation as at the year end was done in respect of the aforesaid defined benefit plans based on the following assumptions: i) General assumptions: Particulars Provident fund (funded) 31.03.12 Discount rate (per annum) Rate of return on plan assets (for funded scheme) Expected retirement age of employees (years) Separation rate of employees Rate of increase in compensation 8.50% 8.60% 58 31.03.11 7.80% 8.50% 58 Gratuity-shore officers (funded) 31.03.12 8.50% 8.50% 58 10.00% 9.00% 31.03.11 8.00% 8.50% 58 10.00% 9.00% Gratuity-off shore officers (non funded) 31.03.12 31.03.11 N.A CA (non funded) 31.03.12 8.50% NA 58 10.00% 9.00% 31.03.11 8.00% NA 58 10.00% 9.00%

ii) Mortality rates considered are as per the published rates in the Life Insurance Corporation (1994-96) mortality table. iii) Leave policy: a) Sick leave balance as at the valuation date and each subsequent year following the valuation date will be availed by the employee against future sick leave; the sick leave balance is not available for encashment. b) Leave balance as at the valuation date and each subsequent year following the valuation date to the extent not availed

by the employee is available for encashment on separation from the Company up to a maximum of 120 days. iv) As this is the fourth year of implementation of Accounting Standard (AS) 15 (revised), only corresponding previous three year figure have been furnished. v) The contribution to be made by the Company for funding its liability for gratuity during the financial year 201213 will be made as per demand raised by the fund administrator Life Insurance Corporation of India. 32 RELATED PARTY TRANSACTIONS: a) Holding companies : i) Essar Global Limited, Cayman Island, ultimate holding company ii) Essar Shipping & Logistics Limited, Cyprus, immediate holding company i) ii) iii) iv) v) vi) vii) viii) (ix) (x) (i) (ii) (iii) Essar Bulk Terminal Limited Vadinar Oil Terminal Limited Vadinar Ports & Terminals Limited Essar Bulk Terminal (Salaya) Limited Essar Bulk Terminal Paradip Limited (w.e.f March 31, 2011) Essar Paradip Terminals Limited Essar Shipping Limited (formerly known as Essar Ports & Terminals Limited) upto October 1, 2010 Essar Logistics Limited (upto September 30, 2010) Essar Oilfield Services India Limited (upto September 30, 2010) Essar Oilfields Services Limited, Mauritius (upto September 30, 2010) Mr. Rajiv Agarwal, CEO & Managing Director Mr. Kamla Kant Sinha, CEO (w.e.f. July 4, 2011) Mr. Shailesh Sawa, Director Finance (w.e.f. July 24, 2010)
49

b) Subsidiaries:

c) Key Management Personnel

Notes forming part of financial statements

(iv) (v) (vi) Mr. A. R. Ramakrishnan, Whole-time Director (upto May 22, 2011) Mr. V. Ashok, Whole-time Director (upto May 24, 2010) Mr. Sanjay Mehta, Managing Director (upto July 24, 2010)

d) Fellow subsidiaries / other related parties / affiliate where there have been transactions: (ii) (iii) (iv) (v) (vi) (vii) (ix) (x) (xi) (xii) Arkay Holdings Limited Imperial Consultants & Securities Pvt. Ltd. Essar Africa Holdings Limited (formerly known as India Securities Holdings Limited) Essar Agrotech Limited Essar Bulk Terminal Paradip Limited (till March 31, 2011) Essar Energy Holdings Limited Essar Infrastructure Services Limited Essar Information Technology Limited Essar Investments Limited Essar Logistics Limited (from October 1, 2010)

(i) Aegis Limited

(viii) Essar House Limited

(xiii) Essar Oil Limited (xiv) Essar Oilfields Services Limited (w.e.f. October 1, 2010) (xv) Essar Oilfield Services India Limited (w.e.f. October 1, 2010) (xvi) Essar Shipping Limited (w.e.f. October 1, 2010) (xvii) Essar Steel India Limited (formerly known as Essar Steel Limited) (xviii) Essar Steel Hazira Limited (xix) Futura Travels Limited

The details of transactions with related parties during the year ended March 31, 2012
(Rs. in lakhs) Nature of transactions Holding and subsidiary companies Year ended March 31, 2012 INCOME Fleet operating income Essar Bulk Terminal Limited Essar Steel India Limited Essar Shipping & Logistics Limited Essar Logistics Limited Vadinar Oil Terminal Limited Essar Bulk Terminal (Salaya) Limited Essar Oil Limited Total Other income Vadinar Oil Terminal Limited Vadinar Ports & Terminals Limited Essar Bulk Terminal Limited Essar Bulk Terminal Paradip Limited Essar Bulk Terminal (Salaya) Limited Essar Africa Holdings Limited Total Year ended March 31, 2011 Other related parties Year ended March 31, 2012 Year ended March 31, 2011 Key management personnel Year ended March 31, 2012 Year ended March 31, 2011 Total Year ended March 31, 2012 Year ended March 31, 2011

1,411.20 1,086.30 252.00 2,749.50 102.00 399.00 399.00 102.00 198.00 1,200.00

168.00 870.00 1,807.00 2,845.00

798.04 798.04

27,081.00 569.00 27,650.00

1,411.20 1,086.30 252.00 2,749.50 102.00 399.00 399.00 102.00 198.00 798.04 1,998.04

27,081.00 168.00 870.00 1,807.00 569.00 30,495.00

50 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of financial statements

(Rs. in lakhs) Nature of transactions Holding and subsidiary companies Year ended March 31, 2012 Equipment lease rental income Essar Steel India Limited Total Interest income on debentures Imperial Consultants & Securities Pvt. Limited Total Interest income Essar Investment Limited Essar Shipping & Logistics Limited Essar Oilfield Services India Limited Essar Oilfields Services Limited Essar Bulk Terminal Paradip Limited Essar Bulk Terminal (Salaya) Limited Essar Bulk Terminal Limited Total Remuneration* Sanjay Mehta A. R. Ramakrishnan Rajiv Agarwal Kamla Kant Sinha Shailesh Sawa V. Ashok Total Direct Voyage Expenses Essar Bulk Terminal Limited Total Hire charges Essar Shipping & Logistics Limited Essar Shipping Limited Total Manning charges Essar Infrastructure Services Limited Essar Bulk Terminal Limited Total Business center fees Essar Infrastructure Services Limited Essar House Limited Total Repair and maintenance Essar Agrotech Limited Essar Infrastructure Services Limited Total Traveling expenses Futura Travels Limited Total Reimbursement of expenses Essar Oilfields Services Limited Futura Travels Limited Essar Logistics Limited Total 70.00 70.00 140.00 140.00 Year ended March 31, 2011 790.00 2,551.00 127.00 84.00 32.00 117.00 3,701.00 606.00 606.00 2,224.00 2,224.00 Other related parties Year ended March 31, 2012 96.66 96.66 39.75 39.75 Year ended March 31, 2011 1.00 1.00 1,740.00 1,740.00 1,278.00 1,278.00 8.00 8.00 216.00 66.00 282.00 5.00 22.00 27.00 141.00 141.00 26.00 202.00 761.00 989.00 Key management personnel Year ended March 31, 2012 Year ended March 31, 2011 23.00 139.00 92.00 97.00 15.00 366.00 Total Year ended March 31, 2012 15.86 215.87 72.24 113.61 417.58 70.00 70.00 96.66 96.66 140.00 140.00 39.75 39.75 Year ended March 31, 2011 1.00 1.00 1,740.00 1,740.00 1,278.00 790.00 2,551.00 127.00 84.00 32.00 117.00 4,979.00 23.00 139.00 92.00 97.00 15.00 366.00 606.00 606.00 2,224.00 2,224.00 8.00 8.00 216.00 66.00 282.00 5.00 22.00 27.00 141.00 141.00 26.00 202.00 761.00 989.00

15.86 215.87 72.24 113.61 417.58

51

Notes forming part of financial statements

(Rs. in lakhs) Nature of transactions Holding and subsidiary companies Year ended March 31, 2012 Aircraft usage charges reimbursement Essar Oil Limited Total Professional / Advisory fees / Agency Fees Essar Shipping Limited India Securities Limited Essar Investment Limited Essar Information Technology Limited Essar Logistics Limited Essar Bulk Terminal Limited Vadinar Oil Terminal Limited Vadinar Ports & Terminals Limited Total Interest on loan (ICD) Vadinar Ports & Terminals Limited Total Interest on others Essar Logistics Limited Total Interest on lease loan Essar Shipping & Logistics Limited Total Sale of investments Essar Energy Holdings Limited Total Sale of preference shares Essar Bulk Terminal Limited Total Advance for allotment of preference / equity shares Essar Oilfield Services India Limited Vadinar Ports & Terminals Limited Essar Bulk Terminal (Salaya) Limited Essar Paradip Terminals Limited Essar Bulk Terminal Paradip Limited Essar Investments Limited Total Acquisition of assets Essar Logistics Limited Total Purchase of preference shares Essar Bulk Terminal Limited Essar Bulk Terminal Paradip Limited Essar Bulk Terminal (Salaya) Limited Essar Paradip Terminals Limited Essar Steel India Limited Total 52 Annual Report 2011-12 Year ended March 31, 2011 Other related parties Year ended March 31, 2012 Year ended March 31, 2011 Key management personnel Year ended March 31, 2012 Year ended March 31, 2011 Total Year ended March 31, 2012 Year ended March 31, 2011

900.00 900.00

900.00 900.00

319.00 221.67 49.07 589.75 438.70 438.70 4.88 4.88

128.00 128.00 1,782.00 1,782.00

31.51 31.51 280.55 280.55

6.00 506.00 11.00 12.00 535.00 5,486.00 5,486.00

31.51 31.51 438.70 438.70 280.55 280.55 4.88 4.88

6.00 506.00 11.00 12.00 535.00 128.00 128.00 1,782.00 1,782.00 5,486.00 5,486.00

100.00 100.00 4,950.00 7,807.36 900.75 18,587.80 32,245.91

2,400.00 8,125.00 525.00 9,050.00 20,100.00 10,076.00 6,600.00 3,118.00 19,794.00

142,331.00 10,076.00 152,407.00 5,002.50 5,002.50

142,331.00 2,400.00 8,125.00 100.00 525.00 9,050.00 10,076.00 100.00 172,507.00 5,002.50 5,002.50 4,950.00 7,807.36 900.75 18,587.80 32,245.91 10,076.00 6,600.00 3,118.00 19,794.00

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of financial statements

(Rs. in lakhs) Nature of transactions Holding and subsidiary companies Year ended March 31, 2012 Purchase of equity shares Vadinar Ports & Terminals Limited Essar Bulk Terminal Paradip Limited Essar Paradip Terminals Limited Total Loans and advances given Essar Bulk Terminal Limited Essar Bulk Terminal (Salaya) Limited Essar Bulk Terminal Paradip Limited Essar Oilfield Services India Limited Essar Oilfields Services Limited Total Security deposit received Essar Oil Limited Vadinar Oil Terminal Limited Vadinar Ports & Terminals Limited Essar Bulk Terminal Limited Total Loans and advances received Vadinar Ports & Terminals Limited Essar Steel India Limited Total Advance received from customer Vadinar Oil Terminal Limited Vadinar Ports & Terminals Limited Essar Bulk Terminal (Salaya) Limited Essar Bulk Terminal Limited Total Guarantees given by others on behalf of Company Essar Shipping & Logistics Limited Total Guarantee on behalf of others Vadinar Oil Terminal Limited Vadinar Ports & Terminals Limited Essar Bulk Terminal Limited Essar Paradip Terminals Limited Essar Bulk Terminal Paradip Limited Total 2,400.00 2,400.00 10,021.71 326.57 754.05 826.22 11,928.55 Year ended March 31, 2011 2.00 4.00 6.00 200.00 40.00 635.00 875.00 150.00 150.00 150.00 450.00 3,500.00 3,500.00 2,589.36 2,589.36 Other related parties Year ended March 31, 2012 Year ended March 31, 2011 100.00 1,381.00 1,481.00 650.00 650.00 10,000.00 10,000.00 Key management personnel Year ended March 31, 2012 Year ended March 31, 2011 Total Year ended March 31, 2012 2,400.00 2,400.00 10,021.71 326.57 754.05 826.22 11,928.55 Year ended March 31, 2011 2.00 4.00 6.00 200.00 40.00 635.00 100.00 1,381.00 2,356.00 650.00 150.00 150.00 150.00 1,100.00 3,500.00 10,000.00 13,500.00 2,589.36 2,589.36

1,600.00 17,500.00 19,100.00

30,000.00 30,000.00 10,500.00 25,000.00 46,700.00 44,000.00 126,200.00

1,600.00 17,500.00 19,100.00

30,000.00 30,000.00 10,500.00 25,000.00 46,700.00 44,000.00 126,200.00

53

Notes forming part of financial statements

OUTSTANDING BALANCES AS AT MARCH 31, 2012 (Rs. in lakhs) Nature of balances Holding and subsidiary companies As at March 31, 2012 Other current assets Essar Bulk Terminal Paradip Limited Essar Africa Holdings Limited Total Advance towards purchase of preference shares Vadinar Ports & Terminals Limited Essar Bulk Terminal (Salaya) Limited Essar Paradip Terminals Limited Essar Bulk Terminal Paradip Limited Total Advance received from customers Vadinar Oil Terminal Limited Vadinar Ports & Terminals Limited Essar Bulk Terminal (Salaya) Limited Essar Bulk Terminal Limited Total 51.26 51.26 As at March 31, 2011 Other related parties As at March 31, 2012 798.04 798.04 As at March 31, 2011 Key management personnel As at March 31, 2012 As at March 31, 2011 Total As at March 31, 2012 51.26 798.04 849.30 As at March 31, 2011

100.00 100.00 13,440.13 326.57 754.05 826.22 15,346.98 3,500.00 3,500.00 202,360.31 122,921.01 7,527.87 20,678.24 11,550.01 904.50 365,941.93

2,400.00 5,007.00 525.00 2,450.00 10,382.00 3,418.00 3,418.00 3,500.00 3,500.00

100.00 100.00 13,440.13 326.57 754.05 826.22 15,346.98 3,500.00 3,500.00

2,400.00 5,007.00 525.00 2,450.00 10,382.00 3,418.00 3,418.00 3,500.00 3,500.00

Loans and advances received

Vadinar Ports & Terminals Limited Total Investments Essar Bulk Terminal Limited Vadinar Oil Terminal Limited Vadinar Ports & Terminals Limited Essar Bulk Terminal (Salaya) Limited Essar Bulk Terminal Paradip Limited Essar Paradip Terminals Limited Total Trade payables and other current liabilities Futura Travels Limited Aegis Limited Arkay Holdings Limited Essar Shipping Limited Essar Logistics Limited Essar Steel India Limited Essar Bulk Terminal Limited Vadinar Oil Terminal Limited Vadinar Ports & Terminals Limited Total Interest accrued but not due on loan Vadinar Ports & Terminals Limited Total

202,360.31 122,921.01 7,527.87 20,678.24 11,550.01 904.50 365,941.93

319.00 221.67 49.07 589.75

11.96 1.62 0.14 1,436.07 4,568.52 18,604.47 24,622.78

1,546.00 1,546.00

11.96 1.62 0.14 1,436.07 4,568.52 18,604.47 319.00 221.67 49.07 25,212.53

1,546.00 1,546.00

510.10 510.10

115.00 115.00

510.10 510.10

115.00 115.00

54 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of financial statements

(Rs. in lakhs) Nature of balances Holding and subsidiary companies As at March 31, 2012 Guarantees given by others on behalf of Company Essar Shipping & Logistics Limited Total Guarantees given on behalf of others Vadinar Oil Terminal Limited Vadinar Ports & Terminals Limited Essar Bulk Terminal (Salaya) Limited Essar Bulk Terminal Limited Vadinar Oil Terminal Limited Essar Paradip Terminals Limited Essar Bulk Terminal Paradip Limited Total As at March 31, 2011 Other related parties As at March 31, 2012 As at March 31, 2011 Key management personnel As at March 31, 2012 As at March 31, 2011 Total As at March 31, 2012 As at March 31, 2011

30,000.00 30,000.00

30,000.00 30,000.00

30,000.00 30,000.00

30,000.00 30,000.00

1,600.00 10,500.00 60,460.00 17,500.00 25,000.00 46,700.00 41,000.00 202,760.00

25,500.00 67,960.00 37,370.00 25,000.00 46,700.00 44,000.00 246,530.00

1,600.00 10,500.00 60,460.00 17,500.00 25,000.00 46,700.00 41,000.00 202,760.00

25,500.00 67,960.00 37,370.00 25,000.00 46,700.00 44,000.00 246,530.00

33 The Company has not received any intimation from the suppliers regarding their status under Micro, Small and Medium Enterprises Development Act, 2006 (the Act) and hence the disclosures required by the Act have not been made. The Company is making efforts to get confirmations from the suppliers as regards their status under the Act. 34 In view of exemption from Central Government obtained by the Company under section 211(4) of the Companies Act, 1956 vide order number 46/60/2011-CL-III dated 15.02.2011, information required under sub-clauses (a), (b), (c) and (e) of paragraph 4-D of part II of schedule VI to the Companies Act, 1956, is not given. 35 The Current year figures are not comparable with the previous year figures as the figures for the previous year includes the operations of the shipping business up to September 30, 2010 before it was demerged into Essar Shipping Limited pursuant to the Composite Scheme of Arrangement with effect from the appointed date of October 1, 2010. 36 The previous year figures have been regrouped / rearranged wherever necessary to conform to the current year classification as per the requirement of the Revised Schedule VI notified under the Companies Act, 1956.

For and on behalf of the Board of Directors

Rajiv Agarwal Managing Director R. N. Bansal Director Mumbai May 30, 2012

Shailesh Sawa Director Finance Manoj Contractor Company Secretary

55

Notes forming part of financial statements

STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 RELATING TO SUBSIDIARY COMPANIES
PARTICULARS Vadinar Oil Terminal Limited Vadinar 31.03.12 1,04,61,42,000 100.00% Essar Bulk Terminal Limited Hazira 31.03.12 37,00,000 74.00% Essar Bulk Terminal (Salaya) Limited Mumbai 31.03.12 30,04,875 100.00% Essar Bulk Terminal Paradip Limited Ahmedabad 31.03.12 47,500 70.30% Essar Paradip Terminals Limited Mumbai 31.03.12 45,000 90.00% Vadinar Ports & Terminals Limited Vadinar 31.03.12 27,01,34,457 100.00%

1 2 3 4

The relevant financial year of the subsidiary ended on No. of shares in the subsidiary company held by Essar Ports Limited as on March 31, 2012 Extent of holding by Essar Ports Limited as at the end of the financial period The net aggregate amount of the subsidiary companies profit / (loss) so far as it concerns the members of the holding company. a) Not dealt with in the holding companys accounts: i) For the financial year ended March 31, 2012

(Rs. 54,45,22,114) (Rs. 3,04,61,77,036)

Rs. 1,17,52,26,044 Rs. 38,44,24,086

(Rs. 36,77,324) (Rs. 16,67,839)

(Rs. 13,70,764) (Rs. 4,33,217)

(Rs. 2,94,775) (Rs. 3,97,628)

Rs. 38,19,95,463 (Rs. 8,10,000)

ii) For the previous financial years of the subsidiary companies since they became the holding companys subsidiaries b) Dealt with in holding companys accounts: i) For the financial year ended March 31, 2012

NIL NIL

NIL NIL

NIL NIL

NIL NIL

NIL NIL

NIL NIL

ii) For the previous financial years of the subsidiary companies since they became the holding companys subsidiaries 5 Change of interest of Essar Ports Limited in the subsidiary between the end of the financial year of subsidiary and that of Essar Ports Limited Material changes between the end of the financial year of the subsidiary and the end of the financial year of Essar Ports Limited in respect of : a) Fixed Assets

NIL

NIL

NIL

NIL

NIL

NIL

NIL NIL NIL NIL

NIL NIL NIL NIL

NIL NIL NIL NIL

NIL NIL NIL NIL

NIL NIL NIL NIL

NIL NIL NIL NIL

b) Investments c) Money lent by the subsidiary d) Money borrowed by the subsidiary company other than for meeting current liabilities (net) Note: i) ii)

Essar ports Limited holds 29.12% in Vadinar Ports & Terminals Limited directly and holds 70.88% through Vadinar Oil Terminal Limited, a 100% subsidiary of Essar Ports Limited. Essar Ports Limited holds 95% in Essar Bulk Terminal Paradip Limited through Essar Bulk Terminal Limited, a 74% subsidiary of Essar Ports Limited.

For and on behalf of the Board of Directors

Rajiv Agarwal Managing Director R. N. Bansal Director Mumbai May 30, 2012

Shailesh Sawa Director Finance Manoj Contractor Company Secretary

56 Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Consolidated Auditors Report

TO THE BOARD OF DIRECTORS OF ESSAR PORTS LIMITED (formerly known as Essar Shipping Ports & Logistics Limited) 1. We have audited the attached Consolidated Balance Sheet of ESSAR PORTS LIMITED (formerly known as Essar Shipping Ports & Logistics Limited) (the Company) and its subsidiaries (the Company and its subsidiaries constitute the Group) as at 31st March, 2012, the Consolidated Statement of Profit and Loss and the Consolidated Cash Flow Statement of the Group for the year ended on that date, both annexed thereto. These financial statements are the responsibility of the Companys Management and have been prepared on the basis of the separate financial statements and other information regarding components. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audit. 2. We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and the disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3. We report that the Consolidated Financial Statements have been prepared by the Company in accordance with the requirements of Accounting Standard 21 Consolidated Financial Statements, as notified under the Companies (Accounting Standards) Rules, 2006. 4. Attention is invited to Note 5 of the financial statements dealing with the recognition and measurement of the borrowings covered by the Corporate Debt Restructuring Scheme (the CDR) as per the accounting policy consistently followed by the Company in the absence of specific guidance available under the Accounting Standards referred to in sub-section (3C) of section 211 of the Companies Act, 1956 in consideration of the CDR. 5. Based on our audit and on consideration of the separate audit reports on the individual financial statements of the Company and its subsidiaries, and to the best of our information and according to the explanations given to us, in our opinion, the Consolidated Financial Statements give a true and fair view in conformity with the accounting principles generally accepted in India: (i) in the case of the Consolidated Balance Sheet, of the state of affairs of the Group as at 31st March, 2012; (ii) in the case of the Consolidated the Statement of Profit and Loss, of the profit of the Group for the year ended on that date; and (iii) in the case of the Consolidated Cash Flow Statement, of the cash flows of the Group for the year ended on that date. For DELOITTE HASKINS & SELLS Chartered Accountants (Firm Reg. No. 117365W)

Khurshed Pastakia Partner (Membership No. 31544) Mumbai May 30, 2012

57

Consolidated Balance Sheet as at March 31, 2012

(Rs. in lakhs) Particulars I. EQUITY AND LIABILITIES 1 Shareholders funds (a) Share capital (b) Reserves and surplus 2 3 Minority interest Non-current liabilities (a) Long-term borrowings (b) Deferred tax liabilities (net) (c) Other long term liabilities (d) Long-term provisions Current liabilities (a) Short-term borrowings (b) Trade payables (c) Other current liabilities (d) Short-term provisions Note No. As at March 31, 2012 As at March 31, 2011

3 4

41,058.61 179,175.00 220,233.61 6,444.09 496,402.32 4,337.29 24,622.76 492.45 525,854.82 1,761.59 7,708.09 107,906.64 2,890.46 120,266.78 872,799.30

41,058.61 175,203.11 216,261.72 8,129.03 423,912.52 15.89 49,476.94 347.97 473,753.32 1,673.98 3,566.27 39,168.37 733.01 45,141.63 743,285.70

5 6 7 8 9 10 11 8

II.

Total ASSETS 1 Non-current assets (a) Fixed assets (i) Tangible assets (ii) Intangible assets (iii) Capital work-in-progress (b) Goodwill on consolidation (c) Non-current investments (d) Deferred tax assets (net) (e) Loans and advances (f) Other non-current assets 2 Current assets (a) Current investments (b) Inventories (c) Trade receivables (d) Cash and bank balance (e) Loans and advances (f) Other current assets

12 12 13 14 6 15 16 14 17 16 18 15 16

412,442.60 10.11 213,506.17 161,324.95 104.51 12,549.05 28,168.50 3,038.48 831,144.37 0.54 688.58 15,855.56 2,749.87 19,316.34 3,044.04 41,654.93 872,799.30

321,847.47 13.52 186,156.07 146,113.25 104.51 37,640.90 104.39 691,980.11 2,256.60 8,318.06 15,692.42 23,971.04 1,067.47 51,305.59 743,285.70

Total See accompanying notes forming part of the financial statements

In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Khurshed Pastakia Partner

For and on behalf of the Board of Directors

Rajiv Agarwal Managing Director R. N. Bansal Director

Shailesh Sawa Director Finance Manoj Contractor Company Secretary

Mumbai May 30, 2012

Mumbai May 30, 2012

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NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Consolidated Statement of Profit & Loss for the year ended March 31, 2012
(Rs. in lakhs) Particulars REVENUE FROM OPERATIONS Other income Total Revenue EXPENSES: Employee benefits expense Operating expenses Establishment and other expenses Total Profit before exceptional items, extraordinary items, finance cost, tax, depreciation and amortisation Finance costs Profit before exceptional items, extraordinary items, tax, depreciation and amortisation Depreciation and amortisation expense Profit before exceptional item Exceptional item (refer note no. 5 (C) (iv) ) Profit after exceptional item and before tax Tax expenses: Current tax (including MAT) MAT credit availed Deferred tax (credit) / charge Tax adjustment for earlier years Profit for the year after tax Less: Share of minority interest (profit) Profit for the year Earnings per share: ( face value Rs. 10/- each ) (1) (2) Basic Diluted 30 1.56 1.50 1.71 1.66 5,286.56 (3,331.36) (8,227.64) 52.90 9,884.22 (3,488.75) 6,395.47 3,492.23 (200.00) 181.58 (13.97) 8,284.13 (1,268.96) 7,015.17 12 24 21 22 23 2,198.66 17,562.42 2,024.05 21,785.13 91,321.26 42,080.84 49,240.42 22,024.56 27,215.86 (23,551.18) 3,664.68 11,344.12 101,992.05 4,073.51 117,409.68 91,202.58 47,375.30 43,827.29 32,083.32 11,743.97 11,743.97 Note No. 19 20 For the year ended March 31, 2012 110,880.69 2,225.70 113,106.39 For the year ended March 31, 2011 191,069.74 17,542.52 208,612.26

See accompanying notes forming part of the financial statements

In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Khurshed Pastakia Partner

For and on behalf of the Board of Directors

Rajiv Agarwal Managing Director R. N. Bansal Director

Shailesh Sawa Director Finance Manoj Contractor Company Secretary

Mumbai May 30, 2012

Mumbai May 30, 2012

59

Consolidated Cash Flow Statement for the year ended March 31, 2012
(Rs. in lakhs) Particulars A CASH FLOW FROM OPERATING ACTIVITIES Profit before tax & exceptional Item Adjustments for : Depreciation / amortisation / impairment Finance cost Interest income Profit on sale of assets Profit on sale of long term investment Profit on sale of current investments Dividend on investments Excess provision of earlier year written back Foreign exchange difference loss / (gain) Operating profit before working capital changes Adjustments for: Trade and other receivables Inventories Trade and other payables Cash generated from operations Income taxes refund / (paid) net Net cash flow from operating activities B CASH FLOW FROM INVESTING ACTIVITIES Purchase of fixed assets including capital work in progress / advance Proceeds from sale of fixed assets Purchase of current investments Proceeds from sale of current investments Proceeds from sale of non-current investments Proceeds from sale of investments in subsidiaries Fixed deposits matured / (placed) with maturity period of more than three months, (net) Loans and advances repaid by subsidiaries and other body corporates Dividend on investments Interest received Purchase of preference shares from minority Net cash used for investing activities (73,536.10) (54,075.53) 54,458.85 3.04 6,102.54 916.40 (5.90) (66,136.70) (128,287.75) 4,755.61 (154,556.88) 164,137.84 37,044.59 (9,107.99) 46,886.80 1,848.90 5,930.70 (10,060.87) (41,409.05) (7,751.19) (72.10) (6,249.29) 75,991.11 (4,626.36) 71,364.75 7,703.20 (552.51) 9,666.59 90,789.80 (4,855.98) 85,933.82 22,024.56 42,080.84 (900.81) (4.85) (3.04) (335.02) (12.39) (1.46) 90,063.69 32,083.32 47,375.30 (7,112.07) (3,011.46) (5,259.81) (161.96) (108.84) (80.61) (1,495.32) 73,972.52 27,215.86 11,743.97 For the year ended March 31, 2012 For the year ended March 31, 2011

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NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Consolidated Cash Flow Statement for the year ended March 31, 2012
(Rs. in lakhs) Particulars C CASH FLOW FROM FINANCING ACTIVITIES Interest and finance expenses paid Refund of share application money Proceeds from debentures Proceeds from secured loans Proceeds from commercial papers Bills accepted during the year Bills repaid during the year Proceeds from unsecured loans Repayment of secured loans Redemption of preference share Repayment of finance lease obligations Repayment of commercial papers Repayment of unsecured loan Net cash flow from / (used in) financing activities INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents given on demerger Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of the year (refer note 18 (A) ) Notes : 1 The above cash flow statement excludes assets / liabilities (other than cash balance) on merger from Essar International Limited and Essar Ports & Terminals Limited and transfer to Essar Shipping Limited on demerger, as it is non cash transaction (refer note 26). 2 Non Cash Transaction During the year, the Company has converted inventory of Rs. 1,640.12 lakhs to capital assets. 3 Cash flow statement has been prepared under the indirect method as set out in Accounting Standards 3 - Cash flow statement referred to in Section 211(3C) of the Companies Act, 1956. See accompanying notes forming part of the financial statements (28,475.07) (1,791.70) 84,294.91 34,884.76 (59,009.15) (18,271.81) (23,700.00) (12,068.06) (6,840.01) 8,455.42 1,615.41 (35,690.63) 130,964.40 166,074.17 16,000.00 57,499.10 (56,626.71) 79,081.53 (162,202.68) (116,461.00) (4,131.99) (16,000.00) (77,007.26) (18,501.07) 26,023.70 (33,617.28) 16,049.00 8,455.42 For the year ended March 31, 2012 For the year ended March 31, 2011

In terms of our report attached For Deloitte Haskins & Sells Chartered Accountants Khurshed Pastakia Partner

For and on behalf of the Board of Directors

Rajiv Agarwal Managing Director R. N. Bansal Director

Shailesh Sawa Director Finance Manoj Contractor Company Secretary

Mumbai May 30, 2012

Mumbai May 30, 2012

61

Notes forming part of consolidated financial statements

1. COMPANY PROFILE Essar Ports Limited (the Company/EPL) develops and operates ports and terminals and is one of the largest private sector port company in India. EPL is Indias second-largest, private-sector port and terminals company by capacity and throughput. EPL is part of the multinational Essar Group and holds the Groups entire ports business. It is listed on the BSE Limited and the National Stock Exchange of India Limited (NSE). The Company, which was previously named Essar Shipping Ports & Logistics Limited (ESPLL), recently went through a demerger process, following which the shipping, logistics and oilfield drilling businesses were demerged from ESPLL and transferred to another company, Essar Shipping Limited, which is also listed on Indian stock exchanges. EPL through its subsidiaries develops and operates ports and terminals for handling liquid, dry bulk, break bulk and general cargo, with an existing aggregate capacity of 88 MTPA across two facilities located at Vadinar and Hazira in the state of Gujarat on the west coast of India. The facilities at Vadinar and Hazira are used primarily by affiliated customers for the receipt of raw materials such as crude oil, iron ore / pellets, limestone, dolomite and coal, and for the dispatch of finished goods such as petroleum products and steel products. EPL is in the process of increasing its aggregate ports capacity to 158 MTPA with expansion projects at Vadinar and Hazira, a new port at Salaya in Gujarat and two terminals at Paradip in the state of Odhisa on the east coast of India. The ports expansion projects have been undertaken, in part, to accommodate the increase in traffic expected to arise from plant expansions planned to be carried out by the Companys affiliated customers, and in part to support the increase in business from non-affiliated customers being targeted by the Company. 2. SIGNIFICANT ACCOUNTING POLICIES: a) Basis Of Accounting These financial statements are prepared under the historical cost convention, except for the revaluation of fleet, on accrual basis of accounting and are in accordance with generally accepted accounting principles and in compliance with the applicable Accounting Standards (AS) referred to in sub-section (3C) of Section 211 of the Companies Act, 1956. b) Use Of Estimates The preparation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported balances of assets and liabilities and disclosures relating to contingent liabilities as at the reporting date and the reported amounts of income and expenses
62
Annual Report 2011-12

during the reporting period. Differences between the actual results and estimates are recognised in the period in which the results are known / materialised. c) Basis of Consolidation a) The financial statements of Essar Ports Limited (formerly known as Essar Shipping Ports & Logistics Limited) (the Company) and its subsidiaries (together Group) are combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after eliminating all material intra-group balances and intragroup transactions in accordance with AS21 Consolidated Financial Statements. b) The difference between the costs of investment in the subsidiaries, over the net assets at the time of acquisition of shares in the subsidiaries is recognised in the financial statements as goodwill or capital reserve, as the case may be. c) The minoritys share in the net profit of the consolidated subsidiaries for the year is identified and adjusted against the income of the Group in order to arrive at the net income attributable to shareholders of the Company. d) The minoritys share in the net assets of the consolidated subsidiaries is identified and presented in the Consolidated Balance Sheet separate from liabilities and equity of the Companys shareholders. e) The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances and where divergent, appropriate adjustments are made. d) Fixed Assets a) Fixed assets are recorded at cost of acquisition or at revalued amounts less accumulated depreciation and impairment loss, if any. Cost of acquisition of fleet includes brokerage, start up costs and cost of major improvements / upgradation. Cost of acquisition is inclusive of cost of construction including erection, installation and commissioning expenses, expenditure during construction, inseparable knowhow costs, gains or losses earned / incurred during the trial run, non refundable duties and taxes, borrowing costs and other incidental costs, where applicable. b) Assets acquired on hire purchase, being in the nature of finance lease, are capitalised as

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

fixed assets at lower of fair value at inception of the lease and the present value of minimum lease payments and corresponding liability is recognised. The lease rentals paid (excluding operating expenses) are bifurcated into principal and interest components by applying an implicit rate of return. The interest is charged against income as a period cost and the principal amount is adjusted against the liability recognised in respect of assets taken on finance lease. c) Foreign exchange differences on conversion / translation / settlement in respect of long term monetary items used for acquisition of depreciable fixed assets are added to the cost of fixed assets. e) Intangible Assets Intangible assets are recognised only when it is probable that future economic benefits attributable to the asset will flow to the Group and the cost of such assets can be measured reliably. Intangible assets are stated at cost less accumulated amortisation and impairment loss, if any. All costs relating to the acquisition are capitalised. Intangible assets are amortised over the useful life of the asset, subject to a rebuttable presumption that such useful lives will not exceed ten years. f) Capital Work-In-Progress, Expenditure During Construction And Capital Advances Direct expenditure on projects or assets under construction or development is shown under capital work in progress. Expenditure incidental to the construction of the projects or assets that take substantial period of time to get ready for their intended use is accumulated as expenditure during construction pending allocation to fixed assets and other accounts, as applicable, on completion of construction.

g) Depreciation Depreciation for fleet including second hand fleet and rigs are provided by using the straight-line method based on a technical evaluation of the economic useful life of respective assets or at the rates prescribed under Schedule XIV to the Companies Act, 1956, whichever is higher as follows: Class of assets Fleet - tankers - bulk carriers - mini bulk carriers - tugs and barges - dredgers Rigs - semi submersible rig - land rig Plant & Machinery Method of depreciation SLM over balance useful life or 5% whichever is higher Estimated useful life 14 - 25 years 3 - 26 years 20 years 20 years 14 years 15 years 10 years 20 years

SLM over balance useful life or 7% whichever is higher

SLM over balance useful life or 4.75% whichever is higher SLM over balance useful life or 4.75% whichever is higher

a) Depreciation on water circulation treatment plant, aircraft, forklifts, cranes, impact hammer, turning plates, clamps, pipelines, vehicles (other than motor car and two wheelers), tankages and other heavy plant and machinery and building is provided on straight line method at the rate prescribed in Schedule XIV to the Companies Act, 1956. b) All other assets are depreciated by using the written down value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956. Assets costing less than Rs. 5,000/- are depreciated at 100% in the year of acquisition. c) Depreciation on the incremental value of fixed assets upon revaluation is recouped

proportionately from fixed assets revaluation reserve. d) Depreciation on additions / deductions to fixed assets made during the year is provided on a pro-rata basis from / up to the date of such additions / deductions, as the case may be. e) Profit or loss on disposal of revalued fixed assets is recognised with reference to their revalued carrying values. The balance, if any, in the fixed assets revaluation reserve relating to revalued fixed assets that are sold / disposed is transferred to general reserve. f) Depreciation on addition of assets due to exchange variation is provided over the remaining useful life of the asset.
63

Notes forming part of consolidated financial statements

g) Assets that are to be handed over to Kandla Port Trust and Gujarat Maritime Board are depreciated over a concession period or rates prescribed under Schedule XIV of the Companies Act, 1956 whichever is higher. h) Impairment Of Assets The Group assesses on each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Group estimates the recoverable amount of the asset. If such recoverable amount of the asset is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The amount so reduced is treated as an impairment loss and is recognised in the Statement of Profit and Loss, except in case of revalued assets, where it is first adjusted against the related balance in fixed assets revaluation reserve. If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is carried at the recoverable amount subject to a maximum of depreciated historical cost, except for revalued assets which are subject to a maximum of depreciated revalued cost. i) Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction / development of qualifying asset are capitalised as a part of cost of such asset. A qualifying asset is one that necessarily takes substantial period of time to get ready for the intended use. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of fixed assets are amortised and charged to the Statement of Profit and Loss, over the tenure of the loan. j) Investments a) Long term investments are carried at cost less provision for other than temporary diminution, in the fair / market value of these investments. b) Current investments are carried at the lower of cost and fair / market value. k) Inventory Inventory is valued at the lower of cost and net realisable value. Cost is determined on first-in firstout basis. l) Revenue Recognition a) Operating and chartering earnings represent the value of charter hire earnings, demurrage, freight earnings, fleet management fees, road freight income and stevedoring and lighterage earnings and are accounted on accrual basis. Freight earnings, stevedoring and lighterage are recognised on a pro-rata basis for voyages in progress at balance sheet date after loading / unloading of the cargo is completed; revenues and related expenses for voyages where cargo has not been loaded / unloaded as on the balance sheet date are deferred and recognised in the following year. b) Revenue on sale of products is recognised when the seller has transferred to buyer the property in the goods for a price or when all significant risks and rewards of ownership have been transferred to the buyer and the seller retains no effective control of the goods transferred to a degree usually associated with ownership and no significant uncertainty exists regarding the amount of consideration that will be derived from the sale of goods. c) Revenue on transactions of rendering services is recognised either under the completed service contract method or under the proportionate completion method, as appropriate. Performance is regarded as achieved when no significant uncertainty exists regarding the amount of consideration that will be derived from rendering the services. d) Interest income is recognised using the time proportion method based on the rates implicit in the transactions. e) Insurance claims are recorded based on reasonable certainty of their settlement. f) Other income is recognised on accrual basis. m) Dividend Income Dividend income is recognised when the right to receive the payment is established by the balance sheet date. n) Operating Expenses All expenses relating to road freight, intercarting and the operation of fleet, including crewing, insurance, stores, bunkers, charter hire, special survey costs and other expenses are expensed under operating expenses on accrual basis. Dry-docking expenses are recognised under operating expenses in the period to which it relates. o) Operating Lease Rentals are expensed with reference to the terms of the lease agreement and other considerations in respect of operating leases. p) Employee Benefits a) The Company (employer) and the employees contribute a specified percentage of eligible employees salary - currently 12%, to the

64

Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

employer established provident fund Essar Staff Provident Fund set up as an irrevocable trust by the Company. The Company is generally liable for annual contributions and any shortfall in the fund assets based on government specified minimum rates of return currently @ 9.5%, and recognises such provident fund liability, considering fund as the defined benefit plan, based on an independent actuarial valuation carried out at every statutory year end. b) Provision for gratuity for floating staff is made as under: i) For officers on actuarial valuation. ii) For crew on accrual basis as per rules of the National Maritime Board and is  charged to the Statement of Profit and Loss. Contribution in respect of gratuity for onshore staff is made to Life Insurance Corporation of India based on demands made. The Company also accounts for gratuity liability based on an independent actuary valuation carried out at every statutory year end. c) Contribution for superannuation, funded by payments to Life Insurance Corporation of India, is a fixed percentage of the salary of eligible employees under a defined contribution plan is charged to the Statement of Profit and Loss / expenditure during construction as applicable. d) Provision for all accumulated compensated absences of eligible employees is made based on independent actuarial valuation. e) The Company has formulated Employee Stock Option Scheme (ESOS) in accordance with Securities and Exchange Board of India (Employee Stock Option Scheme) Guidelines, 1999. The Scheme provide for grant of Options to employees of the Group to acquire the equity shares of the Company that vest in a graded manner and that are to be exercised within a specified period. In accordance with the SEBI Guidelines and the guidance note on Accounting for Employee Share Based Payments notified under the Companies (Accounting Standard) Rules, 2006, the excess, if any, of the market price of the share preceding the date of grant of the option under ESOS over the exercise price of the option is amortised on a straightline basis over the vesting period. q) Foreign Currency Transactions Transactions denominated in foreign currencies are recorded at standard exchange rates determined monthly which approximates the actual rate on the date of transaction. The difference between the standard rate and the actual rate of settlement is accounted in the Statement of Profit and Loss. Monetary items denominated in foreign currency are translated at the rate prevailing at the end of the year. Gains / losses arising on conversion/ translation / settlement of foreign currency transactions are recognised in the Statement of Profit and Loss. Gains / losses on conversion/ translation / settlement of long term foreign currency monetary items related to acquisition of a depreciable fixed asset added to or deducted from the cost of the assets and are depreciated over the balance life of the asset. FCMITDA Gains / losses arising on conversion / translation / settlement of long term foreign currency items other than those relating to acquisition of depreciable assets are accumulated in a Foreign Currency Monetary Item Translation Difference Account and amortised over the balance period of such long term foreign currency item but not beyond accounting period ending on or before March 31, 2020. On consolidation, the assets and liabilities of the Groups overseas operations are translated at exchange rates ruling on the balance sheet date. Income and expense items are translated at the average exchange rates for the year. The resultant exchange differences are classified as foreign currency translation reserve under reserves and surplus. The exchange difference arising on account of investments made during the year in foreign subsidiaries by holding company compared with related share capital of subsidiaries is adjusted in foreign currency translation reserve. r) Taxation a) Income tax on income from qualifying fleet is provided on the basis of the Tonnage Tax Scheme whereas income tax on nontonnage income and fringe benefit tax are provided as per the other provisions of the Income Tax Act, 1961. Taxes on income earned by foreign subsidiaries are provided based on tax laws of its domicile country. b) The tax effect of timing differences relating to non-tonnage tax activities that occur between taxable income and accounting income and are capable of reversal in one or more subsequent periods are recorded as a deferred tax asset or deferred tax liability. They are measured using the substantively enacted tax rates and tax regulations as of the balance sheet date.
65

Notes forming part of consolidated financial statements

Deferred tax assets arising on account of brought forward losses and unabsorbed depreciation under tax laws are recognised, only if there is a virtual certainty of realisation, supported by convincing evidence. Deferred tax assets on account of other timing differences are recognised to the extent there is reasonable certainty of realisation. s) Provisions, Contingent Liabilities And Contingent Assets Provisions are recognised for present obligations arising out of past events if it is probable that an outflow of economic resources, the amount of which can be reliably estimated, will be required to settle the obligation. Contingent liabilities are disclosed in respect of possible obligations that arise from past events, the existence of which will be confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Group, or a present obligation that 3 SHARE CAPITAL Particulars (a) Authorised Equity shares of Rs. 10/- each Redeemable cumulative preference shares of Rs. 100/- each Issued, subscribed and fully paid up Equity shares of Rs. 10/- each Forfeited equity shares is not recognised because a reliable estimate of the liability cannot be made, or the likelihood of an outflow of economic resources is remote. Contingent assets are not recognised in the financial statements. t) Segment Accounting Policies: a) Segment Assets And Segment Liabilities: Segment assets include all operating assets used by the segment and consist principally of fixed assets, inventories, sundry debtors, cash and bank balances. Segment assets and liabilities do not include share capital, reserves and surplus, income tax (both current and deferred) and unallocable assets and liabilities. b) Segment Revenue And Segment Expenses: Segment revenue and expenses are directly attributable to the segment. It does not include interest income on investments, intercorporate deposits, interest expense and provision for taxes.

As at March 31, 2012 Number (Rs. in lakhs) 1,000,000,000 1,050,000 100,000.00 1,050.00 101,050.00 410,455,552 2,464,648 41,045.56 13.05 41,058.61

As at March 31, 2011 Number (Rs. in lakhs) 1,000,000,000 1,050,000 100,000.00 1,050.00 101,050.00 410,455,552 2,464,648 41,045.56 13.05 41,058.61

(i)

Of above 17,18,87,182 (previous year 17,18,87,182) equity shares were allotted as fully paid up equity shares for consideration other than cash pursuant to scheme of amalgamation during financial year 2008-09.

(b)

Reconciliation of the shares outstanding at the beginning and at the end of the reporting period Particulars a) Equity shares of Rs. 10/- each At the beginning of the year Add: Pending allotment of shares Add: Issue of shares Less: extinguishment under the scheme of arrangement Outstanding at the end of the year As at March 31, 2012 Number (Rs. in lakhs) 410,455,552 410,455,552 41,045.56 41,045.56 As at March 31, 2011 Number (Rs. in lakhs) 410,455,552 410,455,552 41,045.56 41,045.56

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DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

(c) Terms / rights attached to equity shares The Company has one class of equity shares having a par value of Rs. 10/- per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing annual general meeting. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding. (d) Shares held by holding / ultimate holding company and / or their subsidiaries / associates and details of the shareholding more than 5% shares in the Company Particulars a) Equity shares of Rs. 10/- each Essar Shipping & Logistics Limited, Cyprus, the holding company Essar Global Limited, the ultimate holding company Essar Projects (India) Limited, subsidiary of the ultimate holding company Essar Steel India Limited, subsidiary of the ultimate holding company Essar Investments Limited, related party Imperial Consultants & Securities Private Limited, related party 284,503,711 66 56,396,995 2,547,223 134,338 4,826 343,587,159 69.31% 0.00% 13.74% 0.62% 0.03% 0.00% 83.71% 340,903,706 66 2,547,223 131,338 4,826 343,587,159 83.05% 0.00% 0.00% 0.62% 0.03% 0.00% 83.71% As at March 31, 2012 Number % As at March 31, 2011 Number %

(i) 7,40,334 shares (As at March 31, 2011, NIL shares) of Rs. 71.10 each towards outstanding employee stock Options granted / available for grant. (ii) 2,04,75,463 shares (As at March 31, 2011, 2,04,75,463 shares) of Rs. 91.70 each towards 5% Foreign Currency Convertible Bonds. 4 RESERVES AND SURPLUS Particulars As at March 31, 2012 (Rs. in lakhs) As at March 31, 2011

a.

General reserves Opening balance Add: Transfer during the year Add: Transfer from tonnage tax utilised reserve Add: Transferred from foreign currency translation reserve Less: Adjustment on account of demerger Closing balance 27,263.00 1,191.11 28,454.11 90,799.34 15,000.00 (30,101.49) (48,434.85) 27,263.00 1,050.00 (1,050.00)

b.

Capital redemption reserve Opening balance Less: Adjustment on account of demerger Closing balance

67

Notes forming part of consolidated financial statements

4 RESERVES AND SURPLUS (contd...) Particulars c. Securities premium account Opening balance Less: Adjustment on account of demerger Closing balance d. Debenture redemption reserve Opening balance Less: Adjustment on account of demerger Closing balance e. Revaluation reserve Opening balance Less: Depreciation on enhanced value of fixed assets Less: Adjustment on account of demerger Closing balance f. Tonnage tax reserve Opening balance Less: Adjustment on account of demerger Closing balance g. Tonnage tax utilised reserve Opening balance Less: Transferred to general reserve Closing balance h. Surplus / (deficit) in the statement of profit and loss Opening balance Add: Net profit for the current year Less: Transfer to general reserves Less: Proposed dividends Equity Preference Less: Tax on dividend Net surplus in the statement of profit and loss Total reserves and surplus (2,072.43) (0.15) (339.83) 145,076.55 179,175.00 (1,056.47) 142,284.61 175,203.11 142,284.61 6,395.46 (1,191.11) 136,325.90 7,015.18 5,550.00 5,550.00 20,550.00 (15,000.00) 5,550.00 20,550.00 (20,550.00) 105.50 (11.16) 94.34 11,280.50 (1,925.00) (9,250.00) 105.50 2,500.00 (2,500.00) 424,285.81 (424,285.81) As at March 31, 2012 (Rs. in lakhs) As at March 31, 2011

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DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

5 LONG TERM BORROWINGS Non current portion Particulars As at March 31, 2012 As at March 31, 2011 As at March 31, 2012 (Rs. in lakhs) Current maturities As at March 31, 2011

A. Secured (a) Loan from banks Rupee term loans Funded interest facilities Less : Amount not payable if funded interest is paid on or before March 31, 2012 (b) Rupee term loans (c) From financial institution Rupee term loans Funded interest facilities Less : Amount not payable if funded interest is paid on or before 31.03.2012 (d) Buyers credit - foreign currency Total secured loan B. Unsecured (a) 5% Foreign currency convertible bonds  Series - B; US$ 18,571,428 interest bearing bonds due on August 24, 2017  Series -A ; US$ 21,428,572 interest bearing bonds due on August 24, 2015 [The above bonds are convertible into fully-paid ordinary shares of Rs. 10/- each of the Company at an initial conversion rate of Rs. 91.70 per equity share at a fixed exchange rate of Rs. 46.94] (b) Rupee term loan from banks (c)  Rupee term loan from financial institutions Total unsecured loan Total Less: Amount disclosed under the head other current liabilities (refer note 11) Long term borrowings [B] [A + B] 20,462.60 496,402.32 496,402.32 66,618.00 423,912.52 423,912.52 30,000.00 52,349.22 (52,349.22) 3,750.00 22,021.81 (22,021.81) 18,750.00 30,000.00 30,000.00 3,750.00 9,500.49 8,295.86 [A] 72,187.85 57,736.06 (24,607.78) 33,128.28 14,051.75 475,939.72 51,638.97 55,425.93 (26,422.53) 29,003.40 8,285.99 357,294.52 5,507.70 280.79 280.79 22,349.22 5,196.65 515.09 515.09 18,271.81 62,979.18 121,364.60 (41,528.20) 79,836.40 213,756.26 69,902.18 95,126.47 (41,772.52) 53,353.95 145,110.03 6,923.00 1,795.83 1,795.83 7,841.90 6,124.00 1,561.07 1,561.07 4,875.00

10,962.11

9,572.14

69

Notes forming part of consolidated financial statements

C. Notes : Secured Master Restructuring Agreement (MRA) Rupee Term loan (i) Term loans and funded interest facilities from banks and financial institutions (other than (b) below) are secured / to be secured by first ranking security interests on all movable and immovable assets, present and future, pledge of shares of the Company held by the promoters and persons associated with the promoters / Company, security interest on rights, titles and interests under each of the project documents, trust and retention accounts / sub-accounts, insurance policies related to the terminal project, immovable properties of Essar Oil Ltd. (EOL) pertaining to terminal project, guarantee by the promoters and guarantee of holding company for Rs. 25,000 lakhs (Previous year Rs. 25,000 lakhs) and pledge of shares of the Company held by the holding company. (ii) The facilities provided by a financial institution upto Rs. 20,000 lakhs (Previous year Rs. 20,000 lakhs) and interest and other charges thereon are secured by a Guarantee of EOL for Rs. 20,000 lakhs. To secure obligation of EOL pursuant to the said guarantee, security is created by first mortgage and charge on immovable and movable properties pertaining to the EOL refinery project, pledge over shares of EOL and an assignment of the project contracts relating to EOL refinery project, the trust and retention accounts pertaining thereto. deduction from funded interest facilities under secured loans / borrowings to reflect the present obligation on the balance sheet date. The changes in the present obligation of the said loans subsequent to capitalisation of the Terminal Project till each reporting date is treated as a finance cost item in the statement of profit and loss. Facility E of Rs. 24,179.58 lakhs is presented in the balance sheet under Funded Interest Facilities from banks and financial institutions under long term borrowings, with corresponding recognition of Rs. 807.34 lakhs, being interest attributable to construction period, being added to fixed assets and balance as Exceptional Item in the Statement of Profit and Loss. Secured Other Rupee Term loan (i) Secured rupee term loan from bank carrying interest rates ranging from 12% to 17% (base rate +/- spread) per annum. Repayment of term loan ranges between quarterly installments from quarter ending June 2012 to quarter ending March 2023. (ii) Term loans are secured by first mortgage and charge of all present and future movable and immovable assets / properties of the Company. The loan is further secured by Corporate Guarantee of Essar Ports Limited (formerly known as Essar Shipping Ports & Logistics Limited) of Rs. 56,000 lakhs. (iii) Foreign Currency Convertible Bonds carries interest @ 5% per annum payable semi annually. The bonds are convertible into equity shares of the company, any time upto the date of maturity at the option of the bond holders at conversion price of Rs. 91.70 per share at a predetermined exchange rate of Rs. 46.94 per USD. The bonds if not converted till the maturity date will be redeemed at par. (iv) Unsecured rupee term loan from financial institutions carry interest rate of 13% per annum, repayable on April 1, 2012. Essar Shipping & Logistics Limited has given corporate guarantee of Rs. 30,000 lakhs. (v) Unsecured rupee term loan of previous year from banks carry interest @ (base rate) - 3.75% per annum, repaid on July 1, 2011. (vi) Foreign currency buyers credit carrying interest rate ranging from 2.62% to 3.62% (LIBOR plus spread) per annum. Buyers credit facility are part of consortium agreement. The Company has intention to convert buyers credit into term loan on the maturity. Repayment terms will be as per those disclosed under point (3) above. The loan is further secured by Corporate Guarantee of Essar Ports Limited (Formerly known as Essar Shipping Ports & Logistics Limited) of Rs. 67,960 lakhs.

(iii) Secured Master Restructuring Agreement (MRA) Rupee Term loan (including funded interest) from bank carrying average interest cost of 10% to 11.50% per annum with quarterly installments payment upto June 2027. (iv) Recognition of Facility Stoppage and Facility E The Master Restructuring Agreement (MRA) dated December 17, 2004 entered pursuant to Corporate Debt Restructuring Scheme, gives an option, subject to consent of its lenders, to the Company to prepay funded interest loans (FS loan) of Rs. 86,908.16 lakhs (previous year Rs. 86,908.16 lakhs) at any point of time during their term at a reduced amount computed in accordance with mechanism provided in the MRA or in full, by one bullet payment in March, 2026. Interest on FS loan was not payable if FS loan was prepaid by April 24, 2012 and therefore considering the plans to prepay FS loan, interest liability on FS loan (Facility E) was earlier considered as contingent liability and now recognised as loan as the same is funded. In order to reflect the substance of the above, in the terms of presentation in balance sheet, an amount of Rs. 66,135.98 lakhs (previous year Rs. 68,195.06 lakhs) being the amount not payable as at balance sheet date has been presented as

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NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

6 DEFERRED TAX LIABILITY (NET) The components of net deferred tax liability / assets are as follows:Particulars Deferred tax liability Depreciation on fixed assets (A) Deferred tax assets Unabsorbed depreciation (B) Deferred tax liability / (assets) net (A-B) 33,792.87 33,792.87 (8,211.76) 16,135.99 16,135.99 15.89 25,581.11 25,581.11 16,151.88 16,151.88 As at March 31, 2012 (Rs. in lakhs) As at March 31, 2011

a. The Company has recognized net deferred tax asset of Rs. 12,549.05 lakhs on unabsorbed depreciation on the basis of estimate of contracted revenue for the period for which agreement has been entered into by it. b. The Company has disclosed Rs. 12,549.05 lakhs (previous year Rs. Nil) as deferred tax assets and Rs. 4,337.29 lakhs (previous year Rs. 15.89 lakhs) as deferred tax liability. 7 OTHER LONG TERM LIABILITIES Particulars Advances from customers Payable in respect of capital goods Acceptances (against LC issued by lenders and convertible into secured term loans on due dates) Total As at March 31, 2012 0.05 12.50 24,610.21 24,622.76 (Rs. in lakhs) As at March 31, 2011 12.50 49,464.44 49,476.94

PROVISIONS Particulars Long term provisions As at March 31, 2012 (a) Provision for employee benefits Gratuity Leave encashment (b) Others Provisions for taxation (net of advance tax) Proposed dividend on equity shares Proposed dividend on preference shares Tax on proposed dividend Total 1.83 492.45 3.13 347.97 458.30 2,072.43 0.15 339.83 2,890.46 55.85 434.77 39.97 304.87 1.25 18.50 As at March 31, 2011 As at March 31, 2012

(Rs. in lakhs) Short term provisions As at March 31, 2011 0.82 28.05 704.14 733.01

71

Notes forming part of consolidated financial statements

9 SHORT TERM BORROWINGS Particulars Secured Working capital loan From banks Rupee short term loan (secured by first pari passu charge on all the present and future movable / immovable assets / properties, insurance contracts, accounts, receivables and all other assets of the Company including but not limited to goodwill, trademarks and patents) (A) Unsecured Buyers credit Total (B) (A + B ) As at March 31, 2012 (Rs. in lakhs) As at March 31, 2011

1,503.55

1,673.98

1,503.55 258.04 258.04 1,761.59

1,673.98 1,673.98

10

TRADE PAYABLES Particulars Trade payablesDue to micro and small enterprises Others Total

As at March 31, 2012 7,708.09 7,708.09

(Rs. in lakhs) As at March 31, 2011 3,566.27 3,566.27

11 OTHER CURRENT LIABILITIES Particulars Payable in respect of capital goods Acceptance in respect of capital goods Advance from customers Current maturities of long-term borrowings (Refer note 5) Interest accrued but not due on borrowings Interest accrued and due on borrowings Other liabilities Statutory and other related dues Payable in respect of purchase of preference shares Others Total 812.00 18,587.80 1,368.90 107,906.64 4,340.50 1,545.88 39,168.37 As at March 31, 2012 33,111.51 1,110.00 51.45 52,349.22 414.61 101.15 (Rs. in lakhs) As at March 31, 2011 9,451.21 45.71 1,116.65 22,021.81 346.61 300.00

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Annual Report 2011-12

12. FIXED ASSETS

As at March 31, 2012 As at April 1, 2011 DEPRECIATION / IMPAIRMENT For the Deductions Adjustments year due to demerger As at March 31, 2012 NET BLOCK As at As at March 31, March 31, 2012 2011

(Rs. in lakhs)

Particulars

As at April 1, 2011

GROSS BLOCK AT COST / VALUATION Additions Other Sale / Adjustments during the adjustments deductions due to year [Borrowing demerger cost capitalised] 350.01 7,516.00 7,866.00 7,866.00 13,975.27 541,872.07 32.04 32.04 492,972.11 379,255.62 18.51 18.51 57,395.39 157,675.51 3.40 3.40 23,124.02 34,755.51 12,322.43 122,713.19 241.84 492,940.08 57,376.87 20.84 23,120.62 12,623.75 56,773.69 411,645.81 536.32 4,063.37 2,083.85 50,340.89 125.85 1,279.03 2,270.97 19,125.23 54.09 5,342.40 7,281.36 4,354.82 52,418.88 69,466.12 342,179.70 179.95 356.37 20.84 221.00 80,497.49 412,442.60 21.91 10.11 21.91 10.11 80,519.40 412,452.71 57,395.39 663,203.00 162.34 10,956.32 762.92 370.45 1,133.37 162.34 9,822.95 24.22 5,653.07 8,560.39 54,690.08 252,583.30 337.78 321,848.84 13.52 13.52 321,862.36

Tangible fixed assets

24.22 6,415.99

138.12 4,190.32

12,623.76 56,773.69 302,923.69 463.63

101,206.13 72.69

Land- freehold Buildings Fleet - Owned Berth and jetty Plant and machinery Furniture, fixture, air-conditioners, refrigerators and office equipments Vehicles Total tangible fixed assets (A) Intangible fixed assets Software Total intangible fixed assets (B) Total (A+B) Previous year

379,224.97

241.84 105,849.10

32.04 32.04 379,257.01 820,878.51

0.00 0.00 105,849.11 114,224.45

NOTICE

Notes forming part of consolidated financial statements

Notes:-

i) Pursuant to the notification of Ministry of Company Affairs relating to the effects of changes in foreign exchange rates, the resultant gain of NIL (previous year loss of Rs. 718 lakhs) arising on conversion / translation / settlement of long term

foreign currency items has been adjusted in the current year deductions to fleet and an aircraft.

ii) The company revalued its fleet on March 31, 2008 on the basis of valuation done by approved valuers. The net difference between book value and revalued value as on 31st March, 2008 amounting to Rs. 48.40 lakhs had been added to book

DIRECTORS REPORT

value of fleet and corresponding credit was given to Fixed Assets Revaluation Reserve. Gross Block as on March 31, 2012 includes Rs. 6,223 lakhs being an amount added on revaluation of fleet.

iii) Additions to Plant and Machinery include Rs. 807.34 lakhs due to capitalization of interest on Facility Stoppage from April 24, 2007 to June 30 , 2007. [refer note: 5(C)(iv)]

iv) (Rs. in lakhs) 23,124.02 (178.93) (909.36) (11.16) 22,024.56

Details of depreciation are as follows:

Particulars

GOVERNANCE

Depreciation for the year as above

Less : Depreciation on iii above considered as exceptional item

Less : Depreciation capitalised during the year

Less : Depreciation recouped from fixed assets revaluation reserve

Depreciation charged to statement of profit and loss

FINANCIAL STATEMENTS

73

Notes forming part of consolidated financial statements

13 CAPITAL WORK-IN-PROGRESS Particulars Capital work-in-progress Expenditure during the construction Total As at March 31, 2012 163,089.81 50,416.36 213,506.17 (Rs. in lakhs) As at March 31, 2011 157,190.08 28,965.98 186,156.06

EXPENDITURE DURING CONSTRUCTION Particulars As at March 31, 2011 60.04 30.19 1,670.49 2,059.24 180.06 18,439.77 57.26 683.82 6.75 24.36 287.93 612.19 2,525.31 1,309.82 8.52 11.62 2,112.20 30,079.57 1,246.53 (215.63) (24.52) (52.27) (22.22) (1,212.12) (759.48) (73.88) (1,113.59) 28,965.98 Additions during the year Capitalised During the Year

(Rs. in lakhs) As at March 31, 2012 230.99 3,738.62 2,690.61 233.44 31,989.20 113.84 1,593.18 13.70 142.50 589.57 3,977.50 218.95 1,763.58 2,728.29 50,023.97 1,114.91 (86.64) (24.52) (200.06) (22.22) (389.08) 392.39 50,416.36

Expenditure during construction Stores and spares Certification and survey charges Salary and manpower expenses Legal and professional charges Insurance Interest and finance cost Agency fee Depreciation Taxes and dues Traveling expenses Hiring charges Custom duty and clearing expense Stamp duty and registration charges Lease rent expenses Manning management / commitment fees Power and electricity expenses Loss / (gain) on foreign currency transaction and translation General expenses Total (A) Less : Interest accrued on term deposits Gain on redemption of mutual funds Interest on intercompany deposits given Site formation / scrap income Vessel and equipment hire income Income from lease rent Income from trial operation Miscellaneous Income Total (B) Total (A+B) (131.61) (49.74) (147.79) (315.20) (644.34) 32,495.20 178.73 1,212.12 759.48 2,150.33 (11,044.82) 100.67 200.80 2,204.99 1,945.34 136.52 21,443.95 56.58 909.36 6.96 119.36 347.84 3,080.17 218.95 1,751.96 616.09 33,139.54 (160.71) (136.87) (1,313.97) (83.13) (7,894.53) (1.23) (46.20) (612.19) (2,525.31) (412.49) (8.52) (13,195.15)

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NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

14 INVESTMENTS Non current Investments Particulars As at March 31, 2012 As at March 31, 2011 As at March 31, 2012 (Rs. in lakhs) Current Investments As at March 31, 2011

Unquoted Non trade investments (valued at cost ) (a) Investments in equity shares (unquoted, fully paid up ) 386,000 (previous year 386,000) equity shares of Rs. 10 /- each of Bhander Power Limited (b) Current Investments 42.643 Units (previous year NIL) of Taurus Mutual Fund Total 104.51 104.51 0.54 0.54 104.51 104.51

15

LOANS AND ADVANCES (UNSECURED, CONSIDERED GOOD) Non current Loans and advances Particulars As at March 31, 2012 14,017.99 566.66 4,571.11 30.76 As at March 31, 2011 25,831.78 151.51 6,955.49 As at March 31, 2012 1,854.20 483.54

(Rs. in lakhs) Current Loans and advances As at March 31, 2011 20.73 2,129.58 1,657.44

a. b. c. d. e.

Capital advances Security deposits Loans and advances to related parties Advance recoverable in cash or kind or for value to be received Other loans and advances (unsecured and considered good, unless stated otherwise) Advance income-tax and tax deducted at source (net of provision for taxation) MAT credit available Prepaid expenses Cenvat receivable Advance to vendor Other receivable

253.00

167.53

4,195.11

5,240.82

3,543.42 3,515.29 1,670.27 8,981.98 28,168.50

212.07 3,928.97 393.55 4,702.12 37,640.90

2,175.45 10,148.14 426.99 32.91 16,978.60 19,316.34

1,868.62 13,047.59 6.26 20,163.29 23,971.04

Total

75

Notes forming part of consolidated financial statements

16 TRADE RECEIVABLES AND OTHER ASSETS Non current Particulars As at March 31, 2012 As at March 31, 2011 As at March 31, 2012 (Rs. in lakhs) Current As at March 31, 2011

a.

Trade receivables outstanding for a period exceeding six months from the date they are due for payment Unsecured, considered good A B 12.75 15,842.81 8,318.06

b.

Other trade receivables (unsecured and considered good) Total Trade receivable

(A + B)

15,855.56

8,318.06

c.

Others (unsecured and considered good, unless stated otherwise) Non current bank balances (refer note 18) Deposits in escrow account Income receivables Unamortised share issue expenses Insurance claim receivable Interest accrued on fixed deposits Interest accrued on inter corporate deposits Interest accrued but not due on loans & advances given to related parties Others Total other current assets 2,820.41 99.26 118.81 104.39 198.59 64.30 86.58 167.61 275.19 18.00 291.83 111.22 308.00

3,038.48

104.39

2,526.96 3,044.04

63.23 1,067.47

17

INVENTORIES Particulars Stores and spares Fuel, oil and lubes Total Note: Inventories are valued at lower of cost and net realisable value. As at March 31, 2012 644.42 44.16 688.58

(Rs. in lakhs) As at March 31, 2011 2,251.04 5.56 2,256.60

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NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

18 CASH AND BANK BALANCES Particulars A. Cash and cash equivalents Balances with banks - On current accounts - Deposits with original maturity of less than three months Cash on hand Total cash and cash equivalent B. Other bank balances Deposits with original maturity of more than 3 months but less than 12 months Deposits with original maturity of more than 12 months Margin money deposit Total other bank balance Total cash and bank balances ( A + B ) [B] 250.00 416.33 468.13 1,134.46 2,749.87 7,237.00 7,237.00 15,692.42 [A] 1,615.41 1,615.41 5,919.08 2,536.26 0.08 8,455.42 As at March 31, 2012 (Rs. in lakhs) As at March 31, 2011

19

REVENUE FROM OPERATIONS Particulars Sale of services Port & terminal services Fleet operating and chartering earnings Surface logistics services Oilfield service Income Total 110,008.19 872.50 110,880.69 For the year ended March 31, 2012

(Rs. in lakhs) For the year ended March 31, 2011 69,890.98 63,667.98 40,658.00 16,852.78 191,069.74

20

OTHER INCOME Particulars Interest income - from banks - from others - Income tax refund - from Inter corporate deposit Management fee income Dividend from others Net gain on sale of investments Net gain on sale of long term investments Net gain on foreign currency translation and transaction (other than considered as finance cost) Profit on sale of assets Technical and facility sharing service income Other non operating income (net of expenses directly attributable to such income) Total 88.43 2.50 364.99 809.88 208.31 335.02 3.04 5.97 4.85 402.71 2,225.70 For the year ended March 31, 2012

(Rs. in lakhs) For the year ended March 31, 2011 625.85 6,486.22 174.18 108.84 161.96 5,259.81 1,495.32 3,011.46 15.75 203.13 17,542.52

77

Notes forming part of consolidated financial statements

21 EMPLOYEE BENEFITS EXPENSE Particulars Floating staff / operating related Salaries, wages and bonus Contribution to staff provident and other funds Staff welfare expenses Office staff / administrative related Salaries, wages and bonus Contribution to staff provident and other funds Staff welfare expenses Total For the year ended March 31, 2012 255.80 3.64 0.95 1,766.57 120.49 51.21 2,198.66 (Rs. in lakhs) For the year ended March 31, 2011 4,424.92 416.96 239.76 5,788.17 77.11 397.20 11,344.12

22

OPERATING EXPENSES Particulars

For the year ended March 31, 2012 651.97 233.84 7.29 1,840.73 125.89 3,789.39 2,253.04 346.54 63.35 1,157.14 1,165.06 4,412.41 644.65 871.12 17,562.42

(Rs. in lakhs) For the year ended March 31, 2011 4,607.37 8,928.54 70,667.18 923.76 2,790.69 1,717.74 1,286.74 2,576.10 137.10 167.89 1,800.02 3,749.30 639.05 2,000.57 101,992.05

Consumption of stores and spares Consumption of fuel, oil and water Direct voyage expenses / surface logistics services Commission, brokerage and agency fees Operation and maintenance service expense Standing costs Dry docking expenses Rent and hire charges Manning management Power and fuel Security maintenance charges Lighterage cost Port charges Wharfage charges Repairs plant and machinery Insurance, protection and indemnity club fees Total

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NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

23 ESTABLISHMENT AND OTHER EXPENSES Particulars Rent Rates and taxes Repairs and maintenance -buildings -others Legal and professional fees Traveling and conveyance Auditors' remuneration (refer note below) Communication expenses Vehicle hire and maintenance charges Other establishment expenses Amortisation of foreign currency monetary Item translation difference account (FCMITDA) Total 573.00 551.96 279.31 111.43 17.32 11.46 232.44 4.51 2,024.05 45.49 433.31 1,694.82 411.97 99.76 5.91 107.02 635.55 4,073.51 For the year ended March 31, 2012 190.42 52.20 (Rs. in lakhs) For the year ended March 31, 2011 583.19 56.49

(Rs. in lakhs) For the year ended March 31, 2012 AUDITORS REMUNERATION INCLUDES For audit fees For other assurance services For reimbursement of expenses Total 32.00 76.13 3.30 111.43 44.50 53.73 1.53 99.76 For the year ended March 31, 2011

24

FINANCE COSTS Particulars For the year ended March 31, 2012

(Rs. in lakhs) For the year ended March 31, 2011

Interest expense - on bank loans - on loan from financial Institution - on finance lease obligations - on foreign currency convertible bonds - on debentures - on others - Other borrowing costs 25,926.74 14,636.87 62.32 436.58 1,018.33 42,080.84 21,773.63 16,253.97 3,047.22 881.90 4,044.40 1,374.18 47,375.30

Total

79

Notes forming part of consolidated financial statements

25 SUBSIDIARIES The reporting date of all the subsidiaries is March 31, 2012. The list of the subsidiaries of the Company which are included in the consolidation and the Groups holding therein are as under: Name of companies Country of incorporation Immediate holding % of Ownership Interest As at March 31, 2012 Vadinar Oil Terminal Limited (VOTL) Vadinar Ports & Terminals Limited (VPTL) Essar Bulk Terminal Limited (EBTL) Essar Bulk Terminal Paradip Limited (EBTPL) from 31.03.2011 Essar Paradip Terminals Limited (EPaTL) Essar Dredging Limited (EDL) # Essar Bulk Terminal (Salaya) Limited (EBTSL) Essar Logistics Limited (ELL)* Essar Shipping Limited (ESL) * Essar Oilfields Services Limited (EOSL)* Essar Oilfield Services India Limited (EOSIL) * Energy Transportation International Limited (ETIL) * Energy II Limited (EII)* Essar Ports & Terminals Limited (EPTL) @ Essar International Limited (EIL)@ * India India India India India India India India India Mauritius India Bermuda Bermuda Mauritius Mauritius EPL VOTL EPL EPL EPL EBTL EPL EPL EPL EPL EOSL EPL EPL EPL EPL 100% 100% 74% 71% 90% NA 100% NA NA NA NA NA NA NA NA As at March 31, 2011 100% 100% 74% 59% 75% 74% 100% NA NA NA NA NA NA NA NA

: ceased to be subsidiaries on demerger from October 1, 2010

@ : ceased to be subsidiaries on merger from September 30, 2010 # : ceased to be subsidiary on July 1, 2011

26 COMPOSITE SCHEME OF ARRANGEMENT The Honble High Court of Gujarat at Ahmedabad vide order dated 1 March 2011 approved the Composite Scheme of Arrangement (Scheme) between Essar Shipping Ports & Logistics Limited (ESPLL), Essar Ports & Terminals Limited (EPTL) Mauritius, Essar International Limited (EIL) Mauritius and Essar Shipping Limited (ESL). The Scheme provided for the merger of EPTL and EIL with ESPLL and the demerger of the Shipping & Logistics Business and the Oilfields Services Business into ESL. Pursuant to the Scheme, all the assets and liabilities pertaining to the Shipping & Logistics Business and the Oilfields Services Business stood transferred to and became vested in ESL at the book values (ignoring revaluation) as appearing in the books of account of ESPLL with effect from October 1, 2010 being the Demerger Appointed Date, which are based on financial statements as on September 30, 2010.The difference between the values of assets and liabilities transferred was first adjusted against share capital (Rs. 205.23 crore), Rs. 25 crore against Debenture Redemption Reserve and the balance to General Reserve of the Company. Foreign Currency Convertible Bonds aggregating to USD 400 lakhs (out of USD 2,800 lakhs) issued by ESPLL stood transferred to ESL. In consideration of the demerger, the Company allotted 41,04,55,552 equity shares of Rs.10/- each as fully paid up to the eligible members of ESPLL whose name were recorded in the register of members of ESPLL as on May 21, 2011, in terms of the Scheme as detailed below.

80

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NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

Name of the company Essar Shipping & Logistics Limited (immediate holding company) Essar Global Limited Essar Steel India Limited ( subsidiary of Essar Global Limited) Erstwhile other shareholders of ESPLL Total No. of shares 340,903,706 66 2,547,223 67,004,557 410,455,552

27

CONTINGENT LIABILITIES Particulars Claims against the Group not acknowledged as debt Guarantees given by banks Guarantee on behalf of others Bills discounted with banks Interest on facility E on principal amount of facility stoppage as per MRA (refer note no. 5 ( c ) (iv) ) Capital commitments Estimated amount of contract remaining to be executed on capital account and not provided for 99,943.15 As at March 31, 2012 322.59 905.35 10,400.00 2,500.00

(Rs. in lakhs) As at March 31, 2011 1,025.00 905.35 10,400.00 18,780.00

66,221.40

28

COMMITTED LIABILITY FOR FUTURE LEASE PAYMENT OPERATING LEASE Particulars a. Payable not later than 1 year b. Payable later than 1 year and not later than 5 years c. Payable later than 5 years Total As at March 31, 2012 449.98 1,831.33 9,604.27 11,885.58

(Rs. in lakhs) As at March 31, 2011 333.51 1334.02 10080.21 11,747.74

29

SEGMENT DISCLOSURE Particulars a) Business segment Segment revenue Operating income Fleet operating and chartering Surface transport services Port and terminal services Oilfields services Unallocated Total 3,622.00 110,008.19 3,422.66 117,052.85 Year ended March 31, 2012

(Rs. in lakhs) Year ended March 31, 2011

73,490.37 40,658.00 70,555.85 16,852.78 14,531.07 216,088.07

81

Notes forming part of consolidated financial statements

29 SEGMENT DISCLOSURE (CONTD.) Particulars Less: Inter segment revenue Net Income from operation Segment results Fleet operating and chartering Surface transport services Port and terminal services Oilfields services Unallocated Profit from operation before interest and finance charges Less: Unallocable Interest and finance expense Profit before Tax and Exception item Less: Exceptional Item Profit before Tax Less: Income tax Profit before share of minoritys interest Share of minoritys interest Profit for the year Segment assets Fleet operating and chartering Port and terminal services Unallocated Total Assets Segment liabilities Fleet operating and chartering Port and terminal services Total liabilities Fixed assets acquired during the year Fleet operating and chartering Surface transport services Port and terminal services Total Depreciation* Fleet operating and chartering Surface transport services Port and terminal services Oilfields services Total 31.93 21,992.63 22,024.56 9,349.25 341.25 17,585.15 7,479.80 34,755.45 5,002.50 95,860.21 100,862.71 41,817.26 1,298.92 71,105.16 114,221.34 (4,568.54) (86,702.64) (91,271.18) (8,370.12) (66,580.00) (74,950.12) 8,890.70 642,463.16 47,571.42 698,925.29 8,606.20 552,254.00 37,284.00 598,144.20 474.57 66,599.47 2,222.66 69,296.70 (42,080.84) 27,215.86 (23,551.18) 3,664.68 6,219.54 9,884.22 (3,488.75) 6,395.47 5,435.00 1,046.50 36,772.50 1,332.46 14,531.50 59,117.96 (47,375.30) 11,742.66 11,742.66 (3,460.34) 8,282.32 (1,268.96) 7,013.36 Year ended March 31, 2012 (3,949.50) 113,103.35 (Rs. in lakhs) Year ended March 31, 2011 (7,475.81) 208,612.26

* includes depreciation of Rs. 909.36 lakhs (previous year Rs. 747 lakhs) transferred to expenditure during
construction and Rs. 11.16 lakhs (previous year Rs. 1,925 lakhs) recouped from fixed assets revaluation reserve.

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FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

(Rs. in lakhs) Segment revenue b) Geographical segment India China U.S.A. U.K. Rest of the world Total 113,103.35 113,103.35 189,861.00 1,508.00 2,497.00 2,017.00 12,729.00 208,612.00 Year ended March 31, 2012 Year ended March 31, 2011

30

EARNINGS PER SHARE

The calculation of basic and diluted earnings per share is based on the following data: Particulars Net profit after tax and minority interest attributable to equity share holders for basic EPS (Rs. in lakhs) Add: Interest on foreign currency convertible bonds (FCCB) Exchange loss / (gain) on FCCB conversion (Rs. in lakhs) Net profit after tax attributable to equity share holders for diluted EPS (Rs. in lakhs) Weighted average no. of equity shares outstanding during the year for Basic EPS (nos.) for Diluted EPS (nos.) Basic EPS (Rs.) Diluted EPS (Rs.) Nominal value per Share (Rs.) Reconciliation between number of shares used for calculating basic and diluted earnings per share a) b) c) d) Number of shares used for calculating basic EPS Potential equity shares (convertible FCCB) Potential equity shares (ESOP) Number of shares used for calculating diluted EPS (a+b+c) 410,455,552 20,475,463 22,460 430,953,476 410,455,552 12,341,375 422,796,927 410,455,552 430,953,476 1.56 1.50 10 410,455,552 422,796,927 1.71 1.66 10 As at March 31, 2012 6,395.47 62.32 4.51 6,462.30 As at March 31, 2011 7,015.18 7,015.18

Note : The Company has capitalised interest of Rs. 1,043.95 lakhs (Previous year Rs. 247.88 lakhs) on FCCB in consolidated financial statement, which is not considered for calculation of profit for diluted EPS.

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Notes forming part of consolidated financial statements

31 FOREIGN CURRENCY EXPOSURE i) There were no forward / options contracts entered in to by the Group during the financial year to hedge its foreign currency exposures.

ii) The year-end foreign currency exposures that have not been hedged by a derivative instrument or otherwise are given below: (A) Amount receivable in foreign currency on account of the following: Particulars Rs. in lakhs Year ended March 31, 2012 Export of goods and services Bank balances (B) 798.00 4.94 Rs. in lakhs Year ended March 31, 2011 5.00 USD USD Currency Foreign currency in lakhs Year ended March 31, 2012 15.6 0.10 Year ended March 31, 2011 0.11

Amount payable in foreign currency on account of the following:

Particulars

Rs. in lakhs Year ended March 31, 2012

Rs. in lakhs Year ended March 31, 2011 66.13 53.06 2.74 8,309.63 17,868.00

Currency

Foreign currency in lakhs Year ended March 31, 2012 Year ended March 31, 2011 0.84 0.84 0.08 186.11 401.70 277.23 3.03 6.43 401.70

Import of goods and services

46.21

USD GBP EUR SGD USD EUR SEK USD

0.90

Buyers credit (including interest accrued) Foreign Currency Convertible Bonds

14,182.25 209.81 48.33 20,549.57

32 TAXATION Income tax on income from qualifying fleet is provided on the basis of Tonnage Tax Scheme. Income tax on other income is provided as per other provisions of Income Tax Act, 1961. Taxes on income earned by foreign subsidiaries are provided based on tax laws of its domicile country. 33 GOING CONCERN As on March 31, 2012, the Groups current liabilities exceeded its current assets by Rs. 78,611.84 lakhs due to classification as current of borrowings amounting to Rs. 52,349.22 lakhs due repayable within the next one year and Rs. 33,111.51 lakhs payable for purchase of capital assets. Subsequent to year end, the Company has rolled over loans of Rs. 30,000 lakhs for a period exceeding 12 months, drawn amounts of Rs. 19,093 lakhs under various existing facilities for payment to creditors for purchase of capital assets and through the Operational Cash Flows. The Company is also in discussion for raising funds through equity. As such, the excess current liabilities position will not affect the operations of the Group and therefore these financial statements have been prepared as a going concern. 34 EMPLOYEE STOCK OPTION SCHEME The members of the Company at the annual general meeting held on September 9, 2011 have approved the issue of employee stock options under the Essar Ports Employee Stock Options Scheme -2011 (hereinafter referred to as the Scheme). The Scheme shall be operated and administered under the superintendence of the remuneration committee of the Board.

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FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

Eligible employees of the Company, its holding company and subsidiaries are entitled to options under the Scheme. Each option entitles the eligible employees to one underlying equity share of the Company. A trust will be formed for the administration of the Scheme. The remuneration committee is authorised to grant the options to the eligible employees and the exercise price of the options in terms of the Scheme. 1/3 options granted will vest in the hands of the eligible employees over a period of 3 years commencing from the end of the 3rd, 4th and 5th year respectively from the date of grant of the option. The eligible employees can exercise the options vested in them within a period of 7 years from the date of vesting. The difference between the fair price of the share underlying the options granted on the date of grant of option and the exercise price of the option (being the intrinsic value of the option) representing stock compensation expense is expensed over the vesting period. Employee stock options details for ESOP as on the Balance sheet date are as follows: Particulars Year ended March 31, 2012 Options (numbers) Option outstanding at the beginning of the year Granted during the year Vested during the year Exercised during the year Lapsed during the year Options outstanding at the end of the year 7,40,334 7,40,334 Weighted average exercise price per option 71.1 71.1

The impact on statement of profit and loss and earnings per share if the fair value of the Options (on the date of the grant) were considered instead of the intrinsic value is as under: (Rs. in lakhs) Particulars Net Profit / (loss) (as reported) Add / (Less): stock based employee compensation (intrinsic value) Add / (Less): stock based compensation expenses determined under fair value method for the grants issued Net Profit / (loss) (proforma) Basic & dilutive earnings per share (as reported) Basic & dilutive earnings per share (proforma) Diluted earnings per share (as reported) (refer note 27) Diluted earnings per share (proforma) Year ended March 31, 2011 26.78 (26.78) (0.01) (0.01)

The fair value of the Options granted is estimated on the date of grant using Black Scholes Options Pricing Model taking into account the terms and conditions upon which the Options were granted. The following table lists the inputs to the model used for calculating fair value: Assumptions Risk free interest rate Expected life Expected annual volatility of shares Expected dividend yield Year ended March 31, 2012 8.36% 58 64.81% 0.00%

85

Notes forming part of consolidated financial statements

35 EMPLOYEE BENEFITS : The Company has classified the various benefits provided to employees as under: I. Defined contribution plans The Company has recognised the following amounts in the statement of profit and loss during the year: (Rs. in lakhs) Particulars March 31, 2012 March 31, 2011 a) Employers contribution to gratuity fund (offshore crew staff) 0.60 29.00 b) Group accident policy premium (all employees) 4.58 10.33 c) Contribution to pension fund (offshore crew staff) 2.39 11.00 d) Employers contribution to superannuation fund 0.94 16.33 e) Employers contribution to provident fund (offshore crew staff) 101.36 115.53 Total 109.88 182.19 The above amounts are included in contribution to staff provident and other funds (refer note 18). II. Defined benefit plans
a. Contribution to provident fund b. Contribution to gratuity fund c. Provision for compensated absences (CA) In accordance with AS-15, relevant disclosures are as under:

(A) Changes in present value of defined benefit obligation:

Particulars Provident fund (funded) Gratuity-shore officers (funded) March 31, 12 178.58 March 31, 11 156.06 Gratuity-off shore officers (non funded) March 31, 12 (0.00)* March 31, 11 194.70

(Rs. in lakhs) CA-paid leave (non funded)

March 31, 12 Present value of defined benefit obligation opening balance Current service cost Current service contributionemployee Interest cost Past service cost Plan amendment Acquisitions Benefits paid Actuarial (gain) / loss on obligations Present value of defined benefit obligation closing * Amount is less than Rs. 1 lakh 1,408.24

March 31, 11 1,668.75

March 31, 12 231.24

March 31, 11 278.17

19.26 36.26 15.92 68.52 (1,279.74) 268.46

119.80 132.93 86.52 (419.04) (259.60) 78.88 1,408.24

40.36 15.44 (3.21) 10.43 241.60

48.31 11.65 66.92 32.65 (156.46) (13.41) 32.86 178.59

(0.00)*

15.00 8.00 (225.70) 8.00 (0.00)

51.53 4.15 15.07 (25.97) 38.60 314.62

31.92 18.53 (167.17) (13.29) 83.09 231.24

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GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

(B) Changes in the fair value of plan asset:
Particulars Provident fund (funded) March 31, 12 Fair value of plan assets opening Expected return on plan assets Actual return on plan assets Acquisition adjustment Actuarial gains / (losses) Contributions by the employer / employees Benefits paid Fair value of plan assets Closing 1,408.24 15.92 (1,279.74) 124.04 268.46 March 31, 11 1,668.74 86.52 (166.30) 78.88 (259.60) 1,408.24 Gratuity-shore officers (funded) March 31, 12 136.90 13.20 0.55 38.43 (3.21) 185.87 March 31, 11 197.30 20.54 (165.01) (4.49) 101.98 (13.41) 136.90 Gratuity-off shore officers (non funded) March 31, 12 March 31, 11 (Rs. in lakhs) CA-paid leave (non funded) March 31, 12 March 31, 11 (1.97) (5.46) (7.43)

(C) Amount recognised in balance sheet:

Particulars Provident fund (funded) March 31, 12 Present value of defined benefit obligation at the end of the year Fair value of plan assets at end of the year Liability / (asset) recognised in the Balance Sheet (included in current liabilities and provisions) (refer note 8) 268.46 March 31, 11 1,408.24 Gratuity-shore officers (funded) March 31, 12 241.60 March 31, 11 178.59 Gratuity-off shore officers (non funded) March 31, 12 (0.00) March 31, 11

(Rs. in lakhs) CA-paid leave (non funded) March 31, 12 314.62 March 31, 11 231.24

268.46

1,408.24

185.87 55.73

136.90 41.69

(0.00)

314.62

(7.43) 238.67

(D) Expenses recognised in the statement of profit and loss:

Particulars Provident fund (funded) March 31, 12 Current service cost Interest cost Expected return on plan assets Past service cost Net actuarial (gain) / loss recognised in the period Total expenses recognised in the Statement of Profit and Loss (Included in Contribution to provident and other funds) (refer note 21) 19.26 15.92 (15.92) 19.26 March 31, 11 119.80 86.52 (86.52) 119.80 Gratuity-shore officers (funded) March 31, 12 40.36 15.44 (13.20) 0.89 9.88 53.37 March 31, 11 48.31 11.65 (20.54) 98.69 37.35 175.47 Gratuity-off shore officers (non funded) March 31, 12 March 31, 11 15.00 8.00 8.00 31.00

(Rs. in lakhs) CA-paid leave (non funded) March 31, 12 51.53 19.22 26.86 97.60 March 31, 11 22.44 18.53 92.56 133.52

87

Notes forming part of consolidated financial statements

(E) Experience history: Gratuity-shore officers (funded) Particulars Defined benefit obligation at the end of the year Plan assets at the end of the year Funded status Experience gain / (loss) adjustments on plan liabilities Experience gain / (loss) adjustments on plan assets Actuarial gain / (loss) due to change on assumptions March 31, 12 (241.59) 185.84 (55.75) (18.99) March 31, 11 (178.21) 137.10 (31.10) (35.02) March 31, 10 (155.86) 197.56 41.70 (66.04) March 31, 09 (78.16) 139.84 61.68 85.11 March 31, 08 NA NA NA NA (Rs. in lakhs)

0.55 8.58

(5.23) 2.10

(9.36) 4.15

0.17

NA NA (Rs. in lakhs)

Gratuity - offshore officers (non funded) Particulars Defined benefit obligation at the end of the year Plan assets at the end of the year year Funded status Experience gain / (loss) adjustments on plan liabilities Experience gain / (loss) adjustments on plan assets Actuarial gain / (loss) due to change on assumptions March 31, 12 March 31, 11 March 31, 10 (190.00) (190.00) 90.00 March 31, 09 (280.00) (280.00) 59.00 March 31, 08 NA NA NA NA

34.00

52.00

NA NA (Rs. in lakhs)

CA-paid leave (non funded) Particulars Defined benefit obligation at the end of the year Plan assets at the end of the year Funded status Experience gain / (loss) adjustments on plan liabilities Experience gain / (loss) adjustments on plan assets Actuarial gain / (loss) due to change on assumptions March 31, 12 (314.62) (314.62) (35.69) March 31, 11 (231.41) (231.41) (94.13) March 31, 10 (278.40) (278.40) (140.29) March 31, 09 (105.27) (105.27) 170.00 March 31, 08 NA NA NA NA

19.99

2.13

21.46

(54.00)

NA NA

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DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

(F) Category of plan assets:
Percentage of each category of plan assets to total fair value of plan assets: Administered by Life Insurance Corporation of India Government of India security Public sector bonds / TDRs State government securities Provident fund (funded) Gratuity-shore officers (funded) March 31, 12 100% March 31, 11 100.00% Gratuity-off shore officers (non funded) March 31, 12 NA NA NA NA March 31, 11 NA NA NA NA CA-paid leave (non funded)

March 31, 12 25.00% 60.00% 15.00%

March 31, 11 25.00% 60.00% 15.00%

March 31, 12 NA NA NA NA

March 31, 11 NA NA NA NA

(G) Actuarial assumptions  In accordance with Accounting Standard (AS) 15 (Revised), actuarial valuation as at the year end was done in respect of the aforesaid defined benefit plans based on the following assumptions: i) General assumptions:
Particulars Provident fund (funded) March 31, 12 Discount rate (per annum) Rate of return on plan assets (for funded scheme) Expected retirement age of employees (years) Separation rate of employees Rate of increase in compensation 8.50% 8.60% 58 March 31, 11 7.80% 8.50% 58 Gratuity-shore officers (funded) March 31, 12 8.50% 8.50% 58 10.00% 9.00% March 31, 11 8.00% 8.50% 58 10.00% 9.00% Gratuity-off shore officers (non funded) March 31, 12 N.A N.A 58 N.A N.A March 31, 11 N.A N.A 58 N.A N.A CA-paid leave (non funded) March 31, 12 8.50% NA 58 10.00% 9.00% March 31, 11 8.00% NA 58 10.00% 9.00%

ii) Mortality rates considered are as per the published rates in the Life Insurance Corporation (1994-96) Mortality table. iii) Leave policy: a) Sick leave balance as at the valuation date and each subsequent year following the valuation date will be availed by the employee against future sick leave; the sick leave balance is not available for encashment.

b)  Leave balance as at the valuation date and each subsequent year following the valuation date to the extent not availed by the employee is available for encashment on separation from the Company up to a maximum of 120 days.

iv) As this is the fourth year of implementation of Accounting Standard (AS) 15 (Revised 2005), only corresponding previous three year figure have been furnished. v) The contribution to be made by the Company for funding its liability for gratuity during the financial year 201213 will be made as per demand raised by the fund administrator Life Insurance Corporation of India. 36 RELATED PARY TRANSACTIONS : (a) Holding companies: 1 2 Essar Global Limited, Cayman Islands (ultimate holding company) Essar Shipping & Logistics Limited, Cyprus (immediate holding company)

89

Notes forming part of consolidated financial statements

(b) Key management personnel: 1 2 3 4 5 6 7 8 9 Mr. Rajiv Agarwal, Whole-time Director (w.e.f. May 27, 2010) Mr. Shailesh Sawa, Whole-time Director (w.e.f. July 24, 2010) Mr. Kamla Kant Sinha, Whole-time Director Capt. Subhas Das, Whole-time Director (Essar Bulk Terminal Limited) Capt. Rajesh Beri, Whole-time Director (Essar Bulk Terminal Paradip Limited) ( w.e.f. October 17, 2011) Capt. Deepak Sachdeva, Whole-time Director (Vadinar Oil Terminal Limited) ( w.e.f. October 18, 2011) Mr. Girish Joshi, Manager (Vadinar Ports & Terminals Limited) ( w.e.f. October 18, 2011) Mr. Sanjay Mehta, Managing Director (Essar Shipping Ports & Logistics Limited) (upto July 24, 2010) Mr. A. R. Ramakrishnan, Whole-time Director (Essar Shipping Ports & Logistics Limited) (upto May 22, 2011)

10 Mr. V. Ashok, Whole-time Director (Essar Shipping Ports & Logistics Limited) (upto May 24, 2010) 11  Mr. A. K. Musaddy, Whole-time Director (Essar Logistics Limited - ELL) (till ELL ceased to be subsidary October 1, 2011

(c)

Fellow subsidiaries / other related parties / affiliate where there have been transactions: 24 Essar Africa Holdings Limited 1 Essar Oilfield Services India Limited (w.e.f. October 1, 2010) 25 Essar Agrotech Limited 2 Essar Power Gujarat Limited 26 Essar Bulk Terminal (Paradip) Limited (till March 31, 2011) 3 Essar Power Limited 27 Essar Energy Holdings Limited 4 Essar Power M. P. Limited 28 Essar Energy Services Limited 5 Essar Project Management Consultancy Limited 29 Essar Engineering Services Limited 6 Essar Projects (India) Limited 30 Essar Exploration South East Asia Limited 7 Essar Properties Limited 31 Essar Gulf FZE 8 Essar Services India Limited 32 Essar Heavy Engineering Services Limited 9 Essar Shipping & Logistics (Panama) Inc. 33 Essar Holdings Limited 10 Essar Shipping (Cyprus) Limited 34 Essar House Limited 11 Essar Shipping Limited (w.e.f. October 1, 2010) 35 Essar House Services Limited 12 Essar Steel Algoma Inc. 36 Essar Information Technology Limited 13 Essar Steel India Limited (formerly known as 37 Essar Infrastructure Holdings Limited Essar Steel Limited) 38 Essar Infrastructure Services Limited 14 Essar Telecom Retail Limited 39 Essar Investments Limited 15 Futura Travels Limited 40 Essar Logistics Holdings Limited 16 Global Supplies FZE 41 Essar Logistics Limited (w.e.f. October 1, 2010) 17 Imperial Consultants & Securities Pvt. Limited 42 Essar Offshore Subsea Limited 18 India Securities Limited 43 Essar Oil Limited 19 The Mobile Store Limited 44 Essar Oil Limited (E&P) 20 Vadinar Power Company Limited 45 Essar Dredging Limited (till July 1, 2011) 21 Aegis Limited 46 Essar Oilfields Services Limited (w.e.f. October 1, 2010) 22 Arkay Holdings Limited 23 Bhander Power Limited

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GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

The details of transactions with related parties
Nature of transactions Holding company Fellow subsidiaries / other related parties / affiliate 2011-12 2010-11 Key management personnel 2011-12 2010-11 (Rs. in lakhs) Total

2011-12 INCOME Fleet operating income Essar Steel India Limited Essar Shipping & Logistics Limited Essar Logistics Limited Essar Projects (India) Limited Essar Power Gujarat Limited Essar Power M. P. Limited Essar Oil Limited (E&P) Essar Power Limited Vadinar Power Company Limited

2010-11

2011-12

2010-11

Total
Port services rendered and wharfage charges Essar Steel India Limited Essar Oil Limited Essar Logistics Limited Essar Shipping Limited Essar Shipping (Cyprus) Limited Essar Offshore Subsea Limited Essar Heavy Engineering Services Limited Total Cargo handling services rendered Essar Logistics Limited Essar Steel India Limited Total Other income Essar Africa Holdings Limited

168.45 168.45

74,386.22 869.76 2,904.71 3,012.49 5,809.38 2,148.63 12.78 374.42 89,518.41

74,386.22 168.45 869.76 2,904.71 3,012.49 5,809.38 2,148.63 12.78 374.42 89,686.86

1,244.19 1,244.19

1,571.95 67,482.46 322.42 1,622.25 24.25 21.58 22.64 71,067.55 1,958.01 33,370.06 35,328.07 798.04 798.04 809.88 1.03 810.91 1.92 12.09 6.14 1.65 21.80

877.00 51,793.80 27.00 45.00 52,742.80 1,689.57 19,002.54 20,692.11 1.20 1.20 2,575.96 126.92 984.92 1,630.55 83.89 5,402.25 1,740.06 1,740.06

1,571.95 67,482.46 322.42 1,622.25 24.25 21.58 22.64 71,067.55 1,958.01 33,370.06 35,328.07 798.04 798.04 809.88 1.03 810.91 1.92 12.09 6.14 1.65 21.80

877.00 51,793.80 27.00 45.00 52,742.80 1,689.57 19,002.54 20,692.12 1.20 1.20 1,244.19 2,575.96 126.92 984.92 1,630.55 83.89 6,646.45 1,740.06 1,740.06 91

Total
Equipment lease rental income Essar Steel India Limited Total Interest income Essar Shipping & Logistics Limited Essar Oilfield Services India Limited Essar Oilfields Services Limited Essar Oil Limited Essar Investments Limited Essar Shipping (Cyprus) Limited Essar Bulk Terminal Paradip Limited Total Interest income on debenture Imperial Consultants & Securities Pvt. Limited

Total
Miscellaneous income Essar Shipping Limited Essar Logistics Limited Essar Projects (India) Limited Arkay Holdings Limited

Total

Notes forming part of consolidated financial statements

Nature of transactions Holding company Fellow subsidiaries / other related parties / affiliate 2011-12 2010-11 900.00 900.00 Key management personnel 2011-12 2010-11 (Rs. in lakhs) Total

2011-12 Aircraft usage charges reimbursed Essar Oil Limited Total Expenditure during construction income Aegis Limited Futura Travels Limited Futura Aviation Limited Essar Oil Limited Essar Investments Limited Essar Projects (India) Limited Essar House Limited Essar Infrastructure Services Limited Essar Engineering Services Limited Essar Power Gujarat Limited Essar Services India Limited

2010-11

2011-12

2010-11 900.00 900.00

Total
Hire / demurrage charges Essar Shipping & Logistics (Panama) Inc. Essar Shipping & Logistics Limited Essar Projects (India) Limited Essar Shipping Limited Essar Logistics Limited

2,223.90 2,223.90

27.46 43.31 77.00 29.17 541.75 35.50 22.08 83.85 427.32 19.65 138.79 1,445.88 96.66 359.78 456.44 129.34 11.04 19.57 41.85 201.80 112.15 419.55 531.70 6.38 6.38 2,023.61 2,023.61

10.10 4.47 1.17 15.73 518.46 118.09 636.54 92.96 99.75 18.26 327.94 342.59 881.50 750.65 137.00 887.65 176.00 176.00 2.80 1.00 114.66 118.47 7.96 3.52 11.48 1,399.27 1,399.27

15.86

23.28 139.00

27.46 43.31 77.00 29.17 541.75 35.50 22.08 83.85 427.32 19.65 138.79 1,445.88 96.66 359.78 456.44 129.34 11.04 19.57 41.85 201.80 112.15 419.55 531.70 6.38 6.38 2,023.61 2,023.61 15.86

10.10 4.47 1.17 15.73 518.46 2,223.90 118.09 2,860.45 92.96 99.75 18.26 327.94 342.59 881.50 750.65 137.00 887.65 176.00 176.00 2.80 1.00 114.66 118.47 7.96 3.52 11.48 1,399.27 1,399.27 23.28 139.00

Total
Freight / lease hire charges Essar Oil Limited Essar House Limited Essar Logistics Limited Essar Infrastructure Services Limited Essar Projects (India) Limited Total Fuel oil purchase / power Essar Oil Limited Bhander Power Limited

Total
Stores and spares-sale Essar Shipping & Logistics (Panama) Inc.

Total
Stores and spares - expenses Essar Projects (India) Limited Essar Heavy Engineering Services Limited Essar Steel India Limited

Total
Manning charges Essar Infrastructure Services Limited Essar Information Technology Limited

Total
O & M charges Essar Oil Limited

Total
Managerial remuneration Mr. Sanjay Mehta Mr. A. R. Ramkrishnan 92
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FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

Nature of transactions Holding company Fellow subsidiaries / other related parties / affiliate 2011-12 104.63 42.34 23.93 170.90 33.12 53.04 60.13 146.29 440.73 76.73 2.50 519.96 278.70 0.37 0.05 2.30 281.42 386.63 138.54 283.21 41.23 614.16 31.51 69.46 3.77 1,568.51 2010-11 366.00 2.00 66.00 434.00 14.00 33.91 47.91 3.46 135.06 5.30 22.26 18.71 184.77 220.64 220.64 765.40 0.37 16.94 0.13 11.00 793.85 6.00 2,796.32 53.43 324.24 45.22 12.00 722.99 63.66 4,023.86 Key management personnel 2011-12 215.87 113.61 156.38 22.12 17.66 84.03 39.81 11.43 676.77 2010-11 14.79 91.60 97.48 116.34 78.00 560.49 (Rs. in lakhs) Total

2011-12 Mr. V. Ashok Mr. Rajiv Agarwal Mr. Shailesh Sawa Mr. Kamla Kant Sinha Capt. Rajen Sachar Capt. Deepak Sachdeva Capt. Subhas Das Capt. Rajesh Beri Mr. Girish Joshi

2010-11

2011-12 215.87 113.61 156.38 22.12 17.66 84.03 39.81 11.43 676.77 104.63 42.34 23.93 170.90 33.12 53.04 60.13 146.29 440.73 76.73 2.50 519.96 278.70 0.37 0.05 2.30 281.42 386.63 138.54 283.21 41.23 614.16 31.51 69.46 3.77 1,568.51

2010-11 14.79 91.60 97.48 116.34 78.00 560.49 366.00 2.00 66.00 434.00 14.00 33.91 47.91 3.46 135.06 5.30 22.26 18.71 184.77 220.64 220.64 765.40 0.37 16.94 0.13 11.00 793.85 6.00 2,796.32 53.43 324.24 45.22 12.00 722.99 63.66 4,023.86

Total

Business centre fees Essar Infrastructure Services Limited Essar Agrotech Limited Aegis Limited Essar House Limited

Total

Rent Essar Steel India Limited Essar House Limited Essar Infrastructure Services Limited Arkay Holdings limited

Total

Repair and maintenance Essar Steel India Limited Essar Projects (India) Limited Essar Agrotech Limited Essar Infrastructure Services Limited Essar Information Technology Limited Essar Heavy Engineering Services Limited

Total

Cargo handling expenses Essar Projects (India) Limited Total Travelling / lodging expenses Futura Travels Limited Arkay Holdings limited Essar Oil Limited Essar Infrastructure Services Limited Essar House Services Limited Essar Steel India Limited

Total

Professional / advisory fees / agency / management fees India Securities Limited Essar Investments Limited Aegis Limited Essar Energy Services Limited Essar Engineering Services Limited Essar Logistics Limited Essar Oil Limited Essar Shipping Limited Essar Services India Limited Essar Information Technology Limited

Total

93

Notes forming part of consolidated financial statements

Nature of transactions Holding company Fellow subsidiaries / other related parties / affiliate 2011-12 2010-11 Key management personnel 2011-12 2010-11 (Rs. in lakhs) Total

2011-12 Bank Charges & Commitment fees recovered Arkay Holdings Limited Essar Steel India Limited Essar Heavy Engineering Services Limited

2010-11

2011-12

2010-11

Total
Business promotion expenses Essar Steel India Limited Total Insurance Essar Logistics Limited

3.55 210.10 3.25 216.90 1.92 1.92 6.06 6.06 12.51 12.51 0.23 0.23 0.39 5.00 5.39 290.04 14.38 3.25 307.67

201.78 1,001.00 484.71 26.25 27.94 775.00 5.68 46.41 1,555.60 0.11 25.62 4,150.10

14.58 14.58

3.88 3.88

3.55 210.10 3.25 216.90 1.92 1.92 6.06 6.06 12.51 12.51 0.23 0.23 0.39 5.00 5.39 290.04 14.38 14.58 3.25 322.25

201.78 1,001.00 484.71 26.25 27.94 775.00 5.68 46.41 1,555.60 3.88 0.11 25.62 4,153.98

Total
Employee accommodation expenses Essar Steel India Limited Total Printing and stationery Essar Infrastructure Services Limited

Total
Staff welfare Essar Infrastructure Services Limited Essar Steel India Limited

Total
Reimbursement of expenses Futura Travels Limited Essar Investments Limited Essar Oil Limited Essar Oilfields Services Limited India Securities Limited Essar Logistics Limited Essar Power Gujarat Limited Essar Power M. P. Limited Essar Steel India Limited Subhas Das Essar Infrastructure Services Limited Essar Heavy Engineering Services Limited Essar Shipping & Logistics (Panama) Inc.

Total
Jetty constructions and project management expenses Essar Projects (India) Limited Essar Oil Limited Aegis Limited Futura Travels Limited Essar Engineering Services Limited Essar Investments Limited Essar Infrastructure Services Limited Essar Steel India Limited Essar Logistics Limited Essar House Limited

Total

1,377.83 1.25 32.25 59.52 3.60 160.87 76.73 11.93 94.24 22.08 1,840.30

1,096.73 0.21 5.00 224.58 1,326.52

1,377.83 1.25 32.25 59.52 3.60 160.87 76.73 11.93 94.24 22.08 1,840.30

1,096.73 0.21 5.00 224.58 1,326.52

94

Annual Report 2011-12

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

Nature of transactions Holding company Fellow subsidiaries / other related parties / affiliate 2011-12 2010-11 Key management personnel 2011-12 2010-11 (Rs. in lakhs) Total

2011-12 Jetty construction expenses procurement Essar Steel India Limited Essar Oil Limited Essar Heavy Engineering Services Limited

2010-11

2011-12

2010-11

1,781.89 1,781.89 140,720.65 140,720.65

4.04 6.63 10.67 5.65 127.30 132.95 848.95 848.95 290.00 290.00 18,590.26 0.83 18,591.09 5.00 5.00 33.00 10,944.21 5,853.28 89.04 4,499.99 21,419.52

572.25 132.00 1.27 705.52 11.00 44.00 9.24 64.24 3,300.00 3,300.00 24.00 13.00 4.00 41.00 2.00 2.00 6,600.00 6,600.00 5,486.25 5,486.25 142,331.35 10,075.59 9,050.00 161,456.94 583.06 11,997.90 529.07 191.64 13,301.67

4.04 6.63 10.67 5.65 127.30 132.95 848.95 848.95 290.00 290.00 18,590.26 0.83 18,591.09 5.00 5.00 33.00 10,944.21 5,853.28 89.04 4,499.99 21,419.52

572.25 132.00 1.27 705.52 11.00 44.00 9.24 64.24 3,300.00 3,300.00 24.00 13.00 4.00 41.00 1,781.89 1,781.89 2.00 2.00 6,600.00 6,600.00 5,486.25 5,486.25 142,331.35 10,075.59 9,050.00 161,456.94 583.06 11,997.90 529.07 191.64 13,301.67 140,720.65 140,720.65

Total

Jetty construction expenses - sale Essar Steel India Limited Essar Heavy Engineering Services Limited Essar Logistics Limited

Total

Lighterage costs Essar Logistics Limited Arkay Holdings limited

Total

Interest on loan / deposit India Securities Limited Essar Logistics Limited Bhander Power Limited

Total Total Total Total

Interest on others Essar Logistics Limited Interest on lease loan Essar Shipping & Logistics Limited Purchase of equity shares Essar Bulk Terminal Paradip Limited Purchase of preference shares Essar Steel India Limited Essar Logistics Limited Essar Bulk Terminal Paradip Limited

Total
Share subscription Essar Energy Holdings Limited

Total Total

Sale of investment Essar Investments Limited Advance for allotment of shares Essar Oilfields Services Limited Essar Investments Limited Essar Bulk Terminal Paradip Limited

Total

Purchase of fixed assets Arkay Holdings Limited Essar Shipping & Logistics (Panama) Inc. Essar Projects (India) Limited Essar Logistics Limited Essar Engineering Services Limited Global Supplies FZE

Total Total

Share application money received Essar Shipping & Logistics Limited

95

Notes forming part of consolidated financial statements

Nature of transactions Holding company Fellow subsidiaries / other related parties / affiliate 2011-12 323.37 51,829.96 121.97 52,275.30 56.00 209.00 265.00 2,500.00 2,500.00 2010-11 1,411.24 23,243.97 7.27 110.69 24,773.17 10,294.00 10,294.00 656.53 100.00 1,381.00 2,137.52 2,287.80 2,287.80 150.00 317.00 467.00 Key management personnel 2011-12 2010-11 (Rs. in lakhs) Total

2011-12 Redemption of preference shares Essar Shipping & Logistics Limited

2010-11 115,893.60 115,893.60 1,759.57 1,759.57 1,438.37 1,438.37 449.20 449.20

2011-12 323.37 51,829.96 121.97 52,275.30 56.00 209.00 265.00 2,500.00 2,500.00

2010-11 115,893.60 115,893.60 1,759.57 1,759.57 1,411.24 23,243.97 7.27 110.69 24,773.17 10,294.00 10,294.00 1,438.37 656.53 100.00 1,381.00 3,575.90 2,287.80 2,287.80 449.20 150.00 317.00 916.20

Total Total

Preference dividend paid Essar Shipping & Logistics Limited Capital work in progress - CWIP Essar Engineering Services Limited Essar Projects (India) Limited Essar Logistics Limited Essar Project Management Consultancy Limited

Total
CWIP and capital advances given Essar Projects (India) Limited

Total

Loans and advances including deposits given Essar Shipping & Logistics Limited Essar Bulk Terminal Paradip Limited Essar House Limited Essar Infrastructure Services Limited Essar Oilfield Services India Limited Essar Oilfields Services Limited

Total Total

Refund of share application money Essar Logistics Limited Loans and advances received Essar Global Limited India Securities Limited Essar Investments Limited

Total

Guarantees given by others on behalf of Company Essar Steel India Limited

Total

THE DETAILS OF OUTSTANDING BALANCES AS ON MARCH 31, 2012 Nature of balances Holding company 2011-12 Sundry debtors Arkay Holdings Limited Essar Steel India Limited Essar Oil Limited Essar Projects (India) Limited Essar Heavy Engineering Services Limited Essar Power Gujarat Limited Essar Logistics Limited Essar Shipping Limited Essar Shipping (Cyprus) Limited Essar Dredging Limited 96
Annual Report 2011-12

Other related parties 2011-12 1.82 5,492.39 4,534.42 6.77 7.56 294.26 2,211.93 1,693.71 27.78 0.99 2010-11 3,479.03 3,479.03 3,882.98 7.52

Key management personnel 2011-12 2010-11

(Rs. in lakhs) Total 2011-12 1.82 5,492.39 4,534.42 6.77 7.56 294.26 2,211.93 1,693.71 27.78 0.99 2010-11 3,479.03 3,479.03 3,882.98 7.52

2010-11

NOTICE

DIRECTORS REPORT

GOVERNANCE

FINANCIAL STATEMENTS

Notes forming part of consolidated financial statements

THE DETAILS OF OUTSTANDING BALANCES AS ON MARCH 31, 2012 Nature of balances Holding company 2011-12 2010-11 Other related parties 2011-12 2.40 798.04 15,072.07 12.50 12.50 11,081.57 38.88 11,120.45 56.00 7,187.69 105.68 209.00 589.98 1,349.54 452.76 2.28 0.35 0.74 9,954.02 104.22 104.22 57.86 117.59 258.99 135.70 0.45 2.02 24,852.21 3.97 2.70 121.07 49.67 0.05 6,244.20 0.07 1,436.07 159.79 2010-11 10,848.56 16,850.97 26.38 485.00 466.80 17,829.14 9,131.00 3,106.27 12,237.27 10,000.00 10,000.00 2,287.80 1,741.70 4,029.50 650.00 650.00 104.22 104.22 36.45 0.58 14.46 30.87 8.80 150.67 4,259.67 309.96 1,544.16 242.67 242.67 4,671.00 114.02 Key management personnel 2011-12 2010-11 (Rs. in lakhs) Total 2011-12 2.40 798.04 15,072.07 12.50 12.50 11,081.57 38.88 11,120.45 56.00 7,187.69 105.68 209.00 589.98 1,349.54 452.76 2.28 0.35 0.74 9,954.02 104.22 104.22 57.86 117.59 258.99 135.70 0.45 2.02 24,852.21 3.97 2.70 121.07 49.67 0.05 6,244.20 0.07 1,436.07 159.79 2010-11 10,848.56 16,850.97 26.38 485.00 466.80 17,829.14 9,131.00 3,106.27 12,237.27 10,000.00 10,000.00 2,287.80 1,741.70 4,029.50 650.00 650.00 104.22 104.22 36.45 0.58 14.46 30.87 8.80 150.67 4,259.67 309.96 1,544.16 242.67 242.67 4,671.00 114.02 97

Essar Offshore Subsea Limited Essar Africa Holdings Limited Retention money Essar Projects Management Consultants Limited

Total

Total

Capital advances Essar Projects (India) Limited Essar Project Management Consultancy Limited Essar Logistics Limited Global Supplies FZE

Total

Loans and advances including accrued interest and deposits given Essar House Limited Essar Oil Limited Essar Engineering Services Limited Essar Infrastructure Services Limited Essar Investments Limited Essar Projects (India) Limited Essar Shipping Limited Essar Services India Limited The Mobile Store Limited Essar Agrotech Limited

Total Loans and advances received

Essar Steel India Limited

Total

Advance towards Equity Essar Logistics Limited Essar Steel India Limited

Total Total Total

Security deposit received Essar Oil Limited Investment in shares Bhander Power Limited Sundry creditors Aegis Limited Arkay Holdings Limited Bhander Power Limited Futura Travels Limited Essar Information Technology Limited Essar Oil Limited Essar Projects (India) Limited Essar Engineering Services Limited Essar Heavy Engineering Services Limited Essar Project Management Consultancy Limited Essar House Limited Essar House Services Limited Essar Logistics Limited Essar Energy Services Limited Essar Engineering Services Limited Essar Shipping Limited Global Supplies FZE

Notes forming part of consolidated financial statements

THE DETAILS OF OUTSTANDING BALANCES AS ON MARCH 31, 2012 Nature of balances Holding company 2011-12 30,000.00 30,000.00 2010-11 30,000.00 30,000.00 Other related parties 2011-12 711.45 189.31 18,947.65 177.70 0.68 53,469.20 10,400.00 10,400.00 20,000.00 2,500.00 22,500.00 2010-11 0.77 0.11 300.77 11,927.63 10,400.00 10,400.00 20,000.00 20,000.00 Key management personnel 2011-12 2010-11 (Rs. in lakhs) Total 2011-12 711.45 189.31 18,947.65 177.70 0.68 53,469.20 10,400.00 10,400.00 20,000.00 2,500.00 30,000.00 52,500.00 2010-11 0.77 0.11 300.77 11,927.63 10,400.00 10,400.00 20,000.00 30,000.00 50,000.00

Essar Investments Limited Essar Infrastructure Services Limited Essar Steel India Limited Essar Services India Limited Essar Agrotech Limited Guarantee given on behalf of others Essar Oil Limited

Total

Total
Guarantee availed for loan taken Essar Oil Limited Essar Steel India Limited Essar Shipping & Logistics Limited Total

37. STATEMENT PURSUANT TO SECTION 212 OF THE COMPANIES ACT, 1956 The Ministry of Corporate Affairs, Government of India, vide General Circular No. 2 and 3 dated February 8, 2011 and February 21, 2011 respectively has granted a general exemption from compliance with Section 212 of the Companies Act, 1956, subject to fulfillment of conditions stipulated in the circular. The Company has fulfilled the conditions stipulated in the circular and hence is entitled to the exemption. Necessary information relating to the subsidiaries has been included in the consolidated financial statements. (Rs. in lakhs )
Sr. No. Particulars Vadinar Oil Terminal Limited 104,614.20 (35,906.99) 306,877.82 238,170.60 0.54 51,639.98 (17,994.27) (12,549.05) (5,445.22) Nil Essar Bulk Terminal Limited 26,150.00 18,636.39 197,073.32 152,286.93 104.22 42,534.14 20,352.85 4,471.42 15,881.43 (2,094.84) Essar Bulk Terminal (Salaya) Limited 20,807.85 (53.45) 65,839.66 45,085.27 (36.77) (36.77) Nil Essar Bulk Terminal Paradip Limited 11,605.00 (26.88) 49,241.89 37,663.77 (19.50) (19.50) Nil Essar Paradip Terminals Limited 905.00 (8.58) 1,275.02 378.60 (3.28) (3.28) Nil Vadinar Port & Terminals Limited 27,013.45 3,811.85 118,327.07 87,501.77 20,738.16 5,654.59 1,834.63 3,819.95 Nil

1 2 3 4 5 6 7 8 9 10

Capital Reserves Total assets Total liabilities Details of investments (except investments in subsidiaries) Turnover Profit / (loss) before taxation Provision for taxation Profit after taxation (7-8) Dividend paid

38. The previous year figures have been regrouped / rearranged wherever necessary to conform to the current year classification as per the requirement of the revised schedule VI notified under the Companies Act, 1956.

For and on behalf of the Board of Directors

Rajiv Agarwal Managing Director R. N. Bansal Director Mumbai May 30, 2012

Shailesh Sawa Director Finance Manoj Contractor Company Secretary

98

Annual Report 2011-12

NOTES

NOTES

The Ministry of Corporate Affairs has taken a Green Initiative in Corporate Governance by allowing paperless compliance by companies. Accordingly, companies can now send various documents electronically to those shareholders who register their email addresses to receive all communications including Annual Reports by e-mail: Holders of shares in physical form are requested to fill up the postage pre-paid e-mail registration form setout below and send the same to the share transfer agents, M/s. Data Software Research Company Private Limited. Members holding shares in demat form may register their e-mail IDs with the Company or their Depository Participant.

E-MAIL REGISTRATION
To

Data Software Research Company Private Limited Unit: ESSAR PORTS LIMITED 19, Pycrofts Garden Road Off Haddows Road Nungambakkam Chennai 600 006 Dear Sir/s, Re: Registration of e-mail ID for receiving communications in electronic form I am a shareholder of the Company. I want to receive all communications from the Company including AGM and other General Meeting notices and explanatory statement(s) thereto, Balance Sheets, Directors Reports, Auditors Reports etc., through e-mail. Please register my e-mail ID, set-out below, in your records for sending communication through e-mail: Folio No* : ........................................................................................................ ........................................................................................................ ........................................................................................................

Name of 1st Registered Holder* : Name of Joint Holder(s) Address :

: ........................................................................................................

........................................................................................................ ........................................................................................................ Pin Code E-mail ID (to be registered) : : ........................................................................................................ Mobile : ...

Landline :

Date Signature of first holder* .. Important Notes: 1) Fields marked * are mandatory for registration of the e-mail ID 2) On registration, all the communications will be sent to the e-mail ID registered in the folio 3) The form is also available on the website of the Company www.essar.com

BUSINESS REPLY INLAND LETTER

Postage will be paid by the Addressee Business Reply Permit No. TN/CH/(C)/BRP/996 Greams Road P.O. Chennai - 600 006

No postage stamp necessary if posted in INDIA

To Data Software Research Company Private Limited Unit: Essar Ports Limited 19, Pycrofts Garden Road, Off Haddows Road, Nungambakkam, Chennai 600 006

1st Fold

2nd Fold

ESSAR PORTS LIMITED

REGD. OFFICE: Administrative Building, Essar Refinery Complex, Okha Highway (SH25), Taluka Khambhalia, District Jamnagar, Gujarat 361 305

PROXY FORM
DP ID.*: Client ID.*: Folio No.

I/We..............................................................................................................................................of ......................................................... in the district of ..........................................being a member of ESSAR PORTS LIMITED, hereby appoint............................................of ................................................. or failing him..................................................................... of ................................................... as my / our proxy to vote for me / us and on my / our behalf at the THIRTY-SIXTH ANNUAL GENERAL MEETING of the Company to be held on Thursday, September 27, 2012 at 2.30 P.M. at the Registered Office of the Company, Administrative Building, Essar Refinery Complex, Okha Highway (SH25), Taluka Khambhalia, District Jamnagar, Gujarat 361 305 and at every adjournment thereof. Signed this ....................................day of ...............................2012 Proxy form must reach the Companys Registered Office, at Administrative Building, Essar Refinery Complex, Okha Highway (SH25), Taluka Khambhalia, District Jamnagar, Gujarat 361 305, not less than 48 hours before the commencement of the meeting. * Applicable only in case of Members holding shares in electronic form. Affix Re.1 Revenue Stamp

Signature

ESSAR PORTS LIMITED

REGD. OFFICE: Administrative Building, Essar Refinery Complex, Okha Highway (SH25), Taluka Khambhalia, District Jamnagar, Gujarat 361 305

ATTENDANCE SLIP
DP ID.*: Client ID.*: 36th Annual General Meeting Time : 2.30 P.M. Date : September 27, 2012 Venue : Administrative Building Essar Refinery Complex Okha Highway (SH-25), Taluka Khambhalia District Jamnagar, Gujarat 361 305 Member Proxy [Name in Capital letters] I hereby record my presence at the 36th Annual General Meeting of the Company. Signature of Member/Proxy Note: 1. Admission restricted to Members / Proxies only. 2. Please avoid bringing children / non-members with you. * Applicable only in case of Members holding shares in electronic form. Folio No.

Book Post

If undelivered, please return to: Data Software Research Company Private Limited Unit: Essar Ports Limited 19, Pycrofts Garden Road, Off Haddows Road Nungambakkam, Chennai - 600 006 Tel: (044) 2821 3738, 2821 4487, Fax: (044) 2821 4636