Dolphin Offshore Enterprises (I)

The Directors have great pleasure in presenting the Twenty Ninth
 Annual Report on the business and operations of your Company, together
 with the audited financial statements for the year ended March 31,
 2008.
 
 1.0 AUDITED FINANCIAL STATEMENTS:
 
 1.1 Summarised Audited Financial Results -
 
                                      (Amounts in Thousands
                                   of Indian Rupees except EPS)
                                      2007-08     2006-07
 
 Revenues                            227,70,47    205,80,77
 
 Gross operating
 profit                               53,05,03     46,05,34
 
 Net operating profit                 29,94,72     33,01,88
 Profit before interest
 and depreciation                     43,84,74     34,54,51
 
 Profit before tax                    24,83,41     23,34,25
 
 Net profit after tax                 16,25,85     14,83,25
 
 Earnings per share
 
 Basic                                   17.34        16.55
 
 Diluted                                 13.71        12.56
 
 
 Year on year, the total revenues increased by 10.63%, Gross operating
 profit by 15.20%, profit before interest and depreciation by 26.92% and
 profit after tax by 9.64%.
 
 1.2 Partial conversion of Foreign Currency Convertible Bonds -
 
 During the year, the Bond Holders converted 3,000 foreign currency
 convertible bonds of USD 1,000 each, (representing 20% of the total
 bonds issued) into 6,04,933 equity shares of Rs 10.00 each at a premium
 of Rs 215.00 per share. Consequently, the paid up share capital of the
 Company has increased to Rs 9.56 crores.
 
 1.3 Dividend
 
 For the year 2007-08, the Board of Directors is pleased to recommend a
 dividend of Rs 2.50 (2007: Rs 2.50) per equity share of Rs 10.00 each,
 which will result in a total outlay of Rs 2.39 crores (2007: Rs 2.24
 crores) towards dividend and Rs 0.46 crores (2007: Rs 0.38 crores)
 towards tax on dividends.
 
 2.0 MANAGEMENTS DISCUSSIONS AND ANALYSIS:
 
 2.1 Industry Trends and Developments -
 
 During the year under review, crude oil prices increased substantially
 from an average Brent price of USD 64.20 a barrel in 2006-07 to an
 average of USD 82.80 in 2007-08. Prices had increased even further to
 around USD 147 in July 08 but early August dropped to USD 125.
 
 A variety of factors are responsible for this surge in oil prices.
 Emerging markets such as India and China have increased oil consumption
 with a growth rate of 9 to 11 % in GDP; frequent interruption in
 supplies in major oil producing countries such as Nigeria and
 Venezuela; a threat of armed conflict with Iran; level of reserve
 stocks of petroleum products in USA; as also forward trading in oil on
 the New York Metal Exchange although it is debatable whether or not
 such trading helps to stabilise prices.
 
 Much of our business is with ONGC in the Mumbai High Oilfields and
 ONGCs activities include installation of new facilities and equipment
 to boost production; revamp, replacement and modification of existing
 infrastructure in order to enhance production as well as to extend the
 life of the oilfields. ONGC has announced that it will invest close to
 USD 30 billion in the Eleventh Five Year Plan to 2012, which is about
 60% higher than its investment in the Tenth Five Plan. Your Companys
 prospects for growth look good. Your Company expects to get its fair
 share of this business.
 
 Your Companys range of services covers diving and subsea intervention;
 vessel ownership, vessel management and marine logistics; fabrication,
 process and electrical engineering, installation and commissioning; and
 ship/drilling rig repairs.
 
 Your Company has the ability to integrate these various services. It
 enables the Company to undertake turnkey EPC contracts at competitive
 rates.
 
 2.2 The year in perspective -
 
 Your Company achieved a significant milestone by completing
 successfully the 6 Clamp-On Project for ONGC. The Company undertook
 this job in a consortium with Larsen & Toubro Ltd. with a share of 55%
 of the Contract price of approximately USD 26 million.
 
 Your Company completed the ONGC Barge Bumper Boat Landing Riser
 Protector Contract (BBBLRP Contract), worth USD 32.19 million. Work on
 this project lasted 19 months to May 2008. Your Company executed this
 contract in a consortium with Naftogaz India Ltd. Your Company was
 responsible for overall Project Management. Dolphins share of this
 project initially was 80% but was later revised to 97% after the
 Company took over the responsibility of procuring materials sourced by
 Naftogaz.
 
 Your Company undertook contracts for the provision of diving services
 for Punj Lloyd under their contract with ONGC for the Heera Development
 Project and with CNS of Italy for their work in China.
 
 Your Company completed its ongoing contracts with Larsen & Toubro Ltd.
 for the SH Reconstruction project and the Pipeline Replacement job.
 
 Offshore Projects in the Mumbai High area are affected by the vagaries
 of the monsoon. Early monsoon in May or a late monsoon in October
 reduces the working season. The year under review was affected by both
 these contingencies and what is more, extremely rough weather prevailed
 in February 08. This reduced the working season leading to higher costs
 and delayed completion of projects.
 
 During the year, your Company sold two of its vessels, Anchor Handling
 Towing Supply vessels (AHTS), Krishna Dolphin and Godavari Dolphin.
 
 2.3 Future Prospects -
 
 With the successful completion of 6 Clamp- on projects, your Company
 has qualified as an independent EPC offshore contractor for ONGCs
 projects. It will have greater freedom to pursue contracts of its
 choice rather than be dependent on its partners/ clients. This in turn
 will facilitate growth in revenues and margins for the Company.
 
 The Companys order book position as on June 30, 2008 covering the
 period from April 01, 2008 onwards is Rs 116 crores.
 
 2.4 Business Risks and Managements assessments -
 
 Your Company has identified the following risks that may arise:
 
 2.4.1 Oil and gas prices:
 
 With oil prices ruling at unprecedented high levels, there is a good
 possibility that economic growth will slow down in all countries,
 developed and developing, which could result in a recession. That would
 have repercussions on many fronts: a slump in the oil industry, lower
 demand for oil and gas, fall in prices of commodities, oil and
 manufactured goods.
 
 However, India will be a different story.  The country is energy
 deficient. India imports more than 70% of its crude oil requirements
 and this percentage will increase as the country grows at more than 8%.
 India will continue to allocate resources to find new oil, mostly
 offshore as it did in the mid 1980s in a similar situation.
 Management of your Company therefore believes that service Companies
 like your Company will flourish despite what happens to their
 counterparts abroad.
 
 2.4.2 Scarcity of resources and increased input costs:
 
 As of now there has been a surge in the level of activity in the
 offshore oil and gas industry.  Demand for resources, men and
 materials, has been increasing around the world.  Situation in India is
 very similar.
 
 Shipyards are overbooked and the period for delivery of vessels and
 rigs is lengthening. Similarly, there is a shortage of skilled and
 trained manpower. International companies are hiring skilled Indian
 personnel at attractive rates creating a shortage of trained men here.
 Costs to the Companies like ours, of skilled men, especially divers,
 have been increasing significantly and in the last year have risen by
 over 50%. As a consequence, the cost of executing projects is
 increasing, thereby affecting margins adversely.
 
 Anticipating higher volumes and revenues in the near future, your
 Company will recruit additional Managerial personnel. Office space at
 Bandra was limited and so, your Company hired a building belonging to
 LIC at Belapur on a long-term lease. The Company moved into these
 premises in September 2007.  All the offices are now under one roof;
 this has helped achieve better control and coordination of different
 Departments.
 
 With regard to skilled offshore personnel, the Company is implementing
 its plan to recruit and train men and in particular, in assisting
 divers to undertake professional courses. Additionally, the Company
 will set up a centre to train divers, diving technicians and ROV
 operators in India.
 
 2.4.3 Need for further investment:
 
 As said above, the Company expects its volume of work to increase
 substantially in the next three to five years. Anticipating this change
 of scenario, the Company either by itself or through its wholly owned
 subsidiaries, has invested in diving systems and in different types of
 vessels for turnkey offshore projects.  Further, the Company has
 entered into long-term charter agreements for two vessels, SEAMEC 1 for
 a period of four years and Abouzar 81 for 31 months.
 
 The Company will make further investments in vessels, diving systems
 etc. Your Companys Management is confident of being able to raise the
 necessary funds for purchase of these assets.
 
 2.4.4 Predominance of a single customer:
 
 Your Companys customer base is currently dominated by a single
 organisation, ONGC. Accordingly, business opportunities for the Company
 are dependent on the decisions of ONGC, especially their policy on
 nominating work, without tenders, to other public sector companies, and
 the timing and terms and conditions of their tenders.
 
 Your Company has been operating in such an environment since its
 inception and is aware of the risks involved. To counter this, it
 concentrates on developing its reputation as a good, reliable and
 efficient service provider. As a consequence, the Company is recognised
 as one of the leading offshore contractors, and has been accepted as
 sub-contractors by a number of large contractors, including public
 sector companies.
 
 The Governments liberalisation policy has enabled private sector
 companies to acquire acreage for exploration and to take over the
 development of some minor oil and gas fields. Private sector has
 acquired nearly 40% of the acreage under exploration. As they move
 towards production activities, hopefully as they discover commercial
 oil fields, the client base of your Company will grow.
 
 2.4.5 Contractual nature of business:
 
 Most of the Companys revenues are now earned on turnkey construction /
 modification contracts. This Has led to some fluctuations in the year
 to year revenues, and resultant profits, as revenues can now be
 recognized only when contracts are completed in total, or specifically
 identified milestones have been achieved as against a per diem revenue
 recognition that was possible under the vessel management contracts in
 earlier years.
 
 This problem is compounded by the fact the Companys financial year
 ends on March 31; this is in the middle of the working season in Mumbai
 High, which should last until the end of May, depending on weather
 conditions.
 
 However, these fluctuations are expected to even out over a period of
 time. Fluctuations in reported revenues and profits do not affect the
 overall revenue earning and profit making capacity of your Company.
 
 2.5 Internal Control Systems and their adequacy -
 
 Your Company has adequate internal control systems in place. With a
 view to monitor the Companys performance as well as to make sure that
 internal checks and controls are operating properly, the Company has
 appointed an external firm of Chartered Accountants as Internal
 Auditors. The Audit Committee of the Board considers the monthly
 reports of the Internal Auditors. The Audit Committee ensures that
 internal control systems are adequate and working effectively.
 
 2.6 Human Resources and Industrial Relations -
 
 The Board wishes to express its deep appreciation to all employees for
 their contributions to the working of the Company during the year.
 Harmonious relations continued to prevail in the organization,
 strengthening the well- established traditions of fairness in dealings
 and commitment to the future growth of employees.
 
 3.0 DUTY CREDIT ENTITLEMENT
 
 As a result of its foreign exchange earnings, the Company has been
 granted a Duty Credit Entitlement of Rs 8.31 crores for 2005 - 06 which
 can be used in lieu of payment of customs duty and / or excise duties
 on the import of capital goods, spares and consumables that the Company
 may require in the normal course of its business. This entitlement is
 available for a period of two years. The Company is also awaiting its
 Duty Credit Entitlement certificate of approximately Rs 10.00 crores
 for 2006 - 07 that are expected shortly.
 
 As a result of this entitlement, the Company will be able to reduce
 capital and operating expenditure and this in turn will enable the
 Company to improve profit margins.
 
 4.0 ISO 9002 CERTIFICATION:
 
 ISO 9002 Certification has been renewed through the American Bureau of
 Shipping [ABS] for the following services:
 
 Marine management of vessels
 
 Diving and underwater engineering
 
 Management of fabrication and offshore turnkey projects Ship repairs.
 
 5.0 DIRECTORS:
 
 5.1 Appointment/Re-designation of Director
 
 The current tenure of Rear Admiral Kirpal Singh as Chairman and
 Managing Director of the Company ends on September 30, 2008. At the
 Board meeting held on June 30, 2008, the Board appointed him as
 Executive Director re-designated as Executive Chairman of the Company
 subject to the approval of shareholders, for a further term of 5 years
 w.e.f. October 01, 2008.
 
 At the above meeting the Board also re- designated Mr. Satpal Singh,
 Joint Managing Director as Managing Director of the Company w.e.f.
 October 01, 2008.
 
 5.2 Directors retiring by rotation -
 
 Mr. Bipin R. Shah and Mr S. Sundar are due to retire by rotation, and
 being eligible, offer them for re-appointment. Your Directors recommend
 their re-appointment.
 
 6.0 AUDITORS:
 
 M/s. Haribhakti and Co. retires as Auditors of your Company at the end
 of the forthcoming Annual General Meeting, and is eligible for re-
 appointment. Your Directors recommend their re- appointment.
 
 7.0 FIXED DEPOSITS:
 
 The Company has not invited or accepted any Fixed Deposits from the
 public within the meaning of Section 58A of the Companies Act, 1956. As
 at March 31, 2008, the Company had accepted Fixed Deposits of Rs 0.46
 crores (2007 - Rs 0.58 crores) from shareholders and others.  There are
 no deposits that are due to have been repaid, nor any interest due,
 which have not been paid.
 
 8.0 SUBSIDIARY COMPANIES:
 
 In terms of approval granted by the Central Government under section
 212(8) of the Companies Act, 1956, a summarized statement of financial
 data on the subsidiaries of the Company has been enclosed with this
 Annual Report in lieu of the audited financial statements.  However,
 any member who is interested in obtaining copies of the audited
 financial statements of the Companys subsidiaries may contact the
 Company Secretary.
 
 The Consolidated Financial Statements of the Company and its
 subsidiaries, prepared in accordance with Accounting Standard AS - 21
 prescribed by The Institute of Chartered Accountants of India, form
 part of this Annual Report.
 
 The Statement pursuant to section 212 of the Companies Act, 1956
 containing details of the Companys subsidiaries is also attached.
 
 9.0 FOREIGN EXCHANGE RECEIPTS AND EXPENDITURE:
 
 During the year ended March 31, 2008, the Companys foreign exchange
 receipts and expenditure was as follows:
 
                             (Amounts in Thousands of Indian Rupees)
 
                                     2007-08       2006-07
 Receipts-
 Contract revenues                1,76,52,55    1,10,89,54
 
 Sale of vessels                    29,37,06         - 
 
 Interest received                   2,81,27       1,21,35
 
                                  2,08,70,88    1,12,10,89
 
 Expenditure-
 Plant & machinery                  12,52,85       1,10,89
 
 Vessels                                -         16,07,62
 
 Foreign subcontractors                88,71       6,19,42
 
 Vessel charter & related
 expenses                           20,67,00      10,93,89
 
 Advance to wholly owned
 subsidiary                         18,52,52      21,55,37
 
 Equipment related expenses             8,61       1,31,03
 
 Materials, stores and spares        6,07,91       7,02,82
 
 Foreign travel                        74,52       1,61,81
 
 Other matters                       2,68,01       3,67,40
 
                                    62,20,13      69,50,25
 
 
 10.0 DIRECTORS RESPONSIBILITY STATEMENT:
 
 As required under Section 217 (2AA), which was introduced by the
 Companies (Amendment) Act, 2000, your Directors confirm:
 
 (i) that in the preparation of the annual accounts, the applicable
 accounting standards have been followed;
 
 (ii) that the Directors had selected such accounting policies and,
 except as may be required in order to comply with newly
 introduced/modified accounting standards, applied them consistently,
 over the years and made judgments and estimates that are reasonable and
 prudent so as to give a true and fair review of the state of affairs of
 the Company as at March 31, 2008 and of the profit of the Company for
 the year then ended;
 
 (iii) that the Directors have taken proper and sufficient care for the
 maintenance of adequate accounting records in accordance with the
 provisions of the Companies Act, 1956 for safeguarding the assets of
 the Company and for preventing and detecting ¦fraud and other
 irregularities;
 
 (iv) that the financial statements have been prepared on a going
 concern basis.
 
 11.0 PARTICULARS OF EMPLOYEES:
 
 The information in accordance with Section 217(2A) of the Companies
 Act, 1956 read with Companies (Particulars of Employees) Rules, 1975 is
 given in a separate statement and forms part of this Report.
 
 12.0 COMPANIES (DISCLOSURE OF
 
 PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988:
 
 Particulars under Companies (Disclosure of Particulars in The Report of
 the Board of Directors) Rules, 1988 on conservation of energy and
 technology absorption are not applicable and hence no disclosure is
 being made in this Report.
 
 13.0 CORPORATE GOVERNANCE REPORT:
 
 Corporate Governance Report is attached by way of Annexure A to this
 Report.
 
 14.0 ACKNOWLEDGEMENTS:
 
 Your Directors wish to place on record the whole hearted co-operation
 the Company has received from its Clients, Bankers, Financial
 institutions, and the Central and State Government authorities,
 shareholders, suppliers and others during the year.
 
 
                      For DOLPHIN OFFSHORE ENTERPRISES (INDIA) LIMITED
 
                      Rear Admiral Kirpal Singh
                      Chairman and Managing Director
 
 Mumbai
 June 30, 2008