To the Members of Essar Oil Limited
 
 The Directors have pleasure in presenting the 22nd annual report &
 audited accounts of the Company for the financial year ended March 31,
 2012.
  
                                                           (Rs. in Crore)
 
                                             2011-2012       2010-2011
 
 Gross Revenue from                          63,427.77       53,191.81
 Operations
 
 Net Revenue including                       58,761.39       47,342.21
 other income 
 
 Earnings before Finance
 cost, depreciation and                       2,100.76        2,779.49
 amortization, exceptional
 items and Tax
 
 Profit / (Loss) before Taxes                   (48.02)         828.39
 and Exceptional Items 
 
 Less: Exceptional items                      1,237.46        1,083.43
 
 Less: Provision for Income
 Tax / Deferred Tax Liability                        -           (3.35)
 
 Net Profit / (Loss) after tax               (1,285.48)        (251.69)
 
 Add: Balance brought                        (2,879.34)      (2,627.65)
 forward from previous year 
 
 Balance to be carried to                    (4,164.82)      (2,879.34)
 Balance Sheet
 
 Financial results
 
 This financial year has been a year of significant importance since the
 refinery was able to increase its capacity from 10.5 MMTPA to 18 MMTPA
 with improved complexity from 6.1 to 11.8. Subsequent to financial year
 ending March 31, 2012, your Company has added another 2 MMTPA capacity
 by undertaking certain optimization activities taking the total
 refining capacity to 20 MMTPA. During the year, the Company recorded a
 strong revenue growth of 19% at Rs.63,428 crore, up from Rs.53,192 crore in
 the previous financial year before reversal of sales tax benefit.  This
 growth is primarily driven by increased product prices, partly offset
 by reduction in the sales quantity on account of the planned refinery
 shut down undertaken during September- October 2011 for tie-in of new
 units to expand the refining capacity to 18 MMTPA and to carry out
 routine maintenance activities. The Current Price Gross Refinery Margin
 (CP GRM) (excluding sales tax benefit) for the refinery business is
 US.23 per barrel compared to US.53 per barrel for the previous
 financial year. The EBIDTA for the current financial year has decreased
 to Rs. 2,101 crore from Rs. 2,779 crore for last financial year. This is
 mainly on account of decrease in refinery throughput due to the planned
 shutdown, decline in gross refinery margin, MTM provision for forex
 losses, shutdown expenditures and reduction in income on account of non
 defeasement of sales tax incentive post passing of order of Hon''ble
 Supreme Court.  For the financial year ended March 31, 2012, the loss
 before and after tax is due to lower EBIDTA as explained above,
 exceptional items on account of reversal of assignment income arising
 out of defeasement of sales tax incentive benefits of Rs.778 crore for
 the period from April 2011 to December 2011 subsequent to the Hon''ble
 Supreme Court order dated January 17, 2012 denying the Gujarat Sales
 tax incentive benefit to the Company, creation of provision of sales
 tax interest of Rs. 83 crore for the period from January 17, 2012 to
 March 31, 2012 and creation of a provision of Rs. 376 crore in accordance
 with Corporate Debt Restructuring (CDR) Exit proposal approved by CDR
 Core Group. The Company reported negative PAT (after exceptional items)
 for current financial year at Rs. (1,285) crore as against previous year
 figure of Rs.(252) crore.
 
 During the financial year, the Company has modified the terms of the
 outstanding Foreign Currency Convertible Bonds aggregating to US2
 million making them compulsorily convertible into equity shares or
 Global Depository Shares. The Bonds were originally convertible at the
 option of the Bond holders.
 
 Due to absence of profits during the financial year, the Board has not
 recommended any dividend for the year. Information on the operational
 performance, etc. of the Company for the financial year is given in the
 Management Discussion and Analysis which is annexed to the Directors''
 Report.
 
 A statement containing salient features of the audited Balance Sheet as
 at March 31, 2012, Statement of Profit and Loss and Cash flow Statement
 for the year ending on that date and Auditors Report on the Abridged
 Financial Statements along with Auditors Report on the full financial
 statements forms part of the Annual Report.
 
 With reopening of accounts of proceeding three financial years, as
 explained in subsequent paras, the financial statements for financial
 year 2011-12 approved by the Board of Directors on May 12, 2012 have
 consequently been revised and approved by the Board of Directors on
 November 9, 2012.
 
 Sales Tax Incentive
 
 The Hon''ble Supreme Court of India, on January 17, 2012, allowed an
 appeal filed by the Gujarat Government and set aside the judgment of
 the Gujarat High Court dated April 22, 2008, thus denying the Company
 benefits under a sales tax incentive scheme of the Government of
 Gujarat to the Company. Hence, the sales tax amount collected and
 retained by the Company since May 1, 2008 to January 17, 2012 became
 payable.
 
 Subsequent to above order, the Company received demand notices from the
 Gujarat Government for repayment of the full amount of sales tax
 deferment liability of Rs. 6,169 crore collected by the Company along
 with applicable interest (i.e. 18% p.a.).
 
 While the Company started paying the Sales Tax / VAT collected from the
 date of Supreme Court judgement i.e. January 17, 2012, it also
 submitted a proposal on April 5, 2012 to the Gujarat Government for
 remission of the whole amount of interest on the tax amount payable and
 also to allow the Company to pay the tax amount without interest in
 convenient instalments. This was not accepted by the Government. The
 Company therefore filed a writ petition on May 7, 2012 before the
 Hon''ble Gujarat High Court which was dismissed by the Hon''ble High
 Court on June 25, 2012.
 
 The Company filed a Special Leave Petition (''SLP'') before the
 Hon''ble Supreme Court on July 10, 2012 against this order of Gujarat
 High Court. In compliance with the directives of the Supreme Court, the
 Company paid an amount of Rs.1,000 crore on July 26, 2012 against the
 sales tax dues. The Supreme Court vide its order dated September 13,
 2012 directed the Company to pay interest @ 10% p.a. on the sales tax
 dues with effect from January 17, 2012 and also to repay the sales tax
 amount in eight equal quarterly installments along with interest
 starting from January 2, 2013.
 
 Re-opening of books of accounts for financial years 2008-09, 2009-10
 and 2010-11
 
 As a consequence of the above-referred Supreme Court order, to reflect
 a true and fair view in the books of account for the three financial
 years ended on March 31, 2009, March 31 , 2010 and March 31, 2011 based
 on the permission received from the Ministry of Corporate Affairs, the
 Company proposes to re-open the books of accounts and financial
 statements for the said three financial years. Necessary resolution
 seeking approval of shareholders for re-opening of the said financial
 statements has been incorporated in the Notice convening the ensuing
 Annual General Meeting. Except for reflecting true and fair view of the
 sales tax incentives/liabilities etc. concerning the Government of
 Gujarat there is no material change in the reopened and revised
 accounts of the Company.
 
 Consequent to reopening of the books of account for the above three
 financial years, the financial statements for these years have been
 revised. The statement containing the salient features of the reopened
 and revised audited Balance Sheets, Statements of Profit and Loss, Cash
 Flow statements and auditors reports on the abridged revised financial
 statements for the financial years 2008-09 to 2010-11 along with
 Auditors'' report on full revised financial statements and amendments
 to Directors'' Reports for respective financial years form part of the
 Annual Report. With amendment in the aforementioned financial
 statements, there are corresponding changes in the consolidated
 financial statements of the Company and its subsidiaries prepared in
 accordance with Accounting Standard AS 21 for the financial years ended
 on March 31, 2009 and March 31, 2010. Accordingly, statements
 containing the salient features of the reopened and revised audited
 Consolidated Balance Sheets, Statements of Profit and Loss, Cash flow
 statements and auditors'' reports on the abridged revised consolidated
 financial statements for the financial years 2008-09 and 2009-10 form
 part of the Annual Report.
 
 Corporate Debt Restructuring
 
 A debt restructuring package for the Company, under the Corporate Debt
 Restructuring Scheme, of Reserve Bank of India was approved by the
 lenders to the Refinery Project in 2003.  Subsequent to this, the
 Company successfully completed the Refinery Project in 2008.
 
 During the year, the Company sought approval of its lenders to exit
 from the CDR scheme. The CDR Core Group has approved the CDR exit
 proposal at its meeting held on June 29, 2012. The major commercial
 terms and conditions of CDR exit have been approved and detailed terms
 and conditions of CDR exit are to be discussed and decided in
 subsequent lenders'' meetings.
 
 CDR exit will give the Company greater financial and operational
 flexibility. Various stringent covenants like raising further
 borrowing, dividend payments, undertaking new projects, making new
 investments, etc. will be relaxed. Offshore lenders will be able to
 participate in project refinancing and working capital facilities.
 
 Directors
 
 During the year Mr. Naresh Nayyar relinquished the role of Managing
 Director & CEO and was assigned the newly created role of Deputy
 Chairman. Further, during the year, Mr. L K Gupta has been appointed as
 Managing Director & CEO with effect from December 2, 2011. Also, Mr. C
 Manoharan has joined the Board as Director (Refinery) with effect from
 March 29, 2012, Mr. Philip Aiken an Independent Director on the Board
 of parent company; Essar Energy Plc has joined the Board as Promoter
 company representative with effect from August 14, 2012.  Mr. Prashant
 S Ruia had resigned from the Board with effect from April 23, 2012.
 Subsequently, he has been appointed as Director with effect from August
 14, 2012. Mr. P Sampath resigned as Director from the Board during the
 year. Mr. Anshuman S. Ruia resigned as Director with effect from Agust
 7, 2012.  Mr. Suneet Shukla joined as nominee of IFCI Ltd. on the Board
 in place of Mrs. Manju Jain with effect from November 9, 2012. The
 Board wishes to place on record its appreciation for the guidance and
 valuable services rendered by Mr.  Anshuman S Ruia, Mr. P Sampath and
 Mrs. Manju Jain during their tenures as members of the Board.
 
 Mr. Naresh Nayyar and Mr. Dilip J Thakkar retire by rotation at the
 ensuing Annual General Meeting (AGM) and offer themselves for
 re-appointment. Mr. L K Gupta and Mr. C Manoharan are proposed to be
 appointed as Managing Director & CEO and Director (Refinery)
 respectively at the AGM. Further, it is proposed to appoint Mr.
 Prashant S Ruia and Mr. Philip Aiken as Non Executive Directors, liable
 to retire by rotation, at the AGM.  Particulars of the directors being
 re-appointed/appointed, as required under clause 49 of the listing
 agreement with the Stock Exchanges, are given in the Notice /
 Explanatory Statement convening the ensuing Annual General Meeting,
 forming part of the Annual Report.
 
 Directors'' Responsibility Statement
 
 Pursuant to the provisions of section 217(2AA) of the Companies Act,
 1956, it is hereby confirmed:
 
 i) that in the preparation of the accounts for the financial year ended
 March 31, 2012, the applicable accounting standards have been followed
 along with proper explanation relating to material departures;
 
 ii) that the Directors have selected such accounting policies and
 applied them consistently and made judgments and estimates that were
 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
 loss of the Company for that period;
 
 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 safe guarding the assets of
 the Company and for preventing and detecting fraud and other
 irregularities; and
 
 iv) that the Directors have prepared the accounts for the financial
 year ended March 31, 2012 on a ''going concern'' basis.
 
 Corporate Governance
 
 In terms of clause 49 of listing agreement with the Stock Exchanges, a
 certificate from the auditors of the Company on compliance of
 conditions of Corporate Governance is annexed to the Directors''
 Report. A report on Corporate Governance as provided in clause 49 of
 the listing agreement is included in the Annual Report.
 
 Employees Stock Option Scheme
 
 The Company has introduced Essar Oil Employees Stock Option Scheme -
 2011 (Scheme). The disclosures required to be made under the SEBI
 (Employee Stock Option Scheme and Employee Stock Purchase Scheme)
 Guidelines, 1999 (Guidelines) is enclosed as Annexure B forming part of
 this report. A certificate obtained from the auditors confirming
 compliance with the Guidelines and shareholders resolution approving
 the Scheme will be placed before the shareholders at the Annual General
 Meeting.
 
 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 shareholders of the Company excluding
 the statement of particulars of employees under section 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.
 
 Energy, Technology Absorption and Foreign Exchange
 
 The particulars as prescribed under section 217(1)(e) of the Act read
 with the Companies (Disclosure of Particulars in the Report of Board of
 Directors) Rules, 1988 are set out in Annexure A to this Report.
 
 Fixed Deposits
 
 Your Company has not accepted any public deposits under section 58A of
 the Companies Act, 1956 during financial year under report.
 
 Holding Company
 
 The Company, within the meaning of section 4(6) of the Companies Act,
 1956, is an indirect subsidiary of Essar Oil & Gas Limited, Mauritius
 (formerly known as Vadinar Oil), which along with its subsidiary holds
 87.09% of the total share capital. Essar Oil & Gas Limited in turn is a
 wholly owned subsidiary of Essar Energy Plc.
 
 Subsidiary Company
 
 During the financial year, Essar Oil Mauritius Limited, Mauritius
 (EOML), has become subsidiary of the Company. The paid- up capital of
 EOML is US.00. There were no operations in EOML during the financial
 year. As required under section 212 of the Companies Act, 1956, the
 audited financial statements along with the Directors'' Report and
 Auditors'' Report thereon of the subsidiary company for the financial
 year ended as on March 31, 2012 are included in the Annual Report. The
 control on EOML is intended to be temporary. Hence, consolidated
 financial statements are not prepared as per AS 21 on Consolidated
 Financial Statements.
 
 Auditors and Auditors'' Report
 
 M/s. Deloitte Haskins & Sells, Chartered Accountants, Auditors of the
 Company hold office until the conclusion of the ensuing Annual General
 Meeting.
 
 M/s. Deloitte Haskins & Sells, Chartered Accountants, have informed the
 Company that, if appointed, their appointment will be within the limits
 prescribed under section 224(1B) of the Companies Act, 1956.
 Accordingly, the members'' approval is being sought to their
 appointment as the Auditors of the Company at the ensuing Annual
 General Meeting. Our comments on the Audit observations are as below:
 
 (i) Auditors have drawn attention that the accumulated losses of the
 Company as on March 31, 2012 are more than 50% of its net worth.
 
 To improve the net worth, during the year the terms of Foreign Currency
 Convertible bonds (FCCBs) have been amended whereby the above bonds
 have now become compulsorily convertible into equity shares / Global
 Depository Shares (GDSs) on the same terms and conditions. Terms and
 conditions of FCCBs are mentioned in note 2 to Abridged Revised
 Financial Statements (note 6 to the full financial statements).
 
 The Company has incurred cash losses during the year mainly due to
 reversal of income recognized during Financial Years 2008-09 to 2011-12
 by defeasance of sales tax liability as detailed in Note 10 to Abridged
 Financial Statements (note 38 of the full financial statements). There
 were no cash losses in the preceding financial year. With the refining
 capacity increased to 20 MMTPA coupled with improved complexity, the
 revenues and profitability of the Company are expected to significantly
 improve.
 
 (ii) On use of funds raised on short term basis amounting to Rs. 3,180.62
 crore for long term investment / purposes, the Company had received a
 sanction letter for a loan of Rs. 1,133 crore on December 29, 2010 from a
 Bank to part fund the Optimization Project. Under this arrangement, the
 Company availed Rs. 500 crore Interim facilities in the form of letter of
 credit / letter of undertaking (LC/LUT) Facilities.  The Company had
 finalized long term Rupee Term Loan (RTL) facility agreement in July
 2012 and under this RTL agreement, LC/LUT can be converted into long
 term loan.  Pending disbursement of the loan as on March 31, 2012, the
 Company has utilized short term funds in form of project creditors /
 ICDs for the project temporarily.  This will be progressively replaced
 by long term funds, once the term loan is disbursed.
 
 Hon''ble Supreme Court of India, vide its order dated September 1 3,
 201 2 directed the Company to pay the outstanding sales tax amount in 8
 equal quarterly installments along with interest from January 2, 2013.
 The Company in the meanwhile has tied up with a Bank for availing
 facilities of up to Rs. 5,000 crore for meeting the sales tax and other
 obligations.
 
 Other observations of the Auditors in the Audit report, if any, are
 explained, wherever necessary, in the appropriate notes to accounts and
 are self-explanatory.
 
 Cost Auditors and Cost Audit Report
 
 M/s. Chandra Wadhwa & Co. were appointed as the Cost Auditor for the
 financial year ended March 31, 2012. The cost audit report for
 financial year ended March 31, 2012 will be filed with the Registrar of
 Companies, Gujarat within the prescribed time period.
 
 Acknowledgement
 
 The Board wishes to express appreciation and place on record its
 gratitude for the faith reposed in and co-operation extended to the
 Company by the Government of India, state governments, various
 government agencies/departments, financial institutions, banks,
 customers, suppliers and investors of the Company. Your Directors place
 on record their appreciation of the dedicated and sincere services
 rendered by the employees of the Company.
 
                           For and on behalf of the Board of Directors
 
                        LALIT KUMAR GUPTA         NARESH NAYYAR
 
                       Managing Director & CEO   Deputy Chairman
 
 Mumbai, November 09, 2012