Dear Shareholders,
 
 The year 2010-11 was special for IndianOil, for it was during this year
 that the company regained its position as the nation''s largest refiner.
 While our business went through a tumultuous and demanding phase during
 the year, to say the least, we were able to surmount the challenges and
 record a superlative performance. We witnessed an improved performance
 on all operational parameters – refining and pipeline throughputs rose
 and our sales went up. The year also saw the successful commissioning
 of some of our most ambitious projects; such as the expansion of
 Panipat refinery, fuel quality up-gradation facilities, besides the
 sustained expansion of our marketing and pipeline network.  We were
 able to leverage our formidable supply chain to meet the challenge of
 making BS-III and IV compliant fuels available at the pump nozzle. Our
 efforts to build the petrochemicals business gained traction with
 logistics and channel partners firmly in place. We covered vital ground
 in the alternative energy business too. However, the year was also a
 test of perseverance as we continued to contend with tight margins at
 the pump nozzle while doing a tightrope act between fund raising and
 capital expenditure on projects.
 
 Globally, the year witnessed enhanced energy consumption driven by a
 strong economic recovery. High oil prices reshaped energy policy and
 the focus once again turned to ensuring oil security in the face of
 disruptions in some producing nations. Bio-fuels, Shale gas, Oil sands
 and other unconventional oil sources continued to receive added
 attention. Global natural gas consumption grew at a record 7.4% in 2010
 with the United States moving to Shale gas.  India witnessed a boost in
 domestic gas availability led by the KG basin output, before it began
 to slide by the end of the year. With the economy showing positive
 signs, we continued to remain the second fastest growing economy in the
 world. However, our energy landscape is still dominated by Coal, which
 accounts for 42% of energy use and that perhaps will continue to be the
 case. While there is a realization that we need to increase the share
 of clean energy like gas as the fuel of choice, the availability,
 especially of LNG, is yet to unfold fully in the face of global price
 levels and affordability of prices in the country.
 
 Despite the growth of gas and possibly alternative energy options,
 liquid fuels will continue to dominate as the fuel that will drive the
 growth of the nation. Hence, we have to invest and the oil industry has
 to generate a justifiable return on investments in terms of robust
 profits. This calls for constant efforts to improve our secondary
 processing capacity to generate value out of the bottom of the barrel.
 
 The volatility of high oil prices is a phenomenon that would make us
 look back in nostalgia to a time when there was at least a range bound
 movement. Till 2005, we could plan for our future considering this
 range. Then the price shot up on speculation before falling and rising
 again. The unwritten rule in crude oil prices currently is that there
 is no rule! We cannot predict crude oil prices, as it remains high in
 the absence of any extraordinary demand and supply factors. There are
 other factors too like the relationship between the currency and the
 commodities market.
 
 For us in India, the gap between the domestic prices of Diesel and SKO
 and international prices has been widening. While MS prices were
 deregulated in June 2010, we still carry large under recoveries on
 other products. The Government does provide compensation by way of
 reimbursement of the under recoveries, but till the time the
 compensation comes, which normally is after a considerable time gap, we
 borrow from the market adding to our financial stress. The Company is
 sitting on high borrowings and a skewed debt-equity ratio. However,
 there was renewed optimism as the industry saw some duty re-structuring
 by the Government, a slight increase in prices of sensitive products
 and an indication of a gradual shift in the policy from the present
 system of indirect subsidies to direct subsidies.
 
 True, the choices are limited for a nation with millions still below
 the poverty line, with a large segment depending on kerosene, diesel
 and LPG. However, if crude prices continue to surge and are not passed
 on to the consumer, it will certainly impact growth and inflation is
 bound to increase, whether we pass the increase or not. Our endeavour
 would therefore be, to continue the dialogue on the issue with various
 stakeholders, on the imperatives of passing on the high crude prices
 off from the Refining and Marketing Companies.
 
 As a National Champion, IndianOil has been relentless in its pursuit of
 excellence. A value that will continue to drive us. Technology has
 played a crucial role in our growth too. The best of technologies are
 those which have simple and lasting benefits and make a difference in
 the daily lives of our customers. Throughout our existence as India''s
 premier energy brand, we have always tapped technology as an enabler.
 Our reputation as a committed provider of energy has stood us in good
 stead. And even today, this philosophy permeates in our core thinking
 and processes. The Paradip Refinery project is the biggest project
 under implementation by IndianOil. The project has been planned as a
 coastal refinery and should give us many strategic advantages, from
 sourcing and processing cheaper crude to providing us with an ability
 to export products, in the likelihood of a surplus in petroleum
 products in the country.
 
 Currently, we propose to invest over Rs. 10,000 crore annually for the
 next few years on projects. Right now, the focus is to develop
 expertise in new areas. Nuclear power is one such area and we would
 also like to expand our presence in the gas sector too.  Our LNG plans
 at Ennore are underway, while in petrochemicals we are trying to get
 into high value specialty and niche chemicals to add to our
 profitability.
 
 I believe that for a corporate like IndianOil it is necessary to win
 the admiration of its stakeholders, not only through its highly ethical
 and environmentally sustainable business practices, but also through
 its valued contribution to the society and the community. Constant
 growth is the basic driver behind our business philosophy as a
 corporate and we need to generate the greatest value to our business
 and our stakeholders. I am happy to state that we are aware of these
 expectations and are responding in the manner expected of us. It is
 time to focus our energies on accelerating smoothly into the next phase
 of growth. I want to thank our customers and shareholders for their
 understanding and welcome their continued support as we move towards a
 brighter future.
 
                                                     R.S. Butola
 
                                                        Chairman