CORPORATE GOVERNANCE REPORT
1. Company's philosophy on Corporate Governance:
Essar Oil Ltd. believes that adhering to global standards of Corporate Governance is essential to enhance shareholder value and achieve long term corporate goals. The Company is committed to ethical conduct of business, manages its affairs with fairness to all stakeholders and operates with openness, integrity and accountability. The Board of Directors conducts the business of the Company in due compliance with its Memorandum and Articles of Association and the laws applicable to the jurisdictions of the places where the Company operates and undertakes a periodic review of business plans, performance and compliance to regulatory requirements
Mr. Philip Aiken, Promoter Company representative has been appointed as Non Executive Director of the Company with effect from August 14, 2012. Further, Mr. Suneet Shukla has been appointed as Nominee of IFCI Ltd. in place of Mrs. Manju Jain with effect from November 9, 2012.
Six Board Meetings were held during the financial year 2011-2012 on April 11, 2011; May 3, 2011; July 11, 2011; November 1, 2011; December 2, 2011 and February 17, 2012.
The management of the Company is conducted by the Managing Director & CEO, who is assisted by the Heads of Divisions/ Departments, subject to the supervision and control of the Board of Directors. Mr. Iftikhar Nasir, CEO - Exploration and Production, Mr. S. Thangapandian, CEO - Marketing and Mr. Suresh Jain, Chief Financial Officer are permanent invitees for attending Board Meetings of the Company.
Mr. Naresh K Nayyar and Mr. D J Thakkar retire by rotation and being eligible, seek re-appointment at the ensuing 22nd Annual General Meeting (AGM). Further, it is proposed to appoint Mr. Prashant S Ruia and Mr. Philip Aiken as Directors liable to retire by rotation, Mr. L K Gupta as Managing Director & CEO and Mr. C Manoharan as Director (Refinery) at the ensuing AGM. A brief resume of the directors retiring by rotation along with the nature of their expertise and the details of other directorships and the committee positions held by them and their shareholdings have been disclosed to the shareholders through notes/Explanatory Statement annexed to the Notice for the ensuing AGM. None of the Directors is related to any other director except for Mr. Prashant S Ruia and Mr. Anshuman S Ruia, who are sons of Mr. Shashikant N Ruia, Chairman. As on March 31, 2012, Mr. D J Thakkar, Mr. K N Venkatasubramanian and Mr. V K Sinha held 300 shares, 6,500 shares and 120 shares respectively in the Company. None of the other directors hold any shares in the Company. Brief profile of all the directors is separately setout in the Annual Report.
2. Code of Conduct for Directors and Senior Management:
The Company has adopted a Code of Conduct ('Code') for Directors and Senior Management personnel one level below the Executive Directors including all Functional Heads. The Code has been posted on the Company's website.
The Directors, Senior Management and Functional Heads have affirmed compliance with the Code.
3. Audit & Governance Committee:
The Audit & Governance Committee comprises of 4 members viz: Mr. D J Thakkar, Mr. K N Venkatasubramanian, Mr. K V Krishnamurthy and the nominee of Life Insurance Corporation of India, Mr. V K Sinha. All the members of the Committee are financially literate. Mr. D J Thakkar, a qualified Chartered Accountant, chairs the meetings of the Committee. The constitution and terms of reference of the Committee are set out in compliance with the requirements of section 292A of the Companies Act, 1956 and clause 49 of the Listing Agreement.
During the financial year 2011-2012, the Committee met six times. Mr. K N Venkatasubramanian and Mr. K V Krishnamurthy attended all meetings. Mr. D J Thakkar and Mr. V K Sinha attended five meetings. The Statutory Auditors, Internal Auditors, the Managing Director, the Chief Financial Officer and the Vice-President (Accounts) are invited to attend the meetings of the Committee. The Company Secretary of the Company acts as the Secretary to the Committee.
4. Remuneration Committee:
The Remuneration Committee has 4 Non-Executive, Independent Directors as members viz: Mr. K N Venkatasubramanian, Mr. D J Thakkar, Mr. K V Krishnamurthy and the Nominee Director of IDBI Bank Ltd., Mr. Melwyn Rego. Mr. K V Krishnamurthy was inducted in the Committee on December 2, 2011.
One meeting was held during the year 2011-2012. All of the Committee members attended the meeting. Mr. K N Venkatasubramanian generally chairs the meetings. The terms of reference of Remuneration Committee include review, determination, increase/ decrease and approval of remuneration, determination of terms of appointment, Company's policy for specific remuneration package, etc. for the Executive and other Directors.
Remuneration to Directors Non - Executive Directors
The Non Executive Directors do not draw any remuneration from the Company except for sitting fees. The Non Executive Directors are being paid sitting fees at the rate of Rs. 20,000/- for attending each meeting of the Board of Directors and Rs. 10,000/-for attending each meeting of Committee thereof. The sitting fees paid to the Directors for the year ended March 31, 2012 are as follows: Mr.Anshuman S Ruia: Rs. 80,000/-; Mr. Naresh Nayyar Rs. 20,000/-; Mr. P Sampath: Rs. 1,00,000/-; Mr. D J Thakkar: Rs. 3,60,000/-; Mr. K N Venkatasubramanian: Rs. 2,10,000/-; Mr. K V Krishnamurthy: Rs. 3,70,000/-; Mr. Melwyn Rego: Rs. 1,30,000/- (paid to IDBI Bank Ltd.); Mr. V K Sinha: Rs. 1,50,000/-(out of which Rs. 90,000 paid to LIC of India) and Mrs. Manju Jain: Rs. 80,000/. During the year, there were no pecuniary relationships or transactions between the Company and any of its Non-Executive Directors.
The Company has not granted any stock options to its Non-Executive Directors.
5. Investors' Relations:
i) Investors' Relations Committee
As of March 31, 2012, the Investors' Relations Committee comprised of 4 members viz: Mr. P S Ruia, Mr. D J Thakkar; Mr. L K Gupta and Mr. K V Krishnamurthy. Mr. D J Thakkar generally chairs the meetings. The Committee was reconstituted in December 2011 by induction of Mr. L K Gupta in place of Mr. Naresh Nayyar. Mr. Prashant S Ruia was member of the Committee upto April 23, 2012. Subsequently, Mr. Naresh Nayyar has been again inducted as a committee member from May 12, 2012.
During the financial year 2011-2012, the Committee had 17 meetings. Mr. D J Thakkar attended 17 meetings, Mr. Naresh Nayyar attended 8 meetings, Mr. L K Gupta attended 5 meetings and Mr. K V Krishnamurthy attended 16 meetings.
ii) Company Secretary
The Company Secretary, Mr. Sheikh S Shaffi, is the Compliance Officer.
There were no complaints from share/debenture holders pending at the beginning of the financial year. During the financial year, 769 complaints were received and 769 complaints were replied to/resolved. As of March 31, 2012, there were no pending complaints.
1,117 requests involving transfer of 1,42,550 shares were received during the financial year. There were 9 requests involving 900 shares pending to be processed. These pending requests are less than 2 days old.
i) The Company does not have any material related parties' transactions which have potential conflict with the interest of the Company at large. Transactions with related parties are disclosed in note no. 14 to the accompanying notes of the abridged revised financial statements of the Company forming part of the Annual Report (they appear in corresponding note no. 47 to full Financial Statements).
ii) The financial statements have been prepared in accordance with the accounting policies generally accepted in India. In compliance with clarificatory orders dated August 4, 2006 and August 11, 2006 issued by Hon'ble Gujarat High Court, interest on certain categories of debentures has been accounted on cash basis as detailed in note 3(a) to Abridged revised Financial Statements forming part of the Annual Report (refer note No. 7(ii)(a) to the full Financial Statements).
Regarding certain funded interest facilities as referred in note 3(c) to Abridged revise Financial Statements (refer note no. 7(ii) (c) to the full Financial Statements), to give accounting effect to reflect the substance of the transactions and 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 and consideration of CDR exit proposal submitted by the Company which has been recommended for approval to the CDR Core Group by CDR Empowered Group. CDR exit proposal has been subsequently approved by CDR Core group.
iii) There were no instances of non-compliance on any matter related to the capital markets, during the last three years.
iv) In respect of compliance with the non-mandatory requirements, the Company has constituted a Remuneration Committee details whereof are given under the heading: Remuneration Committee. The quarterly, half-yearly and annual financial results are put up on the Company's website, besides being available on www.corpfiling.co.in and are being published in English and Gujarati newspapers. The auditor's observations have been adequately explained in Director's Report and also in the notes to the accounts wherever necessary and are self-explanatory.
v) The Company has a Risk Management Policy Framework for risk identification, assessment and control to effectively manage risks associated with the business of the Company.
vi) The Managing Director & CEO and the Chief Financial Officer have certified to the Board of full compliance as per clause 49(V) of the Listing Agreement for the financial year ended March 31, 2012.
7. Means of Communication:
(i) Quarterly/annual financial results are regularly submitted to Stock Exchanges in accordance with the Listing Agreement and published in all editions of English daily, Business Standard and in a Gujarati daily, Jai Hind. The quarterly/ annual results are also made available at the Company's website, www.essar.com. The quarterly/annual financial results are also sent by email to those shareholders, whose email IDs are registered with the Company/Depository Participants. Official news releases, presentations, etc. made to media and analysts are displayed on the Company's website. Official press releases are sent to Stock Exchanges.
(ii) Management Discussion and Analysis Report, in compliance with the requirements of clause 49 of the Listing Agreement with Stock Exchanges, is annexed to the Directors' Report which forms part of this Annual Report being sent to all the members of the Company.
(iii) Full text of Annual Reports of the Company is made available on the website of the Company www.essar.com
(iv) The quarterly/annual financial statements along with Corporate Governance reports, Shareholding Pattern, Annual Report and other documents in compliance with the requirements of Listing Agreement entered into with Stock Exchanges are available on the websites of BSE and NSE.
(v) Printed copy of the Chairman's Speech is distributed to all the shareholders at the Annual General Meeting.
(vi) Reminders were sent to those investors whose interest /redemption amount on debentures were unencashed as per records of the Company and due for transfer to IEPF advising them to seek demand drafts in lieu of their lapsed warrants.
vii. Listing of equity shares on Stock Exchanges:
The equity shares of the Company are listed at Bombay Stock Exchange Ltd. (BSE) and National Stock Exchange of India Ltd.(NSE).
The Company has paid the annual listing fees for the financial years 2011-2012 and 2012-2013 to BSE and NSE
viii. Share Transfer Agent:
M/s. Datamatics Financial Services Ltd. is the Share Transfer Agent of the Company. The Share Transfer Agent acknowledges and executes transfers of securities and arranges for issue of interest/redemption warrants. The Share Transfer Agent also accepts, deals with and resolves requests, queries and complaints of share/ debenture holders.
ix. Share Transfer System:
The Company's shares are traded on the Stock Exchanges compulsorily in dematerialised mode. Physical shares which are lodged for transfer with the Transfer Agent are processed and returned to the shareholders within a period of 15-20 days.
x. Dematerialisation of shares:
As on March 31, 2012, 98.61% of the Company's total shares, i.e. 1,346,627,869 shares were held in dematerialized form and 1.39% i.e. 19,039,217 shares were held in physical form.
xi. Outstanding GDRs / ADRs / Warrants or any Convertible instruments, conversion date and likely impact on equity:
6,604,724 Global Depository Shares (GDSs) represented by 1,010,522,772 equity shares were outstanding as on March 31, 2012. Each GDS represents one hundred and fifty three (153) equity shares.
The US$ 115 million Foreign Currency Convertible Bonds (FCCBs) are convertible at any time on and after June 15, 2011 or from the date the shares of the Company cease to be listed, each at a conversion price of Rs. 138 per share or global depositary shares (GDSs) each representing 153 equity shares subject to adjustments, with a fixed rate of exchange on conversion of Rs. 46.60 to US$ 1.00.
The US$ 147 million FCCBs are convertible at any time on and after July 9, 2011 or from the date the shares of the Company cease to be listed, whichever is earlier, into fully paid equity shares of Rs. 10 each at a conversion price of Rs. 153 per share or GDS each representing 153 equity shares subject to adjustment, with a fixed rate of exchange on conversion of Rs. 46.85 to US$1.00.
The above FCCBs were originally convertible into equity shares / GDSs at the option of the Bond holders. The terms of the above FCCBs have been modified during the year to make them compulsorily convertible securities.
xii.Transfer of unclaimed amount to Investor Education & Protection Fund:
For the financial year ended on March 31, 2012, the Company has transferred to Investor Education Protection Fund (IEPF) in compliance with Section 205C of the Companies Act, 1956, Rs. 5.49 Lakh remaining unpaid or unclaimed for a period of 7 years from the date the amount became due for payament.
xiii. Plant Location:
The Refinery of the Company is located at Khambhalia Post, Dist. Jamnagar - 361 305, Gujarat. The Company's oil fields are located at Mehsana, Gujarat and the Coal Bed Methane (CBM) fields are located in Durgapur, West Bengal.
xiv. Address for communication:
For any assistance, request or instruction regarding transfer or transmission of shares and debentures, dematerialization of shares / debentures, change of address, non-receipt of annual report, interest warrant and any other query relating to the shares and debentures of the Company, please write to the following address:
M/s. Datamatics Financial Services Ltd.,
Unit: Essar Oil Limited, Plot No. B - 5, Part B Cross Lane,
MIDC, Andheri (East), Mumbai – 400 093.
Phone: 91-22-66712151 to 66712156,
For any assistance, share / debenture holders may also write to the Company at the following email ID exclusively designated for the purpose: email@example.com