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.
2. BOARD OF DIRECTORS:
Four Board Meetings were held during the financial year 2012-2013 on May 12, 2012; August 14, 2012; November 9, 2012 and January 15, 2013.
The management of the Company is conducted by the Managing Director & CEO, who is assisted by Heads of Divisions/Departments, subject to the supervision and control of the Board of Directors.
Mr. C Manoharan and Mr. K N Venkatasubramanian retire by rotation and being eligible seek re-appointment at the ensuing Twenty Third Annual General Meeting (AGM). Further, it is proposed to appoint Mr. V.S.Jain as Director liable to retire by rotation at the ensuing AGM. A brief resume of the directors being re-appointed / appointed 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 who is the son of Mr. Shashikant N Ruia, Chairman. As on March 31, 2013, Mr. D J Thakkar and Mr. K N Venkatasubramanian held 300 shares and 6,500 shares respectively. Mr. V. S. Jain who joined the Board of Directors on May 10, 2013 holds 600 shares 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.
3. 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.
During the financial year 2012-2013, the Committee met five times. Mr. K N Venkatasubramanian and Mr. D J Thakkar attended all meetings. Mr. V K Sinha attended two meetings. Late Mr. K V Krishnamurthy and Mr. R Sudarsan attended one meeting each. The Statutory Auditors, Internal Auditors, the Managing Director & CEO, the Chief Financial Officer and the Vice-President (Accounts) are invited to attend the meetings of the Committee. All department heads are invited to attend the Committee meeting whenever audit issues concerning their departments are being discussed in the meeting. The representative of the Cost Auditor is invited to attend the meeting of the Committee when the Cost Audit Report is tabled for discussion. Internal audit team of the parent company, Essar Energy Plc, is also invited to present their audit observations to the Committee when the internal audit report generated by them are tabled for discussion. The Company Secretary of the Company acts as the Secretary to the Committee.
4. AUDIT & GOVERNANCE COMMITTEE:
The Audit & Governance Committee comprises of 3 members viz. Mr. D J Thakkar, Mr. K N Venkatasubramanian and the nominee of Life Insurance Corporation of India, Mr. R Sudarsan. Late Mr. K V Krishnamurthy was a member of the Committee upto January 16, 2013. Mr. R Sudarsan joined the Board as nominee of LIC of India and consequently the Committee on January 15, 2013 in place of 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.
5. REMUNERATION COMMITTEE:
The Remuneration Committee comprises of 4 members viz.: Mr. Naresh Nayyar, Mr. K N Venkatasubramanian, Mr. D J Thakkar and the Nominee Director of IDBI Bank Ltd., Mr. Melwyn Rego. Late Mr. K V Krishnamurthy was a member upto January 16, 2013. Mr. Naresh K Nayyar joined the Committee on January 15, 2013.
Two meetings were held during the year 2012-13. Mr. K N Venkatasubramanian and Mr. D J Thakkar attended all meetings. Late Mr. K V Krishnamurthy and Mr. Melwyn Rego attended one meeting each. 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. During the year, the Committee's scope was enhanced to include review and finalization of the performance of senior management executives just below the Managing Director and decide the variable pay and also determine the criteria and fix the overall annual variable pay of all executives.
Remuneration to 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, 2013 are as follows: Mr. Prashant S Ruia: Rs. 60,000/-; Mr. Anshuman S Ruia: Rs. 20,000/-; Mr. Naresh Nayyar: Rs. 1,40,000/; Mr. Philip Aiken AM: Rs. 60,000/-; Mr. D J Thakkar: Rs. 2,20,000/; Mr. K N Venkatasubramanian: Rs. 1,50,000/-; Late Mr. K V Krishnamurthy: Rs. 60,000/-; Mr. Melwyn Rego: Rs. 70,000/- (paid to IDBI Bank Ltd.); Mr. V K Sinha: Rs. 60,000/-; Mr. R Sudarsan: Rs. 30,000/- (paid to LIC of India); Mr. Suneet Shukla: Rs. 40,000/- and Mrs. Manju Jain: Rs. 40,000/-. 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.
In terms of the Essar Oil Employee Stock Options Scheme - 2011, the Executive Directors are entitled to be granted stock options. Prior to being appointed as Director (Refinery), Mr. C. Manoharan, in his capacity as Head of Refinery, was granted 191,509 stock options in financial year 2011-12. Stock options for FY 2011-12 and FY 2012-13 are yet to be granted. There is no separate provision for payment of severance fee to any of the Executive Directors.
6. INVESTORS' RELATIONS:
i) Investors' Relations Committee
As of March 31, 2013, the Investors' Relations Committee comprised of 3 members viz. Mr. D J Thakkar; Mr. Naresh Nayyar and Mr. L K Gupta. Mr. D J Thakkar generally chairs the meetings. Mr. P S Ruia and Late Mr. K V Krishnamurthy were members upto April 23, 2012 and January 16, 2013.
During the financial year 2012-13, the Committee had 5 meetings. Mr. L K Gupta and Mr. D J Thakkar attended all 5 meetings, Mr. Naresh Nayyar attended 4 meetings and Late Mr. K V Krishnamurthy attended 2 meetings.
The Managing Director & CEO and Company Secretary have been authorised to approve every fortnight, matters pertaining to transfer/transmission/ rematerialization of shares etc. upto certain specified limits.
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, 1008 complaints were received and 1008 complaints were replied to/resolved. As of March 31, 2013, there were no pending complaints.
624 requests involving transfer of 87,000 shares were received during the financial year.
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 45 to the accompanying notes of the financial statements of the Company forming part of the Annual Report. 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 have been accounted on cash basis as detailed in note 7(ii)(a) to financial statements.
Regarding certain funded interest facilities as referred in note 7(ii)(c) to the financial statements, to give accounting effect to reflect substance of the transaction, the Facility Stoppage (FS) loan was, since inception, measured by the Company in accordance with the principles of IAS 39, Financial Instruments, Recognition and Measurement, in absence of specific guidance in Indian GAAP to cover the specific situation.In continuance of the above said principle and applying the principle of Accounting Standard AS 30, Financial Instruments, Recognition and Measurement, the FS loan has, upon signing of the Common Rupee Loan agreement (CLA), been re-measured since inception, considering present value of cash flows inclusive of interest.
ii) There were no instances of non-compliance on any matter related to the capital markets, during the last three years.
iii) 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 www.essar. com, 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 Directors' Report and also in the notes to the accounts wherever necessary and are self-explanatory.
iv) 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.
v) The Company has also adopted a Code of Internal Procedures and Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company.
vii) 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, 2013.
8. 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 are 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 Reports 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 by the respective stock exchanges.
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 was due for transfer to Investor Education and Protection Fund advising them to seek demand drafts in lieu of their lapsed warrants.
9. GENERAL SHAREHOLDER INFORMATION: O O
i. Corporate Identification
Number L11100GJ1989 PLC032116 N
ii. AGM date, time and venue
September 27, 2013 at 11 a.m. at the Registered Office of the Company at Khambhalia Post, Dist. Jamnagar361305
iii. Tentative financial calendar
Approval of the results for the quarter ending June 30, 2013; September30, 2013; and December 31,2013.: Within 45 days of the quarter ending
Audited annual results for the year ending March 31, 2014 :Before May 30, 2014
iv. Date of Book closure
September 25,2013 to September 27, 2013 (both days inclusive)
v. Dividend payment date
vi. 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
2012-2013 and 2013-2014 to BSE and NSE.
The addresses of the stock exchanges are setout below:
Bombay Stock Exchange Ltd.
1st Floor, Rotunda Bldg P. J. Towers, Dalal Street Mumbai - 400 023
National StockExchange of India Ltd.
Exchange Plaza, 5th Floor, Plot No. C/1, G Block Bandra Kurla Complex,
Bandra (East) Mumbai - 400 051
Bombay Stock Exchange Limited : 500134
National Stock Exchange of India Limited: ESSAROIL
ISIN with NSDL and CDSL: INE011A01019
Non - Convertible Debentures
12.50% Secured Non Convertible Debentures of Rs. 105/- each redeemable on July 23, 2018 INE011A07073
vii. 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 on debentures. The Share Transfer Agent also accepts, deals with and resolves requests, queries and complaints of share/debenture holders.
viii. 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 10-15 days. xii. Distribution of shareholding as on March 31, 2013:
xiii. Dematerialisation of shares:
As on March 31, 2013, 98.64% of the Company's total shares, i.e. 1,347,067,919 shares were held in dematerialized form and 1.36% i.e. 18,599,167shares were held in physical form.
ix. 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, 2013. Each GDS represents one hundred and fifty three (153) equity shares.
USD 115 million Foreign Currency Convertible Bonds (FCCBs) which are convertible at any time into fully paid equity shares of Rs. 10 each at a conversion price of Rs. 138 per share or GDSs each representing 153 equity shares subject to adjustments, with a fixed rate of exchange on conversion of Rs. 46.60 to USD1.00.
USD 147 million FCCBs are convertible at any time 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 USD1.00. The FCCBs have to be compulsorily converted by maturity date. xv. Transfer of unclaimed amount to Investor Education & Protection Fund:
For the financial year ended on March 31, 2013, the Company has transferred to Investor Education Protection Fund (IEPF) in compliance with section 205C of the Companies Act, 1956. Rs. 8.68 crore debenture interest and principal amount remaining unpaid or unclaimed for a period of 7 years from the date the amount became due for payment.
x. 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.
xi. 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, Fax: 9122-66712209, Email: firstname.lastname@example.org
For any assistance, share / debenture holders may also write to the Company at the following email ID exclusively designated for the purpose: eolinvestors@ essar.com