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Dear Shareholders,

It gives me immense pleasure to welcome all of you to our 22nd Annual General Meeting.

This has been a momentous year when we have delivered and shown to the world what grit and determination can achieve. We have set up a world-class and world-scale refinery, successfully overcoming the challenges along the way and today are delighted to present before you one of the finest refineries in the world.

Since we last met, your company has undergone a major transformation. Those of you who were present here last year and the years before that, would appreciate the sea-change in the refinery skyline. Over the last 12 months, we have completed the expansion and optimisation projects, taking our refining capacity from 10.5MMTPA to 20MMTPA and Refining Complexity from 6.1 to 11.8. We are today India's second largest single-site refinery and amongst the most complex globally. We have invested about US$5 billion in our Vadinar Refinery Complex.

As a company, we have now moved from the project phase to the operation phase. The world-class assets we have created are now before you and have begun to generate significant returns, as is evident from the immediate past quarter results. Our singleminded focus now is to generate greater returns from these assets for all our stakeholders.

On the financial side, we have made significant progress in de-leveraging our balance sheet. Lenders to your company have agreed to our proposal for exiting the CDR scheme and the process is expected to be completed shortly. This will give us greater operational and financial flexibility.

As you are aware, as per recent RBI guidelines, we are eligible to raise ECBs to replace our costly rupee debt, which, besides bringing down our overall cost of debt, will also provide us a natural hedge, since ours is a dollarized balance sheet. We no longer need to dilute equity to meet minimum float norms, since, as per the clarification received from SEBI, GDRs held by our parent company are not considered as part of promoter's equity.

As you are aware, we had a setback in the sales tax case during the year, which resulted in re-stating our last four years books of accounts. This process took a couple of months and hence we are holding this AGM at this time of the year. The sales tax issue has since been concluded, with the judgment of the Hon'ble Supreme Court on September 13, 2012, based on which we will now be paying the amount over the next two years. We have tied up with lenders to draw upon any funds towards meeting this obligation, if needed.

I trust you would have gone through the annual report and so I will not repeat the figures already before you. I will, instead, talk on the global and Indian energy scenarios and your company's plans for capitalizing on these.

Energy is essential for economic growth and, in the absence of viable alternatives in the foreseeable future, demand for petroleum products is expected to rise. On the demand side, over the past few years, we have observed the progressive shift in oil demand away from OECD (Organization for Economic Co-operation and Development) countries towards non-OECD countries led by Asian countries. For the first time, during the next calendar year, i.e. 2013, it is expected that non-OECD oil demand will overtake OECD demand led by strong demand growth for petroleum products from the Chinese, Middle Eastern and Indian economies.

On the supply side, OECD has been registering steady growth with increase in Canadian and US production. The reduction in Iranian production is largely taken care of by increase in production from Libya, Iraq and Saudi Arabia.

The refining sector globally is witnessing turbulent times and large-scale closures are being witnessed. During the last year alone, over 0.9mbd of refining capacity had closed in Europe and the East Coast of USA, resulting in a tightening of the product supply balance and improving refining margins. Analysts are of the opinion that many less complex refineries are headed for shutdown, owing to factors like increased demand for cleaner fuels and negative margins on some bottom-of-the-barrel products, which makes operations of such refineries unviable. The light and heavy crude oil differentials have begun to show some widening from the narrow differentials witnessed in 2009-2010. Hence, going forward, complex refineries, like yours, should be able to take advantage of cheaper crude oil to improve margins.

Global refining margins are expected to remain strong with some degree of fluctuation due to volatility inherent to international oil prices. The rationale for the strong refining margins is global oil demand growth of almost 1mmb/d, resilience of the Asian and Middle East economies in the face of decline in Europe, refinery closures in the West, particularly of low complexity factor, and global thrust for cleaner fuels. Also, the backwardation in the market is not encouraging large-scale storage of products, which will help support the refining margins.

On the domestic front, over the last five years, Diesel and Petrol demand grew at a CAGR of 8.6 percent and 10.1 percent. Surging demand from the transport sector - as vehicle ownership, currently at 15 per 1,000 of population, particularly of four-wheel vehicles - is forecasted to increase rapidly in the years ahead, resulting in strong petroleum products demand, which, as per the 12th Plan document, is expected to be 4.1 percent per annum over the next five years.

Due to recent commissioning of a few public sector refineries, India currently has surplus of petroleum products. However, the projected growth rate of 4.1 percent per annum translates into an additional demand of 7-8MTPA of petroleum products per annum, which would turn the nation into a deficit market in the next 3-5 years. With limited additional capacity expected in the next decade, India is forecasted to remain a deficit market for a long time. This will give your company an opportunity to sell a larger proportion of its product slate in the domestic market.

There remain distortions in the energy sector in India due to the continued heavy Government subsidy of energy and fuel prices for consumers. If the Indian economy is to grow in a world of high energy prices, it is clear that in the medium to long-term, the Government will need to remove these distortions, replacing them with far more targeted subsidies for the poor. The Government realizes that fuel subsidy is taking a heavy toll in the form of the fiscal deficit and imbalances in the overall macro-economic conditions. We have recently seen some encouraging steps being taken in the form of pilot projects on direct cash transfers and increase of diesel prices. The direct cash transfers through Adhar Cards for disbursement of subsidy on LPG and SKO, target certain categories of consumers, recently announced by the Government of India, is a welcome step.

Once there is a full price deregulation, your company will be able to garner a significant portion of retail fuel sales through its network of over 1,400 retail outlets.

In an energy deficit nation like ours, we are happy to play a significant role in the country meeting its energy requirements. On the Exploration and Production side, your company has reserves and resources of 1.7 billion barrels of oil equivalent. We have put our block development plans on the fast track. At Ranigunj, our flagship CBM Block, we are currently producing 43,000scm of gas a day, which is scheduled to rise to 3million by the end of the next fiscal, making us the largest CBM player in the country.

Progress at our other blocks, which are at various exploratory stages, is also proceeding as per scheduled milestones. Going forward, we expect E&P to be a significant value creator for our business.

With this, I would like to conclude my speech.

I once again thank you for your continued support. Your company's plans for generating greater returns are now turning into a reality and I would like you to remain with us to reap the benefits of hard work and perseverance.

Note : This does not purport to be the proceedings of the 22nd Annual General Meeting held on December 20, 2012



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