Directors Report. annual survey conducted by Applied Trading Systems, Singapore.

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Jocelin Lindsey
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1 Directors Report To The IndianOil Family of Shareowners Dear Members On behalf of the Board of Directors, I have great pleasure in presenting to you the 46 th Annual Report on the working of the Corporation for the financial year ended 31 st March, 2005 along with the Audited Statement of Accounts, Auditors Report and the Review of Accounts by the Comptroller & Auditor General of India. CORPORATE HIGHLIGHTS Your Corporation continued its dominance in the Indian corporate sector and retained its leadership position in the Fortune Global 500 listing released this year. From a ranking of 226 in the year 2002, IndianOil had moved up to 191 in 2003, 189 in 2004, and now 170 in 2005 based on its performance in It has also moved one step up among the largest petroleum companies of the world, and is now placed at the 18 th position. In the Forbes Global 2000 list of the world s biggest public companies in 2005, IndianOil is placed at 279 based on composite ranking for sales, profits, assets and market value. Your Corporation has been consistently rated AAA by ICRA, indicating the highest credit quality. While Standard & Poor s have rated IndianOil as BB+, Moody s have assigned a rating of Baa3, equivalent to the sovereign rating of the country. For the second consecutive year, your Corporation was adjudged # 1 in petroleum trading among the National Oil Companies in the Asia-Pacific region for the year 2004 in the annual survey conducted by Applied Trading Systems, Singapore. Your Corporation was recently honoured with the coveted Superbrand status by the Business SuperBrands Council, an independent branding authority. It also topped the list of India s Most Valuable Brands 2004", featuring the top 500 largest companies listed on the Bombay Stock Exchange by market value and released by The Hindu Businessline. Your Corporation also emerged as the Most Trusted Petrol Pump brand in the country in a survey conducted by AC Nielson-ORG Marg for The Economic Times. For the second consecutive year in 2004, your Corporation retained its ranking among the top 10 Best Employers in India in a Hewitt Associates study. IndianOil was also ranked 4 th among the most respected companies in the TNS India poll featured in Business Today magazine. Your Corporation became the first Indian corporate to breach the Rs. 150,000 crore mark in sales turnover in the year and posted major milestones in the downstream segment with its product sales crossing 50 million tonnes and its countrywide network of petrol and diesel stations (retail outlets) expanding beyond 10,000 during the year. Your Corporation also broke new ground during the year by grossing its first US$ 1 billion in revenues through initiatives in new businesses, viz., overseas ventures, gas marketing and petrochemicals. A-16

Annual Report 04-05 All IndianOil refineries commenced production of BS-II quality petrol and diesel during the year.

2 Annual Report All IndianOil refineries commenced production of BS-II quality petrol and diesel during the year. The year marked your Corporation s big-ticket entry into petrochemicals with the commissioning of the country s largest Linear Alkyl Benzene (LAB) plant at Gujarat Refinery. It is also the largest grassroots single train Kerosene-to-LAB unit in the world. Your Corporation became the first Indian and the sixth global company to develop marine oils, having obtained global approvals for shipboard applications in the entire family of vessels of MAN B&W, Denmark, and Wartsila, Finland. subsidiary, Bongaigaon Refinery & Petrochemicals Ltd., with IndianOil, subject to the approval of the Government of India. Meanwhile, the Government of India has accorded its approval for the merger of Indian Oil Blending Ltd. (a wholly-owned subsidiary) with IndianOil and the process of merger is now in progress. Approval of the Government of India is, however, awaited for the proposed merger of IBP Co. Ltd. with IndianOil. Product Pipelines Length - Industry Share (%) As part of your Corporation s ambitious Project Manthan IT re-engineering project, over 450 IndianOil locations are now conducting unified transactions on the leading SAP R/3 Enterprise Resource Planning software, making it the largest such project in the Asia-Pacific region. HPC 8.7% Petronet 10.7% Following the decision to merge the marketing subsidiary, IBP Co. Ltd., with IndianOil, the Board of IndianOil has recently accorded inprinciple approval for the merger of the refining BPC 10.4% IOC 70.1% Total length of product pipelines in India : 7,013 km Refining Capacity - Industry Share RIL (33 MMTPA) 25.9% IOC (41.35 MMTPA) 32.5% Product Sales - Industry Share (PSUs) (Sales in Million Metric Tonnes) HPC (19.3) IOC (48.17) ONGC (9.71 MMTPA) HPC 7.7% (13 MMTPA) 10.2% BPC (17.4 MMTPA) 13.7% Total Refining Capacity : MMTPA (MMTPA = Million Metric Tonnes Per Annum) IOC Subsidiaries (12.85 MMTPA) 10% BPC (21.5) Other PSUs IOC Subsidiaries (0.9) (5.1) Total Product Sales by PSUs during : 95.0 MMT A-17

3 CORPORATE REVIEW FINANCIAL US $ Million Rs. in Crore US $ Million Rs. in Crore Turnover (inclusive of Excise Duty) , ,203 Profit Profit Before Interest, Depreciation and Tax , ,013 Interest Payment Depreciation 499 2, ,869 Profit Before Tax , ,691 Tax Provision - Current 235 1, ,275 Tax Provision - Deferred Profit After Tax , ,005 Appropriations Interim Dividend Proposed Dividend 267 1, ,869 Corporate Dividend Tax Insurance Reserve Bond Redemption Reserve (134) (586) 9 38 General Reserve 809 3, ,190 PHYSICAL (Million Tonnes) Product Sales - Domestic Export Total Refineries Throughput Pipelines Throughput SHARE VALUE US $ Rupees US $ Rupees Cash Earning Per Share Earning Per Share Book Value Per Share Notes: (1) Exchange rate used: 1 US $ = Rs as on US $ = Rs as on (2) Figures for the previous year have been regrouped, wherever necessary. A-18

Annual Report 04-05 CONSOLIDATED FINANCIAL STATEMENTS In accordance with Accounting Standard-21 Consolidated Financial Statements and Accounting Standard-27 Financial Reporting of Interest in Joint

The Consolidated Financial Results are as under: (Rs.

4 Annual Report CONSOLIDATED FINANCIAL STATEMENTS In accordance with Accounting Standard-21 Consolidated Financial Statements and Accounting Standard-27 Financial Reporting of Interest in Joint Ventures issued by the Institute of Chartered Accountants of India, your Corporation has prepared the Consolidated Financial Statements consolidating all its subsidiaries and joint venture entities. The Consolidated Financial Results are as under: (Rs. in Crore) Turnover (inclusive of Excise Duty) Profit Before Tax 7536 Profit for the Group (After Tax) 5469 MANAGEMENT S DISCUSSION & ANALYSIS REPORT turbine fuel and Group-II lube oil base stock. All of them commenced production of BS-II quality petrol and diesel during the year. Production of Euro-III petrol was also commenced subsequently at Mathura and Panipat refineries, and Euro-III diesel at Gujarat, Mathura, Panipat and Haldia refineries. Management s Discussion & Analysis Report for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, is incorporated in a separate section forming part of the Annual Report. MOU PERFORMANCE IndianOil has been consistently earning Excellent rating for its performance in its Memorandum of Understanding (MoU) with the Government of India for the past 15 years. As per the performance data submitted for the year , your Corporation is expected to achieve Excellent rating once again for the 16 th consecutive year. OPERATIONS REFINERIES IndianOil s seven refineries together registered a throughput of million tonnes during the year, which is marginally lower than that of the previous year, primarily on account of extended shutdown maintenance at Mathura Refinery and closure of the Fluidised Catalytic Cracking Unit at Gujarat Refinery. However, Guwahati, Barauni, Haldia and Panipat refineries individually achieved their highest ever crude oil throughput during the year. IndianOil refineries also achieved an overall distillate yield of 71.5% wt., besides record production of aviation Inauguration of Diesel Hydrotreating plant at Mathura Refinery. The Government of India has allowed your Corporation to charter ocean vessels on its own for oil imports, instead of going through Transchart, the chartering wing of the Ministry of Shipping & Transport. This landmark decision will help IndianOil reduce freight cost and further streamline its business processes from crude procurement to processing. PIPELINES Your Corporation owns and operates the largest network of crude oil and product pipelines in India. With the commissioning of the new Panipat-Rewari product pipeline, this network was expanded to 7,730 km during the year. The overall pipelines throughput during the year was million tonnes. The marginal reduction in throughput A-19

5 compared to the previous year was on account of reduced throughput at our Mathura and Gujarat refineries. MARKETING IndianOil s Marketing Division continued to play a crucial role in maintaining our dominant status in the Indian downstream sector. Its strong, customercentric approach helped maintain market leadership despite increased competition from established and new players. The year was observed as Customer Care Year by the Division. Inauguration of IndianOil's 10,000 th petrol station at Tirupati in Andhra Pradesh. Your Corporation s retail forays gained momentum during the year with a slew of value-added XTRA initiatives, including branded fuels and services. The retail business was demarcated into three broad segments urban, highway and rural to clearly identify and cater to the requirements of various types of customers. About 460 branded XTRACARE retail outlets were unveiled during the year, primarily in urban markets. These outlets are a culmination of careful planning in retail design, product and service upgradation, capability building, automation, loyalty programmes, retail site management techniques, all benchmarked to global standards. Moreover, product quality & quantity, housekeeping, maintenance and customer service at these outlets are certified by the globally renowned agency - M/s Bureau Veritas. Sixty-six large-format Swagat brand retail outlets with added facilities were set up for highway motorists. Besides state-of-the-art fuelling facilities dispensing normal and premium brand fuels, these Your Corporation sold million tonnes of petroleum products, including exports, during the year as against million tonnes in the previous year, registering an increase of 3.1%. Domestic sales were up by 2.9% to million tonnes while exports soared by almost 8% to 1.96 million tonnes. The retail network was expanded with the commissioning of 1,112 retail outlets and 34 kerosene/ldo* dealerships, raising their total number to 10,228 and 3,555 respectively. * Light Diesel Oil A-20

outlets have multiple amenities like dhabas, shops for tyres and other vehicle accessories, general store, rest rooms and dormitories, telephone and internet facilities, clinics, toilets and parking

6 outlets have multiple amenities like dhabas, shops for tyres and other vehicle accessories, general store, rest rooms and dormitories, telephone and internet facilities, clinics, toilets and parking facilities for night halts. As a new growth area in retail business, your Corporation unveiled small-format Kisan Sewa Kendras for rural markets during the year. About 20 such kendras with tailor-made offerings and services were set up during and more will be rolled out during the current fiscal. IndianOil has joined hands with ICICI Bank in this initiative to make available at the farmer s doorstep fuels and financial products & services, besides other essential farm inputs. The Kendras will primarily market petroleum fuels, SERVO lubricants, ICICI Bank s rural financial products, and agro inputs like seeds, fertilisers, pesticides, farming equipment, vegetables, stationery and other items. Besides serving the farming community through a basket of products, services and facilities, this new initiative is also expected to create employment avenues in rural India, which is fast emerging as one of the largest consumer bases, thereby providing attractive returns to the operators. Availability of branded fuels XTRAPREMIUM petrol and XTRAMILE diesel was extended to 1,562 and 3,617 IndianOil retail outlets respectively during the year, besides sale through IBP outlets. IndianOil s XTRAPOWER fleet card is the fastest growing fleet management & rewards programme in the country with nearly 4 lakh cards. These cards account for monthly purchases of about Rs. 200 crore. Your Corporation constituted Platinum and Gold Card Circle dealers platforms to recognise and promote best customer service practices at its retail outlets. These elite IndianOil dealers have emerged Annual Report Brands that make a difference A-21

7 IndianOil's SERVO brand lubricants continued their dominance in India even as they gained wider acceptance in foreign markets. as peer leaders and are an integral part of the XTRACARE dealer sensitisation strategy. AIDS health clinics were organised at retail outlets for creating mass awareness. To further consolidate its leadership position in the bulk consumer segment, your Corporation commissioned 310 dedicated consumer pumps for bulk users during the year. To protect product volumes, long-term tie-ups were entered into with diesel customers in the organised sector for periods ranging from one to three years. The single-window service for high-value customers was extended to 30 more customers during the year, taking the number of key accounts to 84. Despite reduced earnings from LPG business, IndianOil enrolled 35.3 lakh new Indane cooking gas customers during the year to enhance customer convenience and as part of our commitment towards environment protection by way of preventing felling of trees for use as firewood. With this, Indane now reaches lakh homes across the country. Compact 5 kg LPG cylinders continued to be marketed in select rural and hilly markets. Your Corporation commissioned 361 new Indane distributorships during the year, raising their total number to 4,699. About 220 existing distributorships were categorisd as Star Distributors to recognise and promote excellence in customer service. With capacity augmentation of 140 thousand tonnes per annum during the year, the Corporation s LPG bottling capacity now stands at 3,778 thousand tonnes per annum. 3,555 Kerosene/LDO Dealers 4,699 Indane (LPG) Distributors IndianOil s Marketing Network 247 SERVO Stockists 340 Others* 5,956 Bulk Consumer Outlets 10,228 Retail Outlets *Others: Includes bulk storage depots/terminals, Aviation Fuel Stations (AFS), Indane (LPG) bottling plants, etc. Your Corporation continues to lead the aviation fuel supply business with a market share of 65%, meeting the fuel needs of Indian Airlines, Air India, scheduled private airlines, international airlines and the Defence Services. New business of about 83,700 kl per annum was gained during the year. A-22

Annual Report 04-05 Foreign exchange earnings from ATF (Aviation Turbine Fuel) sales to international airlines were Rs. 1,179 crore.

8 Annual Report Foreign exchange earnings from ATF (Aviation Turbine Fuel) sales to international airlines were Rs. 1,179 crore. During the year, IndianOil s 95 th aviation fuel station was commissioned at Purnea in Bihar. In the wake of the tsunami that struck several coastal areas of the country, your Corporation s aviation fuel stations at Port Blair, Car Nicobar and Chennai worked round-the-clock to refuel Indian Air Force and other civil aircraft engaged in relief and rescue operations. IndianOil s SERVO brand of lubricants, being the first and only one in its category in India to be accorded Superbrand status, continued its dominance in the lubricants business in India even as it gained wider acceptance in foreign markets like UAE, Nepal, Bangladesh, Sri Lanka, etc. The market share in finished lubes increased by 2.2% and in total lubes by 3% during the year. ASSAM OIL DIVISION The Digboi Refinery of Assam Oil Division (AOD) processed 0.65 million tonnes of crude oil during the year. The Division sold 1.04 million tonnes of products and retained its position as market leader in the Northeast region. AOD s marketing network comprises 351 retail outlets, 399 Kerosene/LDO dealerships, and 263 Indane (LPG) distributors. AOD supplies Indane gas to lakh households in 183 towns in the Northeast region. RESEARCH & DEVELOPMENT The year marked the consolidation of IndianOil s role as a technology provider. IndianOil Technologies Ltd., your Corporation s wholly-owned subsidiary for translating its intellectual property into financial gains, accrued business worth Rs. 2 crore in its first complete year of operation. During the year , IndianOil s R&D Centre developed 85 lubricant formulations besides upgrading 93 existing ones. Approvals were obtained from original equipment manufacturers (OEM) and user industry for 41 products; of these, 19 products were approved by international agencies such as API-USA, Wartsila-Finland and MAN B&W-Germany. A process for naphtha hydrocracking to LPG was developed in association with Zeolyst International. The R&D Centre also earned four Indian and 12 international patents during the year, taking their combined number to 140. IndianOil's R&D Centre has developed over 2,100 lubricant formulations for virtually all applications. As the nodal agency of the hydrocarbon sector for implementation of the Hydrogen energy programmes in the country, the R&D Centre has made good progress during the year. The Centre is collaborating with Mahindra & Mahindra and the Tata group, among others, for conducting joint research leading to the rollout of India s first Hydrogen engine in the next two years. A corpus fund of Rs. 100 crore is being set up with contributions from public sector petroleum companies and the Oil Industry Development Board for taking up Hydrogen research projects. The Centre has already taken the lead in the development and commercialisation of biodiesel. PROJECTS Your Corporation nurtures the vision of growing from a US $ 35 billion turnover company today to Petrochemicals (Rs. 10,852 crore) 45% IndianOil s X Plan ( ) Outlay for Investments - Rs. 24,399 Crore R&D (Rs. 217 crore) 1% Other Diversification (Rs. 548 crore) 2% Marketing (Rs. 764 crore) 3% Pipelines (Rs. 2,826 crore) 12% Refinery Capacity addition/yield Improvement (Rs. 6,149 crore) 25% Refinery Quality Improvement (Rs. 3,043 crore) 12% A-23

Lab facility for catalyst evaluation for Hydrogen Generation Unit at R&D Centre, Faridabad New depots at Peddapalli, Along and NOIDA IndianOil accords highest priority to project execution.

9 Lab facility for catalyst evaluation for Hydrogen Generation Unit at R&D Centre, Faridabad New depots at Peddapalli, Along and NOIDA IndianOil accords highest priority to project execution. US $ 60 billion by the year with wellcoordinated strategic plans, including clear blueprints for US$ 15.5 billion (Rs. 70,000 crore) investments. During the X Plan period ( ), IndianOil is investing Rs. 24,400 crore in developing capital assets. For the year , the Corporation s capital expenditure at Rs. 6,460 crore was 63% more than that of the previous year. Ten major projects, together costing Rs. 12,664 crore, are being completed in the current fiscal. The list of various projects is as follows: Completed Projects LAB plant at Gujarat Refinery Diesel hydrotreating plant at Mathura Refinery MS quality improvement project at Mathura Refinery Panipat-Rewari product pipeline Sidhpur-Sanganer product pipeline (Panipat Refinery expansion-linked pipeline project) Ongoing Projects Panipat Refinery expansion from 6 to 12 million tonnes per annum Paraxylene/Purified Terephthalic Acid (PX/ PTA) unit at Panipat Refinery MS quality improvement projects at Haldia and Gujarat refineries Paradip Refinery project Mundra-Kandla crude oil pipeline and conversion of Kandla-Panipat section of Kandla-Bhatinda pipeline to crude oil service Paradip-Haldia crude oil pipeline Crude oil blending facilities at Mundra Chennai-Trichy-Madurai product pipeline Koyali-Dahej product pipeline Koyali-Ratlam product pipeline Tap-off points at Trichy, Chittorgarh, Ratlam and Jasidih Bottling Plants at Ilayangudi, Raipur and Vasai New Projects Panipat Refinery expansion from 12 to 15 million tonnes per annum Naphtha Cracker and downstream polymer units at Panipat Residue upgradation and diesel/petrol quality improvement project at Gujarat Refinery Improvement of distillate yield and diesel quality at Haldia Refinery Dadri-Panipat pipeline for re-gassified LNG Panipat-Jalandhar LPG pipeline Chennai-Bangalore product pipeline Raxaul-Amlekhganj product export pipeline New depots at Mandir Hasud (MP) and Lalkuan (Uttaranchal) LPG bottling plant at Mathura A-24

10 Annual Report A-25

IndianOil Performance:

IndianOil Performance: 2011-12 New Delhi, May 28 th, 2012: Indian Oil Corporation Ltd. (IndianOil) is a Maharatna Company and the nation s largest commercial enterprise. Ranked at 98, it is also the highest