Performance Highlights

Full Year
Essar Steel reported a total income of Rs. 9019.68 crore for the year ended March 31, 2007 as compared to Rs. 7058.59 crore last year, an increase of 28%. Operating EBIDTA (excluding Other Income) stood at Rs. 1936.03 crore (Rs.1480.97 crore in the previous year), registering a growth of 31%.

The higher operating EBIDTA has been off set by enhanced Depreciation (arising out of expansion related expenditure) and higher Interest cost (arising due to higher cost of financing and levels of operation). The Profit Before Tax has remained more or less steady at Rs.683 crore, as against Rs.696 crore during the previous year.

After providing for (i) Interest of Rs. 617.94 crore (RS.422.67 crore), (ii) Depreciation of Rs. 631.04 crore (Rs. 482.10 crore) and (iii) Provision for Deferred Tax, Fringe Benefit Tax and Credit for Excess Provisioning in earlier years at Rs. 246.97 crore (Rs165.80 crore) and (iv) Prior period Expenses of Rs. 22.81 crore (Rs.88.36 crore), the Company's Net Profit was at Rs. 436.49 (Rs. 530.18 crore).

Rising costs of iron ore and energy and higher charge for depreciation due to investments in capacity expansion had an impact on the bottom line. The Company expects the benefits of the investments made to be reflected in the coming years.

Fourth Quarter
Essar Steel registered a growth of 37% in total income of Rs.2545.21 crore for the quarter ended March 31, 2007 compared to Rs.1853.80 crore for the corresponding period of the previous year. Operating EBIDTA (excluding Other Income) for the quarter stood at Rs.489.54 crore (Rs. 146.02 crore). Net profit was Rs.61.46 crore (Rs.86.37 crore) after providing for Interest at Rs.177.23 crore (Rs.55.50 crore), Depreciation of Rs.183.93 (Rs. 99.13 crore) and Provision for Deferred Tax and Current Tax and MAT credit of Rs.74.54 crore (Rs. 63.96 crore).

Manufacturing
HR coil production for the year ended March 31, 2007 grew by 15% to 2.95 million tonnes from 2.577 million tonnes in the previous year. The company produced 0.8 million tonnes of HR coils for the quarter ended March 31, 2007 compared to 0.69 million tonnes in the corresponding period of last year.

Marketing
The Company crossed the milestone of 1 million tonnes in exports and continued to be the largest exporter of flat steel from India. Exports during the quarter stood at 0.246 million tonne (0.215 million tonne). Domestic sales in the quarter registered a growth of 16% at 0.54 million tonne. Total domestic sales for the year showed a growth of 13% at 2.8 million tonnes.

The share of value added products in the Company's product portfolio increased from 48% to 60% during the year under review. Essar Steel received the Top National and Regional Exporters trophy from the Engineering Export Promotion Council.

The Company successfully implemented a plan to increase net sales realization per tonne by selling to 'low freight areas' in the domestic and export markets, increasing the proportion of value added grades in its sales portfolio and rationalizing its customer base to optimize order quantity levels.

The Company began a new initiative in the year to address the large and untapped potential in the retail market for steel products. In a bid to reach out to end users directly, the Company has set up over 80 retail outlets under the brand "Essar Steel Hypermart" in different parts of the country.

Capacity enhancement
During the year, the Company completed its capacity expansion to 4.6 million tonnes per annum at Hazira. The pellet plant capacity at Visakhapatnam was also increased to 8 million tonnes per annum to cater to the increased requirements at the steel plant. Additions at the Cold Rolling complex were also made.

About Essar Steel
Essar Steel is the largest integrated producer of steel in Western India with a capacity of 4.6 million tonnes per annum. It is also India's largest exporter of flat steel products. Essar Steel Limited is a subsidiary of Essar Steel Holdings Limited (ESHL) which is a global producer of steel with a footprint covering India, Canada, United States of America, Middle East and Asia. It is a fully integrated flat carbon steel manufacturer - from iron ore to ready to market products. ESHL has a current capacity of 8 million tonnes. With its expansion plans in India and other parts of Asia and North America, its capacity will go up to 20 to 25 million tonnes by 2012. Its products find wide acceptance in highly discerning consumer sectors, such as automotive, white goods, construction, engineering and ship building.

About Essar
Essar Global is an international conglomerate operating in six business areas - steel, energy, power, communications, shipping & logistics and construction. It has offices world-wide and employs approximately 20,000 people, including over 3500 persons in the United States. The group has built a portfolio of assets with expected revenues of US$10 billion in the year to March 2008.

Audited Financial Results for the Period from 1st April, 2006 to 31st March, 2007