MIRA INFORM REPORT

Report Date :

13.11.2006

IDENTIFICATION DETAILS

Name :	ESSAR CONSTRUCTIONS LIMITED
Registered Office :	Express Building, Opp. Churchgate Station, Mumbai - 400020, Maharashtra, India
Country :	India
Financials (as on) :	31.03.2005
Date of Incorporation :	01.09.1989
Com. Reg. No.:	11-53280
CIN No.: [Company Identification No.]	U99999MH1989PLC053280
TAN No.: [Tax Deduction & Collection Account No.]	MUME03801A
PAN No.: [Permanent Account No.]	AAACE2358J
Legal Form :	A closely held public limited liability company
Line of Business :	Leading Engineering, Procurement and Construction (EPC) Contractors.

RATING & COMMENTS

MIRA’s Rating :

Ba

RATING		STATUS	PROPOSED CREDIT LINE
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory

Maximum Credit Limit :	USD 3750000
Status :	Good
Payment Behaviour :	Slow but Correct
Litigation :	Clear
Comments :	Subject is a closely held company of Ruias /Essar Group. It undertake large construction contracts in the country. Trade relations are fair. Financial position is comfortable. Payments of Essar Group in general and subject in particular are reported as very slow but correct. The company can be considered normal for business dealings at usual trade terms and conditions.

LOCATIONS

Registered Office :	Express Building, Opp. Churchgate Station, Mumbai - 400020, Maharashtra, India
Tel. No.:	91-22-22044006
Fax No.:	91-22-22046763
E-Mail :	contactconstructions@essar.com
Website :	http://www.essar.com
Corporate Office :	Essar House, 11 Keshavrao Khadye Marg, Mahalaxmi, Mumbai - 400034, Maharashtra
Tel. No.:	91-22-24950606/56601505
Fax No.:	91-22-24954324
E-Mail :	contactconstructions@essar.com

DIRECTORS

Name :	Mr. Shashikant N. Ruia
Designation :	Director
Address :	40-B, Ridge Road, Malabar Hill, Mumbai - 400006, Maharashtra
Date of Appointment :	01/03/2001
Date of Birth/Age :	25/12/1943
Name :	Mr. S. V. Venkatesan
Designation :	Director
Address :	F 401, The Atrium, 49, New No. 22, Kalakshetra Road, Thirunanmiyur, Chennai - 600041, Tamilnadu
Date of Appointment :	01/03/2001
Date of Birth/Age :	01/10/1939
Name :	Mr. K. T. Nagaraj
Designation :	Director
Address :	403, Peace Court, Opp. Country Club, Begumepet, Hyderabad - 500016, Andhra Pradesh
Date of Appointment :	01/03/2001
Date of Birth/Age :	21/07/1944
Name :	Mr. Vishnoo N. Paraskar
Designation :	Whole Time Director
Address :	N-13, Sector 7, Vashi - 400703, Navi Mumbai, Maharashtra
Date of Appointment :	02/04/2001
Date of Birth/Age :	18/10/1948
Name :	Mr. R. B. Deb Purakayastha
Designation :	Company Secretary
Address :	902-B, Balaji Gardens, CHS, Plot No. 17, Sector 11, Koparkhairne, Vashi, Navi Mumbai - 400709, Maharashtra
Date of Appointment :	18/04/2001
Date of Birth/Age :	26/11/1957

MAJOR SHAREHOLDERS

Names of Shareholders	No. of Shares
Bansari Investment and Finance Private Limited	1
Arkay Holdings Limited	1
Essar Projects Limited and Mr. B. V. Suryakumar	1
Essar Projects Limited and B. R. Deb Purakayasths	1
Essar Projects Limited and Mr. M. N. Hari Haran	1
Essar Projects Limited and Ms. Swati Gurav	1
Mr. N. B. Vyas	1
Essar Investments Limited	8000000

BUSINESS DETAILS

Line of Business :

Leading Engineering, Procurement and Construction (EPC) Contractors.

GENERAL INFORMATION

Customers :

Ø Gas Authority of India Limited

Ø Government of Orissa

Ø Government of Sri Lanka

Ø Gujarat Heavy Chemicals Limited

Ø Hindustan Petroleum Corporation Limited

Ø Kakinada Port Trust

Ø Mazgaon Docks Limited

Ø National Highway Authority of India

Ø New Mangalore Port

Ø Nhava-Sheva Port Trust

Ø Oil and Natural Gas Commission

Ø Polyolefins Industries Limited

Ø Royal Dutch Shel

Ø Tamilnadu Cement Corporation

Ø Tuticorin Port Trust

Ø Vishakhapatnam Port Trust

No. of Employees :

500

Bankers :

Not Available

Facilities :

SECURED LOANS	31.03.2005
Rupee Term Loan from Finantial Institutions	90.574
Cash Credit facilities from Banks	601.474
Foreign Currency Term Loans from a Financial Institution I. Rs Nil ( Previous Year Rs. 54.100 Millions) Foreign Currency Term Loan from Export Import Bank of India ( Exim Bank ) secured by : i) Moveable Fixed Assets of Essar Projects Limited, both present and future, acquired / to be acquired by it for specific projects through L/Cs opened by EXIM Bank under the FC Loan ii) All the receivables of Essar Projects Limited accrued / accruing under specific projects and iii) Irrecoverable and unconditional guarantees from Essar investments Limited and Essar Projects Limited. Rupee Term Loans from Financial Institutions i) Rs Nil { Previous Year Rs. 192.080 Millions) secured by first charge on imported construction equipments acquired for specific ii) Rs.90.574 Millions ( Previous Year Rs. Nil) secured by first pari passu charge of all its current assets other than related to certain banks (c) Cash Credits from Banks (i) Rs231.274 Millions ( Previous Year Rs. Nil) secured by way of first charge on fixed assets and on all current assets of the company pari passu with other working capital banks and with a Financial Institution. (ii) Rs 119.787 Millions ( Previous Year Rs. 92.178 Millions ) is secured by first charge pari passu basis on both present and future current assets and all the l-ngible movable properties / assets of the company (iii) Rs 101.169 Millions is secured by first charge on fixed assets of the company other than acquired under lease finance and on current assets, both present and future excluding the receivables and current assets related to specific projects pari passu with other working capital banks. (iv) Rs 149.244 Millions is secured by first charge on fixed assets of the company other than acquired under lease finance and on current assets, both present and future excluding the receivables and current assets related to specific projects pari passu with other working capital banks and a Financial Institution (v) Rs Nil ( Previous Year Rs 140.066 Millions) secured by First charge on receivables of Essar Projects Limited related to specific projects.
UNSECURED LOANS
Lease Finance from a Company	164.688
Loan from a Foreign Bank	115.140

Banking Relations :

Satisfactory

Auditors :

B. P. Jain and Company

Chartered Accountants

A-16, Everest, 156, Tardeo Road, Tardeo, Mumbai - 400034, Maharashtra

Associates :

v Essar Steel Limited

v Ajitesh Estates Private Limited

v Arkay Holdigs Limited

v Bhargava Estates Private Limited

v Essar Agrotech Limited

v Essar Global Limited, Mauritius

v Essar Gulf FZE, U.A.E

v Essar House Limited

v Essar Information Technology Limited

v Essar Investments Limited

v Essar Oil Limited

v Essar Power Limited

v Essar Projects Limited

v Essar Properties Limited

v Essar Shipping Limited

v Essar Telecom Limited

v Essar Teleholdings Limited

v Futura Travels Limited

v Hy-Grade Pellets Limited

v India Securities Limited

v Kartik Estates Private Limited

v Marmagoa Steel Limited

v P T Essar Dhananjaya, Indonesia

Parents Company :

Essar Investment Limited

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
15000000	Equity Shares	Rs.10/- each	Rs. 150.000 millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
9250007	Equity Shares	Rs.10/- each	Rs. 92.500 millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS	31.03.2005	31.03.2004	31.03.2003
SHAREHOLDERS FUNDS
1] Share Capital	92.500	80.000	80.000
2] Reserves & Surplus	868.308	649.737	495.500
NETWORTH	960.808	729.737	575.500
LOAN FUNDS
1] Secured Loans	692.048	478.424	3.700
2] Unsecured Loans	279.828	0.000	0.000
TOTAL BORROWING	971.876	478.424	3.700
Deferred Tax Liability	209.241	57.425	0.000
GRAND TOTAL	2141.925	1265.586	579.200
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]	1362.521	418.611	414.700
Capital work-in-progress	0.000	0.000	0.000
INVESTMENTS	0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
Inventories	1802.212	1341.438	350.000
Sundry Debtors	673.283	460.472	289.500
Cash & Bank Balances	359.309	457.982	140.900
Other Current Assets	0.000	0.000	0.000
Loans & Advances	945.055	932.061	249.300
Total Current Assets	3779.859	3191.953	1029.700
Less :
Current Liabilities	2916.071	2287.900	848.400
Provisions	84.384	57.078	16.800
Total Current Liabilities	3000.455	2344.978	865.200
Net Current Assets	779.404	846.975	164.500
MISCELLANEOUS EXPENSES	0.000	0.000	0.000
GRAND TOTAL	2141.925	1265.586	579.200

PROFIT & LOSS ACCOUNT

PARTICULARS	31.03.2005	31.03.2004	31.03.2003
Sales Turnover [including other income]	7417.210	4160.634	1202.700
Profit/(Loss) Before Tax	294.851	218.385	115.500
Provision for Taxation	163.780	64.133	24.400
Profit/(Loss) After Tax	131.071	154.252	91.100
Import Value	540.475	47.568	NA
Total Expenditure	7122.359	3942.600	1087.200

KEY RATIOS

PARTICULARS	31.03.2005	31.03.2004	31.03.2003
Debt Equity Ratio	0.90	0.37	0.00
Long Term Debt Equity Ratio	0.90	0.37	0.00
Current Ratio	1.26	1.29	1.09
TURNOVER RATIOS
Fixed Assets	6.02	5.34	2.33
Inventory	4.42	3.83	3.18
Debtors	15.23	12.27	5.84
Interest Cover Ratio	3.40	3.95	4.25
Operating Profit Margin (%)	7.27	10.96	16.44
Profit Before Interest and Tax Margin (%)	6.04	9.02	11.51
Cash Profit Margin (%)	3.12	6.71	11.88
Adjusted Net Profit Margin (%)	1.89	4.76	6.95
Return on Capital Employed (%)	26.18	32.69	28.39
Return on Net Worth (%)	15.51	23.63	17.19

LOCAL AGENCY FURTHER INFORMATION

Review Of Operations

During the year under review, the turnover of the Company has shown a phenomenal increase

as compared to that of the previous year by 78%. The increase was mainly on account of substantial group and non-group projects undertaken during the year by the Company covering industrial plants, supplying and laying of Gas Pipeline, supplying and laying of Water Pipelines and construction of Roads and Highways. Though there has been a substantial increase in the turnover as compared to that of the previous year, the percentage of profit before tax to the turnover for the current year compared to the one reported in the previous year showed a decline as the profitability was effected due to increase in the input costs due to increase in the construction material costs namely Steel, Cement, HSD as most of the contracts executed during the year did not carry any escalation provision to cover the increase in costs.

Generic Name of Principal Product/Service of the company are:

Ø Construction and Project Related Activity

Fixed Assets

v Plant & Machinery

v Furniture & Fixture

v Office Equipment

v Commercial Vehilces

v Motor Cars

Road And Highways

As India upgrades the company's transport network, roads and highways are an important future growth area, the company has the capability to build world-class roads, highways and expressways.

Pipelines

The company has significant expertise in cross-country and industrial pipelines for oil, gas and water. Similarly, it has considerable experience in offshore pipelines and Hook-up and modification works. As reported, it is the only Indian Company which has laid maximum number of pipelines and carried out the largest number of Platform modifications at offshore. It owns a multi-purpose shallow water pipelay and Hook/ modification Barge Scanlay 1.

Marine And Civil Construction:

Marine construction is one of the company's special strengths. It has a unique capacity for underwater rock blasting and dredging. It also has experience in ports and harbours as well as in civil works, irrigation canals, siphons, bridges and associated structures.

AS PER WEBSITE

Press Releases

Essar Constructions Bags Rs. 740.000 Millions Product Pipeline Contract

July 20, 2004

Essar Constructions Limited (ECL) - Stroytransgaz (STG) combine announced today that it had secured an order for a product pipeline project from Indian Oil Corporation Limited(IOCL) in Tamilnadu. The project covers Lying of a 683-km product pipeline connecting Chennai, Trichy and Madurai with a branch line to Sankari. The project is expected to be completed in 11 months at a cost of Rs.740.000 Millions.

The pipeline route would pass through marshy areas near Chennai and plain and hilly terrain in the remaining portion, involving an estimated 60,000 Cu M. of rock excavation.

The scope of the project includes laying of pipeline from Chennai to Asanur (256 Kms.), Asanur to Madurai (270 Kms.) and Asanur to Sankari (157 Kms). The pipeline would pass through two river crossings at Coleroon (1040 mtrs) and Cauvery (925 mtrs) and will be laid by Horizontal Directional Drilling method. In addition, it would also involve about 72 bored crossings across road/rail/nala to be executed by augur boring. The project entails setting up five terminal stations involving piping, mechanical, electrical, instrumentation, fire protection and civil works and ten repeater stations. The pipeline will be provided with temporary cathodic protection system and HDPE duct laying along the pipeline and OFC blowing.

This pipeline would be an addition to the already existing product pipeline network of IOCL, which stretches over a distance of more than 7250 kms. The purpose of this pipeline would be to feed the IOCL product demand centres that lie within the Chennai, Trichy and Madurai districts. This is the longest single pipeline project of IOCL in the recent past.

The project has been awarded to the Essar led consortium against stiff competition from various leading construction companies including international construction companies.

Recently, the ECL-STG combine had completed a gas pipeline project of 200 kms of Gujarat State Petronet Ltd. ahead of schedule.

ECL is a part of the Rs. 170000.000 Millions. Essar Group which has a presence in the core sector areas of steel, shipping, power, oil & gas, telecom and constructions.

Trade References

v Agarwal Metal Sales Corporation

v Goa Mining & Spare Parts Private Limited

v MPL Parts And Services Limited

v Parvalhi Conveyros & Constructions

v Sri Sowmya Enterprises (India) Private Limited

v Yavagal Electronics & Communications

Essar Constructions along with DQE bags Rs. 1290.000 Millions gas pipeline project from GAIL

25.05. 2006

The consortium of Essar Constructions Limited (ECL) and DQE International, China has been awarded the contract for laying of high pressure gas pipeline for Gas Authority of India Limited (GAIL). The contract covers the laying of a 762 cm. diameter (30 inches) pipeline between Jalapur and Boirpada covering a distance of 147 km. and is part of the 450 km. long pipeline that GAIL is constructing between Dahej in Gujarat and Uran in Maharashtra. The Dahej-Uran pipeline is a cross-country natural gas pipeline that passes via Hazira (Gujarat) and Panvel (Maharashtra) and will transport re-gassified LNG. This pipeline will augment the pipeline network in the states of Gujarat and Maharashtra for supplying gas to customers of GAIL.

The project is scheduled to be completed in 11 months at a cost of Rs. 1290.000 Millions.

The scope of the project includes residual engineering, geotechnical survey, pipe laying work, laying of Optical Fibre Cables, construction and installation of related facilities like scrapper launching / receiving stations, terminals, pre-commissioning, commissioning and "gas-in" of the pipelines. The contract also covers the supply of bulk materials, casing pipes , HDPE ducts and other consumables. The major feature of the project is Automatic welding and Automatic UT.

Essar Constructions has a track record of laying over 2000 kms. of pipelines for petroleum products for various clients including Indian Oil Corporation, Hindustan Petroleum and Gujarat State Petronet Corporation. In addition, it has laid cross country pipelines for drinking water and has extensive experience in the construction of land and marine pipelines. It is the only Indian company to have built and commissioned the world's second longest iron ore slurry pipeline (267 kms.) in some of the most difficult terrain.

About Essar Constructions

Essar Constructions is one of India's foremost construction companies offering turnkey engineering, procurement and construction services for a wide range of industries. The Company specialises in infrastructure projects, process plants, marine projects and pipelines. Essar Construction has executed projects worth over Rs. 140000.000 Millions in India and the neighbouring regions.

About Essar Group

The Essar Group is one of India's largest corporate houses with interests spanning the manufacturing and service sectors like Steel, Shipping, Power, Oil & Gas, Telecom & BPO and Construction. The Group has an asset base of over Rs.230000.000 Millions and employs over 15,000 people.

CMT REPORT [Corruption, Money laundering & Terrorism]

The Public Notice information has been collected from various sources including but not limited to: The Courts, India Prisons Service, Interpol, etc.

1] INFORMATION ON DESIGNATED PARTY

No exist designating subject or any of its beneficial owners, controlling shareholders or senior officers as terrorist or terrorist organization or whom notice had been received that all financial transactions involving their assets have been blocked or convicted, found guilty or against whom a judgement or order had been entered in a proceedings for violating money-laundering, anti-corruption or bribery or international economic or anti-terrorism sanction laws or whose assets were seized, blocked, frozen or ordered forfeited for violation of money laundering or international anti-terrorism laws.

2] Court Declaration :

No records exist to suggest that subject is or was the subject of any formal or informal allegations, prosecutions or other official proceeding for making any prohibited payments or other improper payments to government officials for engaging in prohibited transactions or with designated parties.

3] Asset Declaration :

No records exist to suggest that the property or assets of the subject are derived from criminal conduct or a prohibited transaction.

4] Record on Financial Crime :

Charges or conviction registered against subject: None

5] Records on Violation of Anti-Corruption Laws :

Charges or investigation registered against subject: None

6] Records on Int’l Anti-Money Laundering Laws/Standards :

Charges or investigation registered against subject: None

7] Criminal Records

No available information exist that suggest that subject or any of its principals have been formally charged or convicted by a competent governmental authority for any financial crime or under any formal investigation by a competent government authority for any violation of anti-corruption laws or international anti-money laundering laws or standard.

8] Affiliation with Government :

No record exists to suggest that any director or indirect owners, controlling shareholders, director, officer or employee of the company is a government official or a family member or close business associate of a Government official.

9] Compensation Package :

Our market survey revealed that the amount of compensation sought by the subject is fair and reasonable and comparable to compensation paid to others for similar services.

10] Press Report :

No press reports / filings exists on the subject.

CORPORATE GOVERNANCE

MIRA INFORM as part of its Due Diligence do provide comments on Corporate Governance to identify management and governance. These factors often have been predictive and in some cases have created vulnerabilities to credit deterioration.

Our Governance Assessment focuses principally on the interactions between a company’s management, its Board of Directors, Shareholders and other financial stakeholders.

CONTRAVENTION

Subject is not known to have contravened any existing local laws, regulations or policies that prohibit, restrict or otherwise affect the terms and conditions that could be included in the agreement with the subject.

FOREIGN EXCHANGE RATES

Currency	Unit	Indian Rupees
US Dollar	1	Rs.44.75
UK Pound	1	Rs.85.14
Euro	1	Rs.57.55

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	6
PAID-UP CAPITAL	1~10	6
OPERATING SCALE	1~10	6
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	6
--PROFITABILIRY	1~10	6
--LIQUIDITY	1~10	6
--LEVERAGE	1~10	6
--RESERVES	1~10	6
--CREDIT LINES	1~10	6
--MARGINS	-5~5	--
DEMERIT POINTS
--BANK CHARGES	YES/NO	YES
--LITIGATION	YES/NO	NO
--OTHER ADVERSE INFORMATION	YES/NO	NO
MERIT POINTS
--SOLE DISTRIBUTORSHIP	YES/NO	NO
--EXPORT ACTIVITIES	YES/NO	NO
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	NO
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		54

This score serves as a reference to assess SC’s credit risk and to set the amount of credit to be extended. It is calculated from a composite of weighted scores obtained from each of the major sections of this report. The assessed factors and their relative weights (as indicated through %) are as follows:

Financial condition (40%) Ownership background (20%) Payment record (10%)

Credit history (10%) Market trend (10%) Operational size (10%)

RATING EXPLANATIONS

RATING		STATUS	PROPOSED CREDIT LINE
>86	Aaa	Possesses an extremely sound financial base with the strongest capability for timely payment of interest and principal sums	Unlimited
71-85	Aa	Possesses adequate working capital. No caution needed for credit transaction. It has above average (strong) capability for payment of interest and principal sums	Large
56-70	A	Financial & operational base are regarded healthy. General unfavourable factors will not cause fatal effect. Satisfactory capability for payment of interest and principal sums	Fairly Large
41-55	Ba	Overall operation is considered normal. Capable to meet normal commitments.	Satisfactory
26-40	B	Unfavourable & favourable factors carry similar weight in credit consideration. Capability to overcome financial difficulties seems comparatively below average/normal.	Small
11-25	Ca	Adverse factors are apparent. Repayment of interest and principal sums in default or expected to be in default upon maturity	Limited with full security
<10	C	Absolute credit risk exists. Caution needed to be exercised	Credit not recommended
NR		In view of the lack of information, we have no basis upon which to recommend credit dealings	No Rating

PRIVATE & CONFIDENTIAL : This information is provided to you at your request, you having employed MIPL for such purpose. You will use the information as aid only in determining the propriety of giving credit and generally as an aid to your business and for no other purpose. You will hold the information in strict confidence, and shall not reveal it or make it known to the subject persons, firms or corporations or to any other. MIPL does not warrant the correctness of the information as you hold it free of any liability whatsoever. You will be liable to and indemnify MIPL for any loss, damage or expense, occasioned by your breach or non observance of any one, or more of these conditions