MIRA INFORM REPORT

Report Date :

03.04.2007

IDENTIFICATION DETAILS

Name :	VARUN SHIPPING COMPANY LIMITED
Registered Office :	Laxmi Bldg 6S, V Marg, Ballard Estate, Mumbai:400001, Maharashtra
Country :	India
Financials (as on) :	31.03.2006
Date of Incorporation :	29.01.1971
Com. Reg. No.:	11-014985
CIN No.: [Company Identification No.]	U61100MH1971PLC014985
TAN No.: [Tax Deduction & Collection Account No.]	MUMV00108D
PAN No.: [Permanent Account No.]	AAACV1658C
Legal Form :	Public limited liability company. Company’s shares ar listed on the stock Exchange.
Line of Business :	Subject is engaged in the business as Owning and Operating Ships.

RATING & COMMENTS

MIRA’s Rating :

A

RATING		STATUS	PROPOSED CREDIT LINE
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

Maximum Credit Limit :	USD 19000000
Status :	Good
Payment Behaviour :	Regular
Litigation :	Clear
Comments :	Subject is a well-established and reputed company having satisfactory track. Directors are reported a experienced and respectable businessmen. Trade relations are reported as fair. Business is active. Payment are usually correct and as per commitments. The company can be considered normal for business at usual trade terms and conditions

LOCATIONS

Registered Office :	Laxmi Building,6, Shoorji Vallabhdas Marg, Ballard Estate, Mumbai:400 001.
Tel. No.:	91-22-66350100-09
Fax No.:	91-22-66350274
Web site:	http://www.varunship.com
Branches:	5, Shenton Way, #25-03 and 25-04, UIC Building, Singapore 068808
Tel. No.:	65-62211290
Fax No.:	65-6221-3915

DIRECTORS

Name :	Mr. Dilip D. Khatau
Designation :	Chairman
Name :	Mr. Arun Mehta
Designation :	Vice Chairman and Managing Director
Name :	Mr./ Yudhishthir D. Khatau
Designation :	Managing Director
Name :	Mrs. Rina D. Khatau
Designation :	Director
Name :	Mr. C. M. Maniar
Designation :	Director
Name :	Mr. Praveen Singh
Designation :	Director
Name :	Dr. A. K. Bhattacharya
Designation :	Director

KEY EXECUTIVES

Name :

Ms. Manali Parekh

BUSINESS DETAILS

Line of Business :

Subject is engaged in the business as Owning and Operating Ships.

GENERAL INFORMATION

No. of Employees :

About 750

Bankers :

State Bank of India

Bank of India

Bank of Baroda

UTI Bank Limited

Facilities :

SECURED LOANS :

Term Loans from Financial Institutions :	31.03.2006
Secured by a charge on some of the Company’s ships	130.273
Term Loans from Banks :
Secured by a charge on some of the Company’s ships	5,452.351
Secured by a charge on some of the Company’s ships and receivables in respect of some of the Company’s Ships	5,774.872
Secured by way of equitable mortgage by deposit of title deeds in respect of right to occupy and use certain commercial premises represented by equity shares of Khatau Industries Pvt. Limited	24.763
Total:	11382.261

UNSECURED LOANS :

Short Term Loan	31.03.2006
From Bank	--
From others	--

Banking Relations :	Good
Auditors :
Name :	Messrs Sorab S. Engineer and Company Chartered Accountant
Address :	Ismail Building, 381, Dr. D. Naoroji Road, Mumbai:400 001
Associates/Subsidiaries :	Associates: Tarun Shipping and Industries Limited Jaswandi Holdings Limited Khatau International Limited Concord Holdings Private Limited Promising Investment & Trading Company Private Limited K. I. Holdings Private Limited Lamia Finace and Investment Limited Vridhinghat Investments Private Limited Alpaca Finvest (Bombay) Private Limited Marionette Exim Private Limited Enbro Constructions Private Limited Yuka Plantations Private Limited Carona Shoe Company Private Limited Gitanjali Holdings Private Limited Pethe Finance and Leasing Private Limited Fantastic Investment and Trading Company Private Limited Pavanputra Holdings and Estate Developers Private Limited Brindavan Abrasives Private Limited Adventure Lodges India Private Limited Pacific India Atlantic Exim Limited Blue Bank Holdings Private Limited Sunbeam Talc Private Limited Subsidaries: VSC International Pte Limited, Singapore Established during the year 1995

CAPITAL STRUCTURE

Authorised Capital :

No. of Shares	Type	Value	Amount
300000000	Equity Share	Rs.10/- each	Rs.3000.000 Millions
2000000	Perference Shares	Rs.10/- each	Rs.200.000 Millions

Issued, Subscribed & Paid-up Capital :

No. of Shares	Type	Value	Amount
117307773	Equity Share	Rs.10/- each	Rs.1173.000 Millions
1200000	Perference Shares	Rs.100- each	Rs.120.000 Millions

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2006	31.03.2005	31.03.2004
SHAREHOLDERS FUNDS
1] Share Capital		1176.947	1176.538	805.232
2] Share Application Money		0.000	0.000
3] Reserves & Surplus		3575.718	2246.420	1450.102
4] (Accumulated Losses)		0.000	0.000
NETWORTH		4752.665	3422.958	2255.334
LOAN FUNDS
1] Secured Loans		11382.261	5801.164	2504.544
2] Unsecured Loans		0.000	1.000	98.841
TOTAL BORROWING		11382.261	5802.164	2603.385
DEFERRED TAX LIABILITIES
Finance Lease Obligations		1898.050	74.590	96.160
TOTAL		18032.976	9299.712	4954.879
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		17603.021	8224.136	4154.470
Capital work-in-progress
INVESTMENT		207.590	207.591	207.592
DEFERREX TAX ASSETS
CURRENT ASSETS, LOANS & ADVANCES
	Interest Accrued on deposits	0.000	0.000	0.117
	Inventories	0.000	0.000	36.809
	Sundry Debtors	0.000	0.000	245.601
	Cash & Bank Balances	0.000	0.000	448.159
	Other Current Assets	0.000	0.000	0.000
	Loans & Advances	1057.418	1550.163	253.080
Total Current Assets		1057.418	1550.163	983.766
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	601.390	397.683	0.000
	Provisions	233.663	284.495	390.949
Total Current Liabilities		835.053	682.178	390.949
Net Current Assets		222.365	867.985	592.817
MISCELLANEOUS EXPENSES
TOTAL		18032.977	9299.712	4954.879

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2006	31.03.2005	31.03.2004
Sales Turnover
Other Income		6443.115	3882.304	2943.594
Total Income		6443.115	3882.304	2943.594
Profit/(Loss) Before Tax		1883.719	834.776	381.102
Provision for Taxation		24.800	17.870	23.042
Profit/(Loss) After Tax		1808.919	816.906	358.060
Expenditures :
	Operating Cost	2228.772	1955.992	1659.565
	Administrative Expenses	326.349	246.122	191.560
	Interest and Finance Cost	758.170	175.155	174.617
	Depreciation & Amortization	1296.103	670.257	536.751
Total Expenditure		4609.394	3047.526	2562.493

QUARTERLY / SUMMARISED RESULTS

PARTICULARS	30.06.2006	30.09.2006	31.12.2006
Type	1st Qtr	2nd Qtr	3rd Qtr
Sales Turnover	1472.600	1705.600	1634.800
Other Income	06.200	343.100	157.900
Total Income	1478.800	2048.700	1792.700
Total Expenditure	566.300	889.000	743.800
Operating Profit	912.500	1159.700	1048.900
Interest	267.900	257.800	22.300
Gross Profit	644.600	901.900	796.600
Depreciation	404.200	409.300	381.200
Tax	04.600	37.300	19.100
Reported PAT	235.800	455.300	396.300

Notes:

200606 Other Income Includes Profit / (Loss) on sale of ships and other assets Rs 0.166 million Other Income Rs 6.076 million Expenditure Includes Staff Cost Rs 152.518 million Bunker Cost Rs 26.805 million Port Expenses Rs 22.889 million Stores, Lubes & Victualling Rs 77.912 million Repairs & Maintenance including, Cost of Spares & Survey Rs 174.261 million Other expenditure Rs 111.917 million Tax Includes Provision for Current Tax Rs 3.150 million Fringe Benefit Tax Rs 1.500 million EPS is Basic Status of Investor Complaints for the quarter ended June 30, 2006 Complaints Pending at the beginning of the quarter 01 Complaints Received during the quarter 63 Complaints disposed off during the quarter 59 Complaints unresolved at the end of the quarter 05 1. In view at volatile capital market conditions prevailing in Asia, the Company in consultation with its Lead Manager has decided to keep the issue of Singapore Depository Shares on hold. 2. The Company has entered into Memorandum of Agreements for sale of 1983 built small product carrier and sale of 1985 built bulk carrier. 3. In accordance with the requirements of Clause 41 of listing agreement with the Stock Exchange, the Statutory Auditors have performed a Limited review of above financial results for three months ended June 30, 2006. 4. The above results have been duly considered by the Audit Committee and have been taken on record by the Board of Directors of the Company at its meeting held on July 25, 2006. 5. The Company is engaged only in shipping business and there are no separate reportable segments at per Accounting Standard 17. 6. Figures for the previous accounting period have been regrouped wherever necessary.

200609 Other Income Includes Profit / (Loss) on sale of ships and other assets Rs 341.964 million Other Income Rs 1.154 million Expenditure Includes Staff Cost Rs 169.795 million Bunker Cost Rs 122.012 million Port Expenses Rs 32.015 million Stores, Lubes & Victualling Rs 137.562 million Repairs & Maintenance including, Cost of Spares & Survey Rs 273.402 million Other expenditure Rs 154.241 million Tax Includes Provision for Current Tax Rs 35.218 million Fringe Benefit Tax Rs 2.100 million EPS is Basic Status of Investor Complaints for the quarter ended September 30, 2006 Complaints Pending at the beginning of the quarter 05 Complaints Received during the quarter 52 Complaints disposed off during the quarter 51 Complaints unresolved at the end of the quarter 06 1. The Board of Directors have declared an interim dividend of Rs 1.5 per equity share at Rs 10/- each for the year ending March 31, 2007. The outgo on this account is Rs 203.463 million including tax on dividend. 2. The Company has decided to recommend to the shareholders issue of equity shares and / or Optionally Fully Convertible Warrants to foreign Institutional Investors, Promoter group companies, Vice Chairman & Managing Director and venture Capital Fund aggregating upto a total of Rs 2330 million @ Rs 75/- per share / OFCW, which will be used mainly for expansion of Company's fleet. 3. The provision for the current tax is based or the Minimum Alternative Tax payable under the provisions of the Income Tax Act, 1961, mainly arising from tax payable an profit on sale of ships and other assets. The Company has sold one product tanker and one bulk carrier during the quarter. 4. During the quarter balance of 1,650,000 optionally Fully Convertible Warrants (OFCW's) allotted by the Company in March 2005, have been converted into equity shares. There arena outstanding OFCW's as at September 30, 2006. 5. In accordance with the requirements of Clause 41 of listing agreement with the Stock Exchanges, the Statutory Auditors have performed a limited review at the above financial results for three months ended September 30, 2006. 6. The above results have been duly considered by the Audit Committee and have been taken on record by the Board at Directors of the Company at its meeting held on October 30, 2006. 7. The Company is engaged only in shipping business and there ore no separate reportable segments as per Accounting Standard 17. 8. Figures far the previous accounting period have been regrouped wherever necessary.

200612 : EPS is Basic & Diluted 1. On 5th December 2006, the Company has issued and allotted on preferential basis 2,25,50,000 equity shares of Rs 10/- each at a premium of Rs 65/- per share and 85,00,000 Optionally Fully Convertible Warrants (OFCW's) @ Rs 75/- each having paid Rs 7.50 per OFCW on Application and balance Rs.67.50 shall be paid at the time of coversion generating funds aggregating to Rs.175.50 crores. The summary of utilisation is as under: (i) Used for acquisition of a ship Rs. 53.81 crores (ii) Balance lying with the Banks as on 31 December,2006 Rs 121.69 crores will be used mainly for acquisiton of ships 2. During the quarter under review Company has: (i) acquired one Large Gas Carrier viz. Maharshi Vamadeva (ii) sold one Product Tanker viz. Jaladoot (iii) contracted for acquisition of Aframax Crude Tanker viz. Amba Bhargavi which has been delivered to the Company on 4th January, 2007 (iv) contracted for one Very Large Gas Carrier which will join company's fleet in first quarter of the next financial year. 3. The Board of Directors have declared second interim dividend of Rs 1.50 per equity share of Rs 10/- each for the year ending 31st March, 2007. The outgo on this account is Rs 2,420.31 lacs including tax on dividend. 4. Provision for current tax is based on the Minimum Alternate Tax payable under the provisions of the Income Tax Act, 1961, mainly arising from tax payable on profit on sale of ships and other assets. 5. In accordance with the requirements of Clause 41 of listing agreement with the Stock Exchanges, the Statutory Auditors have performed a limited review of the above financial results for three months ended 31st December, 2006. 6. The above results have been duly reviewed by the Audit Committee and have been approved by the Board of Directors of the Company at its meeting held on 23rd January 2007. 7. There were 6 investor complaints pending as on 1st October, 2006. 22 investor complaints were received during the quarter and 25 complaints were disposed off during the quarter. Hence 3 complaints were lying unresolved on 31st December. 8. The Company is engaged only in shipping business and there are no separate reportable segments as per Accounting Standard 17 . 9. Figures for the previous accounting period have been regrouped wherever necessary.

KEY RATIOS

PARTICULARS	31.03.2006	31.03.2005
Debt-Equity Ratio	2.35	1.52
Long Term Debt-Equity Ratio	2.35	1.50
Current Ratio	1.61	1.99
TURNOVER RATIOS
Fixed Assets	0.38	0.41
Inventory	141.30	85.67
Debtors	15.42	12.76
Interest Cover Ratio	3.42	5.76
Operating Profit Margin(%)	60.47	43.20
Profit Before Interest And Tax Margin(%)	40.31	25.97
Cash Profit Margin(%)	48.29	38.23
Adjusted Net Profit Margin(%)	28.14	21.00
Return On Capital Employed(%)	18.99	14.19
Return On Net Worth(%)	44.54	29.20

LOCAL AGENCY FURTHER INFORMATION

Out of the amount of Rs. 1,624.90 million available for appropriation, your Directors propose to transfer an amount of Rs.257.1O million to General Reserve. The Directors recommend payment of final dividend of Rs. 1.50 per equity share for the year ended 31 st March, 2OO6 which together with two interim dividends totalling to Rs.3.OO per equity share declared and paid earlier for the year ended 31st March, 2OO6 aggregating to Rs.4.5O per equity share will absorb Rs.527,9O million and Rs.74.OS million towards dividend tax. During the year, an amount of Rs.40 miliion being the final 1/3rd redemption amount on 1,2OO,OOO cumulative redeemable preference shares of the face value of Rs.lOO each was paid. The Directors also recommend dividend of Rs.3.73 million on 1,2OO,OOO cumulative redeemable preference shares, which dividend has already been paid as interim dividend during the year and on which dividend tax of Rs.O.52 million has been paid. After the above appropriations, your Directors propose to carry forward a balance of Rs.758.86 million in the Profit and Loss Account.

Income from operations was Rs.6,429.31 million compared to Rs.3,889.61 million for the year ended 31 st March, 2O05. Net profit after tax was Rs. 1,808.91 million for the year ended 31 st March, 2O06 as against Rs.816.91 million during the preceding year. Increase in profit was due to continued buoyancy in freight rates for LPG carriers, expansion of Company's fleet and better utilization of Company's fleet during the year under review.

The Company continues to maintain its focus on the hydrocarbon sector, Towards this end, the Company after having acquired its eighth LPG carrier in April, 2OO5, acquired its ninth and tenth LPG carriers, namely, Maharshi Mahatreya in August, 2O05 and Maharshi Krishnatreya in October, 2OO5 all three haying a cargo carrying capacity of 35,559 cbm each respectively. With these acquisitions, the Company's present Indian LPG carrier fleet of 10 is the largest in India in terms of both fleet size and cargo carrying capacity of 26O.71 5 dwt (319,960 m3). It forms approximately 76 percent of total LPG tonnage under Indian flag. In addition thereto, VSC International Pbe Ltd. the Company's wholly owned subsidiary in Singapore also acquired one LPG carrier, Maharshi Bhavatreya in November, 20O5 with cargo carrying capacity of 35,559 cbm. This ship is with the Company on bareboat charter with purchase option. Consequent to the said acquisitions, the group presently owns a fleet of 11 LPG carriers with cargo carrying capacity of 287,915 dwt (355,519 m3).

In order to strengthen its presence in the crude oii sector, the Company acquired its second modem double hull aframax crude oil tanker, Amba Bhakti in July, 20O5 having cargo carrying capacity of 106,597 dwt. The vessel MT Hans Doot which was taken by the Company on bareboat charter cum demise basis was acquired by the Company in July, 2OO5.

Pursuant to a tender floated by Petronet LNG Limited (PLL), Exmar NV led consortium of which your Company was a member had submitted a bid and was short-listed by PLL for time chartering of one LNG tanker for 25 years. PLL had thereafter directed all the bidders to resubmit their price bids as the guidelines relating to LNG shipping were kept in abeyance. Based on the re-submitted bids, the LNG contract was awarded to another participating consortium.

As a result of the Company's strong acquisition programme during the year under review, the award of "Fastest Expanding Indian Shipping Company" was conferred on the Company by National Maritime Day Celebrations Committee formed by the Directorate General of Shipping, Ministry of Shipping, Road Transport and Highways, Government of India. Mr. Arun Mehta, Vice Chairman and Managing Director of the company was given the "Varuna Award" for his sustained and outstanding contribution to the shipping industry in India. Both the awards were given on 5th April, 2OO6, which is celebrated nationwide as India's National Maritime Day.

During the year under review, the Company issued and allotted 5,200,000 and 623,000 equity shares of Rs.1O each to Khatau International Limited and Mr. Arun Mehta, Vice Chairman & Managing Director of the Company respectively, pursuant to their exercise of option for conversion of 5,2OO,OOO and 623,OOO Optionally Fully Convertible Warrants COFCWs) at Rs.32.O9 per share. With the issue and allotment of the said shares, the total issued equity share capital of the Company stands at 117,307,773 equity shares of Rs,10 each.

In order to raise additional funds for our fleet expansion programme, the Company proposes to issue Singapore Depository Shares (SDSs) in Singapore, The Company has in this connection filed the preliminary prospectus with Monetary Authority of Singapore on 31 st March, 20O6 and after complying with all requisite formalities, will consider issue of SDSs during the current financial year. The Company has registered and opened a branch office in Singapore during the year under review and currently manages some of the Company's vessels from this branch.

Management Discussion and Analysis :

(a) Industry Structure and Development ;

The international shipping industry transports hydrocarbons and bulk commodities in the wet, dry bulk, gas and chemical sectors by means of various vessels. The Company operates in abovementioned sectors with a diverse mix of vessels. The Company also owns and operates vessels in offshore services sector.

The composition of the merchant shipping industry can be divided into 5 broad vessel classes namely :

Tankers - Tankers are vessels designed to carry bulk liquids and are engaged in the carriage of liquids such as crude oil, refined petroleum products, chemicals, petro-chemicals and liquefied gases (LPG and LNG). Some examples of tankers are crude oil tankers, petroleum product tankers and gas carriers.

Bulk carriers - Bulk carriers are vessels designed to carry dry bulk cargo such as coal, iron ore, cement, food grains, etc.,

Other cargo ships - Other types of cargo ships include container ships and general or special cargo ships and carry dry non-bulk cargo such as vehicles, paper and pulp etc.

Passenger/cruise ships and ferries - Passenger or cruise ships and ferries are specially designed to carry passengers and/or vehicles.

Miscellaneous ships - Vessels that cater to the requirements of the offshore services industry as also all vessels that do not fall within the above categories.

The shipping industry is generally influenced by factors such as demand for the movement of cargoes, the resultant tonne-mile demand of vessels as well as the supply of vessels, economic growth trends and heating fuel requirements based on weather conditions. The shipping industry has, benefrtted from thfe increase in demand for overseas seaborne trade driven by economic growth experienced by ttie Asia Pacific economies such as India and the Peoples Republic of China, in the recent past. It is also experiencing increased tonne-mile growth as a result of increasing shipments of finished goods over longer distances from the Asia Pacific region to the western hemisphere,

The demand for LPG has grown faster than the demand for world energy every year in the last decade. The main factors which drive LPG consumption are 0> overall economic growth 00 LPG distribution infrastructure Gii) environmental incentives Ov) weather conditions and Cv) natural gas availability.

According to Drewry Annual LPG Market Review and Forecast 20O4-Q5, Asia is the most important LPG importing region accounting for 57.6 percent of the seaborne trade in 2003. With a large proportion sourced from long haul destinations, such 'as the Middle East (and increasingly Africa and Europe), the region is even more important for gas carrier employment. Measured in terms of tonne-mites generated, Asia accounted as a destination for 80.5 per cent of global trade.

There was an increase in seaborne oil trade leading to an increase in tanker tonnage demand in crude oil and petroleum products sector. However, the fleet growth was also high. The average freight rates for crude carriers were down from 2004 to 2OO5 but still at second highest levels since 197Os.

There was an increase in seaborne dry bulk volumes in 2OO5 compared to 2OO4 resulting in an increase in tonnage demand in the dry bulk sector. However, an increase in the dry bulk fleet worldwide resulted in a drop in average freight rates for the year 2OO5 compared to the year 2OO4.

There is an increase in exploration and production activities in the offshore sector globally driven by high global crude oil prices. This has resulted in an increase in demand for shipping activities in the offshore sector. Exploration and production activities in India have increased over the years spurred by plans from the Indian Government to enhance domestic production of oil and gas.

(b) Opportunities and Threats :

The shipping industry in India has benefltted from an increase in demand for seaborne domestic and global trade as a result of overall growth of population in India and economic growth experienced by India and other parts of the worid. According to Indian National Shipowners Association CINSA), Indian shipping transported approximately 13.8 per cent of the total overseas seaborne trade in 2O03-20O4. While India's trade volume continues to grow over the years, the Indian shipping fleet is ageing. As on 1 st October, 2OO5, approximately 38 per cent of Indian flagged vessels were over 2O years old and approximately 19 per cent were between 15 and 19 years old. Although specialised vessels such as LPG earners have a longer trading life of between 3O to 35 years, we expect most other vessels, which are more than 2O years of age to be scrapped over the next 5 years. The growing trade is expected to drive the demand for shipping and the scrapping of the ageing fleet is expected to reduce the supply of vessels. Therefore, the outlook for shipping in India appears to be positive and

presents a good opportunity for existing Indian shipping companies to expand their fleet size and increase their market share.

Indian Government departments and Public Sector Undertakings CPSUs) are required by Government policy directing to import on FOB Cfree on board) or FAS (free alongside ship) basis in relation to cargoes owned or controlled by Indian Government. Further, under guidelines for chartering of foreign flag vessels, Indian flagged vessels are granted a "right of first refusal" in respect of charter of vessels by an Indian charterer. The collective effect of the policy and the guidelines is that Indian flagged vessels would have a right of first refusal with regard to significant import trade undertaken by Indian Government departments or PSUs.

The Indian Union Budget for the year 2OO6-2O07 states that an investment of Rs.22,OOO crores is expected in the next few years in the refinery sector alone. This is likely to lead to long term requirements in the import of crude oil and possible export of surplus refined petroleum products.

The shipping industry is highly competitive due to its global nature and is also increasingly regulated. Due to increase in quality requirements, there is likely to be shortage of skilled seagoing manpower. , .

(c) Seflment-wise Performance :

The Company is engaged only in the business of shipping and there are no separate reportable Segments.

The Company's LPG carriers are deployed on mix of voyage charter, time charter and pool arrangements.

In the crude oil and petroleum products sector, the Company has a fleet of 2 crude oil tankers and 3 product tankers. The 2 crude oil tankers are placed in the Sigma Tanker Pool, which trades globally, 1 product tanker is in a pool arrangement with the Heidmar Tanker Pool and the other two product tankers are employed on a mix of time and/or voyage charters.

The bulk carrier, MV Surya Kripa, is entered into pool arrangement with Bulkhandling Handymax AS of Norway.

In the offshore sector, the Company's 2 Anchor Handling Towing and Supply Vessels (AHTSs) are employed on time charter with Oil and Natural Gas Corporation Limited.

Outlook:

LPG carriers are primarily used to transport LPG and ammonia. LPG due to its clean burning property is the most preferred fuel both for industrial and residential purposes. Forecasts of increased LPG production in association with numerous LNG projects are leading to increased orders of LPG vessels.One of the methods of producing LPG is by the treatment of natural gas to remove impurities.Natural gas comprises mainly of methane and small varying quantities of propane and butane (generally referred to as LPG), and ethane. Under the Kyoto Protocol Cadopted in 1997 in Kyoto, Japan), greenhouse gases including methane Ca key component of natural gas) are placed under restrictions in terms of flaring. Thus increasing amounts of natural gas will need to be processed rather than flared thereby leading to greater amounts of LPG being extracted from natural gas. As per the Drewry

LPG Forecaster 4Q 2O05, Quarterly Analysis of the LPG market, increased LPG production will see more LPG being shipped to the US Gulf with the Atlantic basin playing an increasingly important role in relation to the traditional Middle East-Far East trade that has dominated the VLGC market in the past and which should increase tonne-mile demand. The immediate prospects for fully-refrigerated vessels remain very good due to virtually no vessel supply side pressure in 20O5 and only limited pressure in 2OO6. Given the positive outlook from the Indian and global LPG trade market, it appears that the LPG sector will continue to grow in tandem with the demand for LPG, in an environment with relatively stable freight rates. The Company is well positioned to benefit from the expected growth in demand for LPG both domestically and globally.

On the crude oil and products side, the Platou Report, 2006, indicates that well-known forecasters such as International Energy Agency OEA) and Energy Information Administration of the US Department of Energy CEIA) predicted at the end of 2O05 a growth in global oil consumption in 2OO6 of slightly more than 2 per cent or 1.7 million bpd with China and USA as the main drivers. ElA predicted oil consumption in the US to rise by 2.3 per cent and in China by 7 per cent. The Platou Report 20O6 states that the trend in oil consumption will be the most decisive factor. Consensus forecasts for the world economy tell that 2O06 will be another year of high economic growth. In combination with a possible moderate fall in oil prices, the report still expects oil consumption to show some strength and lead to a comfortable return on capital for shipowners in 20O6.

Based on CRIS INFAC Refining and Marketing Annual Review, January 2OO5, it appears that India will continue to be a net importer of crude oil, natural gas and LPG and net exporter of refined petroleum products during the period up to 2OO8-09.

Address for correspondence

With the Registrars and Transfer Agents : (with effect from 2nd May, 2OO6)	With the Company :
MCS Limited Harmony, 1 st Floor, Sector - 1, Khanda, New Panvel (West), Dist. Raigad 410 2O6. Tel : +91 22 2749 2O03 Fax : +91 22 2749 2005 E-mail : mcsmum@vsnl.com	Varun Shipping Company Limited Laxmi Building, 6, Shoorji Vallabhdas Marg, Ballard Estate, Mumbai 4OO 001 . Tel : +91 22 6635 01OO-09 Fax : +91 22 6635 0274 E-mail : secretarial@varunship.com

Fixed Assets:

Fleet

Land

Premises

Furniture and Fixture

Office Equipments

Vehicles

Varun Shipping Company (VSCL), incorporated in 1971, picked up its first ship in 1973. Till 1982 the company belonging to the Khatau group was operating with only one-ship. The split in the Khatau group brought the company under the Dilip D Khatau group. In 1982, it witnessed a sea-change. Within a short span of a year, the share capital jumped up from Rs 2.400 Millions to Rs 33.500 Millions as investors, led by promoters, injected money into the veins of the Varun. Since 1983, the company has multiplied its fleet by buying a ship each year, barring 1986 and 1989.

 VSCL went public for the first time in Jun.'86. It has a fleet strength of eleven. Of these, six are tankers, four are offshore supply vessels and one is a bulk carrier. Most of the tankers are product tankers, carrying petroleum products, chemicals and edible oil. The offshore supply vessels are chartered to the ONGC. 

VSC International Pte Ltd, Singapore is a subisidiary of Varun Shipping Company Ltd. 

The company has one of the youngest fleets in India. In 1991, it undertook an expansion programme, part financed through a rights-cum-public issue of fully convertible debentures in Apr.'91. In 1995-96, the company acquired an LPG carrier, which is a specialized vessel for movement of LPG and other chemical gases. 

 During 1998, the company acquired its third carrier, as a result the company now owns the largest LPG fleet in the country i.e 55% of the total commercial LPG tonnage operating under indian flag. The company has entered into an agreement with A S Bulkhandling, a leading global pool operator for an association on commercial deployment during the year 1999-2000. During 2001-02 the company issued FCD to the extent of Rs.362.61 million which on conversion in 2002 will increase the capital to Rs.725.23 million. 

 During the year 2003-04, the Company acquired its fifth LPG Carrier, as a result the Company now owns the largest LPG Fleet in the country i.e 65% of the total LPG tonnage operating under Indian flag. 

 In the year 2004-05 the company has acquired its 8th LPG carrier, 9th LPG carrier in August 2005 and 10th LPG Carrier in October 2005 and as result of these acquisition the company owns the largest LPG fleet in the country which constitutes 77.40 per cent of the total LPG tonnage operating under Indian flag. During November 2005 the company's subisidiary VSC International Pte ltd has acquired a LPG Carrier and with this the company is owning 11 LPG carrier along with its subsidiary. Also the company has diversified into tansportation of crude oil with the acquisition of its first modern Aframax crude oil tanker. In July 2005 the company has acquired its second modem double hull Aframax crude oil tanker. 

 During December 2004 the company came out with rights issue for its shareholders in the ratio of one equity share for every two equity share held by the shareholders in the company.

Corporate Profile

They are a private sector shipping company in India, which presently owns/operates a fleet of 19 vessels for seaborne transportation of bulk cargoes mainly in the hydrocarbon sector including LPG, crude oil, petroleum products and easy chemicals and also provides services in the offshore sector. With their diversified fleet, they are able to offer their customers a comprehensive shipping solution across the entire hydrocarbon product chain.

The company presently owns a fleet of 12 LPG carriers, 3 crude oil tankers, 1 product tankers, and 3 offshore supply vessels. These vessels are either placed directly with the end users or in the pools wherein the managers of the pool arrange for chartering of these vessels. They monitor the performance of their vessels on a continuous basis and conduct both regular inspections and spot checks to ensure that their standards are maintained. They have maintained ISO 9001:2000 certificate for Shore Based Ship Management Services since 1995. They have also maintained their Document of Compliance certifying that they are in compliance with the ISM Code since 1998. Further, all their vessels are classed for compliance with applicable international standards and requirements and are certified by internationally recognized Classification Societies such as Det Norske Veritas, Lloyds Register of Shipping and Nippon Kaiji Kyoke and the Indian Register of Shipping. They have a highly professional and theyll qualified team of management in the areas of technical and commercial operations, finance, secretarial, legal, information technology and human resources.

In order to avail of various fiscal and commercial incentives available to the shipping industry, the Company set up a subsidiary, namely, VSC International Pte Ltd, in Singapore in the year 1995. They also provide agency services to international cruise companies like Apollo Ship Chandlers Inc., Crystal Cruises and Holland America Line, Inc. for the recruitment of food and beverage personnel and security staff.

In April 2006, the company was honoured with the prestigious award of “The Fastest Expanding Indian Shipping Company” and Mr Arun Mehta, their Vice Chairman and Managing Director was awarded the “Varuna Award”, by the National Maritime Day Celebrations Committee formed by The Directorate General of Shipping, Government of India. ( Click here to view the Awards)

In November 2006, Mr. Yudhishthir D. Khatau, Managing Director was awarded the 'Personality of the Year’ award at the Llyods List Middle East/Indian Subcontinent Awards 2006 ceremony, held at Dubai.

Their Vision

Their vision comprises of expanding their fleet to cater to the growing needs of their customers and benefit from the expected growth in hydrocarbon transportation demand both in India and abroad.

History & Development

On 29 January 1971, they were incorporated in India as a private company limited by shares under the name of Varun Shipping Company Private Limited under the Companies Act, 1956 with registration number 14985 of 1970-71. They changed their name to Varun Shipping Company Limited on 18 February 1972 when they converted into a public limited company.

They commenced their shipping business in March 1973 with the acquisition of one product tanker and presently own/operate a diversified fleet of 19 vessels.

In 1986, they became a publicly held company with their initial public equity offering in India and listing on Bombay Stock Exchange Limited, Ahmedabad Stock Exchange Limited and The Delhi Stock Exchange Association Limited. In 1988, they were listed on The Calcutta Stock Exchange Association Limited. They are committed to quality assurance and safety at sea. They received and have maintained their ISO 9001:2000 certification since 1995 for shore-based ship management services. They voluntarily participated in the United States of America Coast Guard sponsored Automated Mutual-assistance Vessel Rescue (AMVER) System and one of their previously-owned vessels was awarded the Certificate of Merit by AMVER 9 times.

In July 1995, they incorporated VSC International Pte Ltd, as a wholly-owned subsidiary, in Singapore to avail ourselves of international finance and tax benefits available to Singapore-based shipping companies.

In 2003, they were listed on National Stock Exchange of India Limited. With this listing, their Company was listed on 5 stock exchanges in India.

As at 30 September 2006, they were the largest owner of LPG tonnage in India and they believe they continue to own the largest LPG fleet in India with 79% of the total LPG tonnage (in dwt terms) operating under the Indian flag. In November 2005, they completed the purchase of a modern mid-size LPG carrier, the Maharshi Bhavatreya under their Singapore subsidiary, which is their Group’s 11th LPG carrier.

On 7 July 2005, they registered their branch office in Singapore. The initial business activity of the branch is to provide the technical management services to some of the vessels of their Company.

Their Group owns a diversified fleet of 19 vessels comprising 12 LPG carriers, 3 crude oil tankers, 1 product tankers, and 3 AHTSs. They provide transportation of diversified cargoes globally as well as along the Indian coast and provide support services to the oil exploration industry. In April, 2006, their Company was given the award of “Fastest Expanding Indian Shipping Company” by the National Maritime Day Celebrations Committee (Central) formed by the Directorate General of Shipping, The Government of India, Ministry of Shipping, Road Transport and Highways.

They have been profitable and able to distribute dividends uninterruptedly to their shareholders for the last 23 years.

Varun Shipping acquires AHTS vessel

Varun Shipping has acquired one 2001 built Anchor Handling and Towing Supply Vessel. This vessel has BHP of around 16000 T and Bollard Pull in excess of 180 Tons.This modern and highly sophisticated world class vessel will be used for deep sea oil exploration going on in North Sea, Bay of Bengal and Atlantic Ocean off the coasts of

Nigeria, Brazil and Mexico.

This vessel will be the most powerful AHTS vessel with highest Bollard Pull under Indian flag. As few such vessels exist in the world, the acquisition of this vessel by the company will establish a new milestone in offshore support services for India’s oil industry.

VARUN SHIPPING TO ACQUIRE TWO AHTS VESSELS

Varun Shipping in order to expand its asset base in the oil and gas exploration and production industry has signed Memorandum of Agreements for acquiring two 2001 built Anchor Handling and Towing Supply (AHTS) vessels. These vessels have BHP of around 16000 T and Bollard Pull in excess of 180 Tons. One of the vessels is scheduled to be delivered by end of January, 2007 and the second one in April/May, 2007. These modern and highly sophisticated world class vessels will be used for deep sea oil exploration going on in North Sea, Bay of Bengal and Atlantic Ocean off the coasts of Nigeria, Brazil and Mexico.

These vessels have been designed by Vik-Sandvick, a very reputed designer from Norway and are highly maneuverable and are fitted with the Dynamic Positioning (DP) which ensures that they can safely maintain position off the offshore installations.

These two vessels will be amongst the most powerful AHTS vessels with highest Bollard Pull under the Indian flag. As few such vessels exist in the world, the acquisition of these vessels by the company will establish a new milestone in offshore support services for India’s oil industry.

With the acquisition of above mentioned vessels, the company will have completed an investment of around US$ 320 million out of the proposed expansion plan of US$ 400 million.

Varun Finance & Accounts

Tel: +91-22 66350100-109

Fax: +91-22 66350274

E-mail: finac@varunship.com

Varun Secretarial & Legal

Tel: +91-22 66350100-109

Fax: +91-22 66350274

E-mail: secretarial@varunship.com

Varun Technical & Operations

India
Tel: +91-22 66350100-109

Fax: +91-22 66350200

E-mail: operations@varunship.com

Singapore
Tel: +65 6221 1290

Fax: +65 6221 3915

E-mail: raja@varunship.com

Varun Commercial & Chartering

Tel: +91-22 66350100-109

Fax: +91-22 66350300

E-mail: commercial@varunship.com

Varun Systems, Personnel & Administration

Tel: +91-22 66350100-109

Fax: +91-22 66350278

E-mail: systems@varunship.com

Varun Agency

Tel: +91-22 22663383/71/52

Fax: +91-22 22616115

E-mail: agency@varunship.com

Varun Purchase

Tel: +91-22 22663383/71/52

Fax: +91-22 22616115

E-mail: purchase@varunship.com

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 records 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.42.90
UK Pound	1	Rs.84.96
Euro	1	Rs.57.21

SCORE & RATING EXPLANATIONS

SCORE FACTORS	RANGE	POINTS
HISTORY	1~10	7
PAID-UP CAPITAL	1~10	7
OPERATING SCALE	1~10	6
FINANCIAL CONDITION
--BUSINESS SCALE	1~10	9
--PROFITABILIRY	1~10	5
--LIQUIDITY	1~10	8
--LEVERAGE	1~10	8
--RESERVES	1~10	8
--CREDIT LINES	1~10	8
--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	YES
--AFFILIATION	YES/NO	YES
--LISTED	YES/NO	YES
--OTHER MERIT FACTORS	YES/NO	YES
TOTAL		66

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