MIRA INFORM REPORT

Report Date :

31.01.2008

IDENTIFICATION DETAILS

Name :	VARUN SHIPPING COMPANY LIMITED
Registered Office :	Laxmi Bldg 6S, V Marg, Ballard Estate, Mumbai - 400001, Maharashtra
Country :	India
Financials (as on) :	31.03.2007
Date of Incorporation :	29.01.1971
Com. Reg. No.:	11-14985
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 30000000
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.:	91-22-66350100-109
Fax No.:	91-22-66350274 / 280
E-Mail :	secretarial@varunship.com investors@varunship.com
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
Designation :	Company Secretary

MAJOR SHAREHOLDERS / SHAREHOLDING PATTERN

Names of Shareholders	No. of Shares
Bodies Corporate	64062647
Mutual Funds / UTI	616686
Financial Institutions / Banks	56313
Venture Capital Funds	1500000
Insurance Companies	6656638
Foreign Institutional Investors	27044738
Bodies Corporate	6735448
Individual
Individual shareholders holding nominal share capital upto Rs. 0.100 million	27292478
Individual shareholders holding nominal share capital in excess of Rs. 0.100 million	11815792
Any other (Non Residents)	4227033

BUSINESS DETAILS

Line of Business :	Subject is engaged in the business as Owning and Operating Ships.
Product Description:	Operation of Ships

GENERAL INFORMATION

No. of Employees :

About 750

Bankers :

· State Bank of India

Address: Madame Cama Road, Mumbai -400 001, Maharashtra, India

· Bank of India

· Bank of Baroda

· Axis Bank Limited

· ICICI Bank Limited

Facilities :

SECURED LOANS:-

Term Loans from Financial Institutions :	31.03.2007	31.03.2006
	( Rs. in millions)
Secured by a charge on one of the Company’s ships	90.582	130.273
Term Loans from Banks :
Secured by a charge on some of the Company’s ships	2233.900	5452.351
Secured by a charge on some of the Company’s ships and receivables in respect of some of the Company’s Ships	15591.232	5774.872
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	14.743	24.763
Total:	17839.875	11251.986

Banking Relations :

Good

Auditors :

Name :

Messrs Sorab S. Engineer and Company

Chartered Accountant

Address :

Ismail Building, 381, Dr. D. Naoroji Road, Mumbai - 400 001, Maharashtra

Associates/Subsidiaries :

Associates:

· Tarun Shipping and Industries Limited

· Jaswandi Holdings Limited

· Khatau International Limited

· The Corbett Foundation

· Concord Holdings Private Limited

· Promising Investment and 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	Preference Shares	Rs.100/- each	Rs.200.000 Millions
		Total	Rs. 3200.000 Millions

Issued Capital :

No. of Shares	Type	Value	Amount
142757773	Equity Share	Rs.10/- each	Rs. 1427.577 Millions

Subscribed & Paid-up Capital :

142757773	Equity Share	Rs.10/- each	Rs. 1427.577 Millions
Less:	Call in arrears		Rs. 0.224 Million
		Total	Rs.1427.353 Millions
7250000	Optionally Fully Convertible Warrants (OFCWS) – Allotment money		Rs. 54.375 Millions
		Total	Rs. 1481.728 Millions

Out of the above:-

720000 Equity Shares of Rs. 10 each were issued as fully paid-up Bonus Shares by Capitalisation of Reserves in earlier years.

FINANCIAL DATA

[all figures are in Rupees Millions]

ABRIDGED BALANCE SHEET

SOURCES OF FUNDS		31.03.2007	31.03.2006	31.03.2005
SHAREHOLDERS FUNDS
1] Share Capital		1481.729	1176.947	1176.538
2] Share Application Money		0.000	0.000	0.000
3] Reserves & Surplus		5810.628	3575.718	2246.420
4] (Accumulated Losses)		0.000	0.000	0.000
NETWORTH		7292.357	4752.665	3422.958
LOAN FUNDS
1] Secured Loans		17930.459	11382.261	5801.164
2] Unsecured Loans		0.000	0.000	1.000
TOTAL BORROWING		17930.459	11382.261	5802.164
DEFERRED TAX LIABILITIES
Finance Lease Obligations		0.000	1898.050	74.590
TOTAL		25222.816	18032.976	9299.712
APPLICATION OF FUNDS
FIXED ASSETS [Net Block]		24439.202	17603.021	8224.136
Capital work-in-progress		0.000	0.000	0.000
INVESTMENT		207.491	207.590	207.591
DEFERREX TAX ASSETS		0.000	0.000	0.000
CURRENT ASSETS, LOANS & ADVANCES
	Interest Accrued on deposits			0.000
	Inventories			0.000
	Sundry Debtors	1442.494	1057.418	0.000
	Cash & Bank Balances			0.000
	Other Current Assets			0.000
	Loans & Advances			1550.163
Total Current Assets		1442.494	1057.418	1550.163
Less : CURRENT LIABILITIES & PROVISIONS
	Current Liabilities	866.371	601.390	397.683
	Provisions		233.663	284.495
Total Current Liabilities		866.371	835.053	682.178
Net Current Assets		576.123	222.365	867.985
MISCELLANEOUS EXPENSES		0.000	0.000	0.000
TOTAL		25222.816	18032.976	9299.712

PROFIT & LOSS ACCOUNT

PARTICULARS		31.03.2007	31.03.2006	31.03.2005
Sales Turnover		6726.267	6429.314	3882.304
Other Income		513.801	13.799	0.000
Total Income		7240.068	6443.113	3882.304
Profit/(Loss) Before Tax		1476.897	1883.719	834.776
Provision for Taxation		63.400	24.800	17.870
Profit/(Loss) After Tax		1413.497	1808.919	816.906
Expenditures :
	Operating Cost	2528.392	2228.772	1955.992
	Administrative Expenses	466.779	326.349	246.122
	Interest and Finance Cost	1110.884	758.170	175.155
	Depreciation & Amortization	1657.114	1296.103	670.257
Total Expenditure		5763.169	4609.394	3047.526

QUARTERLY RESULTS

Year	30.06.2007	30.09.2007	31.12.2007
Type	1^st Quarter	2^ndQuarter	3^rdQuarter
Sales Turnover	1935.000	2014.300	2299.500
Other Income	996.400	427.100	169.300
Total Income	2931.400	2441.400	2468.800
Total Expenditure	840.600	940.500	822.400
Operating Profit	2090.800	1500.900	1646.400
Interest	321.500	378.700	362.500
Gross Profit	1769.300	1122.200	1283.900
Depreciation	496.100	541.300	540.100
Tax	5.000	4.400	6.900
Reported PAT	1268.200	576.500	736.900

KEY RATIOS

Year	31.03.2007	31.03.2006	31.03.2005
Debt-Equity Ratio	2.60	2.35	1.52
Long Term Debt-Equity Ratio	2.60	2.35	1.50
Current Ratio	1.37	1.61	1.99
TURNOVER RATIOS
Fixed Assets	0.26	0.38	0.41
Inventory	167.53	141.30	85.67
Debtors	13.48	15.42	12.76
Interest Cover Ratio	1.88	3.42	5.76
Operating Profit Margin(%)	55.73	60.47	43.20
Profit Before Interest And Tax Margin(%)	31.09	40.31	25.97
Cash Profit Margin(%)	38.55	48.29	38.23
Adjusted Net Profit Margin(%)	13.92	28.14	21.00
Return On Capital Employed(%)	9.68	18.99	14.19
Return On Net Worth(%)	15.62	44.54	29.20

LOCAL AGENCY FURTHER INFORMATION

History and 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 Limited, 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.

DIRECTOR REPORTS:

Out of the amount of Rs. 1912.35 million available for appropriation, the Directors propose to transfer an amount of Rs.400.00 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, 2007 which together with two interim dividends totalling to Rs. 3.00 per equity share declared and paid earlier for the year ended 31st March, 2007 aggregating to Rs. 4.50 per equity share will absorb Rs. 604.96 million and Rs. 91.21 million towards dividend tax. After the above appropriations, the Directors propose to carry forward a balance of Rs. 813.36 million in the Profit and Loss Account. Income from operations was Rs. 6726.27 million compared to Rs. 6429.31 million for the year ended 31^st March, 2006. Net profit after-tax was Rs. 141 3.50 million for the year ended 31 st March, 2007 as against

Rs.1808.91 million during the preceding year.

The Company continues to maintain its focus on the hydrocarbon sector and build on its core competencies by expanding its fleet of tankers and gas carriers as also by expanding its assets and operations in the rapidly developing oil and gas exploration and production industry. Towards this end, the Company acquired its twelth LPG carrier, Maharshi Vamadeva in December, 2006 with a cargo carrying capacity of 57,206 cbm. This vessel is the largest LPG carrier in the Indian fleet. The Company also acquired LPG carrier Maharshi Bhavatreya with a cargo carrying capacity of 35,559 cbm in March, 2007, which was on bareboat charter with a purchase option with the Company. With these acquisitions, the Company's LPG carrier fleet of 12 vessels is the largest in India in terms of both fleet size and cargo carrying capacity of 332,023dwt (412,725 cbm) and forms approximately 80 per cent of total LPG tonnage under Indian flag. In order to strengthen its presence in the crude oil sector, the Company acquired its third modern, double hull Aframax crude oil tanker, Amba Bhargavi in January, 2007 with a cargo carrying capacity of 106,004 dwt. The Company acquired one large, modern Anchor Handling Towing and Supply (AHTS) vessel, Subhiksha in January, 2007 with approximately 1 6,000 T British Horse Power (BHP)and a Bollard Pull in excess of 180 Tons. This modern and highly sophisticated world-class vessel can be used for supporting rigs and platforms in deep sea oil exploration activities in the North Sea, Bay of Bengal and the Atlantic Ocean, off the coasts of Nigeria, Brazil and Mexico. This vessel is the most powerful AHTS vessel with the highest bollard pull under Indian flag and as such, has established a new milestone in offshore support services for India's oil industry. Consequent to the said acquisitions, the Company presently owns a diversified fleet of 1 9 vessels.

The Company has also contracted to acquire one more AHTS vessel, which is sister vessel of Subhiksha and one Very Large Gas Carrier (VLGC). These vessels are expected to be delivered to the Company in May, 2O07 and June, 2007 respectively. During the year under review, the Company sold two single hull product tankers, namely, M.T. Hansdoot and M.T. Jaladoot and one bulk carrier, namely, M.V. Surya Kripa.

The Company has decided to sell the 1974 built LGC Maharshi Vishwamitra. Mr. Yudhishthir D. Khatau, the Managing Director of the Company was the recipient of the "Personality of the Year" award at the Lloyds List Middle East/Indian Sub-Continent Awards 2006 ceremony on 8^th November, 2006. According to Lloyds List, this award is given to "the person whose performance and business conduct in the eyes of the judges has stood head and shoulders above all others in Middle East/ Indian Sub-Continent maritime circles."

The Company had in connection with the proposed issue of Singapore Depository Shares filed an amended prospectus with the Monetary Authority of Singapore, but as during the road-show period, the Indian stock markets witnessed a major setback with a similar downturn throughout the South East Asia, the Company in consultation with its lead managers, decided to withhold the issue. The Company thereafter issued and allotted 22550000 equity shares on preferential basis at a price of Rs. 75 per share i.e. Rs.10 on capital account and Rs. 65 on premium account aggregating to Rs.1691.25 million on 5th December, 2006.

The Company, on 5th December, 2006 also issued and allotted 3950000 Optionally Fully Convertible Warrants COFCWs) each to Khatau International Limited and Tarun Shipping and Industries Limited, promoter group companies and 600.00 OFCWs to Mr. Arun Mehta, Vice Chairman and Managing Director of the Company aggregating to 8500000 OFCWs on preferential basis. The said OFCWs were also issued at a

price of Rs.75 per OFCW aggregating to Rs. 637.50 million

During the year under review, the Company issued and allotted 1650000 equity shares of Rs. 10 each to Khatau International Limited pursuant to the exercise of option for conversion of 1650000 OFCWs at Rs. 32.09 per share. During the year under review, the Company also issued and allotted 1100.000 and 150.000 equity shares of Rs.10 each to Tarun Shipping and Industries Limited and Mr. Arun Mehta, Vice Chairman and Managing Director of the Company respectively, pursuant to their exercise of option for conversion of 1100.000 and 150.000 OFCWs respectively at Rs. 75 per share.

With the issue and allotment of the aforesaid equity shares, the total issued equity share capital of the Company, as on date, stands at 142757773 equity shares. In case the option to convert the outstanding OFCWs into equity shares is exercised by the holders thereof, the total equity share capital of the Company would be 150007773 equity shares of Rs. 10 each aggregating to Rs. 1500 million.

In response to the Company's application for voluntary delisting of its equity shares, the Company's equity shares have been delisted from Ahmedabad Stock Exchange Limited. The delisting of the equity shares from The Delhi Stock Exchange Association Limited and The Calcutta Stock Exchange Association

Limited is awaited.

Management Discussion and Analysis :

(a) Industry Structure and Development:

The international shipping industry involved in transportation of cargoes, primarily comprises of vessels operating in the wet-bulk, dry-bulk, liquefied gas, bulk chemical and container sectors. Specialized vessels such as ferries, car carriers and heavy lift ships are also involved in the transportation of passengers, automobiles and project cargoes. Offshore support vessels provide various services to the offshore exploration and production industry. The Company has a diversified fleet of vessels operating in the oil, gas and offshore sectors.

According to the Platou Report, 2007, worldwide economic growth in 2006 was higher than predicted, except for the USA and Japan. China was the most important driver for world trade and tonnage demand. Roughly 40 per cent of the extra need for seaborne transport capacity can be ascribed to China. 2006 was also notable for the amount of liquidity in the global financial system providing conditions that have benefitted consumers everywhere ana emerging market energy, minerals and metal producers and therewith the overall shipping industry. Tightening monetary policies leading to higher interest rate are prevalent but rates are hopefully close to their cyclical peaks and liquidity remains high with capital seeking investments and providing the required impetus for sustained commerce through 2007.

Despite signs of slower economic growth in the US and China, the latest view of the OECD's international Energy Agency is for a doubling of global oil demand growth in 2007 to 1.6 m-bpd. The EIA forecasts that OPEC will raise output by 1 m-bpd in second half 2007. A strong demand and seaborne trade in oil, bodes well for the tanker and offshore markets. LPG is one of the most preferred fuels due to its clean burning properties and therefore is in strong demand the world over. LPG carriers are primarily used for transportation of LPG and ammonia, it was observed that combined Japanese, Chinese and South Korean LPG imports in the first ten months of 2006 were up compared to the same period during the year 2005. Further, the Middle East exports in the first ten months of 2006 were also up compared to the same period of 2005, Towards the end of 20O6, price differentials between the FOB (free on board) and CF (cost and freight) rates in both propane and butane made trading difficult leading to a sharp decline in very large gas carrier (VLGC) rates. However, large gas carrier CLGC) and medium gas carrier CMGC) rates have continued to hold steady.

The demand for crude oil and petroleum products is influenced by world regional trade activities, refinery capacity and heating fuel requirements based on weather conditions. The crude and product tanker market continued to remain firm in the year 2006 but was marginally lower than the year 2005, primarily due to weak winter rates, effected by warm weather throughout the northern hemisphere.

The increased oil exploration and production activities globally resulted in an increase in demand for vessels supporting offshore activities. According to Platou Report, 2007, fuelled by high oil prices and abundant exploration and production activity, the supply vessels market experienced 2006 as a record breaking year in all areas. In India, Oil and Natural Gas Corporation Limited, Reliance Industries Limited and Cairn Energy India Private Limited have plans for increased oil and gas exploration and production activities which will result in higher utilization of offshore support vessels.

(b) Opportunities and Threats :

As per Indian National Shipowners Association (INSA) Annual Review 2006 Indian shipping transported approximately 13.7 per cent of total overseas sea-borne trade in 2004-2005 and the average age of the Indian fleet was approximately 17.9 years with approximately 50 per cent of the fleet being above 20 years of age. There exists therefore an opportunity for the Indian shipping companies to acquire additional tonnage and access the growing cargo base required to be imported/exported into/ from India.

Freight rates will be determined by the fine balance between future demand and supply of ships. The global shipping industry is currently faced with a large order book of vessels in most sectors, leading to an increased supply of tonnage for global trade. Sustained and improved freight rates will be dependant on increased trade growth from emerging markets such as China and India. inspite of introduction of the Tonnage Tax regime since April, 2004, the Indian shipping industry, due to several other taxes, including 'service tax, withholding tax on interest and fringe kSenefit tax is once again losing the level playing field vis-a-vis foreign competitors. An additional area of concern for Indian shipping companies has been the continuous drift of qualified shipboard personnel to the foreign shipping companies due to the receipt of tax free salaries from such companies. The shortage of quality manpower makes it increasingly difficult to operate the existing high priced assets to the demanding standards of international charterers and regulators.

c) Segment-wise Performance

The Company is engaged only in the business of shipping and there are no separate reportable segments. The Company's fleet of twelve LPG carriers, including 10 medium size (MGO and two large size (LGC), have been deployed on a mix of time charters, voyage charters and pool arrangement. The Company has transported approximately 77 per cent of all LPG cargoes imported into the country by the PSU sector.

In the crude oil and petroleum products sector, the Company owns three, double hull Aframax crude oil tankers and one singte hul! product tanker. The three crude oil tankers are placed in the Sigma Tanker Pool, which trades globally and the product tanker is employed on time charter basis on the Indian coast In the offshore sector, the Company has a fleet of three AHTS vessels of which two are deployed on time charter with Oil and Natural Gas Corporation Limited and one with Reliance Industries Limited for supporting their deep sea oil exploration and production activities, in Krishna Godavari basin.

d) Outlook :

During the year 2007, it is forecasted that almost 9.6 per cent of the existing fully refrigerated LPG fleet will be delivered out of yard, but at the same time many LPG ships are due for scrapping thereby reducing the net increase in tonnage. Further, it is expected that greater amounts of LPG will be extracted from natural gas which coupled with increased LPG production is likely to result in increased tonne-mile demand. It is expected that freight rates for mid-size LPG gas carriers will remain firm whereas the rates for Very Large Gas Carriers may be under pressure compared to the previous year.

Oil imports into China as well as to Europe are expected to grow due to likely rise in oil consumption in China and due to continuing decline in North Sea production in Europe. The tanker markets are faced with the challenge of absorbing a large order book of both crude and product tankers that will be delivered by 2011. However, parallel to that, there exists a planned phase out of single hull tankers by 2010 and an increase in trade. Approximately 9.8 m-bpd of new global refining capacity is scheduled to be added by the end of 2012, with almost 80 per cent of this capacity planned in Middle East, Africa and Asia. It is the anticipated trade in crude oil to these refineries and their long haul refined product exports to North America and Europe that has given rise to investments in the tanker segments. Crude tanker freight rates are expected to remain firm in the coming year with product tankers expecting to face greater challenges due to supply side increases.

Due to continuing exploration and production activity, the outlook for the offshore vessel market appears to be promising. According to the Platou Report, 2007, the expected drilling activity and construction/production activity will continue to increase, propelling the demand for offshore vessels in all segments forward even further expecting 2007 to be another exceptional year for the supply

vessel market.

(e) Risks and Concerns :

Shipping industry being global in nature is prone to several risks and uncertainties including international competition, marine mishaps and accidents, amendments in government policies, rules and regulations, new regulatory compliances, port state control, exchange rate fluctuations, acts of terrorism, wars, piracy, arrest of vessel by maritime claimants, etc.

OTHER INFORMATION:

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 well 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 Limited, 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.

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.

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.

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.

The company, 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.

Subject 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 Limited, Singapore is a subisidiary of Varun Shipping Company Limited. 

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 millions 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 Limited 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.

CONTINGENT LIABILITIES: 31.03.2007 31.03.2006

a) On account of guarantees executed by the Rs. in millions Rs. in millions

Company's bankers secured

by charge on some of the Company's

vessels and fixed deposits of

Rs. 6.104 millions (previous year Rs. 12.200 millions). 127.951 43.134

b) Claims against the Company not acknowledged as debts 71.704 67.654

(c) Deputy Commissioner (CT) Chennai had raised a demand for Rs. 83.284 millions for earlier years on account of levy of Commercial tax on Charter-hire in respect of some of their ships. The Company was in appeal against the same and the Appellate authority has given the ruling in favour of the Company. However the Deputy Commissioner (CT) Chennai has preferred an appeal against the same with Sales Tax Appellate Tribunal, Chennai. The Company has been advised that this demand is not sustainable. Hence no provision has been made.

(d) Outstanding commitment on capital account Rs. 4824.191 millions (Previous year - Rs. NIL for purchase of a vessel) against which an advance payment of Rs. 396.019 millions (Previous year - Rs. NIL) has been made during the year

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

Contact:

Varun Finance and Accounts

Tel: 91-22 66350100-109
Fax: 91-22 66350274
E-mail: finac@varunship.com

Varun Technical and 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 Systems, Personnel and Administration

Tel: 91-22 66350100-109
Fax: 91-22 66350278
E-mail: systems@varunship.com

Varun Purchase

Tel: 91-22 22663383/71/52
Fax: 91-22 22616115
E-mail: purchase@varunship.com

Varun Secretarial and Legal

Tel: 91-22 66350100-109
Fax: 91-22 66350274
E-mail: secretarial@varunship.com

Varun Commercial and Chartering

Tel: 91-22 66350100-109
Fax: 91-22 66350300
E-mail: commercial@varunship.com

Varun Team Offshore

Tel: 91-22 66350100-109
Fax: 91-22 66350279
E-mail: offshore@varunship.com

PRESS RELEAESE:

Varun Shippings 9 months PAT up by 137 per cent

Declares second Interim Dividend of 15 per cent

EPS for 9 months is Rs. 17.45

Varun Shippings profit after tax (PAT) for nine months ended 31^st December, 2007 was Rs. 258.16 crores as against Rs. 108.73 crores for the corresponding nine months period in the previous year. PAT for the quarter ended 31^st December, 2007 was Rs. 73.69 crores as against Rs. 39.63 crores for the corresponding quarter in the previous year.

The company has declared second interim dividend of 15 per cent for the current financial year ending on 31^st march 2008. Total of first and second interim dividend declared in the current financial year works out to 30 per cent.

Company’s freight and charter hire income for nine months ended 31^st December, 2007 was Rs. 624.88 crores as compared to RS. 481.29 crores for the corresponding nine months in the previous year. Company’s freight and charter hire income for the quarter ended 31^st December, 2007 was Rs. 229.95 crores as compared to Rs. 163.48 crores for the corresponding quarter in the previous year.

Increase in freight and charter hire income was due to acquisition of additional vessels, particularly in the offshore sector and on account of overall higher level of freight rates in the current financial year.

Earning per share (EPS) (basic not annualized) for nine months ended 31^st December, 2007 was Rs. 17.45 as compared to Rs. 9.04 for the corresponding period in the previous year.

Company has planned expansion programme of US $ 400 million for acquisition of additional vessels by end of calendar year 2008.

Company presently owns a diversified fleet of 20 vessels operating in LPG, crude oil / product off shore sectors.

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. 39.39
UK Pound	1	Rs.78.40
Euro	1	Rs.58.73

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