Financial Performance
IV Quarter
Essar Steel Limited (ESTL) posted a total income (net of excise) of Rs.1926.64 crore for the quarter ended March 31, 2005 compared to Rs.1227.11 crore for the corresponding period of the previous year, registering a growth of 57%. EBIDTA for the quarter stood at Rs.699.49 cr. (Rs.285.66 cr.) a growth of 145%. The net profit was Rs. 272.78 crore (Rs.98.02 crore in the corresponding period of the previous year), a growth of 178% after providing for finance costs of Rs.147.73 crore (Rs72.11 crore), depreciation of Rs.98.46 crore (Rs. 95.99 crore) and Provision for Deferred Tax and Tax of Rs.181.38 crore (Rs.55.35 cr.).

Full Year
Total Income (net of excise) for the year 2004-05 grew by 65% to 6121.27 cr. as compared to Rs. 3717.65 cr. last year. The EBIDTA rose by 157% to Rs. 2204.08 cr. (Rs.859.21Cr.). After providing for interest of Rs.550.73 cr. (397.68 cr.), depreciation of Rs. 394.29 cr.(Rs.403.27 cr.) and Provision for Deferred Tax and Tax of Rs.203.95 cr. (Rs. 34.08 cr.), Net Profit stood at Rs. 590.15 cr. (Rs. 59.99 cr.)

Commenting on the results, Mr. Shashi Ruia, Chairman, Essar Steel, said "The year's results reflect our success in achieving top-line growth and substantially improving profitability. Value added products accounted for over 35 % of sales volumes as against 20 % last year, having a positive impact on profitability. Demand continues to be bullish and we are putting in place a number of measures to remain one of the lowest cost producers of steel in the country".

Capital Structure
In terms of the CDR and the approval of shareholders, Essar Steel had approached the High Court of Gujarat seeking approval to reduce the equity capital by 40%. and in lieu thereof issue 0.01% cumulative redeemable Preference Shares. The Company has received confirmation from the High Court of Gujarat for the same.

As per the terms of approval from the shareholders and subject to approval of regulatory authorities, Essar Steel will issue Compulsorily Convertible Preference Shares (CCPS) to the extent of USD 450 million. The CCPS will be issued to Prime Holdings (promoter company) for an amount not exceeding USD 337.5 million and Asia Steel Holding (non promoter company) for an amount not exceeding USD 112.5 million.

Acquisitions
The Company proposes to utilise this to acquire 51% stake held by Stemcor in Hy Grade Pellets Limited (HGPL) and 100% stake of Stemcor in Steel Corporation of Gujarat limited (SCGL). The acquisitions are expected to be completed shortly.

These acquisitions will make Essar Steel a fully integrated steel maker with control over the entire operations-from iron ore to ready-to-market steel products.

Manufacturing
HR coil production for the quarter ended March 31, 2005 period grew by 35%, to 6.89 Lakh tonnes (5.09 Lakh tonnes). HR coil production for the year ended March 31, 2005 period grew by 20% to 23.24 Lakh tonnes (19.32 Lakh tonnes).

The commissioning of the fourth module of HBI during the year, will meet the increased requirements of raw material, enabling the Company to increase its HRC capacity to 3 million tones per annum. The company has finalized plans to augment the capacity to 4.6 million tones per annum through technology up-gradation, productivity improvements and de-bottlenecking, at a cost of Rs.2000crore. This expansion is expected to be completed by the second quarter of 2006. The Company's thrust on adding value and flexibility in its product mix continued.

Marketing
Total domestic sales during the quarter registered a growth of 16% at 4.29 Lakh tonnes (3.7 Lakh tonnes) Exports during the quarter are up by 58% at 2.55 Lakh tonnes (1.62 Lakh tonnes). Total domestic sales for the year showed a growth of 16.5% at 14.77 Lakh tonnes (12.68 Lakh tonnes) Exports during the year were up by 20% at 7.88 Lakh tonnes (6.55 Lakh tonnes).

The Company's concentration on value addition and customization helped grow revenues and increase market penetration. Introduction of HR Pickled and Oiled (HRPO) coils, shot blasted and painted plates were among the new product introductions during the year. Essar Steel is the only company in the industry to have its downstream facility adjacent to the hot strip mill, resulting in considerable savings in cost and throughput time.

New applications in API grades (where ESTL is Asia's leading supplier), automotive grades, white goods and pre-engineered buildings helped the company consolidate its position among discerning customers. Essar Steel continued to remain India's largest exporter of flat steel products. The Company's products are exported to USA, Europe, Japan, Middle East and Africa.

Audited Financial Results for the Quarter and Year
from 1st April, 2004 to 31st March, 2005