Performance Highlights
Operations
Essar Steel completed its integration programme during the year. Hy Grade Pellets Limited and Steel Corporation Gujarat Limited were merged with Essar Steel. The 8 million tonnes per annum iron ore beneficiation plant at Bailadilla, the 267 km slurry pipeline and the doubling of capacity to 8 million tonnes at the pellet plant at Visakhapatnam were also completed during the year.

The 1.2 million tonne cold rolling complex is operating at near full capacity.

The integration and strict cost management enabled the company to emerge among the lowest cost producers of steel in the world.

Essar Steel's product portfolio now addresses the high value, discerning customer profile in the automotive, white goods, construction, general engineering and ship building industries. The Company has been able to move up the value chain and add an enviable portfolio of leading Indian and international customers.

The Company is on track for completion of capacity expansion to 4.6 million tonnes, which is expected to be completed by the end of the calendar year.

The Company expects the full benefits of integration and expansion to accrue in the coming years.

Financial
The year has seen some significant developments on the financial front, the most important one being the refinancing and repayment of the entire CDR debt.

The Company's net worth has gone up from Rs.1725 crore to Rs.4032 crore and the Company's financial ratios have improved significantly.

Full Year
Essar Steel reported a total income of Rs. 6390.72 crore (net of excise) for the year ended March 31, 2006 as compared to Rs. 6121.27 crore last year, an increase of 4.4%. EBIDTA stood at Rs.1689.11 crore (Rs. 2204.08 crore in the previous year). After providing for interest of Rs. 422.67 crore (Rs.550.73 crore.), depreciation of Rs. 482.10 crore (Rs.394.29 crore) and Provision for Deferred Tax, Fringe Benefit Tax and Tax of Rs.165.80 crore (Rs.203.95 crore), the Company's Net Profit was Rs. 530.18 crore (Rs. 590.15 crore).

The company was able to withstand the pressures of depressed and fluctuating prices in domestic and international markets on the one hand and rising input costs of raw material like iron ore, energy, zinc and other vital inputs on the other. The Company was able to record a satisfactory performance a market that saw prices falling by as much as US$ 150 per tonne enabled it to record a satisfactory performance.

Fourth Quarter
Essar Steel posted a total income of Rs.1690.71 crore (net of excise) for the quarter ended March 31, 2006 compared to Rs.1926.64 crore for the corresponding period of the previous year. EBIDTA for the quarter stood at Rs.340.51 crore (Rs.699.49 crore). Net profit was

Rs.86.37 crore (Rs.272.78 crore) after providing for Interest at Rs.55.50 crore (Rs.147.73 crore), depreciation of Rs.99.13 crore (Rs.98.46 crore) and Provision for Deferred Tax and Tax of Rs.63.96 crore (Rs.181.38 crore).

Manufacturing
HR coil production for the year ended March 31, 2006 grew by 10.8% to 2.577 million tonnes. The company produced 0.686 million tones of HR Coils for the quarter ended March 31, 2006.

Marketing
Domestic sales in the quarter registered a growth of 8.7% at 0.47 million tonne. Total domestic sales for the year showed a growth of 21% at 1.79 million tonnes.. Exports during the quarter stood at 0.215 million tonne (0.26 million tonne) and exports for the full year stood at 0.69 million tonne. The share of value added products improved from 37% to 48% during the year under review. Essar Steel received the Top National and Regional Exporters trophy from the Engineering Export Promotion Council.

About Essar Steel
Essar Steel is the largest integrated producer of steel in Western India with a capacity of 4.6 million tonnes per annum. It is also India's largest exporter of flat steel products.

About Essar
The Essar Group is one of India's largest corporate houses, with interests spanning the core and infrastructure sectors of industry - steel, oil & gas, power, telecom & BPO, shipping and construction. It has an asset base in excess of US $ 6 billion (Rs. 27,000 crore).

Audited Financial Results for the Period from 1st April, 2005 to 31st March, 2006