Nayara Energy (Formerly Essar Oil) Limited Unlisted Shares

Annual Report Summary

Resilient Today for a Brighter Tomorrow: The Nayara Energy Annual Report 2020-21 Summary

Nayara Energy Limited's annual report for 2020-21 highlights the company's resilience and strategic initiatives during a year marked by unprecedented disruption due to COVID-19.

Corporate Overview and Key Performance:

• Resilience and Adaptation: Despite drastic product demand drops, Nayara Energy achieved 85% capacity. It launched phase 1 of an asset development project revamping FCC and LPG Treatment Units and setting up new Propylene Recovery (PRU) and Polypropylene (PP) Units.
• Financial Strength: The company maintained its domestic credit rating of 'AA' by CARE amid a volatile global environment, showcasing a stable outlook. The Retail Business delivered volume growth of 3% year-on-year despite industry-wide de-growth.
• Operational Achievements: Nayara Energy completed a major shutdown ("Turnaround 2020") without major safety incidents and achieved 4747 LTI-free days for employees. All 30 marketing locations were certified to Quality (ISO 9001), Environment (ISO 14001), and Occupational Health & Safety (ISO 45001). Nayara was also adjudged as the National Energy Leader for the last two consecutive years by the CII.
• Retail Expansion: The company achieved a milestone of 6000+ retail fuel stations and launched new, enhanced Nayara-branded fuel stations.

Chairman's Note (Tony Fountain):

• Pandemic Impact: The pandemic severely impacted the global oil industry. Nayara Energy navigated these challenges with agility, leadership, and owner support.
• Operational Success: Operations continued despite industry decline, with fuel retail business growing by 3%. The Vadinar refinery operated above 85% capacity and successfully completed a scheduled shutdown with over 10,000 contract workers on site without spreading infection.
• Strategic Focus: Nayara remains committed to building a world-class integrated petrochemical complex, aligning with the Government of India's "Atmanirbhar Bharat" vision. Thyssenkrupp, Toyo, and Technip were appointed as partners for the first phase polypropylene expansion.
• Community Support: Multi-pronged Covid relief efforts included setting up a 50-bed Covid Care center, launching a mobile health van, and providing PPE kits and equipment to frontline workers, benefiting over 50,000 people in 15 villages.
• Leadership Changes: Key leadership changes announced, with Mr. B Anand succeeded by Dr. Alois Virag as CEO.

CEO's Message (Alois Virag):

• Leveraging Strengths: FY20-21 focused on leveraging innate strengths and virtues to overcome disruptions and uncertainty while moving forward with expansion plans.
• Employee Well-being: Emphasis was placed on employee health, safety, and emotional well-being, including Covid-19 safety protocols, supportive policies, doubled insurance cover for contract staff, and employee assistance programs for stress and anxiety.
• Community Resilience: CSR efforts focused on communities in Devbhumi Dwarka and Jamnagar districts, with response and rehabilitation programs benefiting 12,000-odd families, along with telemedicine kiosks and mobile training apps launched. Installation of 2 oxygen plants at goverment run hospitals in Jamnagar and Rajkot and 1 oxygen plant in Military Hospital in Jamnagar.
• Digitization and Innovation: Early digital infrastructure investments enabled an agile transition to remote work, and 3600+ retail outlets were automated. Supply operations were bolstered by Vehicle Tracking System (VTS), and manual invoice-to-payment processes were automated.
• Operational Optimization: Nayara maintained throughput at 90%, the highest among Indian refiners, through exports and prepaid term contracts. Six new crudes were introduced into the crude basket, and yields and unit reliability were optimized through a planned shutdown. Market share grew to 6.1% despite lockdowns, with EBITDA from retail standing at $410 million.
• Financial Strength Amidst Adversity: The domestic credit rating was affirmed at AA with a stable outlook through cost control, liquidity management, prepayments and efficient refinancing. Financial closure was also achieved for Phase 1 of the petrochemicals expansion plan.
• Expansion Plans: From October 2020, all new outlets were commissioned under the Nayara Brand. Phase 1 expansion entails existing unit revamps, a propylene recovery unit, and a 450 KTPA polypropylene production unit.

Board's Report:

• Financial Performance (Standalone): Revenue from operations reached ₹875,006 million. The Company earned a profit after tax (PAT) of ₹4,665 million. There was increase in the authorized share capital of the Company to 180,006.8 million.
• Global Market: The global economy and oil markets witnessed a historic collapse in demand caused by the Covid-19 pandemic. Global oil inventories built by almost an additional 1.4 billion bbls over the 2019-end figures. For the year ahead, the International Monetary Fund (IMF) has projected the global economy to grow at the rate of 5.5 percent in 2021 and 4.2 percent in 2022.
• Domestic Market Overview: India's passenger vehicle market is expected to post a strong double-digit growth due to strong decline in last 2 years. Unprecedented drop in overall volume in the domestic market, led by decline in sale of two-wheelers has pushed the industry back by six years.
• Operational Excellence: The refinery processed 17.07 MMT of crude achieving 85% capacity utilization. The Company optimized performance through the introduction of new products.
• Marketing Performance: The retail business continued to deliver brilliant all-round performance during FY 2021 with 3% year on year volume. Nayara also added 515 new outlets in FY 2021. By March 2021 your company passed the 6000+ station count.
• Institutional Business: The business registered it's highest ever sale of high speed diesel (HSD), Light Diesel Oil (LDO), and better than plan delivery for bitumen. Increased to the 4.54% in 2021 blending percentage.
• Asset Development: Nayara Energy's strategy includes a step-by step implementation of an asset development plan. The Company aims to realize the full potential of the refinery scheme by maximizing the use of olefinic feedstock propylene, for converting it into polypropylene.
• Safety First: Company optimized performance through the introduction of new products such as Marine Fuel Oil, Heavy Naphtha and High-Density Diesel giving it market share gains in extremely volatile markets.
• Information Technology: Your company took up various initiatives by moving towards a greater degree of digitalisation of its processes.
• People: Company has undertaken various employee assistance program, 24/7 counselling and doctor consultation support, awareness sessions, RT-PCR tests for employees and their dependents, and hospitalization & insurance support, among others, for all employees.
• Sustainable Development of Communities: Your Company has constituted a Corporate Social Responsibility Committee named as CSR and Sustainability Committee ("CSR Committee"). INR 19.18 crore CSR expenditure for the financial year 2021.
• Governance: Corporate Governance is a vital part of our business framework. It is designed to ensure compliance, transparency, and integrity in all areas of our work.

Financial Statements (Standalone and Consolidated):

• Revenue and Profit: Consolidated revenue for the year was ₹875,006 million, while consolidated net profit was ₹4,582 million.
• Operational Adjustments: Nayara Energy implemented cloud-based connected plant services to enhance plant performance. With the advent of the 'new normal', Nayara moved onto a digitally elastic workspace.
• Capital and Debt: There is no change in the issued, subscribed and the paid-up share capital of the Company during FY 2021.
• Financial Control & Vigilance: Nayara Energy implements robust financial controls, risk management, and ethical standards, including a Whistle Blower Policy.

In conclusion, Nayara Energy's FY20-21 Annual Report highlights resilience, strategic investments, community support, and a commitment to strengthening India's energy security. The company has clear strategic plans for operational and financial efficiencies, as well as social responsibility, to drive future value creation.