The Directors have pleasure in presenting the Forty-second Annual Report together with the audited statements of account of the Company for the 18 months period ended 31st March, 2014.

                                      (Figures in millions of Rupees)

                                           18 months       18 months
                                           period ended    period ended
                                           31.03.2014      30.09.2012

PROFIT/LOSS BEFORE TAX                       (4,890.77)       377.27

Less: Provision for Taxation
 Current Tax                                      -            17.50
 Short/(Excess) provision of
 Income-Tax for
 prior years written back                         8.59        (23.88)

PROFIT/LOSS AFTER TAX                        (4,899.96)        383.65

Add: Surplus brought forward from             1,239.40         942.92
previous year

In view of losses incurred by the Company, your Directors are unable to recommend any Dividend for Financial year under review

Freight and charter hire income for the 18 months period ended 31st March, 2014 was Rs.1753.15 million compared to Rs. 4655.02 million for the 18 months period ended 30th September, 2012. Profit before tax was Rs.(4890.77) million for the 18 months period ended 31st March, 2014 as against Rs. 377.27 million during the 18 months period ended 30th September, 2012. Net profit after tax was Rs. 4899.36 million for the 18 months period ended 31st March, 2014 as against Rs.383.65 million during the 18 months period ended 30th September, 2012.

With a view to realign businesses and increase focus on individual growth strategies of each business, the Company together with other companies has proposed to rearrange its businesses by segregating its traditional Shipping Business, Ship Management (technical and commercial management) & Shipping Investment Business (presently confined to holding investment in group companies) into separate entities through a Composite Scheme of Arrangement and Amalgamation ("the Scheme") under the provisions of the Companies Act, 1956 to primarily pursue their individual growth strategies, thereby resulting in enhancement of business prospects and shareholder's value. The company has received approval of Hon'ble Bombay High Court for the said Scheme.

During the period under review, the company invested in the following wholly owned subsidiary companies:

Varun Global Private Limited and acquired 400,000 equity shares of Re.1 each. The existing subsidiary companies namely Varun Resources Pvt Ltd and Varun Global Pvt Ltd, were converted into public limited companies during the period under review.

Further, during the period under review your Company had invested in redeemable preference shares of Varun Asia Pte. Ltd., Singapore and Varun Cyprus Ltd, Cyprus. The details of investment made are mentioned in the attached financial statements.

Effect of 'Global Crisis' to Shipping industry

Due to the global recession in shipping industry there was a downturn in the shipping business of your Company. This has led to lower capacity utilization and has adversely affected the operations of the Company. A combination of these factors has affected the liquidity of the Company and thereby facing problems in servicing the debt in timely manner. Further to this, the vessels are due for drydocking as it is mandatory requirement to drydock the vessels every two and half years. And hence are non operational till past more than a year resulting to a steep fall in the total operating income. Despite the loss of revenues, the Company was incurring fixed operating costs, including settlement of unpaid crew wages and seafarers repatriation. These fixed operating expenses in the form of employee cost, bunker cost and other fixed costs resulted to severe liquidity crisis to the Company and increase in the outstaying debts. Therefore in order for the Company to survive it was imperative to find the solution to service these huge debts. Further, the survival of the Company and resulting companies as result of the proposed demerger and merger, is very crucial as the shareholders of the Company will be receiving the shares of the resulting companies in exchange of their existing shareholding in the Company. If the Company is not revived then the shareholding value of the current shareholders of the Company will be completely eroded.

Therefore, with a view to revive the shipping business of the Company and the resulting Company namely Varun Resources Limited (VRL) and to enable VRL to survive, the Promoters (being the Yudhishthir D Khatau group) and the management together with our bankers (led by the State Bank of India) have decided to restructure the debts under the "Framework for Revitalising Distressed Assets in the Economy - Guidelines on Joint Lenders' Forum (JLF) and Corrective Action Plan (CAP)" issued by the Reserve Bank of India is vide its circular dated February 26, 2014, bearing number RBI/2013-14/503DBOD.BP.BC.No.97/ 21.04.132/2013-14, (hereinafter referred to as the "JLF Mechanism").

The various Joint Lenders Meetings held since 11.04.2014 based on the guidelines and RBI circulars on "Early Recognition of Financial Distress, Prompt, steps for Resolution and Fair Recovery for Lenders" under which the Reserve Bank of India has formulated the JLF Mechanism. The Joint Lenders Forum had decided to restructure the existing loan facilities and to provide incremental funding to the Company for revival of the business. The Bankers had appointed PwC, an independent agency to do Technical Evaluation Study to examine the viability of the business. Based on their viability report, forensic report and the subsequent clearance from Independent Evaluation Committee, it will be agreed by the joint lenders to restructure the account under JLF mechanism.

(i) Social Responsibility:

As a socially responsible corporate citizen, the company continues to support a wide spectrum of community initiatives through NGOs as well as programmes for health, education and environment.

As required under Section 217(2AA) of the Companies Act, 1956, your Directors confirm to the best of their knowledge and belief that:

i) in the preparation of the annual accounts, the applicable accounting standards have been followed;

ii) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit or loss of the company for that period;

iii) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

iv) the Directors have prepared the annual accounts on a going concern basis.

As required by the Listing Agreement with Stock Exchanges on which shares of the company are listed, a Report on Corporate Governance of the Company regarding compliance with Corporate Governance is attached to this report.

During the period Dr. A.K.Bhattacharya, Mr. C.M. Maniar and Mr. Khurshed M Thanawalla resigned from the directorship of the Company.

After the last Annual General Meeting, Ms. Armin Pardiwala was appointed as additional director. In terms of the provisions of the Companies Act she holds office until the date of the ensuing Annual General Meeting. Her appointment as ordinary Director of the Company is placed before the Members for consideration. The Board recommends the resolution for adoption by the members

Mr.Praveen Singh retires by rotation and being eligible, offer himself for re- appointment. Separate resolution is being proposed for his re-appointments.

You are requested to appoint Auditors of the company and fix their remuneration. The retiring Auditors Messrs. Sorab S. Engineer & Co. being eligible, offer themselves for re-appointment.

As required by Section 217(2A) of the Companies Act, 1956, read with Companies (Particulars of Employees) Rules, 1975, as amended, the names and other particulars of the employees are set out in the Annexure to the Directors' Report. However, as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Report and the Accounts are being sent to all shareholders of the company excluding the aforesaid information. Any shareholder interested in obtaining such particulars may write to the Secretarial Department at the registered office of the Company.

Your Directors express their thanks to all the officers of the Ministry of Shipping, Directorate General of Shipping, Ministry of Petroleum and Natural Gas, Indian Navy, Indian Coast Guard, Mercantile Marine Department, Class, oil companies and charterers for the valuable help and co-operation extended by them to the Company. Your Directors also thank the banks for their continued support to the Company. Your Directors also thank the shareholders of the Company for their sustained confidence reposed in the Company and its management. Last but not the least, your Directors express their deep appreciation for the sincere and hard work put in by the floating as well as the shore based officers and staff of the Company.

On behalf of the Board of Directors

YUDHISHTHIR D. KHATAU Chairman and Managing Director Mumbai, 30th May 2014