1. Corporate Information

Aban Offshore Limited (AOL) (the Company) is a public company domiciled in India and incorporated under the provisions of the Companies Act, 1956. Its shares are listed on two stock exchanges in India. The company is engaged in the business of providing offshore drilling and production services to companies engaged in exploration, development and production of oil and gas both in domestic and international markets. The company is also engaged in the ownership and operation of wind turbines for generation of wind power in India.

2. Basis of preparation

The financial statements have been prepared in accordance with IFRS converged Indian Accounting Standards (Ind AS) as issued by the Ministry of Corporate Affairs (MCA).

All the assets and liabilities have been classified as current and non-current as per the Company’s normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of business operations, the Company has ascertained its operating cycle as 12 months for the purpose of current and non- current classification of assets and liabilities.

3.1 Recent accounting pronouncements

In March 2018, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) Amendment, Rules, 2018, notifying Indian Accounting Standards (Ind AS) 115 “Revenue from Contracts with Customers”, notifying amendments to Ind AS 12 “Income Taxes” and Ind AS 21 “The Effect of Changes in Foreign Exchange Rates”.Ind As 115 and amendments to the Ind AS 21 are applicable to the Company w.e.f. 1st April 2018. The impact of the above amendments on the financial statements has not been evaluated.

(a) Terms/ rights attached to equity shares

The Company has only one class of equity shares having a face value of Rs.2 per share. Each holder of equity shares is entitled to one vote per share. The company declares and pays dividend in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

During the year ended 31st March 2018, the amount of per share dividend recognized as distributions to equity shareholders is Nil (31st March 2017: Nil).

The company has reserved 1.84 million equity shares of Rs.2 each for offering to employees under the Employee Stock Option Scheme (ESOS) (31st March 2017:1.84 million equity shares of Rs.2 each) out of which 0.16 million equity shares of Rs.2 each have been already allotted up to the balance sheet date under the scheme and included under the paid up capital (31st March 2017: 0.16 million equity shares of Rs.2 each).

As per the records of the company, including its register of shareholders/members and other declarations received from the shareholders regarding beneficial interest, the above shareholding represents both legal and beneficial ownerships of shares.

* Includes penal interest @ 2% p.a.

Loans under (a) above are secured by second pari-passu charge on specific offshore drilling rigs owned by foreign subsidiaries & first mortgage on windmill lands owned by Indian Parent company.

Loans under (b) above are secured by first charge on specific offshore drilling rigs owned by foreign subsidiaries.

Loans under (c) were Secured by hypothecation of vehicles.

Loans under (d) were Secured by charge on properties owned by Promoter/Promoter group company.

Loans under (e) is Unsecured.

As per Ind AS, the Preference Share capital is grouped under borrowings.

Since all term loans have been recalled by the lenders, the entire term loans are presented as current liabilities as at 31.03.2018.

(i) All the secured lenders of term loans (banks) have issued recall notices during the year. Also one of the secured lenders has issued notice dated 7th May 2018 under section 13(2) of Securitization and Reconstruction of Financial Assets and Enforcement of Securities Interest Act , 2002 (SARFAESI Act) through the security trustee calling upon the company to pay the outstanding amount with interest in 60 days from the date of notice, failing which the bank would exercise the powers under section 13(4) of SARFAESI Act.

(ii) The Company has not redeemed its Non-Convertible Cumulative Redeemable Preference Shares on due dates. One of the preference shareholders of the company has filed a commercial suit before the Honorable High Court of Judicature at Bombay and two of the preference shareholders have filed petitions under section 55 of the Companies Act, 2013/under section 80 of the Companies Act, 1956 before the Honorable National Company Law Tribunal, Chennai Bench for non-redemption of Non-Convertible Cumulative Redeemable Preference Shares.These cases are pending before the said Honorable High Court and Tribunal respectively.

Cash credit from banks is secured by way of hypothecation of inventory of stores and spares and book debts. Moreover, two offshore jack-up rigs of the company have been offered as a second charge for certain cash credit facilities. The cash credit is repayable on demand and carries interest @13 p.a. % to 17.10 % p.a.

4. Fair value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The group categorizes assets and liabilities measured at fair value into one of three levels depending on the ability to observe inputs employed in their measurement. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs that are observable, either directly or indirectly, other than quoted prices included within level 1 for the asset or liability. Level 3 inputs are unobservable inputs for the asset or liability reflecting significant modifications to observable related market data or company’s assumptions about pricing by market participants.

5. Financial risk factors

The Company’s activities expose it to market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall risk management strategy seeks to minimize adverse effect from the unpredictability of financial markets on the Company’s financial performance.

The Board of Directors is responsible for setting the objectives and underlying principles of financial risk management for the Company. They review and agree on the policies for managing each of these risks and are summarized as follows:

Foreign exchange risk

The Company is exposed to foreign exchange risk principally via:

- transactional exposure that arises from the sales / receivables denominated in a currency other than the functional currency of the company

- Transactional exposure that arises from the cost of goods sold / payables denominated in a currency other than the functional currency of the Company.

- Foreign currency exposure that arises from foreign currency term loans / Working Capital loans (including interest payable) denominated in a currency other than the functional currency of the Company.

- Cash and cash equivalents held in foreign currency.

All these unhedged exposures are naturally hedged by future foreign currency earnings.

The impact on the Company financial statements from foreign currency volatility is shown in the sensitivity analysis.

Sensitivity analysis

The sensitivity analysis reflects the impact on income and equity due to financial instruments held at the balance sheet date. It does not reflect any change in sales or costs that may result from changing interest or exchange rates.

The following table shows the illustrative effect on the Income Statement and equity that would result, at the balance sheet date, from changes in currency exchange rates that are reasonably possible for major currencies where there have recently been significant movements:

The following table shows the illustrative effect on the Income Statement and equity that would result, at the balance sheet date, from changes in interest rates that are reasonably possible for term loans with floating interest where there have recently been significant movements:

A decrease in interest rates and a depreciation of foreign currencies would have the opposite effect to the impact in the table above. Credit risk

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. The major classes of financial assets of the Company are bank deposits, trade receivables, amount due from associated company and amounts due from subsidiary corporations. For bank deposits, the Company maintains its cash deposits if any primarily with lenders of the Company or financial institutions with high credit quality to minimise their exposure to the banks.

Due to the nature of the Company’s operations, revenue and receivable are typically concentrated amongst a relatively small customer base of oil and gas companies. Customers are government linked based oil and gas corporations. TheCompany has policies in place to ensure that drilling contracts are with customers of adequate financial standing and appropriate credit history, and where necessary, certain guarantees in form of bank. The maximum exposure to credit risk for each class of financial assets is the carrying amount of that class of financial assets on the balance sheet.

(i) Financial assets that are neither past due nor impaired

Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit-ratings assigned by international credit-rating agencies. Trade receivables that are neither past due nor impaired are substantially receivables from companies with a good collection track record with the Group. Amounts due from subsidiary corporations are neither past due nor impaired.

(ii) Financial assets that are past due and/or impaired

There is no other class of financial assets that is past due and/or impaired except for trade receivables. The age analysis of trade receivables that are past due but not impaired is as follows:

Allowance for impairment of trade receivables arise from customers that are either in financial difficulties and/or have history at default or significant delay in payments which management is of the opinion that payments are not forthcoming as at the end of financial year. In the event that payment is doubtful, the receivables will be recommended for write off.

(c) Liquidity risk

The drilling operations of the Company require substantial investment and are dependent on its ability to finance its rig construction and acquisitions and service its bank borrowings as well as other capital and operating requirements and commitments. The Company ensures that arrangements have been made to obtain adequate funds to meet all its operating and capital obligations in the form of continuing committed credit facilities with financial institutions as well as continuing financial support from the immediate and ultimate holding corporation to enable the Group to meet its debts and liabilities as and when they fall due for at least 12 months from the balance sheet date.

The table below analyses the maturity profile of the Company’s and the Company’s financial liabilities based on contractual undiscounted cash flows at the balance sheet date.

The above analysis table does not include loans to be settled on demand.

Capital management

( a ) The Company’s objectives when managing capital are to ensure the Company’s ability to continue as a going concern and to maintain an optimal capital structure by issuing or redeeming additional equity, borrowings and other instruments when necessary.

As the Company is mainly funded through external borrowings, the objectives of the Board of Directors when managing capital is to ensure that the Group and the Company continue to enjoy the use of funds from borrowings by ensuring that the Company continue to service its debt obligations in the form of interests and principal repayments on due dates in accordance with the borrowing agreements, and to ensure that they remain in compliance with the financial and non-financial covenants in relation to their borrowings.

The Company considers capital to comprise of its equity and borrowings, as follows:

(b ) Fair value measurements

The carrying amounts less impairment provision of trade receivables and payables are assumed to approximate their fair values. The carrying amounts of current borrowings approximate their fair values.

6. Deferred tax liabilities

The balance comprises of temporary differences attributable to:

*Since diluted earnings per share shows higher value as compared to basic earnings when taking the options/warrants into account, the options/warrants are anti-dilutive as at the year ended 31.03.2018 and are ignored in the calculation of diluted earnings per share as required under the Accounting Standard.

7. Gratuity and other defined benefit plans

The company operates a gratuity benefit plan which is funded with an insurance company in the form of a qualifying insurance policy. The company operates a leave encashment plan which is not funded

The following table summarizes the components of net benefit expense recognized in the statement of profit and loss, the funded status and the amounts recognized in the balance sheet for such plans.

8. Employee stock option scheme

The Company has instituted Employee Stock Option Scheme-2005 (ESOS) duly approved by the shareholders in the extra-ordinary general meeting of the company held on 23rd April 2005. As per the scheme, the compensation committee of the board evaluates the performance and other criteria of employees and approves the grant of option. These options vest with employees over a specified period subject to fulfillment of certain conditions. Upon vesting, employees are eligible to apply and secure allotment of company’s equity share at the prevailing market price on the date of the grant of option.

The Securities Exchange Board of India (SEBI) issued the Employee Stock Option Scheme and Employees Stock Purchase Scheme guidelines in 1999, applicable to stock option schemes on or after 19th June 1999. Under these guidelines, the excess of the market price of the underlying equity shares as of the date of the grant over the exercise price of the option is to be recognized and amortized on a straight line basis over the vesting period.

The Company has not recognized any deferred compensation expenses, as the exercise price was equal to the market value (as defined by SEBI) of the underlying equity shares on the grant date.

The details of option granted are given below:

Maximum number of options that may be granted under the scheme is 1.84 million equity shares of Rs.2 each. Options granted during the year-Nil (up to 31st March 2017: 1.84 Million equity shares of Rs.2 each)-Options lapsed during the year 0.461 million(up to 31st March 2017: 0.286 million equity shares of Rs.2 each)-Options exercised during the year- Nil (up to 31st March 2017: 0.160 million equity shares of Rs.2 each)-Options outstanding at the end of year :0.935 million equity shares of Rs.2 each (up to 31st March 2017: 1.396 million equity shares of Rs.2 each)-Options yet to be granted under the scheme: 0.749 million (31st March 2017: 0.288 million equity shares of Rs.2 each).

9. Interest in joint venture/associate

(a) The company’s interest,in joint venture entity/associate is as follows:

The company has ceased to have joint control over Frontier Offshore Exploration (India) Limited and has also provided for diminution in the value of long term investment considering the state of affairs of the joint venture company.

(b) The company’s share of the assets, liabilities, Revenue and Profit in the associate company -Aban Drilling Services Private Limited, based on the audited financial statements are as follows:

10. Segment information

The Company is engaged primarily in the business of offshore drilling services. The wind energy division of the Company does not meet the quantitative threshold as per Ind AS 108.Accordingly there is no requirement of segment reporting as per the said Accounting Standard.

11. Related Party Disclosures

Names of related parties and related party relationship Related parties where control exists

A. Subsidiary companies

Aban Energies Limited, India (wholly owned subsidiary)

Aban Holdings Pte Limited, Singapore (wholly owned foreign subsidiary)

B. Subsidiaries of Aban Holdings Pte Limited, Singapore

Aban Singapore Pte Ltd, Singapore Aban 7 Pte Ltd, Singapore Aban 8 Pte Ltd, Singapore Aban Abraham Pte Ltd, Singapore Aban Pearl Pte Ltd, Singapore Aban International Norway AS, Norway Deep Drilling Invest Pte Ltd, Singapore Deep Drilling 1 Pte Ltd, Singapore Deep Drilling 2 Pte Ltd, Singapore Deep Drilling 3 Pte Ltd, Singapore Deep Drilling 4 Pte Ltd, Singapore Deep Drilling 5 Pte Ltd, Singapore Deep Drilling 6 Pte Ltd, Singapore Deep Drilling 7 Pte Ltd, Singapore Deep Drilling 8 Pte Ltd, Singapore Deep Driller Mexico S de RL de CV, Mexico Aban Labuan Pvt Ltd, Labuan,Malaysia

C. Associate of Aban Offshore Limited

Aban Drilling Services Private Limited

D. Related parties with whom transactions have taken place during the year

a. Key Management personnel

(i) Mr. Reji Abraham Managing Director

(ii) Mr. P. Venkateswaran Dy. Managing Director

(iii) Mr. C. P. Gopalkrishnan Dy. Managing Director and Chief Financial Officer

b. Relative of Key Management Personnel — Mrs. Deepa Reji Abraham - Director

(c ) Claims against the company not acknowledged as debt:

As at 31st March 2018:

(i) In respect of civil suits against the company - Rs 95.50 million

(ii) In respect of Income Tax matters :

Income Tax demand relating to the period 2002 — 2006 amounting to INR 556.40 million pending before High Court of Madras;

Income Tax demand relating to the period 2008 — 2009 amounting to INR 97.48 million pending before Commissioner of Income Tax (Appeals);

Income Tax demand relating to the period 2006—2008 amounting to INR 396.17 million pending before Income Tax Appellate Tribunal;

Income Tax demand relating to the period 2008 — 2009 amounting to INR 418.38 million pending before the Income Tax Appellate Tribunal.

Income Tax demand relating to the period 2009 — 2010 amounting to INR 812 million pending before Income Tax Appellate Tribunal. Income tax demand relating to the period 2010-2011 amounting to INR 1907.90 Million pending before Income Tax Appellate Tribunal. Income tax demand relating to the period 2011-2012 amounting to INR 854.33 Million pending before Income Tax Appellate Tribunal. Income tax demand relating to the period 2012-2013 amounting to INR 1,490.36 Million pending before Income Tax Appellate Tribunal.

(iii) In respect of Service Tax matters:

Service Tax demand relating to the year 2007 amounting to INR 17.36 million pending before Supreme Court.

Service Tax demand relating to the year 2011 amounting to INR 78.72 million pending before the CESTAT ,Chennai.

Service Tax demand relating to the period 2011 — 2012 amounting to INR 18.94 million pending before the CESTAT ,Chennai.

Service Tax demand relating to the period 2012 — 2014 amounting to INR 36.78 million pending before the CESTAT ,Chennai.

Service Tax demand relating to the period 2014 — 2015 amounting to INR 79.80 million pending before the CESTAT ,Chennai.

Service Tax demand relating to the period 2005 — 2011 amounting to INR 37.31 million pending before the CESTAT ,Chennai.

Service Tax demand relating to the period 2012 — 2014 amounting to INR 236.49 million pending before the CESTAT ,Chennai. Service Tax demand relating to the period 2008 — 2010 amounting to INR 605.75 million pending before the CESTAT ,Mumbai. Service Tax demand relating to the period 2009 — 2012 amounting to INR 166.89 million pending before the CESTAT ,Mumbai. Service Tax demand relating to the period 2015 — 2016 amounting to INR .46 million pending before the CESTAT ,Mumbai.

Service Tax demand relating to the period 2015 — 2017 amounting to INR 46.01 million pending before the CESTAT ,Mumbai.

(iv) In respect of Customs duty matter:

Customs Duty demand relating to the period 2015 - 2016 amounting to INR 107.90 million pending before CESTAT Mumbai.

Customs Duty demand relating to the period 2016 - 2017 amounting to INR 916.00 million pending before Hon’ble High Court of Bam bay.

(v) In respect of Sales Tax matter:

Sales Tax demand for the period 2010-11 amounting to INR 984.90 million pending before Joint Commissioner of Sales Tax Appeals.

Sales Tax demand for the period 2012-13 amounting to INR 459.75 million pending before Joint Commissioner of Sales Tax Appeals.

Sales Tax dues for the period 2013-14 amounting to INR 580 million for which the company is intending preferring an appeal with Appellate Authority.

As at 31st March 2017:

(i) In respect of civil suits against the company - Rs 95.50 million

(ii) In respect of Income Tax matters :

Income Tax demand relating to the period 2002 — 2006 amounting to INR 556.40 million pending before High Court of Madras;

Income Tax demand relating to the period 2008 — 2009 amounting to INR 103.10 million pending before Commissioner of Income Tax (Appeals);

Income Tax demand relating to the period 2006—2008 amounting to INR 396.17 million pending before Income Tax Appellate Tribunal;

Income Tax demand relating to the period 2008 — 2009 amounting to INR 418.38 million pending before the Income Tax Appellate Tribunal.

Income Tax demand relating to the period 2009 — 2010 amounting to INR 812 million pending before Income Tax Appellate Tribunal. Income tax demand relating to the period 2010-2011 amounting to INR 1907.90 Million pending before Income Tax Appellate Tribunal. Income tax demand relating to the period 2011-2012 amounting to INR 854.33 Million pending before Income Tax Appellate Tribunal.

(iii) In respect of Service Tax matters:

Service Tax demand relating to the year 2007 amounting to INR 17.36 million pending before Supreme Court.

Service Tax demand relating to the year 2011 amounting to INR 78.72 million pending before the CESTAT ,Chennai.

Service Tax demand relating to the year 2010 amounting to INR 16.32 million pending before the CESTAT ,Chennai.

Service Tax demand relating to the period 2011 — 2012 amounting to INR 18.94 million pending before the CESTAT ,Chennai.

Service Tax demand relating to the period 2012 — 2014 amounting to INR 36.78 million pending before the CESTAT ,Chennai.

Service Tax demand relating to the period 2014 — 2015 amounting to INR 79.80 million pending before the CESTAT ,Chennai.

Service Tax demand relating to the period 2005 — 2011 amounting to INR 37.31 million pending before the CESTAT ,Chennai.

Service Tax demand relating to the period 2012 — 2014 amounting to INR 236.49 million pending before the CESTAT ,Chennai. Service Tax demand relating to the period 2008 — 2010 amounting to INR 605.75 million pending before the CESTAT ,Mumbai. Service Tax demand relating to the period 2009 — 2012 amounting to INR 166.89 million pending before the CESTAT ,Mumbai.

(iv) In respect of Customs duty matter:

Customs Duty demand relating to the period 2015 - 2016 amounting to INR 107.90 million pending before CESTAT Mumbai.

Customs Duty demand relating to the period 2016 - 2017 amounting to INR 916.00 million pending before Hon’ble High Court of Bambay

(v) In respect of Sales Tax matter:

Sales Tax demand for the period 2010-11 amounting to INR 984.90 million pending before Joint Commissioner of Sales Tax Appeals.

Sales Tax demand for the period 2012-13 amounting to INR 459.75 million for which company is in the process of preferring an appeal with Appellate Authority.

Sales Tax demand for the period 2013-14 amounting to INR 580 million for which the Comapny is intending preferring an appeal with appellate authority.

12. Due to micro and small enterprises

The company has no demand to suppliers registered under the Micro, Small and Medium Enterprises Development Act, 2006 (31st March 2017: Nil)

13. Details of loan given, Investments made and guarantees given covered u/s 186(4) of the Companies Act, 2013

(i) Loans given to related parties and investments made in them are disclosed under the respective heads in the financial statements.

(ii) Corporate guarantees given by the Company to:

(a) banks in respect of loans availed by the wholly owned foreign subsidiary and its step down subsidiaries as at 31st March 2018: Rs 612.84 million (31st March 2017: Rs 614.41 million)

(b) customers of wholly owned foreign subsidiary and its step down subsidiaries in respect of contractual performance of such subsidiaries as at 31st March 2018: Rs 8056.25 million (31st March 2017:Nil)

14. Previous year figures

The Company has reclassified previous year figures to conform to this year’s classification.