DIRECTORS' REPORT

Dear shareholders,

1. Your Directors have pleasure in presenting the 34th Annual Report and the audited accounts for the Financial Year of fifteen months ended on 31 March 2014.

2. DIVIDEND

Your Directors recommend to the shareholders at their Annual General Meeting, the confirmation as the final dividend of the Interim Dividend of Rs. 9/- per fully paid up equity share of Rs. 2.00 each on 12,82,50,000 equity shares of the Company, declared by the Board of Directors on 12 November 2013 and paid on 9 December 2013, to those equity shareholders whose names appeared on the Register of Members of the Company as at the close of business hours of 25 November 2013. A sum of Rs. 42 crs is proposed to be transferred to the General Reserve during the year.

3 .Change in control of the company

GSPC Distribution Networks Limited (GDNL) entered into a Share Purchase Agreement, dated 3 October 2012, (SPA) with BG Asia Pacific Holdings Pte Limited (BGAPH), the erstwhile promoter of GGCL and BG Energy Holdings Limited, the holding company of BGAPH, and acting as the guarantor for the BGAPH's obligations under the SPA, for acquisition of 83,518,750 Equity Shares constituting 65.12% of the paid up Equity Share capital of GGCL, for a purchase amount not exceeding Rs. 24,638,031,250/- (Rupees Twenty Four Billion Six Hundred Thirty Eight Million Thirty One Thousand and Two Hundred and Fifty only).

In compliance with Regulations 3(1) and 4 of the SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011, (SAST Regulations), a mandatory Open Offer was made by GDNL along with Gujarat State Petroleum Corporation Limited (GSPC), Gujarat State Petronet Limited (GSPL) and GSPC Gas Company Limited (GSPC GAS) to acquire at the price of Rs. 314.17/- per equity share, up to 33,345,000 equity shares representing 26% of equity shares from the shareholders of GGCL, as a result of an agreement for a direct substantial acquisition of Equity Shares and voting rights, accompanied with a change in control of GGCL pursuant to the SPA.

The said Open Offer had opened on 30 January 2013 and closed on 12 February 2013. GDNL acquired 11,000,330 (8.58%) equity shares of Rs. 2/- each on 12 March 2013, in the Open Offer. GDNL completed the acquisition of 83,518,750 (65.12%) equity shares of Rs. 2/- each from BGAPH as per the SPA and BGAPH had transferred these Equity Shares to GDNL for the consideration of Rs 2463.46 Crs (including escrow amount). As per the provisions of SPA, on 12 June 2013, BGAPH's four Nominee Directors on the Board of GGCL viz. Mr. Hasmukh Shah, Mr. Shaleen Sharma, Mr. Shahram Jahanbani and Mr. Sugata Sircar had resigned and in their place five Nominees of GDNL viz. Dr. Varesh Sinha, IAS, Dr. Hasmukh Adhia, IAS, Mr. DJ. Pandian, IAS, Mr. Tapan Ray, IAS, and Mr. Sugata Sircar were appointed as the Promoter-Directors. Dr. Varesh Sinha, IAS was appointed as the Chairman of the Board and of the Company. Mr. Sugata Sircar was re-appointed as the Managing Director upon the nomination by GDNL.

As per the provisions of SPA, Mr Sugata Sircar continued as Director/MD for the transition period of 6 months w.e.f. 12th June 2013 till 11th December 2013, in order to ensure smooth transfer of GGCL into the folds of GSPC Group. Subsequent to the exit of Mr Sircar from GGCL, the GSPC group appointed Mr PPG Sarma as the In Charge Chief Executive Officer of the Company to take care of the day to day executive functions w.e.f. 12 December 2013.

4 composite scheme of amalagamation

The Board at its meeting dated 24 February 2014, granted its "in-principle" approval to the consolidation by way of amalgamation of the Company, GSPC Gas Company Limited ("GSPC Gas"), GSPC Distribution Networks Limited ("GDNL"), Gujarat Gas Financial Services Limited ("GFSL") and Gujarat Gas Trading Company Limited ("GTCL") through a High Court approved Composite Scheme of Amalgamation and Arrangement.

The Board at its meeting held on 21 April 2014 approved the Scheme of Amalgamation. The report of SSPA & Co, gives a fair ratio of exchange in the event of amalgamation. In consideration of the amalgamation, GDNL to issue and allot the shares as per the following swap ratio:

a. 1 (one) equity share of Rs.10/- each, credited as fully-paid up of GDNL, for every 1 (one) equity share of Rs. 2/-each held by equity shareholders of the GGCL;

b. 1 (one) equity share of Rs.10/- each, credited as fully-paid up of GDNL, for every 1 (one) equity share of Rs. 10/-each held by equity shareholders of GFSL;

c. 81 (eighty one) equity shares of Rs.10/- each, credited as fully-paid up of GDNL, for every 76 (seventy six) equity shares of Rs.10/- each held by equity shareholders of GSPC Gas;

On the above share swap ratios, SBI Capital Markets Ltd has also provided its fairness certificate.

Your Company has initiated the process of Amalgamation as per the relevant provisions of Companies Act, 1956/ or Companies Act 2013, the SEBI requirements including the provisions under the listing agreements with the stock exchanges.

5 MANAGEMENTANALYSIS

5.1 Industry outlook and developments

Natural Gas has emerged and continues to remain a vital energy source amongst various available resources in world's energy consumption. It is one of the cleanest conventional fuels with very low level of greenhouse gas emissions in comparison to other conventional sources. Natural Gas has found increasing usage in different sectors like power, automobile etc. Currently it accounts for 23.94% of total global energy mix1. As per the projections of International Energy Agency (IEA), demand for Natural Gas would grow to approximately 43% through year 20352.

India is amongst one of the fastest growing energy economies in the world which has shown high degree of resilience during recent period of recessions experienced by various other economies. The production of natural gas has steadily increased from 31.33 BCMs during 2005-06 to 39.78 BCMs during 2012-13, registering a CAGR of 3.03%, most of this increase attributed to the discovery of new reserves3. On the other hand, the consumption of natural gas has grown much faster at a CAGR of 6% over previous five years i.e. from 118 mmscmd in year 2007-08 to158 mmscmd in year 2012-13, driven by growth in sectors like power, fertiliser and city gas distribution (CGD)4.

The downstream regulator, the Petroleum and Natural Gas Regulatory Board (PNGRB) is contributing in promoting the growth of the CGD sector in the country. During the period it has awarded licenses to operate and grow cities viz. Bhavnagar, Jamnagar, etc. for which bids were submitted under round - 3 of CGD bidding to the PNGRB. Further, continuing its endeavour, the PNGRB is again inviting competitive bids for developing gas infrastructure (round - 4) including development of new cross country pipelines and CGD networks in the country. Given that all the plans for expansion in natural gas supply in the country, it is envisaged that the share of natural gas in the primary energy mix would reach 20% by 2 0 2 55, with additional RLNG terminals being erected and commissioned, nationwide transmission pipeline network laid and transnational pipelines expected to materialize in the next decade.

Though the economy is bullish, the changes expected in policies to be more industry friendly coupled with change in global scenario, India is being viewed as a potential market for future investments and growth. Most of the measurable indicators are pointing towards India whose economy will grow faster in 2014 and thereafter in immediate next years, but the primary driver to fuel this growth remains "Energy" and with increased focus of the Government in improving the local hydrocarbon discoveries and growing environment concerns to have better cities for its citizens, there is an expected shift of this solid fuel economy to move to natural gas for fuelling its energy needs, apart from testing other renewable fuels during the course of time.

5.2 Opportunities and Challenges

The PNGRB which has been mandated for regulating the CGD sector has been actively pursuing its objective of growth in the sector by awarding new pipeline projects and new geographies during the last year. This would provide the much needed push for growth of the gas markets. The PNGRB has outlined its vision of expanding CGD network to more than 300 cities in India, as part of which, 60 cities have been identified for developing CGD network by 2021-22. Your company has rich technical and commercial resources having varied experience in gas markets and has over 10,000 man years' experience of managing gas networks and servicing customers consuming natural gas and hence is well equipped and most suitable company to lead this market from the front. The PNGRB has announced the winners from its third round of bidding during this financial year. Further, the PNGRB has announced the fourth CGD Bid Round by inviting bids to develop CGD networks in 14 new geographic areas. Your Company is actively evaluating the geographic areas for bid in order to expand its horizon of growth.

Recently, based on a recent Court verdict, the Ministry of Petroleum and Natural Gas (MoPNG) issued a directive for allocating indigenous (domestic) gas to the CGD sector to boost the demand of CNG (transport) and household (domestic segment) for sustainable growth. While, some quantum of the domestic source already available with Your Company was reduced as an arrangement to adhere to this directive issued by the MoPNG, however Your Company benefitted by securing replacement gas volumes from another domestic source, that is cheaper and assured, supporting sustainable future growth of CNG and household markets, which otherwise could have been challenging to develop with sole RLNG as source of supply.

Your Company continues to focus on strong industrial growth coupled with the presence of a well-developed gas transportation network and an encouraging business environment attracting large investments in the state of Gujarat. Recent announcements indicate plans for significant additional investments in manufacturing and urban facilities. It is expected that these investments will continue to fuel further growth of the CGD sector in Gujarat in the near to medium term. While, there is reversal in trend in domestic gas production from a level of 130 mmscmd two years ago, to a level of 94 mmscmd in 2012- 13, leading to an unprecedented gas shortage in the country for various sectors including the industrial sector, however this has put significant reliance on imported fuel to meet the ever increasing demand in these sectors. The demand for natural gas remains strong under dynamic range of gas cost scenarios as the product has several advantages over most of its competing alternate fuels. On its path of evolution and maturity the natural gas pricing is moving towards a market determined pricing mechanism and Indian gas market is getting increasingly aligned with the global trends. Though, the natural gas pricing linked to oil economy continues to create huge pressures on sustenance of natural gas as fuel to few industrial sectors that had switched from solid fuel to natural gas, whereby these industries are switching back to solid fuels to sustain competitive pressure amongst their peers, Your Company continues to place the product in affordable markets by growing in to new geographies and expanding its networks beyond in-fill areas.

In 2012 India imported about 2.0 bcf/day of natural gas through two of its regasification facilities in Gujarat, at Dahej and Hazira. With the commissioning in 2013 of its Dabhol facility in Maharashtra, India now has three import terminals: Dahej, with a capacity to import 10 million tons a year (MMTPA) of LNG (approximately 1.3 bcf/day); Hazira (3.5 MMTPA, or 0.46 bcf/day); and Dabhol (5 MMTPA, or 0.66 bcf/day). India is embarking on an ambitious plan to expand its LNG regasification capacity at Dahej and Hazira. In addition, a number of new import facilities are either under construction or in the planning phase. Thus, availability of natural gas to its markets shall be assured.

Your Company is aware and equipped to manage and grow in the dynamic gas market and the challenges that surround it due to its expertise in this business for more than two and half decades. Your Company has tied up for supply of RLNG on long term basis up to 2025 for serving demand from its industrial customers. Further, it is also aspiring to grow its horizons in new geographies with continuous focus on safety for a safe delivery system in its operations.

1 Minutes of standing committee on Petroleum & Natural Gas on

2 "Allocation & Pricing of Gas"

3 www.bp.com/content//Energy_Outlook_2035

4 Energy Statistics 2014, CSO

5 "Vision 2030"Natural Gas Infrastructure in India

5.3 Operations and Market Performance

Your Company is proud to announce that it has won the coveted Bid for the geographic area of Bhavnagar in the PNGRB CGD third bid round, pursuant to which Your Company has been awarded license by the PNGRB to lay, build, operate or expand the areas comprising of Bhavnagar district and few talukas of the newly formed district of Botad. Your Company has been granted 300 months of infrastructure exclusivity i.e. valid up to March 2039 and 60 months of marketing exclusivity valid up to March 2019 for the CGD network. GGCL having accepted the authorization has begun its operations in the newly awarded geographic area of Bhavnagar with full vigor and determination to develop new geographies.

Your Company met the challenges of depleting domestic gas availability in the country by successfully sourcing natural gas through the year by procuring R-LNG at competitive prices through equitable mix of long term and medium term contracts with various suppliers to ensure uninterrupted gas supplies to customers. Your Company will continue to make concerted efforts to secure such supplies to ensure an efficient balance of medium and short term RLNG in its gas sourcing portfolio. This will safeguard the supply security for your Company's customers and generate flexibility in managing the variations in gas requirements of our diverse market segments.

Your Company recently has experienced drop in volume sales in industrial segments on account of industries switching to cheaper alternates may be at cost of environment, however may be it would be for their survival, at this instance. Your Company continues focus on placing natural gas to affordable markets and has set-up an internal application development centre and endeavours improving fuel efficiencies in certain processes targeting to regain the loss volumes and also fuel growth by adding new industries currently using alternate fuel.

Your Company connected over 75,000 new household customers on natural gas during the year, taking the total number of domestic customers on your Company's network to around 440,000. More than 205,000 vehicles now ply in your Company's operating areas on CNG. Sales volumes grew by 7.4% in the residential segment and 0.6% in the CNG segment during calendar year 2013.

5.4 Future outlook

The natural gas sector is at the threshold of rapid development in India supported by ever increasing demand for the fuel in the country. The increased exploration efforts under NELP, commissioning of the LNG import terminals in the West Coast, projected upcoming LNG terminals and the Government's initiatives in the direction of development of a nationwide natural gas pipeline grid and new CGD networks is augmenting development as envisaged. The demand for natural gas is expected to grow as has been outlined above. It will be critical for your Company to grow in high value industrial markets and expand its network & CNG station infrastructure in order to meet the growth in demand. Your Company plans to continue extending its network to areas contiguous to its current areas of operation and beyond.

Your Company will diligently continue to assess and evaluate growth opportunities within its existing areas of operation and to new geographical areas. Your Company will endeavor to grow by value and volume by identifying and accessing high value market segments.

5.5 Internal Control System and Risk Management

Your Company has a strong internal control framework and an elaborate internal control system to ensure protection of value, ensure adherence to operating standards and to eliminate the risk of fraud.

Your Company follows a comprehensive management assurance process which deals with the broad aspects of risks, compliances and assurances. The Internal Control Framework has identified various areas where internal controls are critical including Financial Control Assurance (FCA) processes which clearly lay down the procedures to be followed for activities which have a bearing on control risk. Various policies and operating procedures have also been laid down to ensure internal control and compliance to statutory requirements as well as to the Company's policies and standards.

The approach adopted by your Company is to embed internal controls in its software solutions to the extent possible. The Company has successfully implemented the ERP modules in 2012 like IS-Utility & Customer Care System(IS-U CCS), Inventory Management(IM) and Plant Maintenance(PM) solutions of SAP to address billing, revenue collection, customer services management, metering management, inventory handling, plant management. This comprehensive solution of SAP now integrates with the existing SAP solutions for financial accounting and procurement and significantly improves the efficiency, effectiveness, reliability and scalability of the aforesaid functions. The Company also uses a Geographical Information System (GIS) to effectively manage its pipeline network.

A process of gaining assurance has been implemented through the Letter of Assurance procedure, which is wide in scope and includes internal control and risk management. The procedure cascades the responsibilities for ensuring compliance to relevant laws through the levels of management.

The Company has implemented a comprehensive compliance matrix for various groups and activities. Compliances by various groups are regularly reviewed by the Internal Audit team with reference to the Compliance Matrix. Review of the compliances made by various groups and periodic update of the Compliance Matrix helps in sustaining a strong compliance environment. The Internal Audit Team carries out reviews of internal controls as a part of an approved audit plan. Regular reviews of audit non-conformities and the findings of investigations carried out by the internal audit team, provides the feedback to the management and the Audit Committee on the status of internal controls in place, and helps in ensuring corrective action.

Risk management is considered to be an effective tool in your Company to deliver its business plan and annual objectives. A register is prepared to capture the risks perceived for the business with inputs from various groups. The same is reviewed by the group heads and by the Executive Committee. The most critical risks are reviewed by the Audit Committee on a quarterly basis.

5.6 Health, Safety, Security and Environment (HSSE)

Duty of care for Health, Safety, Security and the Environment (HSSE) is a core value of the Company, a GSPC Group Company. The management of the Company aims to protect the health, safety and security of its people, to minimize the environmental impact associated with its business and to assure the integrity and safe operation of its assets.

The Company believes that outstanding business performance requires outstanding HSSE performance. The safe delivery of projects and operation of its facilities is a critical success factor for the Company's business. We place HSSE concerns ahead of Company's commercial interest. Our HSSE goal is to deliver the company business with zero injuries to our people and to minimize the environmental impact of our activities. We seek to continuously improve our HSSE performance.

The Company believes that every individual has a duty to both themselves and those around them to ensure that safe practice is adhered to at all times. We expect all our personnel to recognize their personal responsibility for supporting outstanding HSSE performance and to accept a duty to intervene when necessary to promote and reinforce compliance with the Company Policy. All our managers are accountable for HSSE within their area of the business and are responsible for ensuring that our team adopts exemplary HSSE behaviour.

The management of the Company supports the following business principles:

•  believes that all injuries are preventable;

•  provides healthy, safe and secure work environments;

• makes a positive contribution to the protection of the environment; and

•  goes beyond compliance with local environmental regulation to meet internationally accepted best practices

•  reduces to the minimum practicable any adverse effect of its operations on the environment

The management sets HSSE goals, develops improvement plans, monitors implementation of plans and regularly reviews HSSE performance using leading and lagging indicators. The Company has strong self-assurance process as well as independent audit process to ensure that controls are in place to manage HSSE risks effectively. The learning culture in the Company ensures the improvement in the HSSE performance through learning from its own incidents including near miss incidents and significant incidents of other organisations.

Total Recordable Case Frequency (TRCF) for year January 2013 to March, 2014 was 0.604 against target of Zero (0).

An excellent HSSE performance is fundamental requirement for excellent business performance. Over past years the safety culture in GGCL has been getting better and matured too. January 2013 to March, 2014 saw ownership and proactive involvement of all concerns which had a significant contribution in HSSE performance. Periodic campaign on safety critical areas helped to enhance the best practices and improve the safety critical process. Celebration of various National Safety events viz. Road Safety Week, National Safety Week etc. during this period supported in raising the awareness and involvement of various stakeholders. Audits, Mock drills and HSSE tours conducted by Senior Management Team and Managerial cadre assisted in improving site engagement and subsequently improvement in site safety. A comprehensive Safety Culture Survey was conducted for all employees to gather their inputs for continual improvement in HSSE processes and performance. Senior Managers carried out regular HSSE performance review meetings.

We were honoured by Gujarat Safety Council (GSC) with Rotating Shield & Certificate of Honor for lowest Disabling Injury Index (DII).

Contribution to Environment

• Det Norske Veritas M/s DNV approved continuation of the Certificates as per the ISO 14001:2004 & ISO 18001:2007 standards based on the Periodic Assessment audit

• World Environment Day was celebrated on June 5 2013:

• Communication shared with employees on Do's & Don't to avoid food wastage

• Awareness Session with canteen staff at all locations on importance of food storage / preventing wastage

• Clean Plate In - Clean Plate Out" campaign observed by all employees during the week in canteen

• As a part of developing Energy Management Plan, an Energy Audit was carried out to give an opportunity to identify areas of energy optimization

• Review and awareness activities on Odorant Handling and Spill Management process.

5.7 Contribution to Society

During the year, Your Company continued to work on Corporate Social Responsibility (CSR) initiatives, focusing on environmental, education and skill development. The CSR strategy of your Company addresses the need for supporting various sustainable development projects to benefit the communities in the operational areas of the Company.

Your Company continued to support the Government of Gujarat's initiative "School Enrolment Drive" by providing school bags at Government schools of Bharuch district. This programme is aimed at motivating children to enrol in the schools.

Your Company supported the Uttarakhand Relief activities by supplying relief materials to the victims of the natural calamity.

Your Company has organized "Science is fun 2013" event at Ankleshwar and Surat with the support of Vikram A Sarabhai Community Science Center. The event spanned over 4 days aims at developing students' interest in the study of pure science and maths. This event got overwhelming response in both the cities. More than 20,000 students visited the exhibition held as a part of the event and participated in various science related competitions. The participating students represented 250 schools.

Your Company also extended support to GRISERVE under Livelihood Project, a programme focussed on providing services on cattle raising as well as supporting various livelihood activities in the tribal villages of Valia and Mangrol Talukas.

6 SUBSIDIARIES

6.1 Gujaratgas Trading Company Limited (GTCL)

Gujaratgas Trading Company Limited (GTCL) is a wholly-owned subsidiary of the Company. The purchase contract for Cairn gas had been re-assigned to GGCL w.e.f. 3rd June 2013 post which there has been no gas purchase or sale by GTCL. During the 15 months period ending March 2014, GTCL achieved sales of Rs. 34.36 crores as against Rs. 115.37 crores during the 12 months of previous year. Total income for the fifteen months ended on 31 March 2014 was Rs. 35.55 Cr as against total income of Rs. 116.36 Cr in the twelve months ended on 31 December 2012.

Profit after tax (PAT) was Rs. 1.00 Cr during the fifteen months ended on 31 March 2014 as against Rs. 1.00 Cr in the 12 months period of the previous year.

The accounts for GTCL are a part of this Annual Report.

6.2 Gujarat Gas Financial Services Limited (GFSL)

Gujarat Gas Financial Services Limited (GFSL), another subsidiary of Your Company, carried out the job of installing gas connections for residential and commercial customers of the Company. With the regulatory impetus, the company connected 71,529 residential connections in the 15 months period against 34,640 residential connections in 12 months of the previous year.

During the 15 months period of the current year, the net total income was Rs. 66.72 crores as compared to Rs. 34.90 crores in the 12 months period of previous year. the Profit after tax was Rs. 4.96 crores for the 15 month period of current year as compared to Rs. 6.40 crores for the previous year.

The accounts of GFSL are a part of this Annual Report.

7 FINANCE

The cash profits of Your Company have increased over the previous year. Investments were made in extension of pipeline network to reach new areas and in reinforcements and up gradation of existing network as required. Substantial investments were also made for connecting Residential customers and augmenting CNG infrastructure. Investments were also made to upgrade the IT solutions and hardware of Your Company to enhance reliability and enable scalability. A portion of the profits generated during the year has been paid out as interim dividend. Appropriate provisions have been made in the accounts wherever necessary for contingencies, bad debts and diminution in value of investments. During the year under review, Your Company has not invited any fixed deposits within the meaning of Section 58A of the Companies Act, 1956.

8 STATUTORY INFORMATION

As required under Section 212 of the Companies Act, 1956, the audited accounts for the 15 month period ended on 31 March 2014 and Auditors' Report thereon, along with the Directors' Reports of Gujaratgas Trading Company Limited and Gujarat Gas Financial Services Limited, the subsidiaries of GGCL, are attached to GGCL's Balance Sheet.

8.1 Energy, Technology and Foreign Exchange

Since the Company is not a scheduled industry, the details in respect of Form A pursuant to Rule 2 of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are not required to be furnished. However, the details in respect of Form B pursuant to Rule 2 are submitted as Annexure-1 and forms part of this report.

8.2 Human Relations and Particulars of Employees

Your Company employed 523 employees as on 31st March 2014. During the year, Your Company continued its focus on building capabilities and developing competencies of its employees through a robust Annual Development Review process. The average training man days for the year was 3.64 per employee.

There was no strike or lock-out during the year under review.

Particulars of employees in receipt of remuneration exceeding the limits prescribed under the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, is provided in the Annexure forming part of this Report. In terms of section 219(1) (b) (iv) of the Act, the Report and Accounts are being sent to the Members excluding the aforesaid Annexure. The Annexure is available for inspection by Members at the Registered Office of the Company during business hours on working days up to the date of the ensuing Annual General Meeting, and if any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary, whereupon a copy would be sent.

8.3 Gujarat Gas Company Limited Employee Stock Option Plan 2008 ("the ESOP 2008")

The details of the Options granted under the Gujarat Gas Company Limited Employee Stock Option Plan 2008 ("the ESOP") and other disclosures as required under Clause 12 of the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, are set out in the Annexure to this Report. The Company's Auditors, Manubhai & Shah, Chartered Accountants, have certified to the effect that the ESOP has been implemented in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the resolutions passed by the members in this regard.

The Company formed the Gujarat Gas Company Limited Employee Welfare Stock Option Trust ("the Trust") in November 2008, which administers the ESOP of the Company. IDBI Trusteeship Services Limited (ITSL), having its registered office at Asian building, Ground Floor, 17, R. Kamani Marg, Ballard Estate, Mumbai was appointed as an External Trustee of the Trust w.e.f. 28 April 2011, for providing the trusteeship services to the Trust for an agreed remuneration.

Under the ESOP, Options have been granted, which provide the benefit or right but not an obligation for exercising at a future date, equivalent number of equity shares each of the face value of Rs. 2/- each of Gujarat Gas Company Limited against the Options that have vested under the ESOP. The ESOP provides for graded vesting of Options granted, over a period of 4 years from the date of grant. The Options are to be exercised within a maximum period of 2 years from the date of Vesting. Within the Exercise Period, the Option holder has the option to either purchase the shares from the Trust at the Exercise Price or to give a Mandate of Sale of the shares ("the Mandate") to the Trust in accordance with the terms and conditions of the ESOP.

As per the terms and conditions of the ESOP, the Trust has purchased out of the funds advanced by the Company, shares from the open market at ruling prices, at different points of time in respect of the underlying options. These shares purchased by the Trustee(s) are held in their capacity as the Trustee(s) till the Options are exercised upon Vesting by the Option holders as per the terms of ESOP. The Trust had purchased from the secondary market 1,995,500 equity shares of Rs. 2/- each in the name of the Trustee(s) of the Trust.

Under the ESOP, these Equity Shares are subsequently sold following the Mandate from the Option holders or transferred to the Option holders, as the case may be, at the time of the Exercise of the Options upon Vesting. Accordingly, the Trustee(s) sold equity shares through open market and the difference between the sale price and the Exercise Price, net of charges and taxes were given to the Option holders as per the ESOP.

The Trustees are authorized to execute the purchase and sale of shares of the Company, on behalf of the Option holders, in accordance with the ESOP.

Your Company has not passed any resolution for buy-back of shares.

8.4 Directors' Responsibility Statement Your Directors hereby state:

i. that in the preparation of the annual accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;

ii. that 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 as on 31 March 2014 and of the profit of the Company for the year ended on that date;

iii. that 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;

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

8.5 Report on Corporate Governance

As stipulated by Clause 49 of the Listing Agreement, the Report on Corporate Governance is given separately in this Annual Report and forms part of this Report. The Certificate regarding compliance with the Corporate Governance Code is enclosed.

9 AUDITORS.

As Your Company is a Government Company, the Statutory Auditors are appointed by the Comptroller & Auditor General of India (C&AG). Accordingly, the C&AG had appointed Manubhai & Shah, Chartered Accountants, Ahmedabad, as the Statutory Auditors of the Company for the Financial Year 2013 - 14, who will retire at the ensuing Annual General Meeting.

C&AG will appoint the statutory auditors for the current financial year and the Board has recommended the proposal to the shareholders at their ensuing AGM of the Company for the fixing of the remuneration of Statutory Auditors of the Company for Financial Year 2014-15, based on the appointment by CAG.

The Company has received "Nil" Comment Report from the office of CAG for the period of fifteen months ended 31 March 2014, which is annexed herewith and forms part of Directors' Report.

10 COST AUDITOR AND COST AUDITORS' REPORT

Pursuant to the directions of the Central Government for audit of Cost Accounts, Your Company has appointed M/s. Atul Bhatt & Co, as the Cost Auditor for the period from 01.04.2014 to 31.03.2015.

The Central Government had approved the appointment of M/s. Atul Bhatt & Co, as Cost Auditor for Financial Year 2013 - 14 on recommendation by the Company for the said businesses. The Cost Audit Report for the Financial Year 2013 - 14 which is due to be filed in XBRL with the Ministry of Corporate Affairs by 27 September, 2014.

11. Directors

On 12 June 2013, BGAPH's four Nominee Directors on the Board of GGCL viz. Mr. Hasmukh Shah, Mr. Shaleen Sharma, Mr. Shahram Jahanbani and Mr. Sugata Sircar had resigned and in their place five Nominees of GDNL viz. Dr. Varesh Sinha, IAS, Dr. Hasmukh Adhia, IAS, Mr. DJ. Pandian, IAS, Mr. Tapan Ray, IAS, and Mr. Sugata Sircar had been appointed as the Promoter-Directors.

Mr. Sudhir Mankad resigned as the Independent Director from the Board of Directors of the Company w.e.f. 7 May 2013.

Mr. Sugata Sircar was re-appointed as the Managing Director upon the nomination by GDNL. As per the provisions of SPA, Mr Sugata Sircar continued as Director/MD for the transition period of 6 months w.e.f. 12th June 2013 till 11th December 2013, in order to ensure smooth transfer of GGCL into the folds of GSPC Group.

Mr. Tapan Ray, IAS, the Director retiring by rotation at the ensuing Annual General Meeting and being eligible is being proposed for re-appointment by the shareholders at the AGM.The Independent Directors of the Company will be appointed at the Annual General Meeting as per the provisions of the Companies Act, 2013.

For perusal of the shareholders, a brief resume of the Director(s) being appointed or re-appointed, nature of their expertise, the status of their shareholding in the Company, the names of the companies in which they hold directorship and the details of membership of the Committees of the Board are given in the Explanatory Statement to the Notice convening the Annual General Meeting of the Company. The Board of Directors recommend their appointment / re-appointment.

12. APPRECIATION

Your Directors appreciate the continued support received from the valued customers and wish to acknowledge the support and assistance received from the State Government, gas suppliers and CNG franchisees.

The Directors also wish to place on record the sincere thanks to various regulatory authorities and the Central Government for the continuous support extended to the Company.

Your Directors place on record their appreciation for the employees for their dedicated performance. Your Directors appreciate the contribution made by the contractors and vendors of the Company.

Your Directors also thank the Promoters and the Shareholders for their valuable support, trust and confidence in the Company.

For and on behalf of the Board

Dr. Varesh

Sinha, IAS

Chairman

Place: Gandhinagar

Date: August 28, 2014