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Essar Ports Ltd. Accounting Policies | Accounting Policy of Essar Ports Ltd.
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Accounting Policies of Essar Ports Ltd. Company

Mar 31, 2015

1.1 Basis of preparation

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the relevant provisions of the Companies Act, 2013 ("the 2013 Act"). The financial statements of the Company have been prepared on an accrual basis and under the historical cost convention. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year except for change in the accounting policy for depreciation as more fully described in Note 2.4.

1.2 Use of estimates

The preparation of the financial statements in conformity with Indian GAAP requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known/ materialise.

1.3 Fixed assets

Fixed assets are recorded at cost or at revalued amounts less accumulated depreciation, amortisation and impairment loss, if any. The cost of fixed assets comprises its purchase price net of any trade discounts and rebates, any import duties and other taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure including brokerage and start-up costs on making the asset ready for its intended use, other incidental expenses and interest on borrowings attributable to acquisition of qualifying fixed assets up to the date the asset is ready for its intended use.

Subsequent expenditure on fixed assets after its purchase/ completion is capitalised only if such expenditure results in an increase in the future benefits from such asset beyond its previously assessed standard of performance.

1.4 Depreciation and amortisation

Depreciable amount for assets is the cost of an asset, or other amount substituted for cost, less its estimated residual value.

Depreciation on fixed assets has been provided on the straight-line method as per the useful life prescribed in Schedule II to the Companies Act, 2013 except in respect of the following categories of assets, in whose case the life of the assets has been assessed as under based on technical advice, taking into account the nature of the asset, the estimated usage of the asset, the operating conditions of the asset, past history of replacement, anticipated technological changes, manufacturers warranties and maintenance support, etc.:

Nature of fixed asset Useful life

Plant and machinery 32-35 years (floating cranes)

Assets costing less than Rs. 5,000/- are fully depreciated in the year of capitalization. Depreciation on additions/ deductions to fixed assets made during the year is provided on a pro-rata basis from / up to the date of such additions /deductions, as the case may be.

1.5 Impairment of assets

The carrying values of assets (cash generating units) at each balance sheet date are reviewed for impairment if any indication of impairment exists.

If the carrying amount of the assets exceed the estimated recoverable amount, an impairment is recognised for such excess amount. The impairment loss is recognised as an expense in the Statement of Profit and Loss, unless the asset is carried at revalued amount, in which case any impairment loss of the revalued asset is treated as a revaluation decrease to the extent a revaluation reserve is available for that asset.

The recoverable amount is the greater of the net selling price and their value in use. Value in use is arrived at by discounting the future cash flows to their present value based on an appropriate discount factor.

When there is indication that an impairment loss recognised for an asset (other than a revalued asset) in earlier accounting periods no longer exists or may have decreased, such reversal of impairment loss is recognised in the Statement of Profit and Loss, to the extent the amount was previously charged to the Statement of Profit and Loss. In case of revalued assets such reversal is not recognised.

1.6 Borrowing costs

Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan.

Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from commencement of activities relating to construction / development of the qualifying asset upto the date of capitalisation of such asset is added to the cost of the assets. Capitalisation of borrowing costs is suspended and charged to the Statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted.

1.7 Investments

Investments which are readily realisable and intended to be held for not more than one year from the date on which such investments are made are classified as current investments. All other investments are classified as long-term investments.

Long-term investments are carried individually at cost less provision for diminution, other than temporary, in the value of such investments. Current investments are carried individually, at the lower of cost and fair value. Cost of investments include acquisition charges such as brokerage, fees and duties.

1.8 Foreign currency transactions

Foreign currency transactions are accounted at the exchange rate normally prevailing on the transaction date. Monetary items denominated in foreign currency are translated at the exchange rate prevailing as at the balance sheet date.Exchange differences arising on settlement or conversion of short term foreign currency monetary items are recognised in the Statement of Profit and Loss. Exchange differences relating to long term foreign currency monetary items are accounted as under:

(i) in so far as they relate to the acquisition of a depreciable capital asset, such differences are added to / deducted from the cost of such capital asset and depreciated over the balance useful life of the asset.

(ii) in other cases, such differences are accumulated in ''Foreign Currency Monetary Items Translation Difference Account'' and amortised in the Statement of Profit and Loss over the balance life of the long term foreign currency monetary item.

1.9 Taxation

Current tax is the amount of tax payable as per special provisions relating to income of shipping companies under the Income Tax Act, 1961 on the basis of deemed tonnage income of the Company and tax payable on other taxable income for the year as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961 and other applicable tax laws.

Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.

Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences of items other than unabsorbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there are unabsorbed depreciation and carry forward of losses and items relating to capital losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that there will be sufficient future taxable income available to realise the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their realisability.

Current and deferred tax relating to items directly recognised in reserves are recognised in reserves and not in the Statement of Profit and Loss.

1.10 Provisions, contingent liabilities and contingent assets

A provision is recognised when the Company has a present obligation as a result of a past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation in respect of which a reliable estimate can be made. Provisions (excluding retirement benefits) are not discounted to their present value and are determined based on the best estimate required to settle the obligation at the balance sheet date. These are reviewed at each balance sheet date and adjusted to reflect the current best estimates.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events, the existence of which will be confirmed by the occurrence or nonoccurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that is not recognised because a reliable estimate of the liability cannot be made or the likelihood of an outflow of economic resources is remote. Contingent liabilities are disclosed in the notes to financial statements.

Contingent assets are neither recognised nor disclosed in the financial statements.

1.11 Revenue recognition

Revenue from operation represents income from charter hire of fleet. Revenue on transactions of rendering services is recognised under the completed service contract method. Performance is regarded as achieved when the services are rendered and no significant uncertainty exists regarding the amount of consideration that will be derived from rendering the services.

1.12 Other income

Interest income is recognised on time proportion basis taking into account the amount outstanding and rate applicable (accrual basis). Dividend income is recognised when the right to receive it is established.

Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that the amount recoverable can be measured reliably and it is reasonable to expect ultimate collection.

1.13 Leases

Where the Company as a lessor leases assets under finance leases, such amounts are recognised as receivables at an amount equal to the net investment in the lease and the finance income is recognised based on a constant rate of return on the outstanding net investment.

Assets leased by the Company in its capacity as a lessee, where substantially all the risks and rewards of ownership vest in the Company are classified as finance leases. Such leases are capitalised at the inception of the lease at the lower of the fair value and the present value of the minimum lease payments and a liability is created for an equivalent amount. Each lease rental paid is allocated between the liability and the interest cost so as to obtain a constant periodic rate of interest on the outstanding liability for each year.

Lease arrangements where the risks and rewards incidental to ownership of an asset substantially vest with the lessor are recognised as operating leases. Lease rentals under operating leases are recognised in the Statement of Profit and Loss or Expenditure during construction, as applicable, on a straight-line basis over the lease term.

1.14 Employee benefits

a) The Company (employer) and the employees contribute a specified percentage of eligible employees'' salary- currently 12%, to the employer established provident fund "Essar Ports Limited Provident Fund" set up as an irrevocable trust by the Company. The Company is generally liable for annual contributions and any shortfall in the fund assets based on government specified minimum rates of return - currently - 8.75%, and recognises such provident fund liability, considering fund as the defined benefit plan, based on an independent actuarial valuation carried out at every financial year end using the Projected Unit Credit Method.

b) Post-employment benefit plans

Contribution to defined contribution retirement benefit schemes are recognised as expense in the Statement of Profit and Loss, when employees have rendered services entitling them to contributions.

For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the Statement of Profit and Loss, for the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested, and is otherwise amortised on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation and is adjusted both for unrecognised past service cost,and for the fair value of plan assets. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the scheme, if lower.

c) Short-term employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the services.

d) Long-term employee benefits

Compensated absences for the privilege leave which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability at the present value of the defined benefit obligation determined actuarially by using Projected Unit Credit Method at the balance sheet date as against the accounting policy of previous year wherein compensated absences for all the leaves were recognised as a liability. The compensated absences will be recognised as a liability only for the privilege leave accumulated till December 31, 2015 after which all the leave outstanding at the end of the each calendar year will be lapsed. The privilege leave accumulated as of December 31, 2015 will be encashed on the basis of December 31, 2015 salary, only when the employee separates from the Company.

e) Employee Stock Option Scheme

Stock options granted to employees under the employees'' stock option scheme (ESOS) are accounted by adopting the intrinsic value method in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on accounting for employee share based payments issued by the ICAI. Accordingly, the excess of market price of the shares over the exercise price is recognised as deferred employee compensation and is charged to the Statement of Profit and Loss on straight-line basis over the vesting period. The number of options expected to vest is based on the best available estimate and are revised, if necessary, if subsequent information indicates that the number of stock options expected to vest differs from previous estimates.

1.15 Cash and cash equivalents (for the purposes of Cash Flow statement)

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

1.16 Cash flow statement

Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non- cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

1.17 Earnings per share

Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.

1.18 Operating Cycle

Based on the nature of activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.


Mar 31, 2014

1.1 Basis of preparation

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 ("the 1956 Act") (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 ("the 2013 Act") in terms of General Circular 15/2013 dated 13 September, 2013 of the Ministry of Corporate Affairs) and the relevant provisions of the 1956 Act/ 2013 Act, as applicable. The financial statements have been prepared on accrual basis under the historical cost convention The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

2.2 Use of estimates

The preparation of the financial statements in conformity with Indian GAAP requires the Management to make judgments, estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) and the reported income and expenses during the year. The Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ due to these estimates and the differences between the actual results and the estimates are recognised in the periods in which the results are known / materialise.

2.3 Fixed assets and depreciation

Fixed assets are recorded at cost or at revalued amounts less accumulated depreciation and impairment loss, if any. Cost is inclusive of non-refundable duties, taxes and direct costs attributable for purchase of assets.

Depreciation on fleet and plant and machinery, including second hand fleet, is provided under the straight-line method based on a technical evaluation of the economic useful life of respective assets or at the rates prescribed under the Schedule XIV to the Companies Act, 1956, whichever is higher as follows:

Assets Method of depreciation Estimated

useful life

Fleet SLM over balance useful life or 20 years

7% whichever is higher

Plant and SLM over balance useful life or 20 years machinery 4.75% whichever is higher

All other assets are depreciated under the written down value method at the rates and in the manner prescribed in Schedule XIV to the Companies Act, 1956. Assets costing less than Rs. 5,000/- each are fully depreciated in the year of capitalisation.

Depreciation on the incremental value of fixed assets upon revaluation is amortised proportionately from fixed assets revaluation reserve.

Depreciation on additions / deductions to fixed assets made during the year is provided on a pro-rata basis from / upto the date of such additions/deductions, as the case may be.

Profit or loss on disposal of revalued fixed assets is recognised with reference to their revalued carrying values. The balance, if any, in the fixed assets revaluation reserve relating to revalued fixed assets that are sold / disposed is transferred to general reserve.

2.4 Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount (higher of net selling price and value in use) of the asset. If such recoverable amount of the asset is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss, except in case of revalued asset, where it is first adjusted against the related balance in fixed assets revaluation reserve. If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount but limited to the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior accounting periods.

2.5 Borrowing costs

Borrowing costs that are attributable to the acquisition, construction or development of qualifying assets (i.e. the assets that take substantial period of time to get ready for its intended use) are capitalised as part of the cost of such assets. Borrowing costs include interest, amortisation of ancillary costs incurred and exchange differences arising from foreign currency borrowings to the extent they are regarded as an adjustment to the interest cost. Costs in connection with the borrowing of funds to the extent not directly related to the acquisition of qualifying assets are charged to the Statement of Profit and Loss over the tenure of the loan. Borrowing costs, allocated to and utilised for qualifying assets, pertaining to the period from commencement of activities relating to construction /development of the qualifying asset upto the date of capitalisation of such asset are added to the cost of the assets. Capitalisation of borrowing cost is suspended and charged to the statement of Profit and Loss during extended periods when active development activity on the qualifying assets is interrupted.

2.6 Investments

Investments are classified into long term and current investments. Long term investments are carried at cost. Diminution in value of long term investments is provided for when it is considered as being other than temporary in nature. Current investments are carried at the lower of cost and fair value.

Cost of investment include acquisition charges such as brokerage, fees and duties.

2.7 Revenue recognition

Revenue from operation represents income from charter hire of fleet.

Revenue on transactionsof rendering services is recognised under the completed service contract method. Performance is regarded as achieved when the services are rendered and no significant uncertainty exists regarding the amount of consideration that will be derived from rendering the services.

2.8 Other income

Interest income is recognised on time proportion basis taking into account the amount outstanding and rate applicable. Dividend income is recognised for when the right to receive is established.

Insurance claims are recorded based on reasonable certainty of their settlement.

2.9 Operating leases

Lease expenses and lease income on operating leases are recognised on a straight line basis over the lease term in the Statement of Profit and Loss.

2.10 Employee benefits

a) The Company (employer) and the employees contribute a specified percentage of eligible employees'' salary- currently 12%, to the employer established provident fund "Essar Ports Limited Provident Fund" set up as an irrevocable trust by the Company. The Company is generally liable for annual contributions and any shortfall in the fund assets based on government specified minimum rates of return - currently

@ 8.75%, and recognises such provident fund liability, considering fund as the defined benefit plan, based on an independent actuarial valuation carried out at every financial year end.

b) Post-employment benefit plans

Contribution to defined contribution retirement benefit schemes are recognised as expense in the Statement of Profit and Loss, when employees have rendered services entitling them to contributions.

For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the Statement of Profit and Loss, for the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested, and is otherwise amortised on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognised in the Balance Sheet represents the present value of the defined benefit obligation and is adjusted both for unrecognised past service cost, and for the fair value of plan assets. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the scheme, if lower.

c) Short-term employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the services. These benefits include compensated absences such as paid annual leave, and performance incentives.

d) Long-term employee benefits

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability at the present value of the defined benefit obligation determined actuarially by using Projected Unit Credit Method at the balance sheet date.

e) Employee Stock Option Scheme

Stock options granted to employees under the employees'' stock option scheme (ESOS) are accounted by adopting the intrinsic value method in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on accounting for employee share based payments issued by the ICAI. Accordingly, the excess of market price of the shares over the exercise price is recognised as deferred employee compensation and is charged to the Statement of Profit and Loss on straight-line basis over the vesting period.

The number of options expected to vest is based on the best available estimate and are revised, if necessary, if subsequent information indicates that the number of stock options expected to vest differs from previous estimates.

2.11 Foreign currency transactions

Foreign currency transactions are accounted at the rate normally prevailing on the transaction date. Monetary items denominated in foreign currency are translated at the exchange rate prevailing as at the balance sheet date. Exchange differences arising on settlement or conversion of short term foreign currency monetary items are recognised in the Statement of Profit and Loss. Exchange differences relating to long term foreign currency monetary items are accounted as under:

(i) in so far as they relate to the acquisition of a depreciable capital asset added to / deducted from the cost of such capital assets and depreciated over the balance useful life of the asset.

(ii) in other cases, such differences are accumulated in ''Foreign Currency Monetary Items Translation Difference Account'' and amortised in the Statement of Profit and Loss over the balance life of the long term foreign currency monetary item or 31 st March 2020, whichever is earlier.

2.12 Taxation

Provision for income tax liability is made as per special provisions relating to income of shipping companies under the Income Tax Act, 1961 on the basis of deemed tonnage income of the Company whereas income tax on other income is provided as per other provisions of the Income Tax Act, 1961.

Minimum Alternate Tax (MAT) paid in accordance with the tax laws, which gives future economic benefits in the form of adjustment to future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax. Accordingly, MAT is recognised as an asset in the Balance Sheet when it is highly probable that future economic benefit associated with it will flow to the Company.

Deferred tax is recognised on timing differences, being the differences between the taxable income and the accounting income that originate in one period and are capable of reversal in one or more subsequent periods. Deferred tax is measured using the tax rates and the tax laws enacted or substantively enacted as at the reporting date. Deferred tax liabilities are recognised for all timing differences. Deferred tax assets are recognised for timing differences of items other than unabosrbed depreciation and carry forward losses only to the extent that reasonable certainty exists that sufficient future taxable income will be available against which these can be realised. However, if there are unabsorbed depreciation and carry forward of losses, deferred tax assets are recognised only if there is virtual certainty that there will be sufficient future taxable income available to realise the assets. Deferred tax assets and liabilities are offset if such items relate to taxes on income levied by the same governing tax laws and the Company has a legally enforceable right for such set off. Deferred tax assets are reviewed at each balance sheet date for their realisability.

2.13 Provisions, contingent liabilities and contingent assets

A provision is recognised when there is a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obliqation.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events, the existence of which will be confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that is not recognised because a reliable estimate of the liability cannot be made or likelihood of an outflow of resources is remote. Contingent assets are neither recognised nor disclosed in the financial statements.

2.14 Cash and cash equivalents (for the purposes of Cash Flow statement)

Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.

2.15 Cash flow statement

Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.

2.16 Earnings per share

Basic earnings per share is computed by dividing the profit / (loss) aftertax (including the post tax effect of extraordinary items, ifany) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, ifany) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.

Potential equity shares are deemed to be dilutive only if their conversion to equity shares would decrease the net profit per share from continuing ordinary operations. Potential dilutive equity shares are deemed to be converted as at the beginning of the period, unless they have been issued at a later date. The dilutive potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. average market value of the outstanding shares). Dilutive potential equity shares are determined independently for each period presented. The number of equity shares and potentially dilutive equity shares are adjusted for share splits / reverse share splits and bonus shares, as appropriate.

2.17 Operating Cycle

Based on the nature of products / activities of the Company and the normal time between acquisition of assets and their realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of classification of its assets and liabilities as current and non-current.

(i) Stock Options :

In the annual general meeting held on September 9, 2011, the shareholders have approved the issue of upto 1 % options under the "Essar Ports Employee Stock Options Scheme 2011" to be issued in one or more tranches.

Out of above, 7,40,334 and 12,92,746 options (convertible into equivalent number of equity shares of Rs.10/- each of the Company, in three equal installments i.e. at the end of 3rd / 4th / 5th years from the grant date have been granted to the eligible employees and executive directors of the Company pursuant to Essar Ports Employee Stock Option Scheme 2011 on 28 November 2011 and 22 January 2014 respectively. The exercise period for the options is 7 years from the date of vesting.

These stock options have been granted at an option value of Rs. 71.10 and Rs. 57.75 equity share of the face value of Rs. 10/- each (i.e. the closing price of the equity shares of the Company on 1 December 2011 and 21 January 2014 at the National Stock Exchange of India Limited, being the exchange having the higher quantity of trading of Company''s shares). Out of above, 20,33,080 options were outstanding as on 31 March 2014.

(ii) 5 % Foreign Currency Convertible Bonds are convertible into 2,04,75,463 equity shares (as at 31 March 2013, 2,04,75,463 equity shares) of Rs.10/- each at Rs. 91.70 per share (refer footnote (ii) to note 5).

i) Secured rupee term loan from a financial institution is repayable on 30 June 2014. The loan is secured against movable fixed assets and all the cash inflows including dividend received /to be received and receivables of the Company.

ii) FCCBs of US$ 1,85,71,428 (Series - B) due on 24 August 2017 and US$ 2,14,28,572 (Series -A) due on 24 August 2015 carry interest @ 5% per annum payable semi annually. The FCCBs are convertible into 2,04,75,463 fully paid equity shares of Rs.10 each of the Company, any time upto the date of maturity, at the option of the FCCBs holders at conversion price of Rs. 91.70 per share at a predetermined exchange rate of Rs. 46.94 per USD. The FCCBs, if not converted, till the maturity date will be redeemed at par.

iii) The classification of loans between current liabilities and non-current liabilities continues based on repayment schedule under respective agreements as no loans have been recalled due to non compliance of conditions under any of the loan agreement. This is in accordance with the guidance issued by the Institute of Chartered Accountants of India on Revised Schedule VI to the Companies Act, 1956.


Mar 31, 2013

1.1 Basis of preparation

The financial statements of the Company have been prepared in accordance with Generally Accepted Accounting Principles in India ("Indian GAAP"). The Company has prepared these financial statements to comply in all material respects with the Accounting Standards notified under the Companies (Accounting Standards) Rules, 2006 (as amended) and the relevant provisions of the Companies Act, 1956. The financial statements of the Company have been prepared on an accrual basis and under the historical cost convention.

1.2 Use of estimates

The preparation of financial statements in conformity with Indian GAAP requires the management of the Company to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and disclosures relating to contingent liabilities, at the end of the reporting period. Though the management believes that the estimates used are prudent and reasonable and are based on management''s knowledge of current events and actions, actual results could differ from these estimates resulting in material adjustments to be recognised in the periods in which the results are known / materialise.

1.3 Fixed assets, depreciation and amortisation

Fixed assets are recorded at cost or at revalued amounts less accumulated depreciation, amortisation and impairment loss, if any. Cost is inclusive of non-refundable duties, taxes and direct cost attributable for purchase of assets.

Depreciation on fleet, including second hand fleet, is provided by using the straight-line method based on a technical evaluation of the economic useful life of respective vessels or at the rates prescribed under the Schedule XIV to the Companies Act, 1956, whichever is higher as follows:

All other assets are depreciated by using the written down value method at the rates prescribed in Schedule XIV to the Companies Act, 1956. Assets costing less than Rs. 5,000/- are depreciated at 100% in the year of acquisition.

Depreciation on the incremental value of fixed assets upon revaluation is recouped proportionately from fixed assets revaluation reserve.

Depreciation on additions / deductions to fixed assets made during the year is provided on a pro-rata basis from / upto the date of such additions / deductions, as the case may be.

Profit or loss on disposal of revalued fixed assets is recognised with reference to their revalued carrying values. The balance, if any, in the fixed assets revaluation reserve relating to revalued fixed assets that are sold / disposed is transferred to general reserve.

1.4 Impairment of assets

The Company assesses at each balance sheet date whether there is any indication that an asset may be impaired. If any such indication exists, the Company estimates the recoverable amount (higher of net selling price and value in use) of the asset. If such recoverable amount of the asset is less than its carrying amount, the carrying amount is reduced to its recoverable amount. The reduction is treated as an impairment loss and is recognised in the Statement of Profit and Loss. If at the balance sheet date, there is an indication that a previously assessed impairment loss no longer exists, the recoverable amount is reassessed and the asset is reflected at the recoverable amount but limited to the carrying amount that would have been determined (net of depreciation / amortisation) had no impairment loss been recognised in prior accounting periods.

1.5 Borrowing costs

Borrowing costs that are attributable to the acquisition, construction or development of qualifying assets (i.e. the assets that take substantial period of time to get ready for its intended use) are capitalised as part of the cost of such assets.

All other borrowing cost are recognised in the Statement of Profit and Loss.

1.6 Investments

Investments are classified into long term and current investments. Long term investments are carried at cost. Diminution in value of long term investments is provided for when it is considered as being other than temporary in nature. Current investments are carried at the lower of cost and fair value.

1.7 Revenue recognition

Revenue from operation represent income from charter hire of fleet.

Revenue on transactions of rendering services is recognised under the completed service contract method. Performance is regarded as achieved when no significant uncertainty exists regarding the amount of consideration that will be derived from rendering the services.

1.8 Other income

Interest income is recognised on time proportion basis taking into account the amount outstanding and rate applicable. Dividend income is recognised for when the right to receive it is established.

Insurance claims are recorded based on reasonable certainty of their settlement.

1.9 Operating leases

Lease expenses and lease income on operating leases are recognised on a straight line basis over the lease term in the Statement of Profit and Loss.

1.10 Employee benefits

a) The Company (employer) and the employees contribute a specified percentage of eligible employees'' salary- currently 12%, to the employer established provident fund "Essar Ports Limited Provident Fund" set up as an irrevocable trust by the Company. The Company is generally liable for annual contributions and any shortfall in the fund assets based on government specified minimum rates of return - currently @ 8.6%, and recognises such provident fund liability, considering fund as the defined benefit plan, based on an independent actuarial valuation carried out at every statutory year end.

b) Post-employment benefit plans

Contribution to defined contribution retirement benefit schemes are recognised as expense in the Statement of Profit and Loss, when employees have rendered services entitling them to contributions.

For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Actuarial gains and losses are recognised in full in the Statement of Profit and Loss, for the period in which they occur. Past service cost is recognised immediately to the extent that the benefits are already vested, and is otherwise amortised on a straight-line basis over the average period until the benefits become vested.

The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation and is adjusted both for unrecognised past service cost, and for the fair value of plan assets. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the scheme, if lower.

c) Short-term employee benefits

The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered by employees is recognised during the period when the employee renders the services. These benefits include compensated absences such as paid annual leave, and performance incentives.

d) Long-term employee benefits

Compensated absences which are not expected to occur within twelve months after the end of the period in which the employee renders the related services are recognised as a liability at the present value of the defined benefit obligation determined actuarially by using Projected Unit Credit Method at the balance sheet date.

e) Employee Stock Option Scheme:

Stock options granted to employees under the employees'' stock option scheme (ESOS) are accounted by adopting the intrinsic value method in accordance with the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Note on accounting for employee share based payments issued by the ICAI. Accordingly, the excess of market price of the shares over the exercise price is recognised as deferred employee compensation and is charged to the Statement of Profit and Loss on straight-line basis over the vesting period.

The number of options expected to vest is based on the best available estimate and are revised, if necessary, if subsequent information indicates that the number of stock options expected to vest differs from previous estimates.

1.11 Foreign currency transactions

Foreign currency transactions are accounted at the rate normally prevailing on the transaction date. Exchange differences arising on settlement or conversion of short term foreign currency monetary items are recognised in the Statement of Profit and Loss. Exchange differences relating to long term foreign currency monetary items are accounted as under:

(i) in so far as they relate to the acquisition of a depreciable capital asset are added to / deducted from the cost of such capital asset and depreciated over the balance useful life of the asset;

(ii) in other cases such differences are accumulated in "Foreign Currency Monetary Item Translation Difference Account" and amortised in the Statement of Profit and Loss over the balance life of the long term foreign currency monetary item or 31 March 2020, whichever is earlier.

1.12 Taxation

Provision for current taxation is computed in accordance with the relevant tax laws and regulations. Deferred tax is recognised on timing differences between the accounting and the taxable income for the year and quantified using the tax rates and laws enacted or substantively enacted as on the reporting date. Deferred tax assets are recognised only when there is a reasonable certainty that sufficient future taxable income will be available against which they will be realised. Where there is a carry forward of losses or unabsorbed depreciation, deferred tax assets are recognised only if there is a virtual certainty supported by convincing evidence of availability of taxable income against which such deferred tax assets can be realised in future.

Minimum alternative tax (MAT) paid in accordance with tax laws, which gives rise to future economic benefit in form of adjustment of future income tax liability, is considered as an asset if there is convincing evidence that the Company will pay normal income tax against which the MAT paid will be adjusted.

1.13 Provisions, contingent liabilities and contingent assets

A provision is recognised when there is a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.

Contingent liabilities are disclosed in respect of possible obligations that arise from past events, the existence of which will be confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company or a present obligation that is not recognised because a reliable estimate of the liability cannot be made or likelihood of an outflow of resources is remote. Contingent assets are neither recognised nor disclosed in the financial statements.


Mar 31, 2011

1) Composite Scheme of arrangements

The Hon'ble High Court of Gujarat at Ahmedabad vide order dated March 1, 2011 approved the Composite Scheme of Arrangement (Scheme) between Essar Shipping Ports & Logistics Limited (ESPLL), Essar Ports & Terminals Limited (EPTL), Essar international Limited (EIL) and Essar Shipping Limited (ESL).

The Scheme contemplates the merger of EPTL and EIL both 100% subsidiaries of ESPLL and incorporated in Mauritius, (the "amalgamating companies") with ESPLL and the consequent demerger of the Shipping & Logistics Business and the Oilfields Services Business into ESL.

Pursuant to the Scheme, all the assets (comprising of investments, sundry debtors, loans and advances and cash and bank balances aggregating to 7 3,371.92 crores) and liabilities (comprising of current liabilities of 7 47.19 crores) of EPTL (which is engaged in the ports and terminals business through its subsidiaries) and EIL (which is engaged in the business of ship owners, ship charterers, ship managers and also provides all types of logistics services and other incidental businesses) stood transferred to and became vested in ESPLL with effect from September 30, 2010 being the Amalgamation Appointed Date, based on the financial statements of the amalgamating companies.

The amalgamation was accounted as per the pooling of interest method as set out in Accounting Standard (AS) 14 "accounting for amalgamation" referred to in Section 211(3C) of the Act. Accordingly all the assets, liabilities and retained earnings in the books of the amalgamating companies were recorded in the books of ESPLL at the respective book values thereof and in the same form as appearing in the books of the amalgamating companies at the Amalgamation Appointed Date. The excess of the value of the assets over the value of the liabilities and the retained earnings of the amalgamating companies after taking into consideration the cancellation of the value of investments in the amalgamating companies appearing in the books of the Company; and the cancellation of inter-company balances between ESPLL and amalgamating companies were recorded as credit to the Capital Reserve Account in the books of ESPLL.

Further, pursuant to the Scheme

(a) All the assets (comprising of fixed assets, investments, sundry debtors, loans and advances and cash and bank balances aggregating to Rs. 8,556.52 crores) and liabilities (comprising of borrowings, current liabilities aggregating to Rs. 3,459.83 crores) pertaining to the shipping & logistics and oilfields drilling business stood transferred to and vested in ESL at the book values (ignoring revaluation) appearing in the books of account of Company, based on the financial statements of the Company on the day immediately preceding the Demerger Appointed Date being October 1, 2010.

(b) Non Convertible Debentures aggregating to Rs. 700 crores and FCCB aggregating to USD 240 Million (out of FCCB of USD 280 Million raised by ESPLL) stood transferred to ESL.

(c) The difference between the value of assets and liabilities transferred pursuant to the scheme was first apportioned against paid up value of capital cancelled of Rs. 205.23 crores and the balance against the following reserves of the Company, namely Capital Redemption Reserve; Debenture Redemption Reserve; Securities Premium; Capital Reserve and General Reserve.

(d) The Authorised Share Capital of the Company stood reduced to Rs. 1,010.50 crores from Rs. 1,510.50 crores prior to the Scheme. The Issued, Subscribed and Paid Up Share Capital also stood reduced to 7 410.59 crores divided into 41,04,55,552 equity shares of Rs. 10/- each (includes Rs. 0.13 crores towards forfeited shares) from Rs. 615.81 crores prior to the Scheme.

Upon the Scheme becoming effective, EIL, EPTL and ESL ceased to be subsidiaries of ESPLL.

On May 21, 2011, 41,04,55,552 fully paid up equity shares of Rs. 10/- each were allotted to the eligible members of ESPLL in terms of the Scheme.

The reduced shares were listed on the Bombay Stock Exchange and the National Stock Exchange on May 31,2011.

As part of the Scheme, the name of the Company has been changed to Essar Ports Limited with effect from May 13,2011.

2) Fixed assets

(Note no. B (2) of schedule 13 of annual accounts)

(a) Pursuant to notification issued by the Central Government under Companies (Accounting Standards) Amendment Rules, 2009 dated 31st March, 2009; the Company has chosen an option with effect from 1st April, 2007 to adjust the gains/losses arising on conversion/ translation/settlement of long term foreign currency items into the corresponding costs of fixed assets to the extent it is related to acquisition of depreciable fixed assets and the balance gains / losses has been accumulated in "Foreign Currency Monetary Item Translation Difference Account" (FCMITDA).

During the period, exchange difference gain on long term foreign currency items relating to fixed assets amounting to Rs. 7.18 (previous year Rs. 183.14) crore has been adjusted in costs of corresponding fixed assets. The compounding effect of this treatment has resulted into decrease in the profit for the period by an amount of Rs. 6.97 (previous year Rs. 170.82) crore.

(b) The Company has revalued its fleet on 1st April, 2004 and on 31st March, 2008. The valuation was done by accredited valuers on the basis of expected market value in an arm's length transactions and free of encumbrances on the valuation date. The net difference between book value and revalued value on 1st April, 2004 amounting to * 669.52 crore and on 31st March, 2010 amounting to * 491.31 crore (including f 38.62 crore exchange difference, net of depreciation relating to previous year) had been added to the book value of the fleet and corresponding credit was given to the Fixed Assets Revaluation Reserve. Gross block as on 31st March 2011 includes Rs. 1.05 (previous year 7 435.67) crore being amount added on revaluation of fleet. Out of the depreciation for the year, a sum of Rs. 19.25 (previous year Rs. 38.28) crore relating to depreciation, to the extent it is charged on the increased value has been recouped from Fixed assets revaluation reserve and the balance of t 59.87(previous year f 119.51) crore has been debited to the Statement of Profit and Loss.

(c) Gross block of plant and machinery includes Rs. nil (previous year Rs. 38.84) crore leased out; Written down value as on 31st March 2011 is * nil (previous year Rs. nil).

 
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