Directors Report of Great Eastern Shipping Company Ltd.
Mar 31, 2023
Your Directors are pleased to present the 75th Annual Report on the business operations and the Financial Statements of your Company for the financial year ended March 31,2023.
FINANCIAL PERFORMANCE
The financial results of your Company (standalone) for the financial year ended March 31,2023 are presented below:
|
Total Revenue Total Expenses |
('' in crores) |
|
|
2022-23 |
2021-22 |
|
|
5096.18 2707.59 |
2966.39 2135.84 |
|
|
Profit before tax |
2388.59 |
830.55 |
|
Less : Tax Expenses |
36.58 |
18.88 |
|
Profit for the year |
2352.01 |
811.67 |
|
Retained Earnings |
||
|
Balance at the beginning of the year |
2556.51 |
2135.71 |
|
Add: |
||
|
- Profit for the year |
2352.01 |
811.67 |
|
Less: |
||
|
- Other Comprehensive Loss |
4.05 |
12.51 |
|
- Transfer to Tonnage Tax Reserve |
450.00 |
150.00 |
|
- Dividend paid during the year |
359.77 |
198.40 |
|
- Tax on Buyback of equity shares |
- |
29.96 |
|
Balance at the end of the year |
4094.70 |
2556.51 |
The net worth of your Company as on March 31,2023 was '' 8520.25 crores as compared to '' 6571.43 crores for the previous year.
The financial statements have been prepared in accordance with the Indian Accounting Standards (IndAS) notified under the Companies (Indian Accounting Standards) Rules, 2015.
DIVIDENDDuring the year, your Directors declared and paid three interim dividends aggregating to '' 19.80 per share. Subsequent to the end of the year, your Directors declared fourth interim dividend of '' 9.00 per share. The aggregate outflow on account of the equity dividend for the year will be '' 411.16 crores.
Your Directors have not recommended any final dividend for the year under review.
During the previous year, your Directors had announced buyback of the Companyâs equity shares from the open market through stock exchanges at a price not exceeding '' 333 per share for an aggregate amount not exceeding '' 225 crores (''Maximum Buyback Sizeâ). The buyback commenced on January 07, 2022 and closed on July 06, 2022.
The Company bought back 41,99,323 equity shares utilizing '' 133.23 crore which represents 59.21% of the Maximum Buyback Size. The highest, lowest and average market price at which the shares were bought back was '' 333.00, '' 301.65 and '' 316.21 per share respectively.
Consequent upon the buyback, the paid-up equity share capital of your Company was reduced from '' 1,46,96,64,840 comprising of 14,69,66,484 equity shares of '' 10 each to '' 142,76,71,610 comprising of 14,27,67,161 equity shares of '' 10 each.
MANAGEMENT DISCUSSION AND ANALYSIS
COMPANY PERFORMANCE
In Financial Year 2022-23 (FY23), your Company recorded a total income of '' 5096.18 crores (Previous Year '' 2966.39 crores) and earned a PBIDT of '' 3097.88 crores (Previous Year '' 1542.78 crores).
CRUDE TANKER MARKET
Crude tanker earnings were around operating expense (opex) levels for about one and a half years prior to the start of FY23 as COVID-19 took a toll on oil demand. Earnings surged in FY23 to levels not seen since FY09, mainly due to trade disruptions caused by the Russia-Ukraine war.
Following the start of the Russia-Ukraine conflict, many participants in the oil and tanker markets began to self-sanction even before EUâs official ban on Russian crude imports took full effect on December 05, 2022, reshaping both Russiaâs exports and EUâs imports during FY23. As a result, Russiaâs oil exports have seen longer voyages, particularly flowing to India and China. The EU has increased imports from farther sources like Middle East and the Atlantic region. This has benefited Suezmax and Aframax tanker segments, driving higher ton miles and consequently higher freight rates.
Overall seaborne crude trade grew by ~10% y/y during FY23, recovering to pre-Covid levels. Apart from the trade flow disruption caused by the conflict, the following factors were also influential in creating a strong tanker market during the year:
1. Recovering oil products demand, historically low product inventories and elevated product cracks enabled steady crude intake into refineries during FY23. However, refinery runs were still below pre-pandemic levels.
2. Crude production increased sharply in FY23 led by both OPEC and non-OPEC with production levels in Q4 FY23 nearing pre-pandemic levels. OPEC stuck to its planned addition of ~400 kbpd each month but announced cuts of 2.0 mbpd from November, which in real terms appears to be a cut of closer to 1.0 mbpd once underproduction is accounted for.
3. In an attempt to cap prices, the US also released a record ~200 mn bbl of crude from its Strategic Petroleum Reserves. This resulted in higher than normal crude exports from the country, generating a significant amount of tanker demand.
4. On the other side, crude tanker supply was constrained as global fleet grew by 3.0% during the year. Consequently, crude tankers witnessed record high freight rates for most of FY23.
The table below captures spot market earnings for Suezmax and Aframax tankers over the financial year (in USD/day). While average Suezmax earnings for FY23 are at their highest since FY2009, Aframax earnings are higher than any year within our data set starting from FY1991.
|
FY23 |
FY22 |
YOYCHANGE |
|
|
Suezmax |
57,481 |
9,079 |
533% |
|
Aframax |
66,332 |
13,609 |
387% |
PRODUCT TANKER MARKET
As in the case of crude, product tanker earnings also boomed during FY23, and reached the highest annual earnings within our data set starting from FY1991.
Global products trade also saw healthy growth in FY23 ( 5% y/y) and recovered to pre-pandemic levels. Seaborne products trade flow was marked by incremental growth from East-of-Suez to West-of-Suez thereby aiding ton-mile growth.
While EUâs ban on Russian product imports officially began from February 05, 2023, the shift in trade patterns began to appear as early as August/September with the EU increasing its sourcing from Asia and Middle East. Russian products on the other hand are now making their way to newer destinations in Asia, Middle East, Africa and South America.
Chinese product exports were an additional catalyst to products trade as they jumped sharply in H2 FY23, led by liberal export quotas and commissioning of two large new refineries. Middle East also saw refinery capacity increases in Saudi Arabia and Kuwait, enabling higher exports from the region.
Product tanker fleet supply grew by 1.9% in nominal terms. However, supply tightness in crude markets relative to products prompted many LR2 owners to switch their vessels from clean trade to dirty trade, which further curtailed product fleet growth. LR2 product tankers are Aframax sized, and can therefore work as Aframax crude tankers if that market is stronger.
The table below captures the market spot earnings of the LR1 and MR product tankers over the financial year (in USD/day).
|
FY23 |
FY22 |
YOYCHANGE |
|
|
MR - Avg. Earnings |
36,418 |
7,597 |
379% |
|
LR1 MEG-Asia Earnings* |
39,092 |
7,489 |
422% |
|
* Earnings of LR1s on the Middle East to Far East route |
|||
VLGC Earnings 63,072 32,125 96%
Both crude and product tanker asset prices followed the trend in earnings and increased sharply during the year, to levels last seen in 2008. Values have increased between 30%-100% in FY23 depending upon the age profile and the type of the vessel.
Tanker earnings are currently at highly elevated levels implying solid fleet utilizations and even a slight change in supply-demand dynamics from here can have an outsized impact on freight rates. China remains the key trigger for oil demand as it takes steps to emerge from its zero-COVID policy. Oil supply is likely to be lower y/y in absence of US SPR releases and with OPEC having announced a voluntary cut of 1.2 mbpd from May-Dec 2023. Non-OPEC suppliers such as US, Brazil, and Canada will drive global production increases in 2023 and with much of the oil demand growth coming from countries in the Far East, these incremental barrels will need to travel on longer voyages.
Moreover, uncertainty remains around Russia and its ability to sell its oil with full sanctions put in place. Circumstances such as end of war and more importantly whether sanctions on Russia are reversed or not can have profound impact on tanker earnings. It is also important to be cautious in view of the prevailing macro uncertainties, driven by higher interest rates and recession in the West, which will be an overhang on oil demand growth and therefore tanker earnings.
The fleet supply side remains favourable as the orderbook for crude and product tankers are at about 3% and 6% of the fleet respectively, the lowest levels in at least the last 27 years. At the same time the current fleet is ageing, which coupled with new regulations (EEXI/ CII), could lead to accelerated scrapping going forward.
The VLGC freight market, which was reasonably strong in FY22,
strengthened further during FY23. VLGC TCE earnings averaged
~ 96 % higher YoY as compared to FY22.
The main factors driving the VLGC market during FY23 were:
1. Global VLGC trade demand increased ~ 11% YoY driven by increase in LPG exports from both Middle East & North America.
2. The change in the reservation rules for the Neo - Panamax locks at the Panama Canal altered trade patterns during the year.
3. The share of US - Asia VLGC trade through the Panama Canal declined on a YoY basis and more volumes had to take the longer route to Asia via the Cape of Good Hope (CoGH).
4. Additionally, at the end of the year, a higher proportion of ships ballasting towards US had to come via CoGH in wake of these new reservation rules.
5. On the supply side, the in-water VLGC fleet grew by ~ 6% YoY during FY23.
However, effective VLGC fleet supply growth was lower due to congestion at the Panama Canal, especially during H2 FY-23.
The table below captures the market spot earnings of VLGC type of
ships over the financial year (in USD/day).
VLGC asset values increased by ~ 25% during the year driven by the strong freight market.
US LPG exports are expected to continue to grow on the back of sustained production, low domestic consumption and high inventories. Additionally, while the Middle East LPG production growth may be limited in the short term due to OPEC production cuts, the long term LPG production outlook continues to be positive on the back of an expected firm oil price environment.
LPG demand is likely to sustain mainly driven by increase in feedstock demand in the petrochemical sector. LPG continues to remain price competitive to naphtha. In addition, scheduled commissioning of new PDH plants in China would support increase in import demand into Asia. Retail demand growth in India is expected to normalize as most of the new (free) connections under the PMUY scheme have already been provided and refills may not happen at the same rate going forward.
Congestion at Panama Canal continues to remain a wild card as new booking rules prioritize other ship categories over VLGCs, which could lead to congestion during peak demand months.
On the supply side, VLGC orderbook is quite high at 20% of the fleet, and this could present headwinds to the freight market and possibly asset values.
During FY23, dry bulk freight rates corrected from the multi-year highs seen in FY22 as the Covid - 19 related port inefficiencies normalized. On a YoY basis, Capesize earnings fell 55% while earnings for Sub - Capes fell 36%. On an absolute basis also, Sub -Capes continued to outperform Capesizes during the year.
The key factors driving the dry bulk freight market were:
1. Dry bulk fleet grew by only ~ 3 % YoY. However, effective fleet supply was much higher as most of the Covid - 19 related congestions seen last year normalized.
2. On the demand side, global dry bulk trade was only marginally positive YoY.
3. Trade demand for individual commodities showed varying trends.
4. Iron ore trade was marginally negative on the back of low steel production.
5. On the plus side, coal trade was up 5% YoY on the back of increased coal import demand from India and Europe. The Russia - Ukraine war resulted in a dramatic increase in LNG prices in Europe leading to increased coal demand for power generation.
6. The conflict was also the main reason behind a 3% YoY drop in global grain trade as Ukraineâs grain exports fell 55% YoY. Brazil and Australia made up for some of the lost Ukrainian grain volumes as exports were up by 15% and 20% respectively.
The table below shows the market spot earnings of the various categories of dry bulk ships over the financial year (in USD/day):
Capesize 14,760 32,642 -55%
Kamsarmax 17,735 27,914 -36%
Supramax 18,339 28,730 -36%
In line with the drop in freight market, dry bulk asset values corrected between 7 - 12% during FY23. However, asset values continue to be at very healthy levels.
Outlook for the dry bulk freight market continues to be cautiously positive mainly on the back of limited fleet supply growth going forward. The current dry bulk orderbook stands at 6.9% of the fleet, which is close to the lowest seen in the 27 years.
On the demand side, the extent of the recovery of the Chinese economy continues to be the most critical factor. Coal import demand in India is expected to increase further as the "El Nino" weather phenomenon may lead to lower hydro electricity generation in the coming months.
Following are the near-term risks to the dry bulk freight market -
1. Weak property demand in China
2. Continuous steel production cuts in China to prioritize emission controls
3. Continued Russia-Ukraine conflict negatively impacting global grain trade
FLEET SIZE AND CHANGES DURING THE YEAR
As on March 31, 2023, your Companyâs fleet stood at 43 vessels, comprising 29 tankers (7 crude carriers, 18 product carriers, 4 LPG carriers) and 14 dry bulk carriers (2 Capesize, 7 Kamsarmax, 5 Supramax) with an average age of 13.34 years aggregating 3.44 mn dwt.
During the year, your Company sold and delivered to the buyers a Midsize Gas Carrier ''Jag Vijayaâ and an Aframax crude oil carrier ''Jag Lyall''. Subsequent to the end of the year, your Company contracted to sell an Aframax crude oil carrier Jag Lavanya ''.
A detailed Asset Profile section forms part of this Annual Report.
Conventional return ratios are not appropriate to assess the performance or condition of your Company, for the following reasons:
1. A very significant part of the return in shipping comes from the appreciation in the value of the asset itself. This does not enter the Profit and Loss account except at the time of sale.
2. In recent years, due to the change in accounting standards, the Companyâs profits have been affected very significantly by the movement in exchange rates. This has generally had the effect of increasing the Companyâs profits when the rupee appreciates against the US Dollar and of reducing its profits when the rupee depreciates against the US Dollar. In reality, the depreciation of the rupee against the US Dollar improves the profitability of the Company.
Considering the cyclical and highly volatile nature of the shipping industry, the ability to survive weak markets, and if possible, even take advantage of them, is critical to success. The Company therefore believes that the following are the key financial ratios applicable to its business:
1. Gross and Net Debt:equity Ratio - This shows the extent of leverage taken by the business, both at a gross level and net of the cash and cash equivalents held. Net debt:equity is a standard ratio used in assessing a shipping company''s creditworthiness.
There has been a significant improvement in these ratios over the course of FY23, as a result of the high cash flows, repayment of debt and increase in net worth during the year.
|
FY 23 |
FY 22 |
|
|
Gross |
0.30 |
0.52 |
|
Net |
-0.20 |
0.06 |
2. Cash Debt Service Coverage Ratio - This represents the Company''s ability to meet its debt servicing obligations. It is the sum of the PBIDT plus the cash and cash equivalents held by the Company divided by the expected debt service payments over the next 12 months.
This ratio stood at 12.82 as of end FY23, versus 5.95 at the end of the previous financial year. The increase in the ratio is due to (i) increased PBIDT and (ii) increase in cash and cash equivalents in FY23.
3. Net Debt:PBIDT - This shows the number of years earnings it would take to cover the repayment of the debt which is not covered by the cash and cash equivalents.
The ratio was -0.54 as of end FY23 versus 0.24 as at the end of the previous financial year. The decrease in the ratio is due to (i) decrease in net debt to a negative number and (ii) increased PBIDT in FY23.
4. Return on net worth - The ratio was 31.17% for FY23 vs 12.81% for FY22. Profitability was higher during the year as a result of sharply higher tanker markets, which was only partially offset by weaker bulk carrier markets. The reasons for these have been explained in the above sections. The movement in exchange rates had a higher negative impact on the P&L in FY23, as against previous year.
Your Company has carried out a detailed exercise to identify the various risks faced by your Company and has put in place mitigation, control and monitoring plans for each of the risks. Risk owners have been identified for each risk, and these risk owners are responsible for controlling the respective risks. The efficacy of these processes is monitored on a regular basis by Risk Committees for the different areas in order to make continuous improvement and is further reviewed by the Risk Management Committee.
The Risk Management Committee currently consists of Mr. Bharat K. Sheth (Chairman), Mrs. Rita Bhagwati, Dr. Shankar N. Acharya, Mr. Shivshankar Menon, Mr. T. N. Ninan, and Mr. G. Shivakumar. Mr. Tapas Icot is a permanent invitee to the meetings of the Risk Management Committee.
The Board of Directors and Audit Committee are regularly briefed on your Company''s risk management process.
The material risks and challenges faced by your Company are as follows:
ECONOMIC RISK:
Shipping is a global business whose performance is closely linked to the state of the global economy. Therefore, if global economic growth is adversely impacted, it could have an unfavourable effect on the state of the shipping market.
GEO-POLITICAL RISK:
OPEC nations control more than one third of the world oil supply. Therefore, their decision on whether to comply with (or extend) crude production targets can have a material impact on the crude, product and LPG freight markets.
Many of the countries producing and exporting crude oil are politically volatile. Any change in the political situation in these countries may alter the supply-demand scenario. This would have a consequential impact on the tanker market.
Issues such as sanctions and wars may also affect shipping markets.
CYBER RISK:
A new and worrying threat to our business is cyber risk. Your Company is taking steps to secure its assets and systems from this threat, including by having suitable protection in place and by constant training to employees on how to avoid such issues.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has instituted internal financial control systems which are adequate for the nature of its business and the size of its operations. The policies and procedures adopted by your Company ensure the orderly and efficient conduct of its business, including adherence to Companyâs policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information.
The systems have been well documented and communicated. The systems are tested and audited from time to time by your Company and internal as well as statutory auditors to ensure that the systems are reinforced on an ongoing basis. Significant audit observations and follow up actions thereon are reported to the Audit Committee.
No reportable material weakness or significant deficiencies in the design or operation of internal financial controls were observed during the year.
The internal audit is carried out by a firm of external Chartered Accountants (Ernst & Young LLP) and covers all departments. Your Company also has an independent Internal Audit Department. Apart from facilitating the internal audit by Ernst & Young LLP, the Internal Audit Department also conducts internal audit as per the scope decided from time to time.
Both Ernst & Young LLP and Head (Internal Audit) report to the Audit Committee in their capacity of internal auditors of your Company.
In the beginning of the year, the scope of the internal audit exercise including the key business processes and selected risk areas to be audited are finalised in consultation with the Audit Committee. All significant audit observations and follow up actions thereon are reported to the Audit Committee.
The Audit Committee currently comprises of Mr. T.N. Ninan (Chairman), Mrs. Bhavna Doshi, Mr. Raju Shukla and Mrs. Rita Bhagwati, all of whom are Independent Directors and Mr. Berjis Desai, who is a Non-Executive Director on the Board of your Company.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared by your Company in accordance with the Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015. The audited Consolidated Financial Statements together with Auditorsâ Report thereon form part of the Annual Report.
TRADE BARRIERS:
Trade disputes between countries can turn into trade wars with erection of tariff and non-tariff barriers. The manner in which such barriers are implemented could have significant impact on trade volumes and routes.
CHINESE ECONOMY:
China has been a major driver of global growth especially for commodities. If the economy falters or changes its policy towards import of various commodities, the consequential damage to shipping will be significant.
CHALLENGES FACED BY THE SHIPPING BUSINESS
EARNINGS VOLATILITY:
The shipping industry is a truly global business with a host of issues potentially impacting the supply demand balance of the industry. This results in tremendous volatility in freight earnings and asset values.
Your Company attempts to manage that risk in various ways.
If your Company believes that the freight market could weaken, it may enter into time charter contracts ranging from 6 months to 3 years or use freight derivatives to hedge the risk. Another method of managing risk is by adjusting the mix of assets in the fleet through sale or purchase of ships.
Your Company also ensures that assets are bought at cheap prices as capital cost is a major cost component. Your Company hopes to weather the depressed markets better than most players in the business by having among the lowest fleet break-evens.
Your Company operates ships in different asset classes and different markets. This ensures that your Companyâs fortunes are not fully dependent upon a single market.
LIQUIDITY RISK:
The sale and purchase market and time charter markets are not always liquid. Therefore, there could be times when your Company is not able to position the portfolio in the ideal manner.
FINANCE RISK:
Your Companyâs business is predominantly USD denominated as freight rates are determined in USD and so are ship values. Your Company has its liabilities also denominated in USD. Any significant movement in currency or interest rates could meaningfully impact the financials of your Company.
SHIPBOARD PERSONNEL:
Indian officers continue to be in great demand all over the world. Given the unfavourable taxes on a seafarer sailing on an Indian flagged vessel, it is becoming increasingly difficult to source officers capable of meeting the modern-day challenges of worldwide trading.
The group recorded a consolidated net profit of '' 2575.01 crores for the year under review as compared to net profit of '' 629.68 crores for the previous year. The net worth of the group as on March 31, 2023 was '' 10275.36 crores as compared to '' 8051.30 crores for the previous year.
The statement containing the salient features of the financial statements of your Companyâs subsidiaries for the year ended March 31, 2023 is attached along with the financial statements of your Company.
The report on performance of the subsidiaries is as follows:
GREATSHIP (INDIA) LIMITED, MUMBAI
Greatship (India) Limited (GIL), wholly owned subsidiary of your Company and one of Indiaâs largest offshore oilfield services providers, experienced an improved year of performance in the backdrop of market positivity. In the financial year 2022-23, GIL has recorded a total income of '' 804.19 crores (previous year '' 606.25 crores) on a standalone basis and '' 938.23 crores (previous year '' 725.45 crores) on a consolidated basis. In the current financial year, the company has earned a profit before interest, depreciation (including impairment) & tax of '' 316.04 crores (previous year '' 165.56 crores) and '' 346.97 crores (previous year '' 216.80 crores) on a standalone and consolidated basis, respectively. Your Companyâs net profit for the current financial year is '' 56.32 crores (previous year net loss '' 149.05 crores) and net profit '' 33.62 crores (previous year net loss '' 143.69 crores) on a standalone and consolidated basis, respectively.
GIL bought a 2007-built AHTSV ''TC Lam Sonâ of 80T bollard pull capacity in March 2023 renaming her as ''Greatship Amairaâ. With this addition, the vessel fleet of GIL along with its subsidiaries stands at nineteen vessels which comprises four Platform Supply Vessels (PSVs), four R-Class Supply Vessels, nine Anchor Handling Tug cum Supply Vessels (AHTSVs) and two Multi-purpose Platform Supply and Support Vessels (MPSSVs).
GIL has the following four wholly owned subsidiaries, whose performance during the year is summarized hereunder:
1. Greatship Global Energy Services Pte. Ltd., Singapore (GGES)
GGES has incurred a net profit of USD 0.11 Mn for the current financial year as against the net loss of USD 0.02 Mn in the previous year. The net profit in the current year has been on account of the interest received on bank deposits and net loss in the previous year has been on account of reduction in the interest rates resulting into reduced interest on bank deposits.
2. Greatship Global Offshore Services Pte. Ltd., Singapore (GGOS)
GGOS owns and operates two Multi-purpose Platform Supply and Support Vessels and one R-Class Supply Vessel. GGOS has earned a net profit of USD 1.80 Mn for the current financial year as against a net profit of USD 2.93 Mn in the previous year. The reason for decline in net profit in the current year is due to provision made for debtors.
3. Greatship (UK) Limited, United Kingdom (GUK)
GUKâs net loss for the current financial year amounted to USD 0.02 Mn as against the net loss of USD 0.32 Mn in the previous year. Higher net loss in the previous year has been on account of foreign exchange difference which arose on account of the reimbursement of expenses to parent company.
4. Greatship Oilfield Services Limited, India (GOSL)
During the year under review, GOSL has been exploring possible business opportunities and has incurred certain expenses resulting into net losses of less than '' 0.01 crore for the current financial year (Previous Year: '' 0.01 crore).
THE GREATSHIP (SINGAPORE) PTE. LTD., SINGAPORE
The Greatship (Singapore) Pte. Ltd. is a wholly owned subsidiary of your Company. The Greatship (Singapore) Pte. Ltd. does shipping agency business for the ships owned by your Company. During the year ended March 31,2023, there were 69 ship calls at Singapore. The companyâs loss for the current financial year amounted to S$ 43,948 as against the loss of S$ 94,640 in the previous year.
THE GREAT EASTERN CHARTERING LLC (FZC), U.A.E.
The Great Eastern Chartering LLC (FZC) is a wholly owned subsidiary of your Company. During the year ended March 31, 2023, the company made a profit of USD 21.48 Mn (previous year loss of USD 3.12 Mn). The company has invested in shares of some listed shipping companies and these shares were valued at USD 26.89 Mn as of March 31,2023.
THE GREAT EASTERN CHARTERING (SINGAPORE) PTE. LTD., SINGAPORE
The Great Eastern Chartering (Singapore) Pte. Ltd. is a wholly owned subsidiary of The Great Eastern Chartering LLC (FZC), UAE. During the financial year ended March 31,2023, the company made a profit of USD 3.10 Mn (previous year loss of USD 6.47 Mn). The company held positions in dry bulk freight futures and fuel oil futures as of March 31,2023.
GREAT EASTERN CSR FOUNDATION, INDIA
Great Eastern CSR Foundation (Foundation) is a wholly owned subsidiary of your Company which handles the CSR activities of your Company and its subsidiaries. The Foundation received a total contribution of '' 10.18 crores from your Company during the year ended March 31, 2023. The Foundation spent '' 10.03 crores on CSR activities during the year.
Details of CSR activities carried out by Great Eastern CSR Foundation are set out in the reports on CSR activities which form part of this Annual Report.
GREAT EASTERN SERVICES LIMITED, INDIA
Great Eastern Services Limited is a wholly owned subsidiary of your Company. The company has not yet started its commercial operations. The company made a loss of '' 41,300 for the year ended March 31, 2023 as compared to a loss of '' 45,800 for the year ended March 31,2022.
During the year, no fresh debt was raised. The gross debt:equity ratio as on March 31,2023 was 0.30:1 (including effect of currency swaps on rupee debt was 0.35:1) and the debt:equity ratio net of cash and cash equivalents as on March 31, 2023 was -0.20:1 (including effect of currency swaps on rupee debt was -0.14:1). The Company redeemed Non-convertible Debentures aggregating to '' 200 crores during the year and also settled the swaps relating to those debentures.
HEALTH, SAFETY, ENVIRONMENT AND QUALITY (HSEQ)
The last few years have been very challenging for the shipping industry, as it grappled with the pandemic and its after effects, followed shortly by geopolitical instability. Your Companyâs committed teams on board and ashore ensured the implementation of risk-based plan helping in minimizing its impact on business operations to a large extent. Regardless to say the team is still on the job with continued sincerity to deal with ever evolving conditions.
Your Company believes in ensuring clean seas, reducing generation of waste and avoiding pollution at sea. This year also, your Company had zero spills to sea. Continuing its quest to decarbonize the fleet, your Company has placed orders for redesigned efficient propellers, subscribed to a voyage optimization software which will help in selecting an optimized route for ships, and continued with other earlier initiatives like fitment of Mewis Duct, LED lighting and application of high-performance hull coatings. Additionally, the Company is in process of generating voluntary market carbon credits for the applicable energy savings devices from Gold Standards and also enrolled selected ships in Environmental Ship Index (ESI) program.
Your Company cares for its employees and has taken enhanced measures towards their health and safety. For the benefit of all shore employees, arrangements like continued work from home option, remote offices located in Mumbai suburbs and TPA Services for providing larger pool of hospitals pan India closer to their homes are in place. For the benefit of seafarers, a remote expert counselling service, enhanced pre-employment mental examination from the experts and a dedicated crew relationship officer for managing their welfare and to enhance their relationship with the organization are in place.
Training and Assessment (T&A) department remains committed to your Companyâs vision and mission of manning the fleet with competent and well-trained seafarers. To meet the ever-evolving demands of the maritime industry, the department is engaged in providing high-quality training to the Companyâs seafarers.
It gives us delight to share that your Companyâs Training Centre has got its certification revalidated as a Maritime Training Provider (MTP) by Det Norske Veritas (DNV) following a successful audit with
zero non-conformities and no observations. This achievement reflects your Companyâs unwavering commitment to providing top-notch training that aligns with the latest industry and regulatory standards. DNVâs report specifically acknowledges your Companyâs positive contribution in training, highlighting your quick adaptation to emerging topics such as EEXI/CII/SEEMP Part III and Bridge Team Resource Management. This recognition underscores your Companyâs dedication to staying ahead of the curve and equipping professionals with the skills and knowledge needed to thrive in the maritime sector, this will hold your Company in good stead in achieving its goals of operational excellence and sustainability.
The Company has taken proactive measures to address identified areas for improvement in the safety and efficiency of its fleet. These efforts have included the development and delivery of targeted training programs such as Engine Room Best Practices, Blackout Prevention Workshop, Purifier Operation, Maintenance & Troubleshooting, Bridge Equipment Maintenance, Safe Anchoring etc. to address incidents and breakdowns experienced by the vessels. Through these programs, seafarers are provided with the knowledge and skills necessary to effectively maintain critical equipment and prevent potential safety hazards.
The T&A department has been diligently conducting shore-based and computer-based training in line with your Companyâs training matrix, which is continuously updated to meet the latest maritime regulatory requirements. Although the pandemic had a profound impact on the training landscape, your Company has adapted and resumed in-person training while retaining the web-based channels that were introduced during the pandemic. This approach ensures that your Company can derive maximum benefits from both modes of training and remain prepared for any situation as we move forward. The department has also implemented a rigorous system of competency assessments for seafarers at every rank, making it mandatory for both recruitment and promotions. This process ensures that capable candidates are selected for manning your Companyâs fleet.
The department has designed & developed a structured on-the-job skill-upgradation program based on industry best practices that provides practical skills and knowledge necessary for career progression of seafarers. The trainings and assessments are aligned with industry best practices such as INTERTANKO Competence Management Guidance.
Your Companyâs continued focus on technology initiative which includes new platform implementation, Robotic Process Automation (RPA), process automation, application consolidation, Business Continuity Process (BCP) and cybersecurity governance have enabled your Company to conduct smooth business operations. It has also kept the Company and its assets safe from cyberthreats and helped in successfully completing major change initiatives with the implementation of ''Rise with SAP S/4 HANAâ ERP implementation. These changes have helped the Company
implement process improvements bring transparency and enable audit compliance. The organizationâs technology enablement and collaboration platform have enabled the Company to seamlessly implement a hybrid work policy and ensured zero disruption.
In FY 2022-23, IT department has focused on the following major initiatives:
APPLICATION CONSOLIDATION INITIATIVE
To ensure efficient and effective performance of the business support system, the Company has partnered with SAP and have gone live with the latest ''Rise with SAP S/4 HANA'' on September 9, 2022, which is a complete Enterprise Resource Planning (ERP) system which brings in process improvements and standardization, improved compliance management capabilities, built-in data intelligence capabilities to support improved decision making. Continuing on this improvement journey, additional functional developments and integration with other internal business systems are planned as Phase 2 which will be completed by March 2024.
BUSINESS CONTINUITY PLAN
Your Company is committed to ensuring that its systems are resilient and ensure high availability in case of any disaster scenarios. They are designed with a strong business continuity plan. It enables the IT function to respond quickly to any kind of disruption and be prepared with a strong recovery and response time to make systems available with minimum restoration time and data loss. In 2022-23, the Company ensured the continuity of critical business operations through various technology initiatives, so that business can run smoothly during or after the crisis.
Technology transformation initiatives like modernized infrastructure, cloud-first strategy, and setup of a complete Disaster Recovery Site (DR) have helped your Company to run the business from Work from Home (WFH) without compromising on employee productivity.
Work from Home (WFH): Company has ensured that there are zero cybersecurity incidents, 100% application availability, and provided 24x7 remote support (earlier 9x5 support) to ships for smooth business operations.
SHIP IT MANAGEMENT
Your Company is piloting new technology solutions for vessel performance optimization, loT solutions for improved monitoring and management. Additionally, vessels have been upgraded to support higher bandwidth for real-time data transfer, data utilization and to have improved user experience in terms of uninterrupted connectivity. These will enable remote inspections and monitoring leading to improved operational control and cost optimization. The improved connectivity will also help seafarers stay more connected with their families when they are sailing.
BUSINESS INTELLIGENCE
Your Company is committed to improving decision-making by enhancing data visibility and accessibility. To this end, the organization has initiated efforts to define enterprise-level data and
analytics requirements for the business. Additionally, the Company is putting in place the necessary BI (Business Intelligence) and analytics systems, along with scalable architectures, to support the organizationâs growing data needs. Through these endeavors, the Company aims to improve data management and analysis, leading to positive business outcomes and competitive advantage.
CYBER RESILIENCE
Cybersecurity has been and will continue to be a top priority in the international maritime sector. We have strengthened the cybersecurity posture for ships and shore to protect the integrity of the organizationâs information and IT assets.
Governance through "Sea Hawk" an AI& ML-based security application has helped the team to protect the organization from any advanced level cyber threat. Additional cyber security transformation Initiatives has been taken up to benchmark and improve our cyber resilience. Industry-leading technology solutions have been implemented for end-point protection and data leakage prevention. Additionally, the Company has strengthened the underlying infrastructure components and improved their overall security posture.
FUTURE ROADMAP
Your Company is committed for continuing technology modernization initiatives and has a well-defined IT Strategy and Digital Transformation roadmap which is being implemented. As part of this roadmap, the Company is undertaking process and technology transformation initiatives across all business functions. The Company is planning to take up initiatives to adopt industry best practices in shipping across all functions. Among the Company''s key focus areas for the coming year will be the stabilization of the SAP ERP system, process automation leading to operational efficiency improvements in operating functions, development of strategic and analytical dashboards to support decision making, adoption of IoT and RPA to automate repetitive tasks.
After two years of Work From Home, the Company resumed office during April 2022, by adopting a hybrid work model. This model enabled the employees to have adequate flexibility and work-life balance. The organization also tied up with co-working spaces in three locations in Mumbai lowering the to-and-fro commute time for employees.
During the year, the Company resumed in-person training sessions while continuing online learning arrangements with various platforms like Harappa and LinkedIn Learning. Programs on influence, fundamentals of leadership, POSH, ethics and governance were the focal themes.
The Company has witnessed a steady improvement in employee engagement scores during the last three years. The scores have moved up from 68 to 79 during this period.
Employee retention stood healthy at 95%.
Total number of shore staff and ship board personnel was 253 and 1,897 respectively at the end of the year.
GREAT EASTERN INSTITUTE OF MARITIME STUDIES (GEIMS)
Whilst GEIMS has overcome all challenges posed by COVID and the numerous disruptions in the training schedules and delayed course completions of the batches due to partial or total lockdowns, it recently re-opened the college finally for physical lectures in 2022, as per the Government and Director General of Shipping Office directives. All these challenges were successfully overcome by taking additional classes when possible and the Institute is now back to full strength with all batches in the campus. Despite all the disruptions to normal life, the selection, recruitment and training programs have continued unhindered; all faculty and staff have toiled tirelessly to keep to the schedule and maintain quality in all the defined processes successfully.
During FY 2022-23, a total of 293 cadets passed out from the Nautical, Marine Engineering, Electrical Technology and GP Rating courses. The Institute also admitted 435 new cadets during the year in these 4 courses.
The Institute was audited and certified for Quality Management System ISO 9001:2015 by Indian Register of Shipping. An impressive result of 96.1% during the Comprehensive Inspection Program (CIP) Audit of Director General of Shipping was obtained, thus enabling the Insititute to maintain the "OUTSTANDING" rating it has held since inception. This was a very detailed audit as the institute had to change the Classification Society to Det Norske Veritas and hence was equivalent to an Initial Audit.
The Institute was also awarded the ''Best Training Institute Awardâ by National Maritime Day Celebrations Committee in April 2022 as part of the National Maritime Day Celebrations for the 2nd consecutive year. The award is recognition enough to show that the Institute is indeed one of the best managed and operated Maritime Institutes in India.
At the recently concluded Board of Directorâs meeting in GEIMS campus, the Institute as also the personnel were greatly appreciated by the Directors. Many new innovations and upgrading work has been consistently carried out for ensuring the Institute remains in line with the latest techniques of training and educating the trainees passing out from the Institute.
CORPORATE SOCIAL RESPONSIBILITY
Your Company has always been conscious of its role as a good corporate citizen and strives to fulfil this role by running its business with utmost care for the environment and all the stakeholders. Your Company looks at Corporate Social Responsibility (CSR) activities as significant tool to contribute to the society.
The Board of Directors of your Company has constituted a committee of Directors, known as the Corporate Social Responsibility Committee, currently comprising of Mrs. Rita Bhagwati (Chairman), Dr. Shankar N. Acharya and Mr. Bharat K. Sheth to steer its CSR activities.
Copy of the Corporate Social Responsibility Policy of your Company as recommended by the CSR Committee and approved by the Board is enclosed as ''Annexure Aâ. The CSR Policy is also available on the website of your Company: www.greatship.com.
The CSR Policy is implemented by your Company through Great Eastern CSR Foundation, a wholly owned subsidiary of your Company, specifically set up for the purpose.
During FY 2022-23, '' 10.18 crores were contributed by your Company to Great Eastern CSR Foundation for undertaking CSR activities as per the provisions of Section 135 of the Companies Act, 2013.
The Annual Report on CSR activities is enclosed herewith as ''Annexure Bâ.
Following appointments / re-appointments were approved by the members at their Annual General Meeting held on July 29, 2022:
⢠Re-appointment of Mr. Tapas Icot as a Director of the Company, liable to retire by rotation.
⢠Appointment of Mr. Shivshankar Menon as an Independent Director of the Company for a term of 3 years w.e.f. May 06, 2022.
⢠Appointment of Mr. T.N. Ninan as an Independent Director of the Company for a term of 3 years w.e.f. May 06, 2022.
⢠Appointment of Mr. Uday Shankar as an Independent Director of the Company for a term of 3 years w.e.f. May 06, 2022.
⢠Re-appointment of Mr. Bharat K. Sheth as ''Deputy Chairman & Managing Directorâ for a term of 3 years w.e.f. April 01,2023.
⢠Re-appointment of Mr. G. Shivakumar as ''Executive Directorâ for a term of 3 years w.e.f. November 14, 2022.
Mr. Cyrus Guzder and Mr. Vineet Nayyar ceased to be Directors on the Board of the Company upon completion of their second term with effect from September 25, 2022.
Your Directors place on record their appreciation for the valuable guidance and support extended by Mr. Cyrus Guzder and Mr. Vineet Nayyar during their tenure as Independent Directors of the Company.
The Board of Directors, at its meeting held on May 12, 2023, appointed Mrs. Bhavna Doshi as Additional Director and Independent Director of the Company for a term of 3 years w.e.f. May 12, 2023. She brings with her years of rich experience and knowledge of working with various companies, which will be of immense benefit to your Company.
Mrs. Bhavna Doshi, being Additional Director, ceases to be the Director of the Company on the date of the ensuing Annual General Meeting and is required to be appointed by the members. Notice under Section 160 of the Companies Act, 2013 has been received in respect of her appointment as an Independent Director of the Company.
Mr. Berjis Desai shall retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.
Appointment of Mrs. Bhavna Doshi as an ''Independent Directorâ and re-appointment of Mr. Berjis Desai as a ''Director retiring by rotationâ require your approval at the ensuing Annual General Meeting.
Necessary resolutions for their appointment/ re-appointment have been included in the Notice convening the ensuing Annual General Meeting.
As per the provisions of the Companies Act, 2013, Independent Directors shall not be liable to retire by rotation. The Independent Directors of your Company have given the certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149(6) of the Companies Act, 2013 and under Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. In the opinion of the Board, all the Independent Directors are persons of integrity and possess relevant expertise and experience to effectively discharge their duties as Independent Directors of the Company.
The policies on Directorâs appointment and remuneration including criteria for determining qualifications, positive attributes, independence of Director and also remuneration for key managerial personnel and other employees, are enclosed herewith as ''Annexure Câ and ''Annexure Dâ respectively.
The details of remuneration as required to be disclosed pursuant to the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are enclosed as ''Annexure Eâ.
During the year, Mr. Bharat K. Sheth, who is also the Non-executive Chairman of Greatship (India) Ltd. (GIL), a wholly owned subsidiary of the Company, was in receipt of remuneration of '' 9,00,000/- for FY 2021-22 from GIL. The Board of Directors of GIL have approved payment of remuneration of '' 54,00,000/- for FY 2022-23 to Mr. Bharat K. Sheth, subject to GILâs shareholdersâ approval.
During the year, 5 meetings of the Board were held. The details of Board meetings as well as Committee meetings are provided in the Corporate Governance Report.
With a view to bring in objectivity and independence in the process of performance evaluation of the Board, its Committees and individual Directors, your Company engaged the services of Talentonic HR Solutions Private Limited (''Talentonicâ) to assist in conducting performance evaluation for FY 2022-23.
Talentonic conducted the assessment in line with the regulatory requirements and leading practices in the market and submitted its Board Evaluation Reports. They made a comprehensive presentation of their findings to the Board. The annual performance evaluation
of the Board, its committees and all the Directors individually were done based on the same.
Pursuant to the provisions of the Companies Act, 2013, a separate meeting of Independent Directors reviewed performance of your Company, Board as a whole and Non-Independent Directors (including Chairman) of your Company. The Board of Directors reviewed the performance of Independent Directors and Committees of the Board. Nomination and Remuneration Committee also reviewed performance of your Company and every Director.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 134(3) of the Companies Act, 2013, the Board of Directors hereby state that:
(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Maintaining high standards of Corporate Governance has been fundamental to the business of your Company since its inception. A separate report on Corporate Governance is provided together with a certificate from the practicing Company Secretary regarding compliance of conditions of Corporate Governance as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Your Company has formally adopted the ''National Guidelines on Responsible Business Conductâ (''NGRBCâ) issued by Ministry of Corporate Affairs. The applicable aspects of the principles of NGRBC have been suitably incorporated in the internal policy framework and operating processes followed by your Company.
The Business Responsibility and Sustainability Report as per the format specified by Securities & Exchange Board of India forms part of this Annual Report.
A separate section on ESG (Environment, Social & Governance) also forms part of this Annual Report.
Copy of Annual Return as required under Section 92(3) of the Companies Act, 2013 has been placed at the website of your Company: www.greatship.com
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
With a view to create safe workplace, your Company has formulated and implemented Sexual Harassment (Prevention, Prohibition and Redressal) Policy in accordance with the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. For the purpose of handling and addressing complaints regarding sexual harassment, your Company has constituted Internal Complaint Committee(s) with an external lady representative (who has the requisite experience in this area) as a member of the Committee. To build awareness in this area, your Company also conducts awareness programmes within the organisation.
During the year, one complaint with allegations of sexual harassment was received by the Company. The complaint was investigated by the Internal Committee. Based on the Internal Committeeâs recommendations appropriate action was taken and the case was concluded.
VIGIL MECHANISM
Your Company has established a vigil mechanism (Whistle Blower Policy) for Directors and employees to report genuine concerns. The Whistle Blower Policy provides for adequate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases.
A copy of the Whistle Blower Policy is available on the website of your Company: www.greatship.com
RELATED PARTY TRANSACTIONS
Your Company has formulated a policy on dealing with Related Party Transactions, a copy of which is available on the website of your Company: www.greatship.com
The particulars of contracts or arrangements with related parties in Form AOC 2 is annexed herewith as ''Annexure Fâ.
All the related party transactions have been entered into by your Company in the ordinary course of business and on armâs length basis.
DIVIDEND DISTRIBUTION POLICY
The Dividend Distribution Policy of your Company is available on the website of your Company: www.greatship.com
ENERGY CONSERVATION AND TECHNOLOGY
ABSORPTION
CONSERVATION OF ENERGY
In order to align with IMOâs Green House Gas (GHG) emission reduction targets and to prepare for a low carbon future, your Company has been undertaking various initiatives about enhancing energy efficiency in its business operations. The same have also been described in detail in the ESG Report, which forms part of this Annual Report.
ENERGY SAVING TECHNOLOGIES
In its efforts to reduce emissions, your Company has implemented following energy efficiency projects on various vessels during this financial year. Few of these will help in complying with new IMO MARPOL Annex VI regulations - EEXI & CII requirements on emission reduction:
⢠Mewis duct - 05 vessels. Itâs a device which improves the flow of water on to propeller and thus its efficiency. It also helps in reduction of underwater noise.
⢠LED lighting - 05 vessels. LED lights are energy efficient as compared to traditional lights such as fluorescent, halogen and incandescent lights.
⢠High performance paints - For a typical ship loss of energy through hull resistance is around 30% and this increases with growth of hull roughness due to biofouling. To minimize growth of biofouling, your Company has applied superior anti-fouling coatings on 02 vessels during their respective dry dockings in this financial year.
⢠Redesign efficient Propellers - Placed order for 04 LR Tankers. These new propellers will be fitted in their upcoming drydocking in FY24 & FY25.
⢠Voyage optimization software - 13 ships. It will help in selecting an optimized route for ships thereby reducing emissions.
COMPLIANCE WITH IMO DCS AND EU MRV REGULATIONS
IMO DCS Data for the calendar year 2022 has been submitted to Recognized Organization by the due date for their review. A similar exercise for corresponding requirement of European Union, but applicable to vessels which have made commercial voyages to or from EU for the calendar year 2022, has been completed.
QUANTIFICATION AND REPORTING OF GHG EMISSION
Since FY 2015-16, your Company has captured and quantified GHG emissions from its business operations in a transparent and standardized manner for the information of stakeholders of your Company on a voluntary basis. The GHG emission quantification and reporting has been done taking into account:
⢠ISO 14064-1 (2006) Greenhouse gases - Part 1: Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals, and
⢠The Greenhouse Gas Protocol - A Corporate Accounting and Reporting Standard (Revised edition) published by World Business Council for Sustainable Development and World Resources Institute.
COMPLIANCE WITH ENERGY EFFICIENCY EXISTING SHIP INDEX (EEXI) AND CARBON INTENSITY INDICATOR (CII)
Your Company has performed EEXI calculations for all vessels with the support of Classification Societies and plan to fully comply through a combination of Engine Power Limitation (EPL) and other energy savings devices like MEWIS duct etc. Your Company intends to complete the whole process well before the due date.
Your Company is tracking and monitoring Carbon Intensity Indicator (CII) ratings for all its vessels. This will help the organization in timely identifying the vessels which require improvement and appropriate actions can be planned accordingly.
AUDITORS
Pursuant to the provisions of Section 139 of Companies Act, 2013, Deloitte Haskins & Sells LLP were re-appointed as the Statutory Auditors of your Company at the Annual General Meeting held on July 29, 2022, to hold office till the conclusion of the 79th Annual General Meeting to be held in calendar year 2027.
The report given by the Auditors on the financial statements of your Company is part of this Report. There has been no qualification, adverse remark of disclaimer given by the Auditors in their Report.
SECRETARIAL AUDITORS
Pursuant to the provisions of Section 204 of the Companies Act, 2013, your Company appointed M/s. Mehta & Mehta, Company Secretaries to undertake the Secretarial Audit of your Company for the financial year ended March 31, 2023. The Secretarial Audit Report of your Company is annexed herewith as ''Annexure Gâ.
The Secretarial Audit Report of Greatship (India) Limited, the material unlisted Indian subsidiary of your Company, is annexed herewith as ''Annexure Hâ.
FOREIGN EXCHANGE EARNINGS AND OUTGO
The details of Foreign Exchange Earnings and Outgo are as follows:
|
('' in crores) |
||
|
a) |
Foreign Exchange earned on account of freight, charter hire earnings, sales proceeds of ships, etc. |
3764.76 |
|
b) |
Foreign Exchange used including operating expenses, capital repayment, down payments for acquisition of ships (net of loan), interest payment, etc. |
3278.56 |
OTHER DISCLOSURES
Mr. Jayesh M. Trivedi, who currently holds the position of ''President (Secl. & Legal) and Company Secretaryâ of the Company, has decided to relinquish his position as the ''Company Secretaryâ with effect from July 01,2023. He will, however, continue to work with the Company as ''Presidentâ.
The Board of Directors, at its meeting held on May 12, 2023, appointed Mr. Anand Punde, who is currently working with the Company as ''Deputy General Manager (Secl. & Legal)â, as the âCompany Secretary'' of the Company with effect from July 1,2023.
Particulars of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.
There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and the Companyâs operations in future.
Maintenance of cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 is not required by your Company.
Neither any application was made, nor any proceeding was pending under the Insolvency and Bankruptcy Code, 2016 in respect of your Company during or at the end of the financial year 2022-23.
The disclosures on valuation of assets as required under Rule 8(5) (xii) of the Companies (Accounts) Rules, 2014 are not applicable.
APPRECIATION
Your Directors express their sincere thanks to all customers, charterers, vendors, investors, shareholders, shipping agents, bankers, insurance companies, protection and indemnity clubs, consultants and advisors for their continued support throughout the year. Your Directors also sincerely acknowledge the significant contributions made by all the employees through their dedicated services to your Company. Your Directors look forward to their continued support.
For and on behalf of the Board of Directors
K.M. Sheth
Chairman (DIN: 00022079)
Mumbai, May 12, 2023
Mar 31, 2022
Your Directors are pleased to present the 74th Annual Report on the business operations and the Financial Statements of your Company for the financial year ended March 31,2022.
FINANCIAL PERFORMANCE
The financial results of your Company (standalone) for the financial year ended March 31, 2022 are presented below:
|
('' in crores) |
||
|
2021-22 |
2020-21 |
|
|
Total Revenue |
2966.39 |
2892.85 |
|
Total Expenses |
2135.84 |
1826.98 |
|
Profit before tax |
830.55 |
1065.87 |
|
Less : Tax Expenses |
18.88 |
35.74 |
|
Profit for the year |
811.67 |
1030.13 |
|
Retained Earnings |
||
|
Balance at the beginning of the year |
2135.71 |
1344.39 |
|
Add: |
||
|
- Profit for the year |
811.67 |
1030.13 |
|
Less: |
||
|
- Other Comprehensive Loss |
12.51 |
19.13 |
|
- Transfer to Tonnage Tax Reserve |
150.00 |
180.00 |
|
- 2nd Interim Dividend on Eguity Shares (FY 2019-20) |
- |
39.68 |
|
- Final Dividend on Eguity Shares (FY 2020-21) |
132.27 |
- |
|
- 1st Interim Dividend on Eguity Shares (FY 2021-22) |
66.13 |
- |
|
- Tax on Buyback of equity shares |
29.96 |
- |
|
Balance at the end of the year |
2556.51 |
2135.71 |
The net worth of your Company as on March 31,2022 was '' 6571.43 crores as compared to '' 6097.99 crores for the previous year.
The financial statements have been prepared in accordance with the Indian Accounting Standards (IndAS) notified under the Companies (Indian Accounting Standards) Rules, 2015.
During the year, your Directors declared and paid first interim dividend of '' 4.50 per share. Subseguent to the end of the year, your Directors declared second interim dividend of '' 5.40 per share. The aggregate outflow on account of the eguity dividend for the year will be '' 143.23 crores.
Your Directors have not recommended any final dividend for the year under review.
During the year under review, your Company announced buyback of its eguity shares from the open market through stock exchanges at a price not exceeding '' 333 per share for an aggregate amount not exceeding '' 225 crores.
The buyback commenced on January 07, 2022 and is scheduled to close on July 6, 2022. As on date of this Report, your Company has bought back 41,99,323 eguity shares of '' 10 each for an aggregate amount of '' 133.23 crores.
Conseguent upon the buyback, the paid-up eguity share capital of your Company was reduced from '' 1,46,96,64,840 comprising of 14,69,66,484 equity shares of '' 10 each to '' 142,76,71,610 comprising of 14,27,67,161 eguity shares of '' 10 each.
In Financial Year 2021-22 (FY 22), your Company recorded a total income of '' 2966.39 crores (Previous Year '' 2892.85 crores) and earned a PBIDT of '' 1542.78 crores (Previous Year '' 1731.83 crores).
MARKET ANALYSIS CRUDE TANKER MARKET
Crude tanker freight rates remained around opex levels for most of the year in FY22 but experienced a sudden spurt starting end-Feb 2022 due to the Russia-Ukraine conflict. Overall, FY22 earnings were significantly lower than FY21 earnings.
The main reasons for subdued earnings were:
1. Products demand and therefore refinery runs rebounded sharply during FY22 from the lows of FY21. However, both demand and refinery runs were still much below pre-pandemic levels.
2. OPEC continued to unwind their production cuts but actual production remained significantly below pre-pandemic level.
3. Crude trade remained flat during FY22 as backwardation in crude prices resulted in inventory drawdown, which kept the need for imports lower. Trade remained about 10% below pre-Covid levels.
4. On the other side, fleet grew by 1.3% during the year, and vessels in floating storage were released, which added another 0.5% to the fleet supply overhang.
Rates witnessed a sudden spurt in March 2022 due to the Russia-Ukraine conflict, which prompted western countries to impose sanctions against Russia. Although energy was excluded from the sanctions, the usual trade patterns were disrupted by self-sanctioning by many companies and owners'' unwillingness to call Russian ports. As usually happens, the inefficiency caused by the disruption led to more demand for ships, pushing freight rates up. This was more pronounced in the Aframax sizes.
As in the case of crude tankers, product tanker freight rates also remained at record low levels for most of FY22 but recovered significantly towards end Feb 2022 due to the Russia-Ukraine conflict. Overall, earnings were significantly lower in FY22 as compared to FY21.
While the reasons were similar to those mentioned for crude tanker market, a couple of additional factors were observed for product tankers during the year. They are as follows:
1. Jet fuel demand continued to struggle as air-traffic stayed significantly below pre Covid levels. Even at the end of FY22, jet demand remained 20% below pre-pandemic levels.
2. Product trade increased by 6% YoY during FY22. Unlike the crude trade which remained about 10% below pre-Covid levels, product trade was down by only about 3.5%.
3. The relative tightness in product tanker markets compared to crude tanker markets prompted many LR2 owners to switch their vessels from dirty trade into clean trade.
Demand for oil products is expected to rise as economies across the world continue to remove Covid related restrictions. With crude oil and oil products inventory significantly below 5-year average levels, incremental oil demand is expected to be increasingly met by seaborne trade. Further, OPEC will continue to unwind their production cuts, which would increase crude supply in the market. With oil prices above USD 100/bbl, non-OPEC countries, particularly the US, are also expected to increase their crude production. However, macro worries, driven by high commodity prices and rising interest rates/inflation, will be an overhang over world GDP growth and therefore oil demand growth.
Apart from demand side factors, the Russia-Ukraine conflict is likely to be a significant driver of the tanker market in the short term. Sanctions are likely to take a toll on Russian exports, thereby reducing seaborne volumes. On the other hand, sanctions may boost ton-miles as Russian exports increasingly shift towards Asian countries and Europe replaces Russian oil with distant sources like North America, West Africa and the Middle East.
The orderbooks for crude and product tankers are at about 7% and 5% of the fleet respectively, the lowest levels in the last 25 years. Therefore, fleet supply growth is likely to remain under control, especially considering that most of the yard slots are booked through till end of 2024.
In a stark divergence from freight earnings, asset values increased during the year for crude as well for product tankers. This increase can be attributed to rising new building prices owing to surging steel prices while multi-year high scrap prices supported values for older tankers. Values have increased anywhere between 5%-20% depending upon the age profile and the type of the vessel.
During FY22, VLGC earnings averaged ~ 30% lower YoY as compared to FY21. Despite this drop, VLGC earnings remained reasonably healthy throughout the year.
The main factors driving the VLGC market during FY22 were:
1. Global VLGC trade increased ~ 4.5% YoY mainly driven by increase in US LPG exports. Middle East LPG exports also started recovering during second half of the year.
2. On the supply side, the in-water VLGC fleet grew by ~ 6% YoY during FY22.
3. Effective VLGC fleet supply growth was marginally lower due to higher congestion and increase in number of scheduled dry dockings.
4. Bunker prices increased 65% YoY having a negative impact on realized earnings.
US LPG production is expected to grow further due to favorable NGL frac margins going forward. US LPG inventories have already started recovering from all-time lows. Additionally, Middle East LPG production is also expected to increase as OPEC increases output on the back of strong oil price.
LPG trade growth is likely to sustain mainly driven by increase in feedstock demand in petrochemical sector. LPG continues to remain price competitive to naphtha. In addition, scheduled commissioning of new PDH plants in China would support increase in import demand into Asia. Retail demand growth in India is expected to normalize as most of the new (free) connections under the PMUY scheme have already been provided and refills may not happen at the same rate going forward.
Congestion at Panama Canal continues to remain a wild card as new booking rules prioritize other ship categories over VLGCs which could lead to congestion during peak demand months. VLGC asset values gained marginally during the year.
However, VLGC orderbook is quite high at 21% of the fleet, and this could present headwinds to freight market and possibly asset values.
Dry Bulk freight rates hit multi year highs in FY22 (highest since FY08/09) underpinned by a) strong demand recovery on the back of improved economy after the COVID-19 induced market collapse and b) modest fleet supply led by strong congestion. Sub-Capes performed better than Capes with earnings up 134% to 170% YoY vs Cape earnings that were up 104% YoY.
The key factors behind the strong freight market were:
1. Recovery in global industrial activity improved demand for dry bulk commodities especially minor bulks and coal.
2. Minor bulks trade remained strong throughout the year on the back of strong demand for goods in the west and exceptionally high container market - which led to switching of some minor bulk cargoes from containerships to dry bulk vessels.
3. Coal demand was exceptionally strong as we approached winter. Low coal inventories (in China and India) amidst rising power demand and urgency to replenish stocks before winter led to a sudden spurt in demand.
4. A major factor that supported the freight market was increased congestion at ports. So, rising dry commodities demand, periodic resurgence of Covid variants (which slowed port operations) and weather disruptions (typhoon in China) increased congestion to decadal highs.
Currently, the outlook for 2022 seems to Indicate a reasonably firm rate environment. Much like 2021, this could be due to low fleet growth and possible strong congestion (supported by record high container rates). The risk to rates are 1) Potential aggressive moves by China to cap commodity imports to prioritize domestic output instead (e.g. coal), 2) Continuous steel production cuts in China to prioritize emission controls, 3) Potential drought in South America that could reduce grain exports from the region and 4) The Russia-Ukraine conflict that can have a negative impact on grain exports and other commodities.
The current dry bulk orderbook stands at 6.6% of the fleet, which Is around its lowest since Jan 1996.
FLEET SIZE AND CHANGE DURING THE YEAR
As on March 31, 2022, your Company''s fleet stood at 45 vessels, comprising 31 tankers (8 crude carriers, 18 product carriers, 5 LPG carriers) and 14 dry bulk carriers (2 Capesize, 7 Kamsarmax, 5 Supramax) with an average age of 12.55 years aggregating 3.57 mn dwt.
During the financial year, your Company took delivery of a Midsize Gas Carrier ''Jag Vikram'' and a Supramax Bulk Carrier ''Jag Rajiv''.
During the financial year, your Company sold and delivered to the buyers a Midsize Gas Carrier ''Jag Vayu'' and an Aframax Crude Oil Carrier ''Jag Lata''.
A detailed Asset Profile section forms part of this Annual Report.
Conventional return ratios are not appropriate to assess the performance or condition of your Company, for the following reasons:
1. A very significant part of the return in shipping comes from the appreciation in the value of the asset itself. This does not enter the Profit and Loss account except at the time of sale.
2. In recent years, due to the change in accounting standards, the Company''s profits have been affected very significantly by the movement in exchange rates. This has generally had the effect of increasing the Company''s profits when the rupee appreciates against the US Dollar, and of reducing its profits when the rupee depreciates against the US Dollar. In reality, the depreciation of the rupee against the US Dollar improves the profitability of the Company.
Considering the cyclical and highly volatile nature of the shipping industry, the ability to survive weak markets, and if possible, even take advantage of them, Is critical to success. The Company therefore believes that following are the key financial ratios applicable to its business:
1. Gross and Net PebfiFquity Ratio - This shows the extent of leverage taken by the business, both at a gross level and net of the cash and cash equivalents held. Net debt:equity Is a standard ratio used in assessing a shipping company''s creditworthiness.
There has been a drop in these ratios over the course of FY 22, as a result of the repayment of debt during the year.
|
FY 22 |
FY 21 |
|
|
Gross |
0.52 |
0.61 |
|
Net |
0.06 |
0.10 |
2. Cash Debt Service Coverage Ratio - This represents the Company''s ability to meet its debt servicing obligations. It Is the sum of the PBIDT plus the cash and cash equivalents held by the Company divided by the expected debt service payments over the next 12 months.
This ratio stood at 5.95 as of end FY 22, versus 6.33 at the end of the previous financial year. The decrease In the ratio Is due to (I) decreased PBIDT and (II) decrease In cash and cash equivalents In FY22.
3. Net Debt:PBIDT - This shows the number of years earnings It would take to cover the repayment of the debt which Is not covered by the cash and equivalents. The ratio was 0.24 as of end FY 22 versus 0.34 as at the end of the previous financial year. The change was mainly due to the drop In net debt.
4. Return on net worth - The ratio was of 12.81% for FY 22 versus 18.45% for FY 21. Profitability was lower during the year as a result of sharply lower tanker markets, which was not fully compensated by stronger bulk carrier markets. These have been explained In the above sections. In addition, the movement In exchange rates had a negative Impact on the P & L In FY 22, as against a positive Impact In the previous year.
Your Company has carried out a detailed exercise to identify the various risks faced by your Company and has put in place mitigation, control and monitoring plans for each of the risks. Risk owners have been identified for each risk, and these risk owners are responsible for controlling the respective risks. The efficacy of these processes is monitored on a regular basis by Risk Committees for the different areas in order to make continuous improvement and is further reviewed by the Risk Management Committee currently consisting of Mr. Bharat K. Sheth, Chairman, Mr. Berjis Desai, Ms. Rita Bhagwati, Dr. Shankar Acharya, Mr. Tapas Icot and Mr. G. Shivakumar.
The Board of Directors and Audit Committee are regularly briefed on your Company''s risk management process.
The material risks and challenges faced by your Company are as follows:
economic risk:
Shipping is a global business whose performance is closely linked to the state of the global economy. Therefore, if global economic growth is adversely impacted, it could have an unfavourable effect on the state of the shipping market.
geo-political risk:
OPEC nations control more than one third of the world oil supply. Therefore, their decision on whether to comply with (or extend) crude production targets can have a material impact on the crude, product and LPG freight markets.
Many of the countries producing and exporting crude oil are politically volatile. Any change in the political situation in these countries may alter the supply-demand scenario. This would have a consequential impact on the tanker market.
Issues such as sanctions and wars may also affect shipping markets.
trade barriers:
Trade disputes between countries can turn into trade wars with erection of tariff and non-tariff barriers. The manner in which such barriers are implemented could have significant impact on trade volumes and routes.
Chinese economy:
China has been a major driver of global growth especially for commodities. If the economy falters or changes its policy towards import of various goods, the consequential damage to shipping will be significant.
CHALLENGES FACED BY THE SHIPPING BUSINESS EARNINGS VOLATILITY:
The shipping industry is a truly global business with a host of issues potentially impacting the supply demand balance of the industry. This results in tremendous volatility in freight earnings and asset values.
Your Company attempts to manage that risk in various ways.
If your Company believes that the freight market could weaken, it may enter into time charter contracts ranging from 6 months to 3 years or use freight derivatives to hedge the risk. Another method of managing risk is by adjusting the mix of assets in the fleet through sale or purchase of ships.
Your Company also ensures that assets are bought at cheap prices as capital cost is a major cost component. Your Company hopes to weather the depressed markets better than most players in the business by having among the lowest fleet break-evens.
Your Company operates ships in different asset classes and different markets. This ensures that your Company''s fortunes are not fully dependent upon a single market.
liquidity risk:
The sale and purchase market and time charter markets are not always liquid. Therefore, there could be times when your Company is not able to position the portfolio in the ideal manner.
finance risk:
Your Company''s business is predominantly USD denominated as freight rates are determined in USD and so are ship values. Your Company has its liabilities also denominated in USD. Any significant movement in currency or interest rates could meaningfully impact the financials of your Company.
shipboard personnel:
Indian officers continue to be in great demand all over the world. Given the unfavourable taxes on a seafarer sailing on an Indian flagged vessel, it is becoming increasingly difficult to source officers capable of meeting the modern-day challenges of worldwide trading.
cyber risk:
A new and worrying threat to our business is cyber risk. Your Company is taking steps to secure its assets and systems from this threat, including by having suitable protection in place and by constant training to employees on how to avoid such issues.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has instituted internal financial control systems which are adequate for the nature of its business and the size of its operations. The policies and procedures adopted by your Company ensure the orderly and efficient conduct of its business, including adherence to Company''s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information.
The systems have been well documented and communicated. The systems are tested and audited from time to time by your Company and internal as well as statutory auditors to ensure that the systems are reinforced on an ongoing basis. Significant audit observations and follow up actions thereon are reported to the Audit Committee.
No reportable material weakness or significant deficiencies in the design or operation of internal financial controls were observed during the year.
The internal audit is carried out by a firm of external Chartered Accountants (Ernst & Young LLP) and covers all departments. Your Company also has an independent Internal Audit Department. Apart from facilitating the internal audit by Ernst & Young LLP, the Internal Audit Department also conducts internal audit as per the scope decided from time to time.
Both, Ernst & Young LLP and Head (Internal Audit) report to the Audit Committee in their capacity of internal auditors of your Company.
In the beginning of the year, the scope of the internal audit exercise including the key business processes and selected risk areas to be audited are finalised in consultation with the Audit Committee. All significant audit observations and follow up actions thereon are reported to the Audit Committee.
The Audit Committee comprises of Mr. Cyrus Guzder (Chairman), Mr. Raju Shukla and Ms. Rita Bhagwati, all of whom are Independent Directors and Mr. Berjis Desai, who is the Non-Executive Director on the Board of your Company.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared by your Company in accordance with the Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015. The audited Consolidated Financial Statements together with Auditors'' Report thereon form part of the Annual Report.
The group recorded a consolidated net profit of '' 629.68 crores for the year under review as compared to net profit of '' 918.52 crores for the previous year. The net worth of the group as on March 31, 2022 was '' 8051.30 crores as compared to '' 7704.27 crores for the previous year.
The statement containing the salient features of the financial statements of your Company''s subsidiaries for the year ended March 31, 2022 is attached along with the financial statements of your Company.
The report on performance of the subsidiaries is as follows:
GREATSHIP (INDIA) LIMITED, MUMBAI
Greatship (India) Limited (GIL), a wholly owned subsidiary of your Company and one of India''s largest offshore oilfield services providers, has
completed another challenging year of operations. In financial year 2021-22, GIL has recorded a total Income of '' 615.74 crores (previous year '' 567.56 crores) on a standalone basis and '' 730.18 crores (previous year '' 668.22 crores) on a consolidated basis. In the current financial year, GIL has earned a profit before interest, depreciation (including impairment) & tax of '' 165.56 crores (previous year '' 159.16 crores) and '' 216.80 crores (previous year '' 205.75 crores) on a standalone and consolidated basis, respectively. GIL''s net loss for the current financial year is '' 149.05 crores (previous year '' 134.29 crores) and '' 143.69 crores (previous year '' 131.12 crores) on a standalone and consolidated basis, respectively.
GIL, alongwith its subsidiaries, currently owns and operates eighteen vessels and four jack up drilling rigs. The operating fleet of eighteen vessels comprises of four Platform Supply Vessels (PSVs), four R-Class Supply Vessels, eight Anchor Handling Tug cum Supply Vessels (AHTSVs) and two Multipurpose Platform Supply and Support Vessels (MPSSVs).
GIL has the following four wholly owned subsidiaries, whose performance during the year is summarised hereunder:
1. Greatship Global Energy Services Pte. Ltd., Singapore (GGES)
GGES has incurred a net loss of USD 0.02 Mn for the current financial year as against the net profit of USD 0.20 Mn in the previous year. The net loss in the current year has been on account of reduction in the interest rates resulting into reduced interest on bank deposits and the net profit in the previous year has been on account of the interest received on bank deposits.
2. Greatship Global Offshore Services Pte. Ltd., Singapore (GGOS)
GGOS owns and operates two Multi-purpose Platform Supply and Support Vessels and one R-Class Supply Vessel. GGOS has earned a net profit of USD 2.93 Mn for the current financial year as against the net profit of USD 2.05 Mn in the previous year.
3. Greatship (UK) Limited, United Kingdom (GUK)
GUK''s net loss for the current financial year amounted to USD 0.32 Mn as against the net profit of USD 0.01 Mn in the previous year. The net loss in the current year has been on account of foreign exchange difference which arose on account of the reimbursement of expenses to parent company and the net profit in the previous year is attributable to the interest received on bank deposits/exchange gain on forex.
4. Greatship Oilfield Services Limited, India (GOSL)
During the year under review, GOSL has been exploring possible business opportunities and has incurred certain expenses resulting into net losses of '' 0.01 crore for the current financial year same as the net loss of '' 0.01 crore in the previous year.
THE GREATSHIP (SINGAPORE) PTE. LTD., SINGAPORE
The Greatship (Singapore) Pte. Ltd. is a wholly owned subsidiary of your Company. The Greatship (Singapore) Pte. Ltd. does shipping agency business for the ships owned by your Company. During the year ended March 31, 2022, there were 62 ship calls at Singapore. The company''s loss for the current financial year amounted to SS 94,640 as against the profit of SS 2,991 in the previous year.
THE GREAT EASTERN CHARTERING LLC (FZC), U.A.E.
The Great Eastern Chartering LLC (FZC) is a wholly owned subsidiary of your Company. During the year ended March 31, 2022, the company made a loss of USD 3.12 Mn (previous year net profit of USD 3.88 Mn). The company had invested in shares of some listed shipping companies during the year, and these shares were valued at USD 14.17 Mn as of March 31,2022.
During the year, the company made an investment of USD 10.50 Mn in eguity shares of its wholly owned subsidiary, The Great Eastern Chartering (Singapore) Pte. Limited, Singapore.
THE GREAT EASTERN CHARTERING (SINGAPORE) PTE. LTD., SINGAPORE
The Great Eastern Chartering (Singapore) Pte. Ltd. is a wholly owned subsidiary of The Great Eastern Chartering LLC (FZC), UAE. During the financial year ended March 31,2022, the company made a loss of USD 6.47 Mn (previous year profit of USD 0.01 Mn). The company held positions in dry bulk freight futures as of March 31,2022.
The company received an investment of USD 10.50 Mn in its eguity shares from its parent, The Great Eastern Chartering LLC (FZC), U.A.E.
GREAT EASTERN CSR FOUNDATION, INDIA
Great Eastern CSR Foundation (Foundation) is a wholly owned subsidiary of your Company which handles the CSR activities of your Company and
its subsidiaries. The Foundation received a total contribution of '' 6.61 crores from your Company during the year ended March 31, 2022. The Foundation spent '' 6.62 crores on CSR activities during the year.
Details of CSR activities carried out by Great Eastern CSR Foundation are set out in the reports on CSR activities which form part of this Annual Report. GREAT EASTERN SERVICES LIMITED, INDIA
Great Eastern Services Limited is a wholly owned subsidiary of your Company. The company has not yet started its commercial operations. The company made a loss of '' 45,800 for the year ended March 31,2022 as compared to a loss of '' 32,198 for the year ended March 31,2021.
During the year, fresh debt of '' 162.38 crores was raised. The gross debt:equity ratio as on March 31,2022 was 0.52:1 (including effect of currency swaps on rupee debt was 0.59:1) and the debt:equity ratio net of cash and cash equivalents as on March 31, 2022 was 0.06:1 (including effect of currency swaps on rupee debt was 0.12:1). Your Company redeemed non-convertible Debentures aggregating to '' 200 crores during the year and also settled the swaps relating to those debentures.
HEALTH, SAFETY, ENVIRONMENT AND QUALITY (HSEQ)
The last couple of years have been very challenging for the shipping industry. The outbreak of COVID-19 and its impacts worldwide cannot be overstated. Hundreds of millions of people around the globe were infected by the disease with many suffering from severe and life-threatening symptoms. Pandemic throwed up various challenges, which are not only limited to crew change or logistics support to the ship, but also to keep people motivated and focused. However, your Company''s committed teams on board and ashore ensured the implementation of risk-based Disease Outbreak plan helping in minimizing its impact on business operations to a large extent. Regardless to say the team is still on the job with continued sincerity as there are signs of a fresh wave in few parts of the world.
Your Company believes in ensuring clean seas, reducing generation of waste and avoiding pollution at sea. This year, your Company has had zero non-compliance with MARPOL and zero spills to sea.
Your Company cares for its employees and during these challenging times of pandemic, extraordinary measures were taken to give priority to their health and safety. Arrangements like continued work from home option for all shore employees, vessel diversion for crew sign on/sign off, 1-Call remote expert counselling service, enhanced pre-employment mental examination from the experts and a dedicated crew relationship officer for managing their welfare and to enhance their relationship with the organization were some of the measures.
Your Company has taken several initiatives to foster the safety culture on board, which includes introduction of tools to avoid injuries such as Whip-check device, finger saver and 3M⢠Protect® Rebel Self-Retracting Lifeline and continuation of GESCO safety culture course and Dynamic Safety Trainings. These initiatives have started yielding results and have translated into reduction of Lost time Injury with Zero Fatalities or Partial / Total disability cases.
Your Company conducted exclusive vaccination drives for seafarers on board and on vacation. 85.6% and 12.8% were fully and partially vaccinated respectively. Similar programs were done for shore employees and their families in Ocean House. All of the shore employees are now fully vaccinated except for some maternity cases.
Your Company''s vessel ''Jag Rani'' was involved in a rescue operation of a seafarer at sea. It was done while vessel was enroute to Jeddah. 3rd Officer had fallen overboard from another vessel in the vicinity while working on lifeboat. He was picked up from sea using a life buoy & cargo net and was provided with warm clothing, food and water. Later, he was safely disembarked.
In its effort to reduce the GHG emissions, your Company has fitted its vessels with Mewis Duct, LED lighting, and applied superior antifouling coatings on selected vessels this fiscal. In its journey towards decarbonization, your Company conducted successful ship trials with a low carbon alternate fuel (biofuel blend) on one of its vessels. These fuels are generally considered to be carbon neutral because the amount of carbon dioxide (C02) they emit during combustion tends to be absorbed by source plants, etc. during their growing stage. The biofuel blend used for trials was certified by International Sustainability and Carbon Certification (ISCC) and complying with EU Renewable Energy Directive (RED II) requirements.
Your Company also successfully conducted Its first drone delivery operation trials at Singapore anchorage on the vessel ''Jag Arnav''. This will help your Company in reducing its scope 3 emissions and provide an option of contactless delivery.
Environmental initiatives working group was formulated who shall be doing research on the feasibility of use of alternate fuels, technologies, and retrofits for use on your Company''s existing fleet.
In the effort to streamline the organization structure and consolidate functions, the Training & Assessment and Vessel Performance Cells were moved under the HSEQ department. This will also help in overall value creation by better collaboration and implementation.
Keeping in mind your Company''s endeavour to man the entire fleet with a pool of competent, confident and well-trained seafarers, the Training and Assessment cell has continued to manage and satisfactorily conduct mandatory and recommendatory value-added training for the seafarers.
The challenges due to ongoing COVID 19 pandemic faced by the department during the past year are minimized to Quite an extent, however continuing in some areas. During the pandemic, your Company commenced online facilitation of various in-house trainings. Your Company also worked with the maritime training institutes to move some of the existing training online and developed some new online trainings. Training and Assessment department continued to work jointly with various partners in training not only in India but also globally, to shift the focus from classroom training to online training.
In view of the new maritime regulatory reguirements and updated training matrix, the department developed and conducted various in-house training modules with assessment viz. DANAOS ISM Module, LSA FFA Module, Inventory of Hazardous Material Training, Cyber Security Online Module, Main Engine & Boiler Water-Chemical Treatment, Incident Investigation Training, Risk Assessment Training, Environmental Officer Training Course and Induction Program etc.
In addition, various other value-added Courses (beyond the Training Matrix) were conducted on e-platforms.
The department continued conducting the competency assessments for every rank of seafarers. Clearing these competency assessments Is a mandatory reguirement of your Company for recruitment and promotions of the seafarers.
Training and Assessment portal developed in-house Is being used to monitor the Training Need Identification and monitoring of its effectiveness.
Your Company''s focus on technology initiatives which includes new platform implementation, application consolidation, Business Continuity Process (BCP) and Cybersecurity Governance have enabled your Company to conduct smooth business operations, safe from cyberthreat, and helped in embarking on major change initiative of ''Rise with SAP S/4 HANA'' ERP implementation. These changes will bring in industry best practices, process standardization, improvement, bring transparency and audit compliance. The organization''s technology enablement and collaboration platform ensured zero disruption during pandemic lockdown period and BCP got demonstrated as live use case.
In FY 2021-22, IT department has focused on the following major initiatives:
APPLICATION CONSOLIDATION INITIATIVE
To ensure efficient and effective performance of business support system, your Company has partnered with SAP and has gone for latest ''Rise with SAP s/4 HANA'', which Is a complete enterprise resource planning (ERP) system with built-in intelligent technologies, including Al, machine learning and advance analytics. Implementation of SAP will be done in FY 2022-23.
Last year, your Company had partnered with Danaos (Greece based shipping software company) for their powerful maritime software suite, which Is an integrated and unified environment between ship and office. In Phase 1, your Company has implemented Planned Maintenance System (PMS) for Technical Department. In the second Phase, your Company has Implemented HSEQ modules and Implementation of commercial and operations modules Is In progress.
Your Company is committed to ensure that its systems are resilient and ensured high availability in case of any disaster scenarios. They are designed with strong business continuity plan. It enabled IT to respond quickly to any kind of disruption and be prepared with a strong recovery and response time to make systems available with minimum restoration time and data loss. In FY 2021-22, your Company ensured continuity of critical business operations through various technology initiatives, so that business can run smoothly during or after the crisis.
Technology transformation initiatives like Modernised Infrastructure, Cloud-first strategy, and setup of complete Disaster Recovery Site (DR) has helped your Company to run the business from Work from Home (WFH) without compromising on employee productivity.
Work from Home (WFH): Your Company has ensured that there are zero cybersecurity incidents, 100% application availability and provided 24x7 remote support (earlier 9x5 support) to ships for smooth business operations.
Your Company improvised the solution to have centralized platform for remote monitoring, maintenance and management of the entire IT and connectivity infrastructure onboard including network devices, satellite terminals, operating systems, applications, OT details with low, controlled bandwidth requirements. Below are the features of the solution:
⢠Asset management
⢠Network visualization
⢠Remote monitoring and management
⢠Software update and patching mechanism
⢠Alert mechanism for server and system for CPU, memory, storage issues
⢠Remote installation and uninstallation of software
Ships well connected with high bandwidth continued to help to cut down the travel costs by quick access for expert advice from office to resolve technical issues. Major Dry Dock operations had also been carried out on multiple ships through video conferencing.
Cybersecurity will continue to be on top priority in the international maritime sector. Your Company has strengthened the cybersecurity posture for ships and shore to protect the integrity of the organization''s information and IT assets.
Governance through ''Sea Hawk'' an Al & ML based security application has helped the team to protect the organization from any advanced level cyber threat.
Your Company is committed to continue technology modernization initiatives and is planning to carry out industry benchmarking and technology gap analysis exercise to detail out continual improvement plans and roadmap for future. Your Company is planning to take up initiative to adopt best practices in shipping industry and its key focus areas for coming year will be adoption and stabilization of new SAP ERP system, process automation leading to operational efficiency improvements, Strategic and Analytical Dashboards development to support decision making, adoption of lOT and RPA to automate the mundane tasks and improve productivity.
The second wave of the Covid-19 pandemic and the onslaught of Omicron variant compelled the organization to defer resumption of the office till next fiscal year and hence employees continued to work from home during this year. The organization took proactive measures to facilitate double vaccination of its shore and floating staff through tie ups with eminent hospital chains across India and onsite vaccination campaigns.
Focus on training continued through online delivery of the programs as well as tie ups with learning platforms such as Linkedln learning and Nomadic. Programs on coaching for leadership roles, ethics and governance, communication, POSH awareness sessions and specific marine programs were held during the year. A program based on positive psychology by leveraging one''s strengths using Clifton Strengthfinder was organized for 120 shore employees.
Your Company signed a four-year wage settlement with Shore Union during the year. Settlement is effective from 1 July 2021.
Retention of the shore staff for the year was 97%.
Total number of shore staff and ship board personnel was 249 and 1812 respectively at the end of the year.
GREAT EASTERN INSTITUTE OF MARITIME STUDIES (GEIMS)
Whilst the world has been striving hard to overcome the effects of the Covid-19 pandemic, the Maritime Training Institutes like most other schools and colleges were most adversely affected. The Great Eastern Institute of Maritime Studies was no less affected and had to overcome multiple challenges including effectiveness of on-line training. With the coming and going of each wave of the pandemic (all in a span of few months from October 2021 till March 2022) we had to re-open, close and then recently re-open the college finally for physical lectures, as per the Government and Director General of Shipping Office directives. Each time it caused severe disruption in schedules and delayed course completion of the batches. All these challenges were successfully overcome, and the Institute is now back to full strength and all batches are in the campus now. Despite all this, the selection, recruitment and training programs have continued unhindered and all faculty and staff have manfully toiled to make things happen seamlessly.
During FY 2021-22, a total of 293 cadets passed out from the Nautical, Marine Engineering, Electrical Technology and GP Rating courses. The Institute also admitted 435 new cadets during the year in these 4 courses.
The Institute was audited and certified for Quality Management System ISO 2008-2015 by Indian Register of Shipping. An impressive result of 97.5% during the Comprehensive Inspection Programme (CIP) Audit of Director General of Shipping was obtained thus maintaining the "OUTSTANDINGâ rating since inception.
The Institute was awarded the ''Maritime Training Institute of the Year'' award at the Samudra Manthan awards in December 2021. The Institute was also awarded the ''Best Training Institute Award'' by National Maritime Day Celebrations Committee in April 2022 as part of the National Maritime Day Celebrations. These dual awards are recognition enough to show that the Institute is indeed one of the best managed and operated Maritime Institutes in India.
Your Company proposes to construct a state-of-the-art museum on the GEIMS premises, which would serve as an effective primer for understanding the maritime industry, your Company''s historical and present role in facilitating trade and the importance of a seafarer''s role within this overall context.
CORPORATE SOCIAL RESPONSIBILITY
Your Company has always been conscious of its role as a good corporate citizen and strives to fulfil this role by running its business with utmost care for the environment and all the stakeholders. Your Company looks at Corporate Social Responsibility (CSR) activities as significant tool to contribute to the society.
The Board of Directors of your Company has constituted a Committee of Directors, known as the Corporate Social Responsibility Committee comprising of Mr. Vineet Nayyar (Chairman), Mr. Cyrus Guzder and Mr. Bharat K. Sheth to steer its CSR activities.
Copy of the Corporate Social Responsibility Policy of your Company as recommended by the CSR Committee and approved by the Board is enclosed as ''Annexure A''. The CSR Policy is also available on the website of your Company: www.greatship.com.
The CSR Policy is implemented by your Company through Great Eastern CSR Foundation, a wholly owned subsidiary of your Company, specifically set up for the purpose.
During FY 2021-22, '' 6.61 crores were contributed by your Company to Great Eastern CSR Foundation for undertaking CSR activities as against the mandatory requirement of spending '' 5.03 crores as per the provisions of Section 135 of the Companies Act, 2013.
The Annual Report on CSR activities is enclosed herewith as "Annexure Bâ.
Following appointments / re-appointments were approved by the members at their Annual General Meeting held on July 29, 2021:
⢠Re-appointment of Mr. G. Shivakumar as a Director of the Company, liable to retire by rotation.
⢠Appointment of Mr. Urjit Patel as an Independent Director of the Company for a term of 5 years w.e.f. August 01,2020.
⢠Re-appointment of Mr. Tapas Icot as ''Executive Director'' of the Company for a term of 3 years w.e.f. November 02, 2021.
Mr. Urjit Patel resigned as an ''Independent Director'' of the Company with effect from January 31, 2022. Due to his new full-time work assignment, the attendant time constraint compelled Mr. Urjit Patel to tender his resignation.
Your Directors place on record their appreciation for the valuable guidance and support extended by Mr. Urjit Patel during his tenure as an Independent Director of the Company.
The Board of Directors, at its meeting held on May 06, 2022, appointed Mr. Shivshankar Menon, Mr. T N. Ninan and Mr. Uday Shankar as Additional Directors and Independent Directors of the Company for a term of 3 years w.e.f. May 06, 2022. They bring with them years of rich experience and knowledge of working with private sector as well as public services, which will be of immense benefit to your Company.
Mr. Shivshankar Menon, Mr. T N. Ninan and Mr. Uday Shankar, being Additional Directors, cease to be the Directors of the Company on the date of the ensuing Annual General Meeting and are reguired to be appointed by the members. Notices under Section 160 of the Companies Act, 2013 have been received in respect of their appointment as Independent Directors of the Company.
The Board of Directors, at its meeting held on May 06, 2022, re-appointed Mr. Bharat K. Sheth as ''Deputy Chairman & Managing Director'' for a period of 3 years w.e.f. April 01, 2023 and Mr. G. Shivakumar as ''Executive Director'' for a period of 3 years w.e.f. November 14, 2022.
Mr. Tapas Icot shall retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.
Appointments of Mr. Shivshankar Menon, Mr. T N. Ninan and Mr. Uday Shankar as ''Independent Directors'', re-appointment of Mr. Bharat K. Sheth as ''Deputy Chairman & Managing Director'', re-appointment of Mr. G. Shivakumar as ''Executive Director'' and re-appointment of Mr. Tapas Icot as a ''Director retiring by rotation'' reguire your approval at the ensuing Annual General Meeting.
Necessary resolutions for their appointments / re-appointments have been included in the Notice convening the ensuing Annual General Meeting.
As per the provisions of the Companies Act, 2013, Independent Directors shall not be liable to retire by rotation. The Independent Directors of your Company have given the certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149(6) of the Companies Act, 2013 and under Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Reguirements) Regulations, 2015. In the opinion of the Board, all the Independent Directors are persons of integrity and possess relevant expertise and experience to effectively discharge their duties as Independent Directors of the Company.
The policies on Director''s appointment and remuneration including criteria for determining Qualifications, positive attributes, independence of Director and also remuneration for key managerial personnel and other employees are enclosed herewith as Annexures ''C'' and ''D''.
The details of remuneration as reguired to be disclosed pursuant to the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are enclosed as Annexure ''E''.
During the year, Mr. Bharat K. Sheth, who is also the Non-executive Chairman of Greatship (India) Ltd. (Gil), a wholly owned subsidiary of the Company, was in receipt of remuneration of '' 5.40 lakhs for FY 2020-21 from GIL. The Board of Directors of GIL have approved payment of remuneration of '' 9 lakhs for FY 2021-22 to Mr. Bharat K. Sheth, subject to GIL''s shareholders'' approval.
During the year, 6 meetings of the Board were held. The details of Board meetings as well as Committee meetings are provided in the Corporate Governance Report.
With a view to bring in objectivity and independence in the process of performance evaluation of the Board, its Committees and individual Directors, your Company engaged the services of Grant Thornton Bharat LLP (''GTBL'') to assist in conducting performance evaluation for FY 2021-22. The Performance Evaluation Framework of your Company was accordingly modified to enable the same.
GTBL conducted the assessment in line with the regulatory reguirements and leading practices in the market and submitted its ''Board Assessment Report''. The annual performance evaluation of the Board, its committees and all the Directors individually was done based on the ''Board Assessment Report'' submitted by GTBL.
Pursuant to the provisions of the Companies Act, 2013, a separate meeting of Independent Directors reviewed performance of your Company Board as a whole and Non-Independent Directors (including Chairman) of your Company.
The Board of Directors reviewed the performance of Independent Directors and Committees of the Board. Nomination and Remuneration Committee also reviewed performance of your Company and every Director.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 134(3) of the Companies Act, 2013 the Board of Directors hereby state that:
(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;
(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(e) the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
(f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate
and operating effectively.
Maintaining high standards of Corporate Governance has been fundamental to the business of your Company since its inception. A separate report on Corporate Governance is provided together with a certificate from the practicing Company Secretary regarding compliance of conditions of Corporate Governance as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Your Company has formally adopted the ''National Guidelines on Responsible Business Conduct'' (''NGRBC'') issued by Ministry of Corporate Affairs. The applicable aspects of the principles of NGRBC have been suitably incorporated in the internal policy framework and operating processes followed by your Company.
The Business Responsibility and Sustainability Report as per the format specified by Securities & Exchange Board of India forms part of this Annual Report. Though not mandatory yet, your Company has voluntarily decided to publish it.
A separate section on ESG (Environment, Social & Governance) also forms part of this Annual Report.
Copy of Annual Return as required under Section 92(3) of the Companies Act, 2013 has been placed at the website of your Company, www. greatship.com.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
With a view to create safe workplace, your Company has formulated and implemented Sexual Harassment (Prevention, Prohibition and Redressal) Policy in accordance with the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. For the purpose of handling and addressing complaints regarding sexual harassment, your Company has constituted Internal Complaint Committee with an external lady representative (who has the requisite experience in this area) as a member of the Committee. To build awareness in this area, your Company also conducts awareness programmes within the organisation.
During the year, no complaints with allegations of sexual harassment were received by the Company.
Your Company has established a vigil mechanism (Whistle Blower Policy) for Directors and employees to report genuine concerns. The Whistle Blower Policy provides for adeguate safeguards against victimisation of persons who use such mechanism and make provision for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases.
A copy of the Whistle Blower Policy is available on the website of your Company: www.greatship.com
Your Company has formulated a policy on dealing with Related Party Transactions, a copy of which is available on the website of your Company: www.greatship.com
The particulars of contracts or arrangements with related parties in Form AOC 2 is annexed herewith as "Annexure Fâ.
All the related party transactions have been entered into by your Company in the ordinary course of business and on arm''s length basis.
The Dividend Distribution Policy of your Company is available on the website of your Company: www.greatship.com
ENERGY CONSERVATION AND TECHNOLOGY ABSORPTION CONSERVATION OF ENERGY
In order to align with IMO''s GHG emission reduction targets and to prepare for a low carbon future, your Company has been undertaking various initiatives about enhancing energy efficiency in its business operations. The same have also been described in detail in the ESG Report, which forms part of this Annual Report.
In our efforts to reduce emissions, your Company has implemented following energy efficiency projects on various vessels during this financial year. Few of these will help us in complying with new IMO MARPOL Annex VI regulations - EEXI & CII reguirements on emission reduction:
⢠Mewis duct - 06 vessels at an additional cost of USD 1.46 Mn. Mewis Duct is a device which improves the flow of water on to propeller and thus its efficiency. It also helps in reduction of underwater noise.
⢠LED lighting - 05 vessels at an additional cost of USD 0.10 Mn. Cost of USD 0.03 Mn has also been committed for the LED lighting projects under progress. LED lights are energy efficient as compared to traditional lights such as fluorescent, halogen and incandescent lights.
⢠High performance paints - For a typical ship loss of energy through hull resistance is around 30% and this increases with growth of hull roughness due to biofouling. To minimize growth of biofouling, your Company has applied superior anti-fouling coatings on 10 vessels during their respective dry dockings in this financial year. The additional cost incurred for application of the superior anti-fouling coatings was USD 1.89 Mn.
During the year, saving of USD 3.47 Mn was achieved in fuel cost from propulsion energy saving retrofits (viz. Mewis Duct, Propeller Boss Cap Fins, Kappel Propeller) and use of superior anti-fouling hull coatings carried out on fleet vessels in previous years. This fuel saving also resulted in reduction of C02 emission by 18537.15 MT during the year.
COMPLIANCE WITH IMO DCS AND EU MRV REGULATIONS
With effect from January 01, 2019 all vessels above GT 5000 are mandatorily reguired to report their annual fuel consumption, distance sailed and sailing hours and certain other technical features of individual ships to its Flag State and upon satisfactory verification of the data, Flag States in turn are obliged to submit such data to International Maritime Organization (IMO) all as per Regulation 22A - Collection and reporting of ship fuel oil consumption data of MARPOL Convention, Annex VI. The data will be used by IMO for making future policy decision with respect to further reduction of GHG emission from ships on international trade. Your Company has developed ship specific reguired Data Collection Plans which describes the procedure of collection, Quality control, storage and transmission of relevant data and the same have been approved by Recognized Organizations (RO). Data for the calendar year 2021 have been submitted to R.O by the due date for their review.
Similar exercise for corresponding reguirement of European Union, but applicable to vessels which have made commercial voyages to or from EU for the calendar year 2021, has been completed.
QUANTIFICATION AND REPORTING OF GHG EMISSION
Your Company since FY 2015-16 has started to capture and quantify GHG emission from its business operations in a transparent and standardized manner for the information of stakeholders of your Company on a voluntary basis. The GHG emission quantification and reporting has been done taking into account:
⢠ISO 14064-1 (2006) Greenhouse gases - Part 1: Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals, and
⢠The Greenhouse Gas Protocol - A Corporate Accounting and Reporting Standard (Revised edition) published by World Business Council for Sustainable Development and World Resources Institute.
COMPLIANCE WITH ENERGY EFFICIENCY EXISTING SHIP INDEX (EEXI) AND CARBON INTENSITY INDICATOR (CII)
In preparation for the new regulations of Energy Efficiency Existing Ship Index (EEXI) which is coming into force from January 01, 2023, your Company has performed sample EEXI calculations for all its fleet vessels with the support of Classification Societies and plan to fully comply through a combination of engine power limitation (EPL) and other energy savings devices like MEWIS duct etc. Your Company intends to complete the whole process well before the due date.
Your Company has developed an inhouse program for tracking and monitoring of Carbon Intensity Indicator (CII) ratings for all its vessels. This will help the organization in timely identifying the vessels which require improvement and appropriate actions can be planned accordingly.
Pursuant to the provisions of Section 139 of Companies Act, 2013, Deloitte Haskins & Sells LLP were appointed as the Statutory Auditors of your Company at the Annual General Meeting held on August 10, 2017, to hold office till the conclusion of the ensuing Annual General Meeting.
Since Deloitte Haskins & Sells LLP has completed its first term as prescribed under Section 139(2) of the Companies Act, 2013, the Audit Committee and the Board of Directors have recommended their re-appointment as Statutory Auditors for second term to hold office from the conclusion of the ensuing Annual General Meeting till the conclusion of the 79th Annual General Meeting to be held in calendar year 2027.
Necessary resolution for their re-appointment has been included in the Notice convening the ensuing Annual General Meeting.
The report given by the Auditors on the financial statements of your Company is part of this Report. There has been no qualification, adverse remark of disclaimer given by the Auditors in their Report.
Pursuant to the provisions of Section 204 of the Companies Act, 2013, your Company appointed M/s. Mehta & Mehta, Company Secretaries to undertake the Secretarial Audit of your Company for the financial year ended March 31,2022.
The Secretarial Audit Report of your Company is annexed herewith as "Annexure Gâ.
The Secretarial Audit Report of Greatship (India) Limited, the material unlisted Indian subsidiary of your Company, is annexed herewith as "Annexure Hâ.
FOREIGN EXCHANGE EARNINGS AND OUTGO
The details of Foreign Exchange Earnings and Outgo are as follows:
|
a) |
Foreign Exchange earned on account of freight, charter hire earnings, sales proceeds of ships, etc. |
('' in crores) 1990.50 |
|
b) |
Foreign Exchange used including operating expenses, capital repayment, down payments for acquisition of ships (net of loan), interest payment, etc. |
2271.28 |
Particulars of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.
There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.
Maintenance of cost records as specified by the Central Government under sub-section (1) of section 148 of the Companies Act, 2013 is not reguired by your Company.
Neither any application was made, nor any proceeding was pending under the Insolvency and Bankruptcy Code, 2016 in respect of your Company during or at the end of the financial year 2021-22.
The disclosures on valuation of assets as reguired under Rule 8(5)(xii) of the Companies (Accounts) Rules, 2014 are not applicable.
Your Directors express their sincere thanks to all customers, charterers, vendors, investors, shareholders, shipping agents, bankers, insurance companies, protection and indemnity clubs, consultants and advisors for their continued support throughout the year. Your Directors also sincerely acknowledge the significant contributions made by all the employees through their dedicated services to your Company. A special mention needs to be made about the shipboard personnel who have soldiered tirelessly to keep global supply chain open even in the phase of the Covid-19 pandemic. Your Directors look forward to their continued support.
For and on behalf of the Board of Directors
K.M. Sheth
Chairman (DIN: 00022079)
Mumbai, May 6, 2022
Mar 31, 2018
The Directors are pleased to present the 70th Annual Report on the business operations and the Financial Statements of your Company for the financial year ended March 31, 2018.
FINANCIAL PERFORMANCE
The financial results of the Company (standalone) for the financial year ended March 31,2018 are presented below:
(Rs. in crores)
|
2017-18 |
2016-17 |
|
|
Total Revenue |
2399.27 |
2224.71 |
|
Total Expenses |
2232.08 |
1583.32 |
|
Profit before tax |
167.19 |
641.39 |
|
Less : Tax Expenses |
7.00 |
40.00 |
|
Profit for the period |
160.19 |
601.39 |
|
Retained Earnings |
||
|
Balance at the beginning of the year |
1405.71 |
1558.29 |
|
Add : |
||
|
- Profit for the year |
160.19 |
601.39 |
|
- Other Comprehensive Income |
3.42 |
(2.14) |
|
Less : |
||
|
- Transfer to Tonnage tax reserve |
15.00 |
100.00 |
|
- Transfer to Debenture redemption reserve |
28.75 |
591.25 |
|
- Interim Dividend on Equity Shares |
- |
54.28 |
|
- Final Dividend on Equity Shares (FY - 2016-17) |
98.01 |
- |
|
- Dividend Distribution Tax |
14.63 |
6.30 |
|
Balance at the end of the year |
1412.93 |
1405.71 |
The net worth of the Company as on March 31, 2018 was Rs.5225.42 crores as compared to Rs.5162.02 crores for the previous year.
The financial statements have been prepared in accordance with the Indian Accounting Standards (IndAS) notified under the Companies (Indian Accounting Standards) Rules, 2015.
DIVIDEND
Your Directors recommend a final dividend of Rs.7.20 per share which will result in an outflow of Rs.126.08 crores (inclusive of tax on dividend). This represents a payout ratio of 78.71% (previous year 28.90%). The dividend will be paid after your approval at the ensuing Annual General Meeting.
GREAT EASTERN INSTITUTE OF MARITIME STUDIES (GEIMS)
The Great Eastern Institute of Maritime Studies, Lonavla (GEIMS) has trained 3463 cadets since inception. These cadets, upon passing out, serve on merchant ships as Nautical Officers, Graduate Marine Engineers and Electro-Technical Officers. About 50% of the passed out cadets serve on the Companyâs vessels whereas almost 70% of the Officers on the Companyâs vessels have been trained at GEIMS. This percentage will increase in the next few years. The first General Purpose Rating (GP Rating) batch of trainees successfully passed at GEIMS in July 2017. After successful completion of their training, 34 trainees are placed on Companyâs vessels.
For the first time GEIMS has inducted seven Angolan cadets (including two female cadets) to be trained as Electro-Technical officers.
During the last Annual Comprehensive Inspection Programme (CIP) conducted under the enhanced guidelines of DG Shipping, GEIMS has improved on its earlier score and was once again awarded Grade A1 (Outstanding). This gradation places GEIMS as one of the premier Maritime Training Institutes in the country and confirms the high level of compliance with all Merchant Shipping rules and associated orders, circulars and guidelines issued by DG Shipping from time to time.
To further enhance training at the Institute, GEIMS has installed a full size forecastle of a ship procured from the shipbreaking yard at Alang. This will provide hands-on training to trainees on aspects of seamanship, anchor operations, navigational lights, electrical and hydraulics machinery and ship construction.
Also, a Modern Bridge Simulator, encompassing the current technologies and types and sizes of ships, has been set-up in the campus for practical training of nautical officers. An advanced Electrical and Control Laboratory is being set up for training of Engineering and ElectroTechnical officers at GEIMS.
Forty computer work stations have been included in the Institute library to enable trainees to browse the digital library for technical reference.
Above training facilities have been included in the campus in addition to the already existing âCenters of Excellenceâ for marine boiler and high voltage simulation and a fully functional marine diesel engine.
To enhance the security within the campus, 29 high resolution CCTV cameras have been mounted at vulnerable locations. Also, as per DG shipping requirement, in order to ensure the required attendance of lectures by all trainees, biometric recording has been initiated at the entrance of each classroom.
CORPORATE SOCIAL RESPONSIBILITY
The Company has always been conscious of its role as a good corporate citizen, and strives to fulfill this role by running its business with utmost care for the environment and all the stakeholders. The Company looks at Corporate Social Responsibility (CSR) activities as significant tool to contribute to the society.
The Board of Directors of the Company has constituted a Committee of Directors, known as the Corporate Social Responsibility Committee, comprising of Mr. Vineet Nayyar (Chairman), Mr. Cyrus Guzder and Mr. Bharat K. Sheth to steer its CSR activities.
Copy of the Corporate Social Responsibility Policy of the Company as recommended by the CSR Committee and approved by the Board is enclosed as âAnnexure Aâ. The CSR Policy is also available on the website of the Company : www.greatship.com.
The CSR Policy is implemented by the Company through Great Eastern CSR Foundation, a wholly owned subsidiary of the Company specifically set up for the purpose.
The Annual Report on CSR activities is enclosed herewith as âAnnexure Bâ.
DIRECTORS
Mr. G. Shivakumar shall retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.
Necessary resolution for re-appointment of Mr. G. Shivakumar has been included in the Notice convening the ensuing Annual General Meeting.
As per the provisions of the Companies Act, 2013, Independent Directors have been appointed for a period of five years and shall not be liable to retire by rotation. The Independent Directors of your Company have given the certificate of independence to your Company stating that they meet the criteria of independence as mentioned under Section 149(6) of the Companies Act, 2013 and under Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The policies on Directorâs appointment and remuneration including criteria for determining qualifications, positive attributes, independence of Directors, and also remuneration for key managerial personnel and other employees are enclosed herewith as Annexure âCâ and âDâ.
During the year, Mr. Bharat K. Sheth, who is also a Non-Executive Chairman of Greatship (India) Ltd. (GIL), a wholly owned subsidiary of the Company, was in receipt of commission of Rs.13,000,000 from GIL.
The details of remuneration as required to be disclosed pursuant to the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are enclosed as Annexure âEâ.
BOARD MEETINGS
During the year, 5 meetings of the Board were held. The details of Board meetings as well as Committee meetings are provided in the Corporate Governance Report.
BOARD EVALUATION
Annual performance evaluation of Board, its committees (namely, Audit, Nomination and Remuneration, Corporate Social Responsibility and Stakeholdersâ Relationship Committees) and all the Directors individually has been done in accordance with the Performance Evaluation Framework adopted by the Nomination and Remuneration Committee of the Company. The Performance Evaluation Framework sets out the performance parameters as well as the process for performance evaluation to be followed. During the year, the Performance Evaluation Framework was revised to elaborate the evaluation parameters and process in line with the Guidance Note on Board Evaluation issued by SEBI vide its circular dated January 05, 2017.
In accordance with the new Performance Evaluation Framework, performance evaluation forms were circulated to all the Directors to record their evaluation of the Board, its Committees and Non-executive Directors of the Company. The performance evaluation of the Company and Executive Directors was done on the basis of presentation made by the management.
Pursuant to the provisions of the Companies Act, 2013, a separate meeting of Independent Directors reviewed performance of the Company Board as a whole and Non-Independent Directors (including Chairman) of the Company.
The Board of Directors reviewed the performance of Independent Directors and Committees of the Board. Nomination and Remuneration Committee also reviewed performance of the Company and every Director.
DIRECTORSâ RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 134 (3) of the Companies Act, 2013, the Board of Directors hereby state that:
a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;
c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
d) the directors had prepared the annual accounts on a going concern basis; and
e) the directors, in the case of a listed company, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
CORPORATE GOVERNANCE
Maintaining high standards of Corporate Governance has been fundamental to the business of your Company since its inception. A separate report on Corporate Governance is provided together with a Certificate from the practicing Company Secretary regarding compliance of conditions of Corporate Governance as stipulated under Listing Regulations.
The extract of annual return in Form MGT-9 as required under Section 92(3) of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014 is enclosed herewith as Annexure âGâ.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
With a view to create safe workplace, the Company has formulated and implemented Sexual Harassment (Prevention, Prohibition and Redressal) Policy in accordance with the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. For the purpose of handling and addressing complaints regarding sexual harassment, the Company has constituted Internal Complaint Committee with an external lady representative (who has the requisite experience in this area) as a member of the Committee. To build awareness in this area, the Company also conducts awareness programmes within the organisation.
During the year, no complaints with allegations of sexual harassment were received by the Company.
VIGIL MECHANISM
The Company has established a vigil mechanism (Whistle Blower Policy) for Directors and employees to report genuine concerns. The Whistle Blower Policy provides for adequate safeguards against victimisation of persons who use such mechanism and makes provision for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases.
A copy of the Whistle Blower Policy is available on the website of the Company: www.greatship.com
RELATED PARTY TRANSACTIONS
The Company has formulated policy on dealing with Related Party Transactions, a copy of which is available on the website of the Company: www.greatship.com
The particulars of contracts or arrangements with related parties in Form AOC 2 is annexed herewith as âAnnexure Fâ.
All the related party transactions have been entered into by the Company in the ordinary course of business and on armâs length basis.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Particulars of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Companyâs operations in future.
DIVIDEND DISTRIBUTION POLICY
The Dividend Distribution Policy of the Company is enclosed as âAnnexure Hâ. The Dividend Distribution Policy is also available on the website of the Company : www.greatship.com.
ENERGY CONSERVATION AND TECHNOLOGY ABSORPTION CONSERVATION OF ENERGY
In order to contribute to and prepare for a low carbon future, your Company has been undertaking various initiatives with regard to enhancing energy efficiency in its business operations.
ENERGY SAVING DEVICES
During the financial year under consideration, following Energy Saving Devices were retrofitted for reducing fuel consumption of main propulsion system:
a) Jag Aparna, Jag Rishi, Jag Prakash, Jag Pushpa, Jag Aanchal and Jag Prerana were retrofitted with Propeller Boss Cap Fins / EcoCap, a device which improves propulsive efficiency. The propellerâs rotational motion forms a strong vortex at the center, which causes overall loss of propulsive efficiency. The finned features of a PBCF-EcoCap break up this vortex, thereby reducing the loss of energy.
Total cost incurred on above six ships: USD 354,293.
b) For a typical Bulk Carrier or Tanker, loss of energy through hull resistance is around 30% and this increases with growth of hull roughness due to bio-fouling. To minimize growth of bio-fouling, the Company has applied superior anti-fouling coatings on Jag Laadki, Jag Prakash, Jag Pushpa and Jag Prerana during their respective dry dockings during the financial year.
The additional cost incurred for application of the superior anti-fouling coatings was USD 669,038.
During the financial year saving of USD 1.77 Mn was achieved in fuel cost from energy saving retrofits and use of superior anti-fouling hull coatings alone. This fuel saving also resulted in reduction of CO2 emission by 15,771 MT
TECHNOLOGY ABSORPTION
Your Company has identified and absorbed several technologies on fleet vessels. These are reflected in paragraphs above.
COMPLIANCE WITH EU MRV (MONITORING, REPORTING, VERIFICATION) REGULATION
With effect from 1st January 2018 all vessels above GT 5000 engaged in carrying cargo to and from and within European Union (EU) ports are mandatorily required to report their fuel consumption, CO2 emission and certain other parameters pertaining to work done during such voyages to European Commission as per their Regulation (EU) 2015/757 (on the monitoring, reporting and verification of carbon dioxide emissions from maritime transport) annually. Your Company has developed ship specific required Monitoring Plans which describes the procedure of collection, quality control, storage and transmission of relevant data and the same have been approved by accredited Verification Body. Data for the first calendar year 2018 duly reviewed by Verification Body will have to be submitted to EC by 30th April 2019.
QUANTIFICATION AND REPORTING OF GREENHOUSE GAS (GHG) EMISSION
Since FY 2015-2016, your Company has started to capture and quantify GHG emission from its business operations in a transparent and standardized manner for the information of stakeholders of the Company on a voluntary basis. The GHG emission quantification and reporting has been done taking into account:
- ISO 14064-1 (2006) âGreenhouse gases - Part 1: Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals, and
- The Greenhouse Gas Protocol - A Corporate Accounting and Reporting Standard (revised edition) published by World Business Council for Sustainable Development and World Resources Institute.
FOREIGN EXCHANGE EARNINGS AND OUTGO
The details of Foreign Exchange Earnings and Outgo are as follows:
AUDITORS
Pursuant to the provisions of Section 139 of the Companies Act, 2013, Deloitte Haskins & Sells LLP were appointed as the Statutory Auditors of your Company to hold office until the conclusion of the Annual General Meeting of the Company to be held in the calendar year 2022.
The Report given by the Auditors on the financial statements of the Company is part of this Report. There has been no qualification, adverse remark or disclaimer given by the Auditors in their Report.
SECRETARIAL AUDIT
Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Company appointed M/s. Mehta & Mehta, Company Secretaries to undertake the Secretarial Audit of the Company for the financial year ended March 31, 2018.
The Secretarial Audit Report is annexed herewith as âAnnexure Iâ.
APPRECIATION
Your Directors express their sincere thanks to all customers, charterers, vendors, investors, shareholders, shipping agents, bankers, insurance companies, protection and indemnity clubs, consultants and advisors for their continued support throughout the year. Your Directors also sincerely acknowledge the significant contributions made by all the employees through their dedicated services to the Company. Your Directors look forward to their continued support.
For and on behalf of the Board of Directors
K.M. Sheth
Chairman
(DIN : 00022079)
Mumbai, May 04, 2018
Mar 31, 2017
The Directors are pleased to present the 69th Annual Report on the business operations and the Financial Statements of your Company for the financial year ended March 31, 2017.
FINANCIAL PERFORMANCE
The financial results of the Company (standalone) for the financial year ended March 31, 2017 are presented below:
(Rs. in crores)
|
|
2016-17 |
2015-16* |
|
Total Revenue |
2226.74 |
2110.39 |
|
Total Expenses |
1585.35 |
1473.11 |
|
Profit before tax |
641.39 |
637.28 |
|
Less : Tax Expenses |
40.00 |
19.00 |
|
Profit for the period |
601.39 |
618.28 |
|
Retained Earnings |
|
|
|
Balance at the beginning of the year |
1558.29 |
1448.45 |
|
Add : |
|
|
|
- Profit for the year |
601.39 |
618.28 |
|
- Other Comprehensive Income |
(2.14) |
(134) |
|
Less : |
|
|
|
-Transfer to Tonnage tax reserve |
100.00 |
125.00 |
|
-Transfer to Debenture redemption reserve |
591.25 |
25.00 |
|
-Dividend on Equity Shares |
54.28 |
309.09 |
|
-Dividend Distribution Tax |
6.30 |
48.01 |
|
Balance at the end of the year |
1405.71 |
1558.29 |
*recasted as per Ind AS
The net worth of the Company as on March 31, 2017 was Rs.5162.02 crores as compared to Rs.4620.08 crores for the previous year.
The financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015.
DIVIDEND
During the year, your Directors declared and paid an interim dividend of Rs.3.60 per share, resulting in an outflow of Rs.60.58 crores (inclusive of tax on dividend).
Your Directors recommend a final dividend of Rs.6.50 per share which will result in an outflow of Rs.117.96 crores (inclusive of tax on dividend). The dividend will be paid after your approval at the ensuing Annual General Meeting. The aggregate outflow on account of the equity dividend for the year will be Rs.178.54 crores (inclusive of tax on dividend). This represents a payout ratio of 29.69% (previous year 39.46%).
COMPANY PERFORMANCE
In Financial Year (FY) 17, the Company recorded a total income of Rs.2226.74 crores (Previous year Rs.2110.39 crores) and earned a PBIDT of Rs.1261.97 crores (previous year Rs.1,108.30 crores).
MARKET ANALYSIS
CRUDE MARKETS
The crude oil tanker market in FY 17 saw lower earnings than FY 16 due to the following factors:
- Disruptions in oil supply from West Africa and Canada.
- Oil demand growth slowed down to below 1.4 mbpd coupled with a significant growth in fleet supply at 6.5%.
- Flattening oil price curve leading to less demand for ships for storage and release of a significant number of ships already held in floating storage.
- Weaker refining margins, compared to last year, as products inventory was drawn down, leading to lower crude demand by refineries. The table below captures the earnings of the Suezmax and the Aframax type of ships over the financial year (S/day).
Source: Baltic Exchange
These weak earnings led to healthy correction in asset prices for the crude ships and the Company was able to capitalize on the same by acquiring a few modern ships. The Company believes that these acquisitions will be value accretive to the shareholders in the long term.
In FY 17, crude tankers, inclusive of ''spot'' and ''period'', earned an average TCY of $ 21,853 /day (previous year $31,913/day).
PRODUCT MARKETS
The clean products trade in FY 17 was adversely affected due to the following factors:
- Due to high refinery runs in FY 16, inventory of products increased significantly, capping product prices and shutting many arbitrage plays.
- The West to East movement of naphtha almost came to a standstill, while the movement of cargo between the EU and US reduced as well.
- Crude prices also began to rise which further added strain to refinery margins.
- The lack of a contango led to a reduction in the number of vessels employed on storage and in slow steaming on certain vessels.
- Fleet supply was also quite strong at 5.5%.
The table below captures the earnings of the LR and MR type of ships over the financial year (S/day).
Source: Baltic Exchange
As a result of the lackluster earnings, the prices of the clean ships also corrected. The Company bought an MR tanker during FY 17 and also entered into a contract to buy another modern MR tanker just after the conclusion of the financial year. The Company believes that these acquisitions will also be value accretive in the long term.
Product carriers, inclusive of ''spot'' and ''period'', earned an average TCY of $ 15,707/day (previous year S20,155/day).
GAS MARKET
The rise of the gas market over the last few years had been characterized broadly by robust demand and the incremental LPG flowing from the US gulf Asia rather than middle east thus contributing tonne miles. To put it in perspective, the total LPG exports from the US, which was 1.42 Mn tons in 2006, grew to about 27-28 Mn tons in Cal 2016, with the majority destined for Asia.
However in FY 17, the fall in crude prices has led to a major slowdown in shale production which consequently has reduced the supply of LPG. Price increases in the US and depressed prices in Asia led to the elimination of arbitrage opportunities. While fundamental demand still remains strong, the cargoes have reduced on the margin. FY 17 also witnessed unprecedented fleet growth at 14.76% with minimal scrapping. As a result the freight markets remained under pressure in FY 17.
The graph below shows the VLGC earnings for FY 17 (S/day).
Source: Clarksons
The Gas carriers, inclusive of ''spot'' and ''period'', earned an average TCY of $ 38,114/day (previous year $77,586/day).
DRY BULK MARKETS
The dry bulk markets began the financial year on a weak note, thus continuing the sentiment of the previous financial year. The defining characteristic of the Dry Bulk market over the last few years is that it is intrinsically dependent on what happens to Chinese cargo volumes.
The following events followed each other during the financial year:
- China closed some iron ore mines with a focus on reducing pollution and steel mills focused more on high quality imported ore. This resulted in a boost in imports.
- The Chinese government in a measure to combat air pollution shut around 290 Mn tons of domestic coal mining capacity, leading to a surge in high quality imported coal.
- The fleet supply remained subdued during the first three quarters due to a high level of scrapping.
The raft of measures by the Chinese government led to a steadily strengthening market through the year with the fourth quarter taking a major turn upwards. The Company purchased several dry bulk ships in the financial year in order to capitalize on the low asset values. These acquisitions are already proving to be value accretive.
The table below shows the earnings of the various Dry bulk ships over FY 17 (S/day).
Source: Baltic Exchange
In FY 17, the average TCY for dry bulk vessels, inclusive of ''spot'' and ''period'', was approximately $ 7,051 /day as compared to $ 6,638/day in the previous year.
FLEET SIZE AND CHANGE DURING THE FINANCIAL YEAR
As of 31st March 2017, the fleet of your Company stood at 44 ships aggregating 3.69 Mn dwt, with an average age of 9.41 years. During the financial year, your Company took delivery of 7 tankers, 1 Very Large Gas Carrier and 6 Dry bulk carriers aggregating 1.39 Mn dwt. The Company also sold an Aframax tanker in the financial year.
MOVEMENT OF ASSET VALUES
The weakness of the tanker freight markets translated into the weakening of vessel values over the year. The crude vessels lost about 35% - 40% of the value depending on size and age whereas the clean vessels lost about 20% - 30% of their value depending on size and age. The value of the dry bulk vessels moved up on the back of strengthening freight rates with gains of 40% - 80%. Currently, the Company believes that the values of crude tankers have a negative bias especially of the older vessels while the clean tankers have stabilized in values. The values of the dry bulk assets continue to exhibit positive bias on their current valuations.
ORDER BOOK AND OUTLOOK
The tanker order book stands at about 12.6% of the fleet. The majority of this order book is slated to be delivered over the next 12 -15 months. As this order book delivers, coupled with the expected extension of OPEC cuts and lower refinery throughputs, the tanker freight markets are expected to remain subdued over the next 6-9 months where after secular demand is expected to make its effect felt on the markets.
The Dry Bulk order book stands at about 8.1% of the fleet and the majority of it is slated to be delivered over the next 12-15 months. Whilst this order book does not seem large, the Company has already seen a large growth in fleet over the last few years and thus it is critical that the order book does not grow. The strength in the freight markets coupled with low asset values is however encouraging owners to order more new buildings which can postpone the return of robust earnings for these vessels. The Company expects the market to plateau around the current earnings level over the next 6 months and the trajectory thereafter shall be guided by additional demand for dry bulk commodities and the increase/decrease of order book in the interim.
RISKS AND CONCERNS
Your Company has carried out a detailed exercise to identify the various risks faced by the Company, and has put in place mitigation, control and monitoring plans for each of the risks. Risk owners have been identified for each risk, and these risk owners are responsible for controlling the respective risks. The efficacy of these processes is monitored on a regular basis by Risk Committees for the different areas in order to make continuous improvement and is further reviewed by the Risk Management Committee consisting of the three Whole-time Directors and the Compliance Officer.
The material risks and concerns faced by the Company are as follows:
ECONOMIC RISK:
Shipping is a global business whose performance is closely linked to the state of the global economy. Therefore, the earnings of your Company could be impacted negatively if the global economic situation does not improve over the longer term.
VOLATILITY:
Over and above the economic risks, the shipping industry is impacted by numerous short term and regional factors, like political fallouts, weather changes, etc. This results in great amount of volatility in the freight market, which in turn impacts your Company''s earnings.
Your Company has attempted to hedge some of the above risk by entering into time charters for part of its fleet. Your Company also believes that one of the main elements of risk management in shipping is the cost of the asset, and will endeavour to time acquisitions and sales in such a way as to reduce risk on the portfolio.
SHIPBOARD PERSONNEL:
Indian officers continue to be in great demand all over the world. Given the unfavorable tax status conferred on a seafarer sailing on Indian-flagged vessels, it is becoming increasingly difficult for your Company to source officers capable of meeting the modern day challenges of worldwide trading. This is more relevant for tanker personnel and may become a hindrance to growth.
OPEC ACTION:
If the OPEC decides to prolong the cut in output, this drop in supply along with increased new building deliveries, could continue to negatively impact the demand for tankers.
CHINESE ECONOMY:
As seen in the recent past, China has been the main driving factor of the shipping demand. The Chinese economy has over the last financial year increased its consumption of imported dry bulk commodities. Whilst this has impacted trade growth positively, this demand needs to continue going forward. If this demand were to falter, this along with increased new building deliveries may renew the negative impact on dry bulk freight markets.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has instituted internal financial control systems which are adequate for the nature of its business and the size of its operations. The policies and procedures adopted by the Company ensure the orderly and efficient conduct of its business, including adherence to Company''s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information.
The systems include a range of activities such as approvals, authorizations, verifications, reconciliations, review of operating and financial performance, security of assets, segregation of duties, preventive and detective controls.
The systems have been well documented and communicated. They are also tested from time to time through internal as well as external audits.
The internal audit is carried out by a firm of external Chartered Accountants and covers all departments. In the beginning of the year, the scope of the internal audit exercise including the key business processes and selected risk areas to be audited are finalized in consultation with the Audit Committee. All significant audit observations and follow up actions thereon are reported to the Audit Committee.
The Audit Committee comprises of Mr. Cyrus Guzder (Chairman), Mr. Berjis Desai, Mr. Farrokh Kavarana and Ms. Rita Bhagwati.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared by your Company in accordance with Ind ASs notified under the Companies (Indian Accounting Standards) Rules, 2015. The audited Consolidated Financial Statements together with Auditors'' Report thereon form part of the Annual Report.
The group recorded a consolidated net profit of Rs.754.96 crores for the year under review as compared to Rs.1096.98 crores for the previous year. The net worth of the group as on March 31, 2017 was Rs.7223.33 crores as compared to Rs.6563.48 crores for the previous year,
subsidiaries
The statement containing the salient features of the financial statements of the Company''s subsidiaries for the year ended March 31, 2017 has been attached along with the financial statements of the Company. The report on performance of the subsidiaries is as follows:
GREATSHIP (INDIA) LIMITED, INDIA
Greatship (India) Limited (GIL), wholly owned subsidiary of your Company and one of India''s largest offshore oilfield services providers, has completed its one of the most challenging years in the midst of worst downturn in the offshore oil and gas industry. GIL has, after accounting for an impairment of Rs.184.33 crores in asset values, recorded a profit after tax of Rs.154.71 crores on a consolidated basis for the year ended March 31, 2017 as compared to Rs.523.77 crores for the year ended March 31, 2016, after accounting for impairment of Rs.163.09 crores in asset values. The consolidated net worth of GIL for financial year 2017 was Rs.3,219.65 crores as compared to Rs.3,098.39 crores for financial year 2016.
During the year under review, GIL sold one 1999 built Platform Supply Vessel (PSV), ''Greatship Disha'' and its subsidiary in Singapore sold one 2013 built ROV (Remotely Operated Vehicle) Support Vessel (ROVSV), ''Greatship Ragini''. There was no addition to the fleet during the year under review. GIL, along with its subsidiaries, currently owns and operates nineteen vessels and four jack up drilling rigs. The operating fleet of nineteen vessels comprises of four PSVs, eight Anchor Handling Tug cum Supply Vessels (AHTSVs), two Multipurpose Platform Supply & Support Vessels (MPSSVs) and five ROVSVs.
During the year under review, the company commenced group restructuring exercise whereby the company has acquired full ownership of its Singapore subsidiary, Greatship Global Energy Services Pte. Ltd. (GGES) and further has also decided to acquire the jack-up rigs owned by GGES.
GIL has the following wholly owned subsidiaries:
- Greatship Global Energy Services Pte. Ltd., Singapore (GGES)
Subsequent to acquisition of all shares of GGES from GGHL by GIL, GGES has become the direct 100% wholly owned subsidiary of GIL w.e.f March 28, 2017. GGES currently owns four Jack-up rigs and GGES has committed to sell all its four jack-up rigs to GIL. GGES after accounting for impairment of USD 223.7 Mn in the asset values on account of assets being held for sale, incurred a loss of USD 198.54 Mn for the current financial year as against the profit of USD 42.87 Mn in the previous year.
- Greatship Global holdings Ltd., Mauritius (GGHL)
During the year, GGHL sold all the shares held by it in GGES, representing 89.3% of share capital of GGES, to GIL and recognized a gain on disposal of its holding in GGES. GGHL is the holding company of GGOS.
- Greatship Global Offshore Services Pte. Ltd., Singapore (GGOS)
GGOS owns and operates three offshore support vessels which include one Anchor Handling Tug cum Supply Vessel (AHTSV) and two Multipurpose Platform Supply and Support Vessels (MPSSVs). GGOS after accounting for an impairment of USD 16.32 Mn in asset values, incurred a loss of USD 19.96 Mn for the current financial year as against the loss of USD 5.33 Mn in the previous year, after accounting for impairment of USD 8.93 Mn in asset value.
During the year, GGOS''s wholly owned subsidiary, GGOS Labuan Ltd., Malaysia was struck off with effect from March 4, 2017.
- Greatship (uK) Limited, united Kingdom (GuK)
During the year under review, the term of the charter party for one of the ROV Support Vessels (ROVSVs) inchartered from GIL was completed and GUK continued to operate the other ROV Support Vessel (ROVSV) inchartered from GIL. GUK''s profit after tax for the current financial year amounted to USD 0.41 Mn as against the profit of USD 1.55 Mn in the previous year.
- Greatship Oilfield Services Ltd., India (GOSL)
GOSL did not carry out any operations during the year.
THE GREATSHIP (SINGAPORE) PTE. LTD., SINGAPORE
The Greatship (Singapore) Pte. Ltd. is a wholly owned subsidiary of your Company. The Greatship (Singapore) Pte. Ltd. does shipping agency business for the ships owned by your Company. During the year ended March 31, 2017 there were 87 ship calls at Singapore. The company''s profit after tax for the current financial year amounted to S$ 0.13 Mn as against the profit of S$ 0.20 Mn in the previous year.
THE GREAT EASTERN SHIPPING CO. LONDON LTD., u.K.
The Great Eastern Shipping Co. London Ltd. was a wholly owned subsidiary of your Company. It did not carry out any operations during the year. The company had filed an application with the Companies House, UK for voluntarily striking off its name from Register of Companies, UK. The company has been dissolved w.e.f August 30, 2016.
THE GREAT EASTERN CHARTERING LLC (FzC), u.A.E.
The Great Eastern Chartering LLC (FZC) is a wholly owned subsidiary of your Company. Chartering of ships is the main activity of this company. The company had in-chartered one Suezmax tanker on 3 years charter which will end in June 2017. The vessel was chartered to The Great Eastern Shipping Co. Ltd. commencing 3rd April 2015 on back to back terms. During the financial year ended March 31, 2017, the company made a loss of USD 0.59 Mn as against the profit of USD 1.65 Mn in the previous year.
THE GREAT EASTERN CHARTERING (SINGAPORE) PTE. LTD., SINGAPORE
The Great Eastern Chartering (Singapore) Pte. Ltd. is a wholly owned subsidiary of The Great Eastern Chartering LLC (FZC), UAE. The company has done no trading activity during the year due to deteriorating market conditions. During the financial year ended March 31, 2017, the company made a loss of USD 0.05 Mn as against the loss of USD 0.10 Mn in the previous year.
GREAT EASTERN CSR FOUNDATION, INDIA
Great Eastern CSR Foundation (Foundation) is a wholly owned subsidiary of your Company which handles the CSR activities of your Company and its subsidiaries. The Foundation received a total contribution of Rs.8.28 crores from the Company and Great ship (India) Limited during the year ended March 31, 2017. The Foundation spent Rs.6.87 crores on CSR activities during the year.
Details of CSR activities carried out by Great Eastern CSR Foundation for your Company are set out in the annual report on CSR activities which forms part of this Board''s Report.
DEBT FUND RAISING
During the year, fresh debt of Rs.1931.21 crores was raised. The gross debt : equity ratio as on March 31, 2017 was 0.86:1 and the debt : equity ratio net of cash and cash equivalents was 0.27:1.
During the year, the Company has bought back and extinguished 100 Secured and 550 Unsecured Debentures of Rs.10,00,000 each, aggregating to Rs.65 crore.
QUALITY, SAFETY, TRAINING, HEALTH & ENVIRONMENT
A high level of safety on board assets has been maintained during the year on the Company''s vessels by continued efforts of the seafarers and the office staff. This requirement continues to be emphasised during the scheduled meetings with the management level floating staff and the Company''s top management. Lost Time due to Injury (LTI) was 2.34 per million exposure hours and Total Recordable case Frequency (TRCF) was 5.23 per million exposure hours. This is slightly more than the Company''s KPI of 2.0 and 4.8 respectively. The increase as compared to last year is due to the re-classification of data collected based on OCIMF guidelines.
The Company, to ensure that the assets are maintained in good condition, carried out additional inspections of vessels. The Company''s assets continued to perform well during oil major inspections. The Company also ensured that new acquisitions into the fleet were taken into the Company''s quality management system quickly during the rapid fleet expansion phase.
The need for continuous improvement in safety and operating standards is recognized by the Company and to achieve greater level of compliance a separate department dealing with training at all levels of seafarers has been established. This department identifies the seafarer''s training needs on an individual basis and organizes shore-based training in established training institutes. The department is also involved in designing company specific training modules.
IT INITIATIVES
In this financial year, IT has focused on the following major initiatives:
TIGHTENING OF CYBER SECURITY
In this digitally connected world, cyber security is a matter of great concern for all organizations. The Company has appointed a major IT service provider and security expert to assess the vulnerability, both in the shore office and on board the ships, with respect to Cyber security.
The agency is guiding the Company to implement the required technologies in order to reduce vulnerability of the Company''s systems.
UPGRADING PLANNED MAINTENANCE SYSTEM (PMS)
The PMS is one of the key functions on board to keep the ship''s equipment technically fit to operate with minimum disruption. Your Company is upgrading the PMS software, and this will further help the technical maintenance teams to ensure maximum uptime for all equipment, and to maintain the ship itself to the highest possible standards.
DIGITIZATION INITIATIVE
The goal has been set for the organization to go for paperless environment and IT is enabling the organization towards that direction, by way of making more user friendly software applications to increase usage of software. Also, old paper records are being digitized to maximize accessibility and minimize storage requirements.
GST IMPLEMENTATION INITIATIVE
The Company''s ERP system has been developed and built in-house over the past 10 years or more and all of the organization''s functions are working through this system. In order to implement GST, a significant amount of modifications are required to be done in the ERP platform before July 2017 deadline. A dedicated team has been on the job to make it happen before deadline, so as to enable your Company to move on to the GST platform seamlessly.
HUMAN RESOURCES
Your Company recognizes the ability to attract and retain the best talent is vital for sustainability and competitive advantage for the organization. A set of initiatives were implemented for enabling talent acquisition and development during the year. A focused social media campaign improved applicant base for the pre-sea courses held at GEIMS. Introduction of structured scientific recruitment methods resulted in enhancement of quality of cadets at the Institute.
Learning & Development continued to get organizational attention. As in the past, the Company has initiated the 3600 feedback process for senior roles to aid in individual development and succession planning. Employees underwent training in shipping business simulation, emotional intelligence, critical thinking and career planning. Team relationship reviews facilitated cohesiveness among members. A special workshop was held for women employees based on career anchors and wheel of balance.
Social cafe approach was utilized to harness employee camaraderie which included Quiz, Marathon and cultural programs during festive occasions. The annual town hall held in December 2016 helped in employee alignment and building team spirit.
The overall employee engagement measured by Coffman Index stood at 77% compared to 74% in the previous year.
For the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
Total number of permanent shore staff and floating staff was 191 and 222 respectively.
GREAT EASTERN INSTITUTE OF MARITIME STUDIES (GEIMS)
The Great Eastern Institute of Maritime Studies, Lonavla (GEIMS) has since inception trained 3068 cadets. These cadets are serving on ships as Nautical, Engineering or Electro-Technical Officers. Almost 70% of the officers of Company''s vessels have been trained at GEIMS. This percentage will increase in the next few years.
In August 2016, GEIMS set up a state of the art ''Electrical High Voltage Safety and Switch Gear laboratory with simulator'' and obtained approval of the Directorate General of Shipping. With this facility GEIMS has provided the mandatory training to 145 senior Engineers of the Company and to others on payment of fees.
GEIMS was inspected as per the Comprehensive Inspection Programme (CIP) enhanced guidelines of the Director General of Shipping in November 2016 by an Audit team from DNV GL Ship Classification Society. GEIMS was certified that it meets the training requirement criteria as per IMO STCW Convention and effectively complies with all applicable Merchant Shipping Rules, and other associated orders, circulars and guidelines issued by the Directorate General of Shipping. On basis of the successful inspection, GEIMS was once again assigned Grade A1 (outstanding) for three years.
In December 2016, GEIMS was granted approval by the Directorate General of Shipping to conduct the 6-months training course for General Purpose Ratings (GP Rating). The GP Rating training course successfully commenced at GEIMS with a first batch of 37 trainees in January 2017. After successful completion of their training, these trainees are expected to be placed on Company''s vessels as trainee seamen.
CORPORATE SOCIAL RESPONSIBILITY
The Corporate Social Responsibility Committee comprises of Mr. Vineet Nayyar (Chairman), Mr. Cyrus Guzder and Mr. Bharat K. Sheth.
Copy of the Corporate Social Responsibility Policy of the Company as recommended by the CSR Committee and approved by the Board is enclosed as ''Annexure A''. The CSR Policy is also available on the website of the Company : www.greatship.com.
The Annual Report on CSR activities is enclosed herewith as "Annexure Bâ.
DIRECTORS
Mr. K. M. Sheth shall retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.
Necessary resolution for re-appointment of Mr. K. M. Sheth has been included in the Notice convening the ensuing Annual General Meeting.
The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013 and under Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements), 2015.
BOARD MEETINGS
During the year, 5 meetings of the Board were held. The details of Board meetings as well as Committee meetings are provided in the Corporate Governance Report.
APPOINTMENT AND REMUNERATION POLICY FOR DIRECTORS AND SENIOR MANAGEMENT
The Nomination & Remuneration Committee has framed a policy for appointment of Directors. The Nomination & Remuneration Committee has also framed policies for remuneration of Directors, Key Managerial Personnel and other employees, which have been adopted by the Board.
The aforesaid policies are enclosed herewith as Annexure ''C'' and ''D''.
The details of remuneration as required to be disclosed pursuant the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are enclosed as Annexure ''E''.
BOARD EVALUATION
Annual performance evaluation of Board, its committees (namely, Audit, Nomination & Remuneration, Corporate Social Responsibility and Stakeholders'' Relationship Committees) and all the Directors individually has been done in accordance with the Performance Evaluation Framework adopted by the Nomination & Remuneration Committee of the Company.
The Performance Evaluation Framework sets out the performance parameters as well as the process for performance evaluation to be followed. Performance evaluation forms were circulated to all the Directors to record their evaluation of the Board, its Committees and Non-executive Directors of the Company. The performance evaluation of the Company and Executive Directors was done on the basis of presentation made by the management.
Pursuant to the provisions of the Companies Act, 2013, a separate meeting of Independent Directors reviewed performance of the Company, Board as a whole and Non-Independent Directors (including Chairman) of the Company.
The Board of Directors reviewed the performance of Independent Directors and Committees of the Board. Nomination & Remuneration Committee also reviewed performance of the Company and every Director.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 134 (3) of the Companies Act, 2013 the Board of Directors hereby state that:
a) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
b) The directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;
c) The directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
d) The directors had prepared the annual accounts on a going concern basis; and
e) The directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
f) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
CORPORATE GOVERNANCE
Your Company has complied with all the mandatory provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, relating to Corporate Governance. A separate section on Corporate Governance forms part of the Board''s Report and the certificate from practicing Company Secretary confirming the compliance of conditions on Corporate Governance is included in the Annual Report.
VIGIL MECHANISM
The Company has established a vigil mechanism (Whistle Blower Policy) for directors and employees to report genuine concerns. The Whistle Blower Policy provides for adequate safeguards against victimization of persons who use such mechanism and make provision for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases.
A copy of the Whistle Blower Policy is available on the website of the Company: www.greatship.com
RELATED PARTY TRANSACTIONS
The Company has formulated policy on dealing with Related Party Transactions, a copy of which is available on the website of the Company: www. greatship.com
The particulars of contracts or arrangements with related parties in Form AOC 2 is annexed herewith as "Annexure Fâ.
All the related party transactions have been entered into by the Company in the ordinary course of business and on arm''s length basis.
However, following transaction, though entered into in the ordinary course of business, may not strictly be treated on arm''s length basis:
During the year, the Company has transferred a Hyundai i20 Asta car to Mr. Jayesh M. Trivedi, President (Secl. & Legal) & Company Secretary for no consideration (subject to applicable taxes) as per employment rules of the Company. Mr. Jayesh M. Trivedi had availed the car in 2010 based on his entitlement. The value of car has already been deducted from his salary.
EXTRACT OF ANNUAL RETURN
The extract of the Annual Return in Form MGT 9 is enclosed herewith as "Annexure Gâ.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Particulars of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the financial statements.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.
DIVIDEND DISTRIBUTION POLICY
The Dividend Distribution Policy of the Company is enclosed as ''Annexure H''. Copy of the Dividend Distribution Policy is also available on the website of the Company : www.greatship.com.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION
CONSERVATION OF ENERGY
In order to contribute to and prepare for a low carbon future, your Company has been undertaking various initiatives with regard to enhancing energy efficiency in its business operations.
ENERGY SAVING DEVICES
During the year under consideration, following Energy Saving Devices were retrofitted for reducing fuel consumption of main propulsion system:
- Jag Rani and Jag Pankhi were retrofitted with Propeller Boss Cap Fins (PBCF), a device which improves propulsive efficiency. The propeller''s rotational motion forms a strong vortex at the center, which causes overall loss of propulsive efficiency. The finned features of a PBCF break up this vortex, thereby reducing the loss of energy.
Total cost incurred on above two ships: USD 150,000.
- For a typical Bulk Carrier or Tanker, loss of energy through hull resistance is around 30% and this increases with growth of hull roughness due to bio-fouling. To minimize growth of bio-fouling, the Company has applied superior anti-fouling coatings on Jag Rishi, Jag Rani, Jag Roopa and Jag Vishnu during their respective dry dockings during the financial year.
The additional cost incurred for application of the superior anti-fouling coatings was USD 290,000.
During the year, saving of USD 1.06 million was achieved in fuel cost from energy saving retrofits and use of superior anti-fouling hull coatings alone. This fuel saving also resulted in reduction of CO2 emission by 13,973 MT.
INITIATIVES OF VESSEL PERFORMANCE MANAGEMENT CELL
VPM Cell in co-ordination with IT Department has developed a Main Engine Performance Monitoring tool and has been rolled out to fleet vessels. This will assist in closer monitoring and analysis of main engine performance over time i.e. trend analysis.
TECHNOLOGY ABSORPTION
Your Company has identified and absorbed several technologies on fleet vessels. These are reflected in paragraphs above.
QUANTIFICATION AND REPORTING OF GREENHOUSE GASES (GHG) EMISSION
Since last year, your Company has started to capture and quantify GHG emission from its business operation in a transparent and standardized manner for the information of stakeholders of the Company on a voluntary basis. The GHG emission quantification and reporting has been done taking into account:
- ISO 14064-1 (2006) ''Greenhouse gases - Part 1: Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals'', and
- The Greenhouse Gas Protocol - A Corporate Accounting and Reporting Standard (Revised edition) published by World Business Council for Sustainable Development and World Resources Institute.
CONTRIBUTION IN THE WORK OF MARINE ENVIRONMENT PROTECTION COMMITTEE OF INTERNATIONAL MARITIME ORGANIZATION
Marine Environment Protection Committee of IMO is currently developing new regulations and reviewing existing regulations for reduction of CO2 emission from ships. Your Company, as a stake holder, has been providing feedback to this work through Government of India for development of pragmatic regulations for benefit of the environment and society.
FOREIGN EXCHANGE EARNINGS AND OUTGO
The details of Foreign Exchange Earnings and Outgo are as follows:
(Rs. in crores)
|
a) Foreign Exchange earned on account of freight, charter hire earnings, etc. |
1150.34 |
|
b) Foreign Exchange used including operating expenses, capital repayment, down payments for |
2142.38 |
|
acquisition of ships (net of loan), interest payment, etc. |
|
AUDITORS
Pursuant to provisions of Section 139 of Companies Act, 2013, Kalyaniwalla & Mistry LLP were appointed as the Statutory Auditors of the Company at the Annual General Meeting held on September 25, 2014, to hold office till the conclusion of the ensuing Annual General Meeting. Since Kalyaniwalla & Mistry LLP has completed its term as prescribed under Section 139(2) of the Companies Act, 2013, the Company is required to appoint another firm as the Statutory Auditor in their place.
Accordingly, the Audit Committee and the Board of Directors have recommended appointment of Deloitte Haskins & Sells LLP as Statutory Auditors to hold office from conclusion of the ensuing Annual General Meeting till the conclusion of the 74th Annual General Meeting to be held in calendar year 2022.
Necessary resolution for their appointment has been included in the Notice convening the ensuing Annual General Meeting.
SECRETARIAL AUDIT
Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Company appointed M/s. Mehta & Mehta, Company Secretaries to undertake the Secretarial Audit of the Company for the financial year ended March 31, 2017.
The Secretarial Audit Report is annexed herewith as "Annexure Iâ.
APPRECIATION
Your Directors express their sincere thanks to all customers, charterers, vendors, investors, shareholders, shipping agents, bankers, insurance companies, protection and indemnity clubs, consultants and advisors for their continued support throughout the year. Your Directors also sincerely acknowledge the significant contributions made by all the employees through their dedicated services to the Company. Your Directors look forward to their continued support.
For and on behalf of the Board of Directors
K.M. Sheth
Chairman
(DIN : 00022079)
Mumbai, May 05, 2017
Mar 31, 2014
Dear Members,
The Directors are pleased to present the 66th Annual Report on the
business operations and the Financial Statements of your Company for
the financial year ended March 31, 2014.
FINANCIAL PERFORMANCE
The financial result of the Company (standalone) for the financial year
ended March 31, 2014 is presented below:
Rs. in crores
2013-14 2012-13
Total Revenue 1780.25 2033.79
Total Expenses 1571.57 1876.53
Profit before tax 208.68 157.26
Less : Tax Expenses 4.00 11.00
Profit for the period 204.68 146.26
Add : Profit as per last Balance Sheet 2904.98 2922.62
Less :
-Transfer to Tonnage tax reserve 30.00 10.00
-Transfer to General reserve 21.00 15.00
-Transfer to Debenture redemption reserve 25.00 15.00
-Transfer to Capital redemption reserve 1.54 -
-Interim Dividend on Equity Shares 60.32 45.70
-Proposed Dividend on Equity Shares 75.39 68.54
-Dividend Distribution Tax 14.85 9.66
Balance Carried Forward 2881.56 2904.98
DIVIDEND ON EQUITY SHARES
During the year, your Directors declared and paid interim dividend of Rs.
4 per share resulting in an outflow of Rs. 70.57 crore (inclusive of tax
on dividend) and recommend a final dividend of Rs. 5 per share resulting
in an outflow of Rs. 88.20 crore (inclusive of tax on dividend). The
dividend will be paid after your approval at the ensuing Annual General
Meeting. The aggregate outflow on account of the equity dividend for
the year would be Rs.158.77 crore (inclusive of tax on dividend). This
represents a payout ratio of 77.56% (previous year 84.71%).
Your Directors, at their meeting held on August 12, 2014, declared
interim dividend of Rs. 4 per share for financial year 2014- 15 resulting
in an outflow of Rs. 67.31 crore (inclusive of tax on dividend).
BUYBACK OF EQUITY SHARES
During the year under review, your Company announced buyback of its
equity shares from the open market through stock exchanges at a price
not exceeding Rs. 279 per share for an aggregate amount not exceeding Rs.
279 crores.
The buyback commenced on September 2, 2013 and was completed on
February 28, 2014. The Company bought back 15,45,019 equity shares of
face value of Rs.10 each for an aggregate amount of Rs. 41.27 crores. The
highest, lowest and average price at which the shares were bought back
was Rs. 279.00, Rs. 252.08 and Rs. 266.51 per share respectively.
The Company was unable to achieve the maximum buyback of Rs. 279 crores
as the stock price remained above the maximum price of Rs. 279 per share
during a substantial part of the buyback period.
Consequent upon the buyback, the paid up share capital of the Company
was reduced from Rs. 1,52,32,20,840 comprising of 15,23,22,084 Equity
Shares of Rs.10 each to Rs. 1,50,77,70,650 comprising of 15,07,77,065
Equity Shares of Rs. 10 each.
COMPANY PERFORMANCE
In FY 13-14, the Company recorded a total income of Rs. 1780.25 crores
(Previous year Rs. 2033.79 crores) and earned a PBIDT of Rs. 780.84
crores (previous year Rs. 729.71crores).
TANKER BUSINESS
MARKET TREND AND ANALYSIS
Tanker average time charter equivalent earnings over the year ($ per
day)
The Crude tanker market began the year with falling freight rates and
weak sentiment. Declining US oil imports, lack of demand growth from
developed markets, slowing demand growth from the emerging nations were
seen as insurmountable hurdles for a market recovery. However, the
market underwent a turnaround during Q3 FY14 and rates soared mainly on
the back of stronger Chinese oil imports, slowing fleet growth,
longer-haul trades for Atlantic barrels, and weather related delays
primarily in the Atlantic.
The Product tanker market continued its steady run during the first 9
months of FY14, outperforming the crude market on a relative as well as
on an absolute basis. The first nine months of FY14 were well supported
by increased refined product exports out of US Gulf and a subdued fleet
supply growth. However, in Q4FY14, reduced volatility in underlying
commodity prices, refinery turnarounds, and a cold US winter, kept the
rates subdued at the end of the year.
At the end of the FY14, the world tanker fleet increased by 1.15% to
485.31 mn dwt as against 479.76 mn dwt at the end of FY13.
COMPANY PERFORMANCE
The tanker business accounted for around 77% of the Company''s operating
revenues and 74% of the operating profits.
In FY14, around 38% of the tanker earnings were derived from the period
market. Crude tankers, inclusive of ''spot'' and ''period'', earned an
average TCY of $16,700/day (previous year $17,700/day). Product
carriers, inclusive of ''spot'' and ''period'', earned an average TCY of
$14,900/day (previous year $15,000/day).
TANKER FLEET CHANGES
As of 31st March 2014, the tanker fleet of your Company stood at 22
tankers aggregating 1.79 mn dwt, with an average age of 10.52 years as
against 23 tankers aggregating 1.86 mn with an average age of 10.43
years as on 31st March 2013.
During the year, your Company took delivery of:
- MR Tanker ''Jag Prabha'' in August 2013.
- MR Tanker ''Jag Pranav'' in September 2013.
During the year, your Company sold & delivered the following tankers:
- GP Tanker ''Jag Parwar'' in April 2013.
- GP Tanker ''Jag Preeti'' in June 2013.
- Aframax Tanker ''Jag Leela'' in July 2013. Subsequent to the year your
Company:
- contracted to sell and delivered its 1996 built MR Tanker ''Jag Padma''
in Q1FY15.
- contracted to sell its 1990 built VLGC ''Jag Vidhi''. The ship will be
delivered to the buyer in Q3/Q4 FY15.
- took delivery of the 1994 built VLGC ''Jag Vishnu'' in Q2FY15.
OUTLOOK FOR THE TANKER MARKET
Crude appetite is expected to remain strong in non - OECD countries. It
has also been forecasted that developed economies would also have
marginal growth in crude demand which is a more optimistic picture as
compared to the last year. Oil demand is expected to grow by 1.2% y-o-y
to 91.8 mn bbl per day versus a moderate fleet growth of 1.7%.
Crude sea borne demand is expected to be better than 2013 due to
increased longer haul trades. The demand - supply remains well balanced
as compared to previous years, where supply growth was greater than sea
borne demand. Slowing fleet growth coupled with a positive demand
scenario is giving rise to more positive expectations on the crude
tanker segment.
On the clean product side, there exists a reasonably good demand
scenario, however, there is concern over the substantial order book,
wherein majority of new builds are being delivered in FY 2015 and FY
2016.
Therefore, it is expected that crude markets will fare better as
compared to FY 2014 while the products earnings will be under pressure
in FY 2015.
The global tanker orderbook stands at about 62.25 mn dwt or 13.59 % of
the fleet at the end of March 2014.
DRY BULK BUSINESS
MARKET TREND AND ANALYSIS
Dry bulk average time charter equivalent earnings over the year ($ per
day)
FY14 was a year of relief for the dry bulk owner as the freight levels
steadily climbed from Q1 to Q3FY14. The positive sentiment on the
Capesizes was on the back of growing Chinese iron ore imports. China
was at the forefront of the recovery of rates as it accounted in excess
of 80% share of global dry bulk demand growth during the financial
year. Substantial recovery in global grain trade in the latter part of
the year supported rates in the Panamax and Supramax categories. Indian
coal imports were also higher by 20% during the year. The freight
market however gave away most of it gains by the end of the year due to
slower Chinese activity around its new year holidays, tonnage build up
in the Atlantic and a disappointing South American grain season.
At the end of the FY14, the world dry bulk fleet increased by 7.1% to
740.46 mn dwt as against 691.16 mn dwt at the end of FY13.
COMPANY PERFORMANCE
The dry bulk fleet contributed around 23% of the Company''s operating
revenues and 26% of the operating profits.
In FY14, around 29% of the bulk carrier earnings were derived from the
period market.
In FY14, the average TCY for dry bulk vessels, inclusive of ''spot'' and
''period'', was approximately $ 12,100/day as compared to $9,800/day in
the previous year.
DRY BULK FLEET CHANGES
As of 31st March 2014, the dry bulk fleet of your Company stood at 8
vessels aggregating 0.62 mn dwt, with an average age of 8.5 years as
compared to 9 vessels aggregating 0.67 mn dwt with an average age of
7.8 years on 31st March 2013.
During the year, your Company sold & delivered:
- Handymax bulk carrier ''Jag Ravi'' in June 13.
During the year, your Company placed orders for 2 Kamsarmax Bulk
carriers at Tsuneishi Shipbuilding Co. Ltd. The vessels are expected to
join the fleet during H1 FY16.
Your Company also placed orders for 3 Kamsarmax Bulk carriers at
Jiangsu New Yangzi Shipbuilding Co. Ltd. The vessels are expected to
join the fleet during H1 FY17.
OUTLOOK FOR THE DRY BULK MARKET
Concerns on slowing Chinese demand for some dry bulk commodities,
coupled with growing fleet supply, resulted in freight markets
remaining weak in Q1FY15.
However, the Company expects Chinese import demand for dry bulk to
recover once the current imbalances in commodities pricing are
corrected favoring Chinese imports over domestic sourcing of raw
materials.
On the tonnage supply side, new building deliveries are expected to
slow down as we enter into H2 FY14. These will together help improve
freight levels as we progress into FY15. Overall, we expect FY15
averages to be around FY 14 levels.
The global bulk carrier orderbook stands at about 158.52 mn dwt or
21.4% of the fleet at the end of March 2014.
ASSET VALUES
During FY14 second-hand values for modern crude tankers witnessed a
rise of about 15-20% while product tanker values rose about 20%.
Second-hand values of modern dry bulk carriers rose by about 25-30%
during the same period. New building prices were up by about 15-20% for
crude tankers while those of product tankers had firmed up by about 10%
during the financial year. New building prices for dry bulk carriers
witnessed a rise of about 10-15% for the same period.
RISKS AND CONCERNS
Economic risk: Shipping is a global business whose performance is
closely linked to the state of the global economy. Therefore, the
earnings of your Company could be impacted negatively if the global
economic situation does not improve over the longer term.
Volatility: Over and above the economic risks the shipping industry is
impacted by numerous short term and regional factors, like political
fallouts, weather changes etc. This results in a great amount of
volatility in the freight market, which in turn impacts your Company''s
earnings.
Your Company has attempted to hedge some of this risk by entering into
time charters for part of its fleet.
Shipboard personnel: Indian officers continue to be in great demand all
over the world. Given the unfavourable tax status conferred on a
seafarer sailing on Indian-flagged vessels, it is becoming increasingly
difficult for your Company to source officers capable of meeting the
modern day challenges of worldwide trading. This is more relevant for
tanker personnel and may become a hindrance to growth.
OPEC action: If the OPEC decides to cut output, it could negatively
impact the demand for tankers.
European financial crisis: The on-going European financial crisis can
further depress the already subdued demand especially for dry bulk in
the Euro zone.
Chinese economy: As we have seen in the recent past China has been the
main driving factor of the shipping demand, in case there is a major
downward shift in the Chinese economy, it could have negative impact on
shipping.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared by your
Company in accordance with Generally Accepted Accounting Principles in
India, the Accounting Standards issued by The Institute of Chartered
Accountants of India and the provisions of the Companies Act, 1956 to
the extent applicable. The audited Consolidated Financial Statements
together with Auditors'' Report thereon form part of the Annual Report.
The group recorded a consolidated net profit of Rs. 573.95 crores for the
year under review as compared to Rs. 537.76 crores for the previous year.
The net worth of the group as on March 31, 2014 was Rs. 6772.85 crores as
compared to Rs. 6341.76 crores for the previous year.
SUBSIDIARIES
Greatship (India) Limited
Greatship (India) Limited (GIL), 100% wholly owned subsidiary (WOS) of
your Company and one of India''s largest offshore oilfield services
providers, had another rewarding year. GIL recorded a profit after tax
of Rs. 228.23 crores on a standalone basis and Rs. 463.78 crores on a
consolidated basis for the year ended March 31, 2014 as compared to Rs.
166.33 crores and Rs. 430.72 crores, respectively, for the year ended
March 31, 2013. The consolidated net worth of GIL for financial year
2014 was Rs. 3472.32 crores as compared to Rs. 2889.63 crores for financial
year 2013.
Subsequent to the year end, GIL redeemed 1.45 crores Preference Shares
with the dividend rate of 7.5% p.a. held by your Company.
As on date, the total share capital held by your Company in GIL
comprises of 11.13 crores equity shares of Rs. 10 each totalling in value
to Rs. 1305.14 crores and 11.96 crores preference shares of Rs. 10 each
totalling in value to Rs. 358.87 crores.
GIL, alongwith its subsidiaries, currently owns and operates twenty one
vessels and three jack up drilling rigs and has one 350'' Jack Up Rig
under construction. The operating fleet of twenty one vessels comprises
of four Platform Supply Vessels (PSVs), nine Anchor Handling Tug cum
Supply Vessels (AHTSVs), two Multipurpose Platform Supply & Support
Vessels (MPSSVs) and six ROV (Remotely Operated Vehicle) Support
Vessels (ROVSVs).
GIL has the following wholly owned subsidiaries:
a) Greatship Global Energy Services Pte. Ltd., Singapore
b) Greatship Global Offshore Services Pte. Ltd., Singapore (GGOS)
c) Greatship Global Holdings Ltd., Mauritius
d) Greatship (UK) Limited, United Kingdom
e) GGOS Labuan Ltd., Malaysia (Incorporated as WOS of GGOS on
25.06.2014)
During the year under review, GIL''s wholly owned subsidiary in
Australia - Greatship Subsea Solutions Australia Pty. Limited has been
voluntarily de-registered with effect from June 30, 2013. GIL''s two
wholly owned subsidiaries in Singapore - Greatship Subsea Solutions
Singapore Pte. Ltd. and Greatship Global Offshore Management Services
Pte. Ltd. have amalgamated with their parent company  Greatship Global
Offshore Services Pte. Ltd. (w.e.f December 31, 2013).
Other Subsidairies
Apart from GIL and its subsidiaries, your Company has the following
wholly-owned subsidiaries:
a) The Great Eastern Shipping Co. London Ltd.
b) The Greatship (Singapore) Pte. Ltd.
c) The Great Eastern Chartering LLC (FZC)
d) The Great Eastern Chartering (Singapore) Pte. Ltd.
Subsidiaries'' Accounts
Ministry of Corporate Affairs, vide General Circular No : 2 /2011 dated
February 08, 2011, has granted a general exemption to companies under
Section 212(8) of the Companies Act, 1956. Pursuant to the said
Circular, the Board of Directors of your Company has, by passing a
resolution, given consent for not attaching the balance sheets, profit
and loss accounts, reports of the Board of Directors, reports of the
Auditors, etc. of the subsidiaries with the Balance Sheet of your
Company as required under Section 212 of the Companies Act, 1956.
Accordingly, copies of the balance sheets, profit and loss accounts,
reports of the Board of Directors, reports of the Auditors,etc. of the
subsidiary companies have not been attached to the Balance Sheet of
your Company as at March 31, 2014. As per the terms of the said
Circular, a statement containing brief financial details of the
subsidiaries of the Company for the year ended March 31, 2014 is
included in the Annual Report.
The annual accounts of the subsidiary companies and the related
detailed information shall be made available to shareholders of the
Company at any point of time. The annual accounts of the subsidiary
companies have been kept for inspection by any shareholder at the
registered office of the Company and of the subsidiary companies
concerned. The Company shall furnish a hard copy of details of accounts
of subsidiaries to any shareholder on demand.
DEBT FUND RAISING
During the year, the Company did not raise any funds by way of debt. As
on March 31, 2014, the Company''s gross debt equity ratio was 0.69:1 and
net (of cash) debt : equity ratio was 0.10:1.
QUALITY, SAFETY, HEALTH & ENVIRONMENT
Enhancement of Energy Efficiency of Ships
Your Company has undertaken the following initiatives to enhance energy
efficiency of the ships. This effort would reduce the fuel burnt to
carry a specific cargo for a specific distance which in turn reduces
exhaust gas emission by the ships into the environment:
1. Reducing hull friction through application of ultra-smooth high
grade Self Polishing Copolymer (SPC) antifouling paint on ships'' hull.
2. Wake equalizing duct "Mewis Duct" has been fitted on Jag Lata, Jag
Lalit and Jag Aabha during their dry docking. These ducts increase the
ship''s speed and hence the power requirement of the ship''s propulsion.
Based on experience, a reduction of about 5% in fuel consumption for
the vessel''s propulsion has been observed.
3. Fitting of highly efficient "tipped" propeller on ships to reduce
power consumption.
Qualship 21 Program of United States Coast Guard
The United States Coast Guard (USCG) has a system for identifying
superior quality ships and to provide incentives to encourage quality
operations. They also feel that such quality vessels should be
recognized and rewarded for their commitment to safety and quality.
This initiative is called Qualship 21 (Quality Ships for the 21st
Century).
A ship has to fulfill certain eligibility criteria to qualify i.e.
superior Port State Control performance of the vessel, operating
company, Flag State and Classification Society etc in US waters. USCG
rewards Qualship 21 vessels by waiving annual inspection of non-tank
vessels and reduced stringency during annual inspection of tank
vessels.
We are proud to state that the USCG has now included the Company and
five ships which visited USA in 2013 under their Qualship 21 program.
Training
The effort to increase knowledge of sea farers at all levels is an
ongoing process in the Company. The continuous training both mandatory
and non-mandatory enhances the level of safety and awareness on board
the vessels and in turn reduces lost time due to incidents, injuries
and accidents. The Company has decided to provide "on line" training to
the ship''s staff and also conduct competency assessment at all levels
based on a Learning Management System. This system would enable the
sea-farer to access various modules on the Learning Management System
even while on leave and enhance their knowledge. The platform would
also be available on the vessels.
Maritime Labour Convention
The Company has completed certification of all vessels in the fleet to
this convention which is adopted by the ILO, which establishes minimum
requirements for all aspects of working and living conditions aboard
the ship.
GREAT EASTERN INSTITUTE OF MARITIME STUDIES (GEIMS)
During the 8th year of your Company''s training Institute in Lonavala,
following training facilities along with infrastructure were added in
order to enhance the quality of training being imparted:
- Further to the first phase of Transas TECHSIM 5000 Engine Simulator -
5 more student stations (Computer Monitors) has been added for
enhancement of training facilities for Cadets.
- Upgradation of Workshop & Shipboard Pollution Prevention Laboratory
Equipments for Oily Water Separator (OWS). Equipments like Pressure
Vaccum Calibrator, temperature Calibrator with accessories, Autoklean
filter with various components have been overhauled and installed with
latest electronic/ automatic monitors.
- Safety Equipments and High Voltage Circuit Breaker for Electrical
High Voltage (6.6 KV) training has been procured and set up in the
Electrical H.V Laboratory.
- Fire detection & Alarm Systems has been installed at prime locations.
During the year 2 batches of TNOCs with a total of 113 cadets, 3
batches of GMEs with a total of 119 Cadets & 2 batches of ETOs with a
total of 79 cadets were trained. The total number of cadets trained so
far is 2271.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has instituted internal control systems which are adequate
for the nature of its business and the size of its operations. In the
beginning of the year, the scope of the audit exercise and the key
business processes and selected risk areas to be audited are decided in
consultation with the Audit Committee. The Internal Audit is carried
out by a firm of external Chartered Accountants and covers all
departments. All significant audit observations and follow up actions
thereon are reported to the Audit Committee.
IT INITIATIVES
With an objective of making your Company more technology driven and
efficient, your Company has continuously striven to introduce new
technology, and also to enhance existing technology.
Some highlights of the major initiatives completed in this financial
year are:
Connectivity between shore & ship
Direct phone connectivity from the desk to the ship over internet has
been implemented in 14 of your Company''s vessels. The process of
implementing the solution on the remaining ships is in progress. This
connectivity is done using latest technology called SIP trunking
between two heterogeneous protocols. Besides making it easy to call
ships and therefore improving the quality of interaction with the
working assets, this will also save significantly on communication
costs.
Mobile Apps
In the age of mobile connectivity, your Company is also progressing
with pace by implementing quite a few mobile applications for senior
and middle management, in order to making operational and MIS data
available anywhere at any time. It is intended to develop many more of
these in the next financial year.
Data Center Movement
As part of the risk reduction approach, the Company has successfully
moved the production (LIVE) data center from Ocean House to a third
party professional data centre.
HUMAN RESOURCES
As the business environment in which the organization operate has
become more competitive and demanding, the need for a structured
approach to developing talent has increased markedly. With this in
mind, the Company has initiated a series of measures aimed at improving
employee alignment and development summarized below:
- The heads of functions presented the key focus areas for their teams
at the beginning of the year. Upon approval, these were converted as
goals for individual team members to be achieved during the year.
- Talent genome - a 360 degree feedback targeted at middle and senior
management was carried out during the year to identify strengths and
improvement areas of critical talent.
- Based on the inputs from talent genome and performance history of key
employees a talent review was held by the senior management team to
plan medium to long term career deployment options.
- To aid learning and development of floating and shore staff
employees, the Company is currently implementing an e-learning project.
Modules which are both domain specific and soft skills will be offered
on an e-learning platform to the respective audience. This initiative
will enable virtual learning and resolve logistical and monitoring
challenges in the final delivery of training modules.
- As in the past, training continued to be a key focus area. We held
leadership conclaves and training sessions on topics like maritime
insurance, interviewing skills and several expert sessions on career
development, conflict resolution etc. during the year.
- Four year wage settlement with the staff union was signed in
September, 2013.
Employee attrition for shore staff was 6% during the year. Number of
shore employees was 190 while floating staff stood at 425.
DIRECTORS
Mr. K. M. Sheth, Whole-time Director and Executive Chairman of the
Board of Directors, has decided to reduce his day to day commitments
and, therefore, expressed a desire to relinquish the office of the
Whole-time Director. He accordingly ceases to be the Whole-time
Director of the Company with effect from September 01, 2014. Mr. K. M.
Sheth has been associated with the Company since 1952 in various
capacities as Managing Director, Deputy Chairman and Executive Chairman
and has greatly contributed to the growth and progress of the Company
for more than 6 decades.
Mr. K. M. Sheth will continue to be the Non-Executive Chairman on the
Board of Directors of the Company.
Mr. K. M. Sheth has offered to be treated as Director liable to retire
by rotation pursuant to Section 152 of the Companies Act, 2013.
Accordingly, Mr. K. M. Sheth shall retire at the ensuing Annual General
Meeting and being eligible, offers himself for re-appointment.
The Board of Directors has further decided to appoint Mr. Tapas Icot
and Mr G. Shivakumar as Whole-time Directors to be designated as
''Executive Directors'' of the Company. Mr. Tapas Icot has been
associated with the Company since 1991 and is currently President
(Shipping) of the Company. Mr. G. Shivakumar has been associated with
the Company since 1990 and is currently Chief Financial Officer of the
Group.
Whilst Mr. Tapas Icot''s appointment as an ''Additional Director'' and
''Executive Director'' is effective from August 12, 2014, keeping in view
of the legal provisions relating to the proportion of Independent
Directors and Non Independent Directors, appointment of Mr. G.
Shivakumar will be held till the Company inducts one more Independent
Director on the Board.
Mr. Tapas Icot, being an Additional Director, ceases to be a Director
on the date of the 66th Annual General Meeting. Notice under section
160 of the Companies Act, 2013 has been received in respect of his
appointment as Director on the Board. Appointment of Mr. Tapas Icot as
an ''Executive Director'' also requires your approval at the 66th Annual
General Meeting.
In view of the provisions of Section 149 of the Companies Act, 2013,
all the Independent Directors, namely, Mr. Cyrus Guzder, Mr. Keki
Mistry, Mr. Vineet Nayyar, Mr. Berjis Desai and Dr. Rajiv B. Lall, are
proposed to be appointed at the ensuing Annual General Meeting upto a
term of 5 years. Notices under section 160 of the Companies Act, 2013
have been received in respect of their appointment as Independent
Directors on the Board.
The Company has received declarations from all the Independent
Directors of the Company confirming that they meet the criteria of
independence as prescribed under sub-section (6) of Section 149 of the
Companies Act, 2013 and under Clause 49 of the Listing Agreement with
the Stock Exchanges.
Necessary resolutions for the re-appointment of Mr. K. M. Sheth, Mr.
Tapas Icot and all the Independent Directors as aforesaid have been
included in the Notice convening the ensuing Annual General Meeting.
CORPORATE GOVERNANCE
Your Company was Corporate Governance compliant much before SEBI
stipulated deadline in the year 2005. Your Company has complied with
the mandatory provisions of Clause 49 of the Listing Agreement,
relating to Corporate Governance. A separate section on Corporate
Governance forms part of the Directors'' Report and the certificate from
practicing Company Secretary confirming the compliance of conditions on
Corporate Governance is included in the Annual Report. Your Company has
also complied with the ''Corporate Governance -Voluntary Guidelines
2009'' issued by the Ministry of Corporate Affairs, to the extent
disclosed in the Annual Report.
RISK MANAGEMENT PROCESS
In accordance with requirements of Clause 49 of the Listing Agreement,
your Company has established a Risk Management mechanism to manage
significant risks faced by your Company. The programme is built upon
the foundation of the risk management process and practices followed by
the Company over a period of time. The mechanism has been strengthened
from time to time with a view to manage risks in a more structured way
as an integral part of decision making process.
The Risk Management framework and reporting regime enables the Company
to assess and demonstrate whether its significant risks are properly
identified and controlled, and to potentially eliminate unnecessary
control related overheads. The Risk Management framework involves risk
identification, assessment, treatment / action plan, review and
reporting as a continuous process.
Your Directors believe that your Company has a sound risk assessment
and minimisation mechanism in place.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 217 (2AA) of the Companies Act,
1956 the Board of Directors hereby state that :
i. in preparation of the annual accounts, the applicable accounting
standards had been followed (alongwith proper explanation relating to
material departures) and that there are no material departures;
ii. they have, selected the accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profit of the
Company for that period;
iii. the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities;
iv. they have prepared the annual accounts on a going concern basis.
COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF
DIRECTORS) RULES, 1988
Pursuant to Notification No. GSR 1029 dated 31.12.1988 your Company is
not required to furnish prescribed information regarding conservation
of energy and technology absorption, as Shipping Industry is not
covered by the schedule to the said rules. The details of Foreign
Exchange Earnings and Outgo are :
Rs. in crores
(a) Foreign Exchange earned on account of freight,
charter hire earnings, etc. 971.75
(b) Foreign Exchange used including operating
expenses, capital repayment, down payments for
acquisition of ships (net of loan),
interest payment, etc. 1780.82
PARTICULARS OF EMPLOYEES
Statement pursuant to Section 217(2A) of the Companies Act, 1956 (Act),
read with the Companies (Particulars of Employees) Rules, 1975, is
annexed to this Report. As contemplated by Section 219 of the Act,
members are provided with abridged accounts. Members desirous of
receiving the Statement pursuant to Section 217(2A) will be provided
the same on receipt of written request from them.
AUDITORS
Messrs Kalyaniwalla & Mistry, the Auditors of your Company, who hold
office until the conclusion of the forthcoming Annual General Meeting
being eligible, offer themselves for re-appointment. Since Messrs
Kalyaniwalla & Mistry has been functioning as Auditors of your Company
for more than 10 years, as per Section 139 of the Companies Act, 2013,
they can be appointed for maximum number of 3 years.
Necessary resolution for their re-appointment has been included in the
Notice convening the ensuing Annual General Meeting.
APPRECIATION
Your Directors express their sincere thanks to all customers,
charterers, vendors, investors, shareholders, shipping agents, bankers,
insurance companies, protection and indemnity clubs, consultants and
advisors for their continued support throughout the year. Your
Directors also sincerely acknowledge the significant contributions made
by all the employees for their dedicated services to the Company. Your
Directors look forward to their continued support.
For and on behalf of the
Board of Directors
K.M. Sheth
Executive Chairman
Mumbai, August 12, 2014
Mar 31, 2013
The Directors are pleased to present the 65th Annual Report on the
business and operations of your Company and Audited Accounts for the
financial year ended March 31, 2013.
FINANCIAL PERFORMANCE
The financial results of the Company (standalone) for the financial
year ended March 31, 2013 are presented below:
Rs. in crores
2012-13 2011-12
Total Revenue 2033.79 2011.92
Total Expenses 1876.53 1846.58
Profit before tax 157.26 165.34
Less : Tax Expenses 11.00 22.00
Profit for the period 146.26 143.34
Add : Profit as per last Balance Sheet 2922.62 2947.76
Less :
-Transfer to Tonnage tax reserve 10.00 20.00
-Transfer to General reserve 15.00 14.50
-Transfer to Debenture redemption reserve 15.00 20.00
-Interim Dividend on Equity Shares 45.70 45.69
-Proposed Dividend on Equity Shares 68.54 53.30
-Dividend Distribution Tax 9.66 14.99
Balance Carried Forward 2904.98 2922.62
DIVIDEND ON EQUITY SHARES
During the year, your Directors declared and paid interim dividend of
Rs. 3/- per share resulting in an outflow of Rs. 53.11 crores
(inclusive of tax on dividend). Your Directors recommend a final
dividend of Rs. 4.50/- per share resulting in an outflow of Rs. 70.79
crores (inclusive of tax on dividend). The dividend will be paid after
your approval at the ensuing Annual General Meeting. The aggregate
outflow on account of the equity dividend for the year would be Rs.
123.90 crores of (inclusive of tax on dividend). This represents a
payout ratio of 84.71% (previous year 79.51%).
ALLOTMENT OF FURTHER SHARES
During the year, the Company allotted 32,400 Equity Shares of Rs. 10
each pursuant to the order received from The Special Court (Trial of
Offences relating to Transactions in Securities) Act, 1992 which were
held in abeyance. With this, the paid up Share Capital of the Company
stands increased to Rs. 152,32,20,840 divided into 15,23,22,084 Equity
Shares of Rs. 10/- each.
COMPANY PERFORMANCE
In FY 12-13, the Company recorded total income of Rs. 2033.79 crores
(Previous year Rs. 2011.92 crores) and earned a PBIDT of Rs. 729.71
crores (previous year Rs. 781.26 crores).
TANKER BUSINESS
MARKET TREND AND ANALYSIS
Tanker average time charter equivalent earnings over the year ($ per
day)
The crude tanker market remained depressed throughout FY 12-13. A sharp
drop in tonnage demand coupled with steady fleet addition kept the
charter rates under pressure. Shutdown of a major refinery in Venezuela
(in Q2 FY 12-13) and continued decline in the US imports added to the
woes resulting in lower fleet utilization. Some improvement in the
crude tanker rates was witnessed in HY2 FY 12-13 on back of seasonal
winter demand and increase in the Middle East exports. But this was
short lived and the charter rates slid back to lower base. Compared to
crude segment, the product tanker market remained relatively firm.
Disruption of refineries on the US east coast due to Hurricane Sandy,
improved demand from the Asian economies and emergence of new trade
routes of distillates from US to South American countries like Peru &
Chile kept the product tanker charter rates stable. But any meaningful
improvement in the charter rates was dismissed by the excessive fleet
supply in the market.
At the end of the FY 12-13, the world tanker fleet increased by 3.9% to
498.8 mn dwt as against 480.1 mn dwt at the end of FY 11-12.
COMPANY PERFORMANCE
The tanker business accounted for around 82% of the Company''s net
revenues and 95% of the operating profits.
In FY 12-13, around 50% of the tanker earnings were derived from the
period market. Crude tankers, inclusive of ''spot'' and ''period'', earned
an average TCY of $17,700/day (previous year $19,000/day). Product
carriers, inclusive of ''spot'' and ''period'', earned an average TCY of
$15,000/day (previous year $15,300/day).
TANKER FLEET CHANGES
As of 31st March 2013, the tanker fleet of your Company stood at 23
tankers aggregating 1.86 mn dwt, with an average age of 10.43 years as
against 24 tankers aggregating 1.88 mn dwt with an average age of 9.36
years as on 31st March 2012.
During the year, your Company took delivery of:
- Very Large Gas Carrier (VLGC) ''Jag Vidhi'' in Aug-12
During the year, your Company sold & delivered the following tankers:
- New Building Very Large Crude Carrier (VLCC) ''Vasant J Sheth'' in
May-12
- Medium Range Product Carrier ''Jag Pradip'' in Jun-12
- LPG Carrier ''Jag Viraj'' in Jun-12
During the year, your Company contracted to sell its 1988 built General
Purpose (GP) product carrier ''Jag Parwar'' with delivery in Q1 FY 13-14.
Subsequently the Company delivered the vessel to the buyers in Q1 FY
13-14.
During FY 12-13, your Company placed an order for one Medium Range
product carrier which will be delivered in Q4FY14-15.
Subsequent to the year, your Company contracted to sell its 1999 built
Aframax crude carrier ''Jag Leela''. The vessel will be delivered to the
buyers in H1FY 13-14.
OUTLOOK FOR THE TANKER MARKET
In view of the sluggish global macroeconomic environment, IEA has
forecast oil demand growth of only 0.9% to 90.6 mn bpd. Muted demand
from the EU countries and declining US oil imports are the key factors
causing lower growth. With US turning out to be net exporter of
distillates, the product tanker market has already started to witness a
structural change in the trade pattern and the same impact is expected
to continue going forward. Even though some positive signals like
increase in scrapping activities are seen, excessive supply coupled
with uncertain oil demand will keep the tanker markets volatile.
The global tanker orderbook stands at about 53.9 mn dwt or 10.8% of the
fleet at the end of March 2013.
DRY BULK BUSINESS
MARKET TREND AND ANALYSIS
Dry bulk average time charter equivalent earnings over the year ($ per
day)
Echoing the previous financial year, FY 12-13 also registered a steady
supply of new vessels in the market which reflected in the subdued
charter rates for dry bulk vessels. Although steady expansion in the
demand was witnessed across all major commodities, excessive new fleet
growth kept a lid on any potential improvement in the freight rates.
Citing difficult operating environment, scrapping too picked up and a
record 32.08 mn dwt got scrapped in FY 12-13.
At the end of the FY 12-13, the world dry bulk fleet increased by 9.2%
to 690.5 mn dwt as against 632.3 mn dwt at the end of FY 11-12.
COMPANY PERFORMANCE
The dry bulk fleet contributed around 18% of the Company''s net revenues
and 5% of the operating profits.
In FY 12-13 the average TCY for dry bulk vessels, inclusive of ''spot''
and ''period'', was approximately $9,800/day as compared to $15,500/day
in the previous year.
DRY BULK FLEET CHANGES
As of 31st March 2013, the dry bulk fleet of your Company stood at 9
vessels aggregating 0.67 mn dwt, with an average age of 8.04 years as
compared to 10 vessels aggregating 0.74 mn dwt with an average age of
7.9 years on 31st March 2012.
During the year, your Company sold & delivered:
- Panamax bulk carrier ''Jag Arnav'' in Mar-13
Subsequent to the year, the Company contracted to sell its 1997 built
Handymax dry bulk carrier ''Jay Ravi''. The vessel will be delivered to
the buyers in Q1 FY 13-14.
OUTLOOK FOR THE DRY BULK MARKET
Amidst the situation of new fleet overhang, the global commodity demand
is expected to show some improvement in CY2013. Asian economies,
largely China & India, will be the key for this commodity growth.
However, any disruption in the demand from China can have a serious
impact on the dry bulk trade. Going forward, slowing down of new
deliveries in combination with world trade recovery should help in
reducing the demand supply mismatch in this segment.
The global dry bulk orderbook stands at about 127.3 mn dwt or 18.4% of
the fleet at the end of March 2013.
ASSET VALUES
During FY 12-13 second-hand values for modern crude tankers witnessed a
drop of about 10-15% while product tanker witnessed a drop of about 5%
vis-a-vis start of financial year. Second-hand values of modern dry
bulk carriers dropped by about 10-15% during the same period. New
building prices dropped by about 5-10% for crude tankers. However, new
building prices for product tankers more or less remained same during
the financial year. New building prices for dry bulk carriers witnessed
a drop of about 5% for the same period.
RISKS AND CONCERNS
Economic risk: Shipping is a global business whose performance is
closely linked to the state of the global economy. Therefore, the
earnings of your Company could be impacted negatively if the global
economic situation does not improve over the longer term.
Volatility : Over and above the economic risks the shipping industry is
impacted by numerous short term and regional factors, like political
fallouts, weather changes etc. This results in great amount of
volatility in the freight market, which in turn impacts your Company''s
earnings.
Your Company has attempted to hedge some of this risk by entering into
time charters for part of its fleet.
Shipboard personnel : Indian officers continue to be in great demand
all over the world. Given the unfavorable tax status conferred on a
seafarer sailing on Indian-flagged vessels, it is becoming increasingly
difficult for your Company to source officers capable of meeting the
modern day challenges of worldwide trading. This is more relevant for
tanker personnel and may become a hindrance to growth.
OPEC action : If the OPEC decides to cut output, this combined with
inventories and increased new building deliveries, could negatively
impact the demand for tankers.
European financial crisis : The on-going European financial crisis can
further depress the already subdued demand in the Euro zone.
Chinese economy : As we have seen in the recent past that China has
been the main driving factor of the shipping demand; in case there is a
major downward shift in the Chinese economy, this along with increased
new building deliveries could have negative impact on shipping.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared by your
Company in accordance with Generally Accepted Accounting Principles in
India, the Accounting Standards issued by The Institute of Chartered
Accountants of India and the provisions of the Companies Act, 1956 to
the extent applicable. The audited Consolidated Financial Statements
together with Auditors'' Report thereon form part of the Annual Report.
The group recorded a consolidated net profit of Rs. 537.76 crores for
the year under review as compared to Rs. 316.55 crores for the previous
year. The net worth of the group as on March 31, 2013 was Rs. 6341.76
crores as compared to Rs. 5995.93 crores for the previous year.
SUBSIDIARIES
Greatship (India) Limited
Greatship (India) Limited (GIL) has successfully completed 7 years of
operations. The Company, one of India''s largest offshore oilfield
services provider, has recorded steady financial performance for this
year, as in the last 6 years.
GIL has recorded a profit after tax of Rs. 166.33 crores on a
standalone basis and Rs. 430.72 crores on a consolidated basis for the
year ended March 31, 2013 as compared to Rs. 90.19 crores and Rs.
220.23 crores, respectively, for the year ended March 31, 2012. The
consolidated net worth of GIL for financial year 2013 was Rs. 2889.63
crores as compared to Rs. 2455.77 crores for financial year 2012.
During the year, upon acquisition of shares of GIL from Mr. Ravi K.
Sheth (jointly held with Mrs. Amita R. Sheth), GIL became a wholly
owned subsidiary of your Company.
Subsequent to the year, on April 2, 2013, GIL redeemed 1.45 crores
Preference Shares with the dividend rate of 7.5% p.a. held by your
Company at Rs. 40.90/- per share (including the redemption premium of
Rs. 30.90 per share) in accordance with the terms of issue. As on date,
the total share capital held by your Company in GIL comprises of 11.13
crores equity shares of Rs. 10 each totalling in value to Rs. 1298.09
crores and Rs. 13.41 crores preference shares of Rs. 10 each totalling
in value to Rs. 402.372 crores.
GIL, alongwith its subsidiaries,currently owns and operates twenty one
vessels and three jack up drilling rigs. The operating fleet of twenty
one vessels comprises of four Platform Supply Vessels (PSVs), nine
Anchor Handling Tug cum Supply Vessels (AHTSVs), two Multipurpose
Platform Supply & Support Vessels (MPSSVs) and six ROV (Remotely
Operated Vehicle) Support Vessels (ROVSVs).
GIL has the following wholly owned subsidiaries:
a) Greatship Global Energy Services Pte. Ltd., Singapore
b) Greatship Global Offshore Services Pte. Ltd., Singapore
c) Greatship Global Holdings Ltd., Mauritius
d) Greatship Subsea Solutions Singapore Pte. Ltd., Singapore
e) Greatship Subsea Solutions Australia Pty Limited, Australia
f) Greatship (UK) Limited, United Kingdom
g) Greatship Global Offshore Management Services Pte. Ltd., Singapore
Subsequent to the end of the year, Greatship Subsea Solutions Australia
Pty Limited has made an application to Austrlian Securities and
Investments Commission for voluntary deregistration of the company.
Other subsidiaries
Apart from GIL and its subsidiaries, your Company has the following
wholly-owned subsidiaries:
a) The Great Eastern Shipping Co. London Ltd.
b) The Greatship (Singapore) Pte. Ltd.
c) The Great Eastern Chartering LLC (FZC)
d) The Great Eastern Chartering (Singapore) Pte. Ltd. (wholly owned
subsidiary of The Great Eastern Chartering LLC (FZC) incorporated on
April 17, 2013.)
Subsidiaries'' accounts
Ministry of Corporate Affairs, vide General Circular No : 2 /2011 dated
February 08, 2011, has granted a general exemption to companies under
Section 212(8) of the Companies Act, 1956. Pursuant to the said
Circular, the Board of Directors of your Company has, by passing a
resolution, given consent for not attaching the balance sheets, profit
and loss accounts, reports of the Board of Directors, reports of the
Auditors, etc. of the subsidiaries with the Balance Sheet of your
Company as required under Section 212 of the Companies Act, 1956.
Accordingly, copies of the balance sheets, profit and loss accounts,
reports of the Board of Directors, reports of the Auditors, etc. of the
subsidiary companies have not been attached to the Balance Sheet of
your Company as at March 31, 2013. As per the terms of the said
Circular, a statement containing brief financial details of the
subsidiaries of the Company for the year ended March 31, 2013 is
included in the Annual Report.
The annual accounts of the subsidiary companies and the related
detailed information shall be made available to shareholders of the
Company and subsidiary companies seeking such information at any point
of time. The annual accounts of the subsidiary companies have been kept
for inspection by any shareholder at the registered office of the
Company and of the subsidiary companies concerned. The Company shall
furnish a hard copy of details of accounts of subsidiaries to any
shareholder on demand.
DEBT FUND RAISING
During the year, the Company did not raise any funds by way of debt. In
the previous year, Rs. 452.57 crores were raised towards capital
expenditure for building tangible assets and general corporate
purposes. As on March 31, 2013, the Company''s gross debt equity ratio
was 0.73:1 and net (of cash) debt : equity ratio was 0.09:1.
DIRECTORS
In accordance with the provisions of the Companies Act, 1956 and the
Articles of Association of the Company, Mr. Vineet Nayyar and Ms. Asha
Sheth are liable to retire by rotation and being eligible, offer
themselves for re-appointment. Necessary resolutions for their
re-appointment have been included in the Notice convening the ensuing
Annual General Meeting.
CORPORATE GOVERNANCE
Your Company was Corporate Governance compliant much before SEBI
stipulated deadline in the year 2005. Your Company has complied with
the mandatory provisions of Clause 49 of the Listing Agreement,
relating to Corporate Governance. A separate section on Corporate
Governance forms part of the Directors'' Report and the certificate from
the Company''s Auditors confirming the compliance of conditions on
Corporate Governance is included in the Annual Report. Your Company has
also complied with the ''Corporate Governance -Voluntary Guidelines
2009'' issued by the Ministry of Corporate Affairs, to the extent
disclosed in the Annual Report.
RISK MANAGEMENT PROCESS
In accordance with requirements of Clause 49 of the Listing Agreement,
your Company has established a Risk Management mechanism to manage
significant risks faced by your Company. The programme is built upon
the foundation of the risk management process and practices followed by
the Company over a period of time. During the year, your Company has
strengthened the mechanism with a view to manage risks in a more
structured way and making risk management process an integral part of
decision making process.
The Risk Management framework and reporting regime enables the Company
to assess and demonstrate whether its significant risks are properly
identified and controlled, and to potentially eliminate unnecessary
control related overheads.
The Risk Management framework involves risk identification, assessment,
treatment / action plan, review and reporting as a continuous process.
Your Directors believe that your Company has a sound risk assessment
and minimisation mechanism in place.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 217 (2AA) of the Companies Act,
1956 the Board of Directors hereby state that :
i. in preparation of the annual accounts, the applicable accounting
standards had been followed (alongwith proper explanation relating to
material departures) and that there are no material departures;
ii. they have, selected the accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profit of the
Company for that period;
iii. the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities;
iv. they have prepared the annual accounts on a going concern basis.
COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF
DIRECTORS) RULES, 1988
Pursuant to Notification No. GSR 1029 dated 31.12.1988 your Company is
not required to furnish prescribed information regarding conservation
of energy and technology absorption, as Shipping Industry is not
covered by the schedule to the said rules. The details of Foreign
Exchange Earnings and Outgo are :
Rs.in crores
(a) Foreign Exchange earned on account of freight,
charter hire earnings, etc. 1427.47
(b) Foreign Exchange used including operating
expenses, capital repayment, down 1753.01
payments for acquisition of ships (net of
loan), interest payment, etc.
PARTICULARS OF EMPLOYEES
Statement pursuant to Section 217(2A) of the Companies Act, 1956 (Act),
read with the Companies (Particulars of Employees) Rules, 1975, is
annexed to this Report. As contemplated by Section 219 of the Act,
members are provided with abridged accounts. Members desirous of
receiving the Statement pursuant to Section 217(2A) will be provided
the same on receipt of written request from them.
AUDITORS
Messrs Kalyaniwalla & Mistry, the Auditors of your Company, who hold
office until the conclusion of the forthcoming Annual General Meeting
being eligible, offer themselves for re-appointment.
APPRECIATION
Your Directors express their sincere thanks to all customers,
charterers, vendors, investors, shareholders, shipping agents, bankers,
insurance companies, protection and indemnity clubs, consultants and
advisors for their continued support throughout the year. Your
Directors also sincerely acknowledge the significant contributions made
by all the employees for their dedicated services to the Company. Your
Directors look forward to their continued support.
For and on behalf of the
Board of Directors
K.M. Sheth
Executive Chairman
Mumbai, May 06, 2013
Mar 31, 2012
To The Members,
The Directors are pleased to present the 64th Annual Report on the
business and operations of your Company and Audited Accounts for the
financial year ended March 31, 2012.
FINANCIAL PERFORMANCE
The financial results of the Company for the financial year ended March
31, 2012 are presented below :
Rs. in crores
2011-12 2010-11
Total Revenue 2016.23 1662.06
Total Expenses 1850.89 1366.85
Profit before tax 165.34 295.21
Less : Tax Expenses 22.00 28.75
Profit for the period 143.34 266.46
Add : Profit as per last Balance Sheet 2947.76 2886.73
Less :
-Transfer to Tonnage tax reserve 20.00 40.00
-Transfer to General reserve 14.50 27.00
-Transfer to Debenture redemption reserve 20.00 -
-Interim Dividend on Equity Shares 45.69 53.30
-Proposed Dividend on Equity Shares 53.30 68.53
-Dividend Distribution Tax 14.99 16.60
Balance Carried Forward 2922.62 2947.76
The total income for the year was recorded at Rs. 2016.23 crores as
against Rs. 1662.06 crores in the previous year and a Net Profit of Rs.
143.34 crores as against Rs. 266.46 crores in the previous year.
DIVIDEND ON EQUITY SHARES
During the year, your Directors declared and paid interim dividend of Rs.
3/- per share resulting in an outflow of Rs. 53.10 crores (inclusive of
tax on dividend). Your Directors recommend a dividend of Rs. 3.50/- per
share. The dividend will be paid after your approval at the ensuing
Annual General Meeting. The aggregate outflow on account of the equity
dividend for the year would be Rs. 113.98 crores including tax on
dividend. This represents a payout ratio of 79.51% (previous year
51.95%).
COMPANY PERFORMANCE
In FY 11-12, the Company recorded total revenue of Rs. 2016.23 crores
(Previous year Rs. 1662.06 crores) and earned a PBIDT of Rs. 781.26 crores
(previous year Rs. 829.20 crores).
TANKER BUSINESS
MARKET TREND AND ANALYSIS
Tanker average time charter equivalent earnings over the year ($ per
day)
Throughout the last financial year, the tanker market remained subdued.
Steady fleet growth, disruption of Libya's crude supply, stagnant
demand from western economies and closure of some US & EU refineries
were the main factors, which reflected in the weak freight rates.
Demand from the OECD countries too got negatively impacted on back of
high crude oil prices. Some spurts in the tanker freight rates were
witnessed due to increase in OPEC production, long haul shipments,
scrapping activities and jump in seasonal demand, but new fleet
addition capped any significant improvement in the freight rates.
The world tanker fleet increased to 480.1 mn dwt at the end of the
financial year, about 5% higher than the 457.6 mn dwt at the beginning
of FY 11-12.
COMPANY PERFORMANCE
The tanker business accounted for around 75% of the Company's net
revenues and 74% of the operating profits.
In FY 11-12, around 51% of the tanker earnings were derived from the
period market. Crude tankers, inclusive of 'spot' and 'period', earned
an average TCY of $19,000/day (previous year $20,400/day). Product
carriers, inclusive of 'spot' and 'period', earned an average TCY of
$15,300/day (previous year $15,800/day).
TANKER FLEET CHANGES
The tanker fleet of your Company stood at 24 tankers aggregating 1.88
mn dwt, with an average age of 9.36 years (as of 31st March 2012) as
against 27 tankers aggregating 2.10 mn dwt with an average age of 9.81
years as on 31st March 2011.
During the year, your Company sold and delivered the following tankers
:
- Suezmax crude carrier 'Jag Lakshya' in Jun-11
- General Purpose product carrier 'Jag Pari' in Oct-11
- Medium Range product carrier 'Jag Pratap' in Dec-11
During the year, your Company also contracted to sell three New
Building Very Large Crude Carrier tankers. Two of the VLCCs viz.
'Maneklal Ujamshi Sheth' & 'Ardeshir H Bhiwandiwalla' were delivered in
Jan-12 & Feb-12 respectively. The third VLCC 'Vasant J Sheth' will be
delivered in Q1 FY13.
OUTLOOK FOR THE TANKER MARKET
For 2012, IEA has anticipated a modest 0.9% growth in world oil demand
to 89.9 mn bpd. This is on back of uncertain economic recovery, high
crude oil prices and weak demand scenario. Apart from these negatives,
the key macroeconomic factor to watch out closely will be the Western
sanctions on Iran. If the Iran dispute aggravates, it can have a
significant impact on the movement of oil, which can change the trade
dynamics going forward. On the supply side, newbuilding cancellations
and delays are expected to become more prevalent as the financing
environment remains under stress.
The global tanker orderbook stands at about 78.2 million dwt or 16.3%
of the fleet at the end of March 2012.
DRY BULK BUSINESS
MARKET TREND AND ANALYSIS
Dry bulk average time charter equivalent earnings over the year ($ per
day)
As projected, FY 11-12 proved to be the year of record new building
deliveries, which impacted the fleet utilization significantly.
Increased Chinese coastal trade, prolonged port congestions and
excessive scrapping augured well on the positive side, but the
relentless fleet addition overshadowed any improvement in the freight
rates. Logistical disruptions post Tsunami in Japan and weather related
issues in the iron ore & coal producing countries resulted in decline
of imports. Sharp reduction in the exports to European Union (EU) also
resulted in lower tonnage utilization.
The world dry bulk fleet increased to 632.3 mn dwt at the end of FY
11-12, about 15% higher than the 551.9 mn dwt at the beginning of the
financial year.
COMPANY PERFORMANCE
The dry bulk fleet contributed around 25% of the Company's net revenues
and 26% of the operating profits.
In FY 11-12 the average TCY for dry bulk vessels, inclusive of 'spot'
and 'period', was approximately $15,500/day as compared to $20,754/day
in the previous year.
DRY BULK FLEET CHANGES
The dry bulk fleet stood at 10 vessels aggregating 0.74 mn dwt, with an
average age of 7.9 years (as of 31st March 2012) as against 7 vessels
aggregating 0.52 mn dwt with an average age of 9.9 years on 31st March
2011.
During the year, your Company took delivery of the following new built
vessels Ã
- Two Kamsarmax bulk carriers 'Jag Aditi' in Apr-11 and 'Jag Arya' in
Sep-11.
- Supramax bulk carrier 'Jag Rani' in Jul-11.
OUTLOOK FOR THE DRY BULK MARKET
Even though, cancellations and delivery slippages are likely to remain
at very high levels due to volatile freight rates and tough financing
environment, it is expected that the market will experience significant
fleet growth resulting in depressed freight rates except for some
short-term seasonal fluctuations. On the demand side, global seaborne
commodity movement is expected to improve on back of increased imports
in Asia. But a possible 'slowdown' in China or prolonged recession in
Europe could possibly result in downward revision of these demand
forecasts, which can have a negative impact on the cargo movement and
freight rates.
The global dry bulk orderbook stands at about 191.5 mn dwt or 30.3% of
the fleet at the end of March 2012.
ASSET VALUES
During FY 11-12 second-hand values for both modern crude tankers and
dry bulk carriers witnessed a drop of 20-30% vis-ÃÂ -vis start of FY
11-12. Second-hand values for modern product tankers also dropped
albeit by 10% during the same period. New building prices for tankers
witnessed a drop of 5-10% during the year, while those for the dry bulk
ships moved down by about 15-20%. Your Company's decision not to
acquire assets during the year therefore stands vindicated.
RISKS AND CONCERNS
Economic risk : Shipping is a global business whose performance is
closely linked to the state of the global economy. Therefore, the
earnings of your Company could be impacted negatively if the global
economic situation does not improve over the longer term.
Volatility : Over and above the economic risks the shipping industry is
impacted by numerous short term and regional factors, like political
fallouts, weather changes etc. This results in great amount of
volatility in the freight market, which in turn impacts your Company's
earnings.
Your Company has attempted to hedge some of this risk by entering into
time charters for part of its fleet.
Shipboard personnel : Indian officers continue to be in great demand
all over the world. Given the unfavorable tax status conferred on a
seafarer sailing on Indian-flagged vessels, it is becoming increasingly
difficult for your Company to source officers capable of meeting the
modern day challenges of worldwide trading. This is more relevant for
tanker personnel and may become a hindrance to growth.
OPEC action : If the OPEC decides to cut output, this combined with
inventories and increased new building deliveries, could negatively
impact the demand for tankers.
European financial crisis : The growing European debt crisis can
further depress the already subdued demand in the Euro zone.
Chinese economy : As we have seen in the recent past that China has
been the main driving factor of the shipping demand, in case there is a
major downward shift in the Chinese economy, this along with increased
new building deliveries could have negative impact on shipping.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared by your
Company in accordance with Generally Accepted Accounting Principles in
India, the Accounting Standards issued by The Institute of Chartered
Accountants of India and the provisions of the Companies Act, 1956 to
the extent applicable. The audited Consolidated Financial Statements
together with Auditors' Report thereon form part of the Annual Report.
The group recorded a consolidated net profit after prior period
adjustment of Rs. 316.55 crores for the year under review as compared to
Rs. 468.70 crores for the previous year. The net worth of the group as on
March 31, 2012 was Rs. 5997.19 crores as compared to Rs. 6030.66 crores for
the previous year.
SUBSIDIARIES
Greatship (India) Limited
Greatship (India) Limited (GIL) has completed 6th year of its
successful operations. The Company, now one of India's largest offshore
oilfield services providers, has recorded steady financial performance
for this year, as in the last 5 years.
GIL has recorded a profit after tax of Rs. 90.19 crores on a standalone
basis and Rs. 220.23 crores on a consolidated basis for the year ended
March 31, 2012 as compared to Rs. 118.38 crores and Rs. 215.71 crores
respectively for the year ended March 31, 2011. The consolidated net
worth of GIL for financial year 2012 was Rs. 2457.03 crores as compared
to Rs. 2031.56 crores for financial year 2011 on a consolidated basis.
Your Company has till date invested total of Rs. 1714.43 crores by
subscribing to 10.92 crores equity shares totaling in value to Rs.
1268.56 crores and 14.86 crores non-convertible preference shares
totaling in value to Rs. 445.87 crores. Your Company's holding is 98.11%
of the total equity share capital of GIL.
GIL, alongwith its subsidiaries, is currently owning/operating 4
Platform Supply Vessels (PSVs), 9 Anchor Handling Tug cum Supply
Vessels (AHTSVs), 3 Multipurpose Platform Supply & Support Vessels
(MPSSVs), 3 Multipurpose platform support vessels capable of Remotely
Operated Vehicles operations (ROVSVs) and 2 Jack up Rigs. GIL and its
subsidiaries also have an order book of three ROVSVs and one 350 feet
Jack up Rig. During the year, the shipbuilding contracts for 2
Multipurpose Supply & Support Vessels were cancelled.
During the year, GIL granted 189600 stock options (net of
cancelled/forfeited) under various Employee Stock Options Schemes.
GIL has the following wholly owned subsidiaries :
a) Greatship Global Energy Services Pte. Ltd., Singapore
b) Greatship Global Offshore Services Pte. Ltd., Singapore
c) Greatship Global Holdings Ltd., Mauritius
d) Greatship Subsea Solutions Singapore Pte. Ltd., Singapore
e) Greatship Subsea Solutions Australia Pty. Limited, Australia
f) Greatship (UK) Limited, United Kingdom
g) Greatship Global Offshore Management Services Pte. Ltd., Singapore
Greatship DOF Subsea Projects Private Limited, Mumbai, erstwhile wholly
owned subsidiary of GIL was struck off from the Registrar of Companies
under the Fast Track Exit mode on 30.12.2011.
Other subsidiaries
Apart from GIL and its subsidiaries, your Company has the following
wholly-owned subsidiaries :
a) The Great Eastern Shipping Co. London Ltd.
b) The Greatship (Singapore) Pte. Ltd.
c) The Great Eastern Chartering LLC (FZC).
Subsidiaries' accounts
Ministry of Corporate Affairs, vide General Circular No : 2 /2011 dated
February 08, 2011, has granted a general exemption to companies under
Section 212(8) of the Companies Act, 1956. Pursuant to the said
Circular, the Board of Directors of your Company has, by passing a
resolution, given consent for not attaching the balance sheets, profit
and loss accounts, reports of the Board of Directors, reports of the
Auditors, etc. of the subsidiaries with the Balance Sheet of your
Company as required under Section 212 of the Companies Act, 1956.
Accordingly, copies of the balance sheets, profit and loss accounts,
reports of the Board of Directors, reports of the Auditors, etc. of the
subsidiary companies have not been attached to the Balance Sheet of
your Company as at March 31, 2012. As per the terms of the said
Circular, a statement containing brief financial details of the
subsidiaries of the Company for the year ended March 31, 2012 is
included in the Annual Report.
The annual accounts of the subsidiary companies and the related
detailed information shall be made available to shareholders of the
Company and subsidiary companies seeking such information at any point
of time. The annual accounts of the subsidiary companies have been kept
for inspection by any shareholder at the registered office of the
Company and of the subsidiary companies concerned. The Company shall
furnish a hard copy of details of accounts of subsidiaries to any
shareholder on demand.
DEBT FUND RAISING
During the year, the Company raised funds of Rs. 452.57 crores towards
capital expenditure for building tangible assets and general corporate
purpose as against Rs. 410.62 crores in the previous year. As on March
31, 2012, the Company's gross debt equity ratio was 0.76 :1 and net (of
cash) debt : equity ratio was 0.17 :1.
QUALITY, SAFETY, HEALTH & ENVIRONMENT
Environment Protection
To enhance fuel efficiency and reduce green house gas emission from
your vessels 'Ship Energy Efficiency Management Plan' have been
introduced on board all vessels with effect from 1st July, 2011.
Several initiatives have been put in place to develop awareness among
staff on this very important tool for sustainable shipping viz. Senior
Officers are being briefed on the subject as a part of their
pre-joining briefing, training CDs on the subject have been developed
and sent to vessels, posters on best management practices have been
developed and displayed on board.
Maritime Labour Convention
Maritime Labour Convention developed by International Labour
Organization for setting minimum standard of living and working
conditions for seafarers is scheduled to enter into force once
condition for entry into force is met. Your Company has proactively
implemented the requirements since 1st December 2011. Once flag
administration issues their relevant specific requirements, the same
will be incorporated. Once the Convention enters into force, each ship
would require to be surveyed and certified.
To ensure high standard of medical care, a system of 24 x 7 Company
doctor accessible to all vessel Masters for consultation through phone
and e-mail has been put in place.
Piracy Risk
With continuing piracy incidents in Gulf of Aden & waters around
Somalia and Indian Ocean, your Company is continuously updating and
strictly enforcing Best Management Practices to mitigate the security
risks of its vessels transiting through these waters.
Rescue at Sea
Jag Lakshita, while proceeding from San Diego Lighterage Area, USA
towards the west coast of Africa, rescued 3 sailors' private sailing
expedition from their disabled sailing vessel off Cape Horn on 24th
February, 2011. The rescue had been carried out in coordination with
MRCC Uruguay, MRCC Puerto Belgrano and MRCC Rio De Janeiro. The weather
at that time was inclement, with gale force winds, rough seas and
moderate swell. The rescued sailors, 1 South African national and 2
British nationals, were disembarked in good health at Cameroon.
Vice Admiral of Brazilian Navy commended the Master and Crew for their
gallant action with these words "I know that this rescue operation
caused a delay on the normal course of the M. V. Jag Lakshita, although
it was for a noble reason and it was done without any thought of
recognition or reward. The fast response and the professionalism of the
Jag Lakshita's crew allowed all three crew members of Yacht Spraydust
to be rescued alive in good health conditions."
Jag Pushpa, during her voyage from Gizan, Saudi Arabia to Sikka, India
on 30th June, 2011, deviated from her planned passage to rescue 13 crew
members, all Indian nationals of M.T. Pavit in Arabian Sea. The weather
at that time was severe, with gale force winds, rough seas and heavy
swell. However, to protect the lives of the 13 sailors on Pavit, Master
of the vessel decided to take all necessary precautions and proceeded
to the rescue. The vessel was immobilized with flooded machinery space.
A UK Naval helicopter from a British naval vessel in the region
transferred the crew, all of whom were safely disembarked at Sikka.
Cadet Training
In view of availability of spare accommodation on board Jag Preeti,
large number of Cadets (27 nos.) have been placed on board the vessel
and facility for class room training has been arranged. Highly
experienced Cadet Training Officer has been placed onboard for
achievement of training objectives and monitoring of discipline and
behavioural aspects of Cadets in a systematic manner.
Anti Bribery Policy
During the year Anti Bribery Policy for fleet vessels has been
introduced in view of increasing importance of the subject and to work
towards compliance with international legislative requirements.
GREAT EASTERN INSTITUTE OF MARITIME STUDIES (GEIMS)
This year was the 6th year of operations of your Company's training
Institute in Lonavala. During the year, there has been consolidation
and augmentation of infrastructure as well as enhancement in training
being imparted. During the year, the Institute admitted 3 batches of
TNOC and 4 batches of GME totaling 278 cadets.
The Institute is the only Institute approved by DG Shipping, Government
of India to conduct the newly introduced pre sea Electro Technical
Officers course as mandated by IMO's STCW 2010. During the year, the
Institute in addition to the TNOC and
GME cadets also trained 60 ETO cadets. This course was designed and
developed by the Institute as per IMO requirements. In addition, the
ongoing mandatory STCW safety and familiarisation courses for sea
farers have been conducted for batches of students who have passed out
from the Institute.
As per the Company's requirement the Institute designed a Special
"Performance Enhancement Course" for officers which were earlier
conducted by Germanischer Lloyd. The 18 day course for Nautical
officers and engineers is now being conducted by the faculty from Jan
2012. During the year 2 such courses were conducted.
The additional hostel block of 23780 sq.feet was completed on 31st
August, 2011. This block is being presently utilized for conducting
post-sea courses.
Full Mission Engine Room Stimulator which was ordered in August, 2010
has been fully installed and is now functional for both pre-sea and
post-sea level training.
The installation of Slow Speed Two stroke main engine was completed in
October, 2011 alongwith the connected civil work. The availability of
ships main propulsion engine in operational condition has substantially
enhanced Institute's training capabilities.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has instituted internal control systems which are adequate
for the nature of its business and the size of its operations. In the
beginning of the year, the scope of the audit exercise and the key
business processes and selected risk areas to be audited are decided in
consultation with the Audit Committee. The Internal Audit is carried
out by a firm of external Chartered Accountants and covers all
departments. All significant audit observations and follow up actions
thereon are reported to the Audit Committee. The Audit Committee
comprises of 3 Independent Directors with the Chairman being a person
well qualified and conversant with matters pertaining to Accounts and
Finance. The Audit Committee met 4 times during the year.
IT INITIATIVES
In line with the strategy of aligning IT with Business, your Company
has completed the following initiatives this year -
- Internet connectivity for 5 ships
- The ships are disconnected with shore and in today's scenario it is
extremely difficult to manage something remotely. In order to bridge
the gap, the internet connectivity has been installed in 5 ships out of
34 fleet as part of phase I. The usage of Internet for communication
as well as to and fro data flow between shore and ship have increased
considerably. This will help to reduce significant amount of
productivity loss by instant online communication between ship and
shore.
- New Software applications
- As part of various in-house software development and implementation,
the most significant software that has gone live is called 'geNautical'
which captures day to day operational data and automatically integrates
with related software at shore. It has streamlined the data flow from
ship to shore.
- Class Approval for Planned Maintenance System (PMS)
- This year also your Company added Class approvals from different
Groups for its successful operations of PMS at ships which are as
follows :
- ABS Class - for 3 ships - total stands at 8
- LRS Class - for 1 ship - total stands at 5
- DNV Class - for 7 ships - total stands at 7
- First CLOUD initiative
- As a strategy of exploring the advantages of cloud computing, your
Company has introduced first initiative with its Institute, GEIMS for
their emailing service from Google cloud. It will be extended further
in Company's IT area in future.
HUMAN RESOURCES
To remain at the leading edge of business and to be the best in the
Industry, your Company's focus has been not only on business strategies
but also on developing and nurturing talent. Your Company strongly
believes that its people alone provide sustainable and competitive
advantage. During the period under review, your Company initiated
several HR practices aimed at people development and improving
organizational health.
With support from an external consultancy firm, your Company carried
out an exercise titled 'Organization Genome' to determine competencies
critical for business success of the two divisions. This was aligned
with the 360 degree process 'Talent Genome' to map competency profiles
of senior and middle level executives, resulting in feedback and
individual development plan for each employee. It is planned that the
development progress will be measured during the annual talent review
and succession planning process.
Based on employee feedback, your Company incorporated few changes in HR
policy addressing diversity and flexibility needs of team members along
with annual compensation review. The Social Café initiatives continued
to focus on employee health, fitness and camaraderie. These initiatives
have ensured that your Company remains an employer of choice in
shipping sector.
Your Company played an active role to facilitate a milestone NMB
agreement pertaining to shipping crew. This will help to optimize crew
wages during the time shipping industry is faced with many challenges
and uncertainties.
The employee attrition stood at 6% compared to 5 % last year. Your
Company had employee strength of 195 on shore and 460 floating as on
March 31, 2012.
DIRECTORS
Mr. K. V. Kamath conveyed his inability to continue as Director of the
Company after taking over additional responsibility as Chairman of
Infosys Limited. Mr. Kamath resigned from the Board of Directors of the
Company with effect from November 11, 2011. Your Directors place on
record their appreciation for the valuable guidance and support
extended by him during his tenure as a Director.
Dr. Rajiv B. Lall was appointed as an Additional Director on the Board
of Directors of the Company with effect from February 10, 2012 as an
Independent Director. He ceases to be a Director on the date of the
64th Annual General Meeting. Notice under section 257 of the Companies
Act, 1956 has been received in respect of his appointment as Director
on the Board.
In accordance with the provisions of the Companies Act, 1956 and the
Articles of Association of the Company, Mr. Cyrus Guzder and Mr. Berjis
Desai are liable to retire by rotation and being eligible, offer
themselves for re-appointment. Necessary resolutions for their
re-appointment have been included in the Notice convening the ensuing
Annual General Meeting.
CORPORATE GOVERNANCE
Your Company was Corporate Governance compliant much before SEBI
stipulated deadline in the year 2005. Your Company has complied with
the mandatory provisions of Clause 49 of the Listing Agreement,
relating to Corporate Governance. A separate section on Corporate
Governance forms part of the Directors' Report and the certificate from
the Company's Auditors confirming the compliance of conditions on
Corporate Governance is included in the Annual Report. Your Company has
also complied with the 'Corporate Governance -Voluntary Guidelines
2009' issued by the Ministry of Corporate Affairs, to the extent
disclosed in the Annual Report.
RISK MANAGEMENT PROCESS
In accordance with requirements of Clause 49 of the Listing Agreement,
your Company has established a Risk Management mechanism for its
business risks. The programme is built upon the foundation of the
existing risk management process and practices of the Company and has
evolved a structured approach for risk management to manage significant
risks faced by your Company.
The Risk Management framework and reporting regime enables the Company
to assess and demonstrate whether its significant risks are properly
identified and controlled, and to potentially eliminate unnecessary
control related overheads.
The Risk Management framework involves risk identification, assessment,
treatment/action plan, review and reporting as a continuous process.
Your Directors believe that your Company has a sound risk assessment
and minimisation mechanism in place.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 217 (2AA) of the Companies Act,
1956 the Board of Directors hereby state that :
i. in preparation of the annual accounts, the applicable accounting
standards had been followed (alongwith proper explanation relating to
material departures) and that there are no material departures;
ii. they have, selected the accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profit of the
Company for that period;
iii. the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities;
iv. they have prepared the annual accounts on a going concern basis.
PARTICULARS OF EMPLOYEES
Statement pursuant to Section 217(2A) of the Companies Act, 1956 (Act),
read with the Companies (Particulars of Employees) Rules, 1975, is
annexed to this Report. As contemplated by Section 219 of the Act,
members are provided with abridged accounts. Members desirous of
receiving the Statement pursuant of Section 217(2A) will be provided
the same on receipt of written request from them.
AUDITORS
Messrs Kalyaniwalla & Mistry, the Auditors of your Company, who hold
office until the conclusion of the forthcoming Annual General Meeting
being eligible, offer themselves for re-appointment.
APPRECIATION
Your Directors express their sincere thanks to all customers,
charterers, vendors, investors, shareholders, shipping agents, bankers,
insurance companies, protection and indemnity clubs, consultants and
advisors for their continued support throughout the year. Your
Directors also sincerely acknowledge the significant contributions made
by all the employees for their dedicated services to the Company. Your
Directors look forward to their continued support.
For and on behalf of the Board of Directors
K.M. Sheth
Executive Chairman
Mumbai, May 03, 2012
Mar 31, 2011
The Directors are pleased to present the 63rd Annual Report on the
business and operations of your Company and Audited Accounts for the
financial year ended March 31, 2011.
FINANCIAL PERFORMANCE
The financial results of the Company for the financial year ended March
31, 2011 are presented below:
Rs. in Lakhs
2010-11 2009-10
Total Income 165928 224539
Total Expenditure 136407 181343
Profit before tax 29521 43196
Less : Provision for Income Tax 2800 3915
Profit for the year after tax 26721 39281
Add/(Less): Prior period adjustments (75) 294
Net Profit 26646 39575
Less: Transfer to Tonnage Tax Reserve
Account under section
115VT of the Income-tax Act, 1961 4000 4000
22646 35575
Add : Surplus brought forward from previous year 288673 271177
Amount available for appropriation 311319 306752
Appropriations:
-Transfer to General Reserve 2700 4000
-Interim Dividend on Equity Shares 5330 -
-Proposed Dividend on Equity Shares 6853 12183
-Tax on Dividends 1660 1896
Balance Carried Forward 294776 288673
The total income for the year was recorded at Rs. 165928 lakhs as
against Rs. 224539 lakhs in the previous year and a Net Profit after
prior period adjustments of Rs. 26646 lakhs as against Rs. 39575 lakhs
in the previous year.
DIVIDEND ON EQUITY SHARES
During the year, your Directors declared and paid interim dividend of
Rs. 3.50/- per share resulting in an outflow of Rs.6215 lakhs
(inclusive of tax on dividend).
Your Directors recommend a dividend of Rs. 4.50/- per share. The
dividend will be paid after your approval at the ensuing Annual General
Meeting. The aggregate outflow on account of the equity dividend for
the year would be Rs. 13843 lakhs including tax on dividend. This
represents a payout ratio of 51.95% (previous year 35.57%).
DIRECTORS
In accordance with the provisions of the Companies Act, 1956 and the
Articles of Association of the Company, Ms. Asha V. Sheth and Mr. Keki
Mistry are liable to retire by rotation and being eligible, offer
themselves for re-appointment. Necessary resolutions for their
re-appointment have been included in the Notice convening the ensuing
Annual General Meeting.
CORPORATE GOVERNANCE
Your Company was Corporate Governance compliant much before SEBI
stipulated deadline in the year 2005. Your Company has complied with
the mandatory provisions of Clause 49 of the Listing Agreement,
relating to Corporate Governance. A separate section on Corporate
Governance forms part of the Directors Report and the certificate from
the Companys auditors confirming the compliance of conditions on
Corporate Governance is included in the Annual Report.
Your Company has also complied with the ÃCorporate Governance
-Voluntary Guidelines 2009 issued by the Ministry of Corporate
Affairs, to the extent disclosed in the Annual Report.
RISK MANAGEMENT PROCESS
In accordance with requirements of Clause 49 of the Listing Agreement,
your Company has established a Risk Management mechanism for its
business risks. The programme is built upon the foundation of the
existing risk management process and
practices of the Company and has evolved a structured approach for risk
management to manage significant risks faced by your Company.
The Risk Management framework and reporting regime enables the Company
to assess and demonstrate whether its significant risks are properly
identified and controlled, and to potentially eliminate unnecessary
control related overheads.
The Risk Management framework involves risk identification, assessment,
treatment/action plan, review and reporting as a continuous process.
Your Directors believe that your Company has a sound risk assessment
and minimisation mechanism in place.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 217 (2AA) of the Companies Act,
1956 the Board of Directors hereby state that:
i. in preparation of the annual accounts, the applicable accounting
standards had been followed (alongwith proper explanation relating to
material departures) and that there are no material departures;
ii. they have, selected the accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profit of the
Company for that period;
iii. the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of
the Company and for preventing and detecting fraud and other
irregularities;
iv. they have prepared the annual accounts on a going concern basis.
COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF
DIRECTORS) RULES, 1988
Pursuant to Notification No. GSR 1029 dated 31.12.1988 your Company is
not required to furnish prescribed information regarding conservation
of energy and technology absorption, as Shipping Industry is not
covered by the schedule to the said rules. The details of Foreign
Exchange Earnings and Outgo are:
Rs. in lakhs
(a) Foreign Exchange earned on account of freight,
charter hire earnings, etc. 114186
(b) Foreign Exchange used including operating
expenses, capital repayment, down payments for 149786
acquisition of ships (net of loan),
interest payment, etc.
PARTICULARS OF EMPLOYEES
Statement pursuant to Section 217(2A) of the Companies Act, 1956 (Act),
read with the Companies (Particulars of Employees) Rules, 1975, is
annexed to this Report. As contemplated by Section 219 of the Act,
members are provided with abridged accounts. Members desirous of
receiving the Statement pursuant of Section 217(2A) will be provided
the same on receipt of written request from them.
AUDITORS
Messrs Kalyaniwalla & Mistry, the Auditors of your Company, who hold
office until the conclusion of the forthcoming Annual General Meeting
being eligible, offer themselves for re-appointment.
APPRECIATION
Your Directors express their sincere thanks to all customers,
charterers, vendors, investors, shareholders, shipping agents, bankers,
insurance companies, protection and indemnity clubs, consultants and
advisors for their continued support throughout the year. Your
Directors also sincerely acknowledge the significant contributions made
by all the employees for their dedicated services to the Company.
Your Directors are grateful to the Government of India, Ministry of
Shipping, Transchart, Ministry of Petroleum & Natural Gas, Ministry of
Finance, Directorate General of Shipping, Port Authorities, Mercantile
Marine Department and various other authorities for their co-operation.
Your Directors look forward to their continued support.
For and on behalf of the
Board of Directors
K.M. Sheth
Executive Chairman
Mumbai, May 06, 2011
Mar 31, 2010
The Directors are pleased to present the 62nd Annual Report on the
business and operations of your Company and Audited Accounts for the
financial year ended March 31, 2010.
Financial Performance
The financial results of the Company for the financial year ended March
31,2010 are presented below:
RS. IN LAKHS
2009-10 2008-09
Total Income 224539 336474
Total Expenditure 181343 194505
Profit Before Tax 43196 141969
Less : Provision for Taxation
-Current Tax 3915 4375
- Fringe Benefit Tax - 125
Profit for the Year after Tax 39281 137469
Add: Prior period adjustments 294 1013
Net Profit 39575 138482
Less transfer to Tonnage Tax
Reserve Account under Section
115VTofthe Income-tax Act, 1961 000 23000
35575 115482
Add : Surplus brought forward
from previous year 71177 183949
Amount available for Appropriation 306752 299431
Appropriations:
-Transfer to General Reserve 4000 14000
- Interim Dividend on Equity Shares - 12183
- Proposed Dividend on Equity Shares 12183 -
-Taxon Dividends 1896 2071
Balance Carried Forward 288673 271177
The total income for the year was recorded at Rs. 224539 lakhs as
against Rs. 336474 lakhs in the previous year and a Net Profit after
prior period adjustments of Rs. 39575 lakhs as against Rs. 138482 lakhs
in the previous year.
Dividend on Equity Shares
Your Directors recommend a dividend of Rs. 8/- per share. The dividend
will be paid after your approval at the ensuing Annual General Meeting.
The aggregate outflow on account of the equity dividend for the year
would be Rs. 14079 lakhs including tax on dividend. This represents a
payout ratio of 35.57% (previous year 10.29%).
Management Discussion and Analysis
Company Performance
In FY 10, the Company recorded a total income of Rs. 224539 lakhs
(previousyear Rs. 336474 lakhs) and earned a PBIDT of Rs. 92139 lakhs
(previousyear Rs. 199182 lakhs).
Tanker Business Market Trend and Analysis
After enjoying several years of strong tanker markets, FY 10 turned out
to be a turbulent year for tanker owners. During the first half of the
year, earnings across various segments fell to levels wherein certain
tanker owners were faced with the dilemma of operating their ships at
or below the operating costs. This was particularly true in the clean
and dirty products category.
Consequent to the collapse of global financial stability, in the first
nine months of FY 10 average world oil demand dipped by about 0.45% or
0.4 million barrels per day over FY 09. This was largely led bytheOECD
nations where demand dropped by staggering 4% or 1.9 million barrels
per day during the same period. To respond to the crisis, OPEC cut its
average oil supply by about 5.4% or 1.7 million barrels per day during
FY 10.
The world tanker fleet increased to 441.40 million dwt at the end of
the financial year, about 6% higher than the 416.90 million dwt at the
beginning of FY 10. The fleet growth was more skewed in favour of the
product tanker segment.
Floating storage provided some relief to the tanker owners in such a
challenging environment. The main driver of this situation was an
oversupplied market, with land-based crude oil storage largely full up
and final demand for refined products well down. To tap the then
prevailing contango (a term used when future prices are higher than
spot prices) in the spot and the future oil and oil products prices,
it is believed that traders withdrew close to 150 tankers out of the
active fleet to store approx. 55 million barrels of crude oil and 98
million barrels of clean products at the peak of this activity sometime
in November 2009.
Amongst other factors that provided some respite to the tanker owners
were increased scrapping vis-a-vis FY 09, slow steaming and lower
single hull tonnage utilization. Also, towards the end of the financial
year, increased crude oil imports by China, especially from West
Africa, improved the tonne-mile demand.
Company Performance
The tanker business accounted for around 83% of the Companys net
revenues and 87% of the operating profits.
In FY 09-10, around 61% of the tanker earnings were derived from the
period market. The crude tankers, inclusive of spot and period,
earned an average TCY of $22,300/day (previous year $41,200/day). The
product carriers, inclusive of spot and period, earned an average
TCY of $18,200/day (previous year $23,700/day).
Tanker Fleet Changes
The tanker fleet of your Company stood at 32 tankers aggregating 2.48
million dwt, with an average age of 10.6 years (as of 31st March 2010)
as against 31 tankers aggregating 2.3 million dwt with an average age
of 9.9 years as on 31st March 2009.
During the year, your Company acquired one double hull 1996 built
Medium Range Product tanker Jag Padma in January 2010.
During the year, your Company also took delivery of the following new
building vessels:
- Double hull Long Range One (LR1) Product tanker Jag Amisha in April
2009
Double hull Long Range One (LR1) Product tanker Jag Aparna in June
2009
During the year, your Company delivered to the buyers 2007 built Medium
Range Product tankers Jag Panna in July 2009 and Jag Payalin May
2009.
Subsequentlyyour Company delivered tothe buyers 1996 built Suezmax
Crude tankerJag Layakin April 2010 which was contracted for sale in
October 2009 and 1985 built General Purpose Product tanker Jag Palak
in May 2010.
During FY 08-09, your Company had placed orders for two Suezmax
tankers, both of which were to be delivered in 2011. These have been
replaced with three Very Large Crude Carrier tankers to be delivered in
early 2012. The total tanker new building order-book for your Company
now stands at three vessels.
Outlook for the Tanker Market
Prospects for the tanker market in FY 2010-11 remain uncertain. As per
IEA, world oil demand in 2010 is expected to improve to 86.6 million
barrels per day, which is about 2% or 1.7 million barrels higher than
that seen in 2009. While Chinas oil demand growth is expected to stay
in the region of 6.5%-7%, a lot depends on a sustainable oil demand
recovery in the OECD nations, specifically the US and the Europe. While
last quarter of the previous financial year did see slight improvement
in the US oil demand, economic problems in Greece and surrounding Euro
zone can dramatically alter demand dynamics. Significant refining
capacity will come on stream in the Middle East and Asia in 2010, which
will take away market share from refiners in the US and the Europe.
This will boost tonne mile demand for the product tanker tonnage going
forward.
On the supply side, the global tanker orderbook currently stands at
about 128.6 million dwt or 29.1% of the fleet at the end of March 2010,
with about 50.40 million dwt scheduled for delivery between April and
December 2010. However, last calendar year registered 25% slippage in
tanker new building deliveries against that scheduled at the beginning
of the year. Assuming similar slippage and complete single hull tonnage
phase out in 2010, net tanker fleet is expected to grow at approx. 2-3%
in the calendar year. Overall, barring seasonal volatility, average
tanker earnings in FY 11 are expected to remain similar to those seen
in FY 10.
After experiencing 5 years of a supercharged cycle (2003-08), the dry
bulk business witnessed a slump not seen in a long time in the third
quarter of FY 09. In an environment characterized by extreme global
economic uncertainty and fear of an impending flood of new building
deliveries, FY 10 performance was expected to be very poor. However, to
the surprise of dry bulk ship owners, the year turned out to be much
better than generally expected at the beginning. While on a yearly
average basis, freight rates were around 40-50% lowerthan those seen in
FY 09, they represented a significant improvement over the lows of
December 2008.
Most dramatically in a year in which global steel production fell by
about 110 mt (Calendar 2009 over Calendar 2008), Chinese steel
production increased by 67 mt (13.5%). Consequently Chinese iron ore
imports rose by a massive 184 mt (41%) to reach 628 mt. As a result
despite unprecedented fall in imports by EL) and Japan, global seaborne
iron ore trade actually increased in one of the least expected years.
The substantial escalation in Chinese imports was supported by a couple
of factors. The massive economic stimulus package created strong growth
in demand for steel and energy. The low price of raw materials gave
great incentives to secure large volumes at bargain prices from the
international market. For most of the calendar year 2009, international
iron ore and coal prices were lowerthan domestic Chinese prices. The
surge in imports triggered congestion in ports with average waiting
delays both in loadports in Australia and discharge time in China
increasing sharply.
The dry bulk fleet stood at 475.60 million dwt as at the end of the
financial year, about 12.3% higher than the 423.4 million dwt at the
beginning of FY 10. Fleet growth would have been even higher had it not
been for significant slippage (about 40% in calendar 2009) in new
building deliveries and sizable scrapping of the older vessels.
Overall, FY 10 turned out to be better than expected year for the dry
bulk market.
Company Performance
The dry bulk fleet contributed around 17% of the Companys net revenues
and 13% of the operating profits. The average TCY for dry bulk vessels,
inclusive ofspot and period, was approximately $20,300/day as
compared to $39,800/day in the previous year.
Dry Bulk Fleet Changes
The dry bulk fleet stood at 6 vessels aggregating 0.41 million dwt,
with an average age of 13.6 years (as of March 31, 2010) as against 8
vessels aggregating 0.50 million dwt with an average age of 13.3 years
on March 31, 2009.
During the year, your Company delivered to the buyers the following
vessels -
1984 built Handymax bulk carrier Jag Rani in May 2009 and 2000 built
Handymax bulk carrier Jag Reena in June 2009
The total bulker new building order-book for your Company now stands at
five vessels.
Outlook for the Dry Bulk Market
Chinese imports policy and actual new building deliveries will set the
undertone for the dry bulk shipping market in short to medium term. On
the back of increased domestic demand backed by greener pastures
outside China, there is a potential for Chinese steel mills to increase
steel production at home at a quicker rate than domestic consumption.
However, a cause of concern exists as international prices for iron ore
and coal have shot up nearly 50-60% and have turned fairly
uncompetitive to Chinese domestic ore. If this propels higher
consumption of the domestic ore in China, sea borne iron ore and coal
trade can suffer severe impact at a time when the dry bulk shipping
industry is already under pressure from potential new building
deliveries.
Currently the dry bulk orderbook stands at 288.2 million dwt or 60.6%
of the existing fleet with 109.5 million dwt scheduled for delivery in
the balance of calendar year 2010. However, it must be pointed out that
the above delivery schedule is fairly theoretical in nature as we have
already seen 40% slippage in new building deliveries during the last
calendar year.
Further extraneous factors such as trade patterns, congestion, natural
calamities and weather changes can have their multiplier effect on dry
bulk freight earnings.
Overall, it is expected that going forward new building deliveries are
likely to cap any improvement in dry bulk earnings in the short to
medium term and hence FY 11 earnings are likely to average lowerthan FY
10.
Asset Values
Second-hand values for modern and older tankers witnessed a drop of
10-20% over the year while modern and older dry-bulk carriers
appreciated by 20-30% during the same period. New building prices for
tankers also witnessed a drop of 15-25% during the year, while those
for the dry bulk ships moved down by about 10-20%.
Risks and Concerns
Economic risk : Shipping is a global business whose performance is
closely linked to the state of the global economy. Therefore, the
earnings of your Company could be impacted negatively if the global
economic situation does not improve over the longer term.
Volatility: Over and above the economic risks the shipping industry is
impacted by numerous short term and regional factors, like political
fallouts, weather changes, etc. This results in great amount of
volatility in the freight market, which in turn impacts your Companys
earnings.
Your Company has attempted to hedge some of this risk by entering into
time charters for part of its fleet. For the year 2010-11,
approximately half of the Companys operating days has been covered in
this manner.
Single hull tankers in the fleet: 82% of your Companys tanker fleet is
double-hulled. The single hull tankers in the fleet could be vulnerable
to any further changes in regulations that may take place. However, the
existing single hull tankers are likely to be phased out in the near
future.
Shipboard personnel: Indian officers continue to be in great demand all
over the world. Given the unfavorable tax status conferred on a
seafarer sailing on Indian-flagged vessels, it is becoming increasingly
difficult for your Company to source officers capable of meeting the
modern day challenges of worldwide trading. This is more relevant for
tanker personnel and may become a hindrance to growth.
OPEC action: If the OPEC decides to cut output further, this combined
with large inventories and increased new building deliveries, could
negatively impact the demand for tankers.
European financial crisis: The growing European debt crisis can further
depress the already subdued demand in the Euro zone.
Chinese economy: As we have seen in the recent past that China has been
the main driving factor of the shipping demand, in case there is a
major downward shift in the Chinese economy, this along with increased
new building deliveries could have negative impact on shipping.
Piracy Risk : With escalation of piracy incidents in Gulf of Aden and
waters around Somalia and Indian Ocean, your Company is strictly
enforcing its Code of Practice to mitigate the security risks of its
vessels transiting through these waters. Self protective measures are
being provided to vessels transiting through piracy prone waters,
wherever feasible. Your Company is engaged in dialogue and
communication with Indian Government and international industry
associations through Indian National Shipowners Association in finding
solution to and mitigating risk of piracy.
Consolidated Financial Statements
The Consolidated Financial Statements have been prepared by your
Company in accordance with the requirements of the accounting standards
issued by The Institute of Chartered Accountants of India. The audited
Consolidated Financial Statements together with Auditors Report
thereon form part of the Annual Report.
The group recorded a consolidated net profit after prior period
adjustment of Rs. 51276 lakhs for theyear under review as compared to
Rs. 141783 lakhs for the Company. The Networth of the group as on March
31, 2010 was Rs. 570977 lakhs as compared to Rs. 523210 lakhs for the
Company.
Subsidiaries
Creatship (India) Limited
Greatship (India) Limited (GIL), having commenced operations in the
offshore oilfield services sector in April 2006, is one of the Indias
largest offshore oilfield services providers. Your Company has till
date invested total of Rs. 111600 lakhs by subscribing to
861 lakhs equity shares totaling in value to Rs. 85200 lakhs and 880
lakhs preference shares totaling in value to Rs. 26400 lakhs.
GIL has recorded a profit after tax of Rs. 8218 lakhs on a standalone
basis and Rs. 10563 lakhs on a consolidated basis for the year ended
March 31, 2010 as compared to Rs. 5063 lakhs and Rs. 4472 lakhs
respectively for the year ended March 31, 2009. The net worth of GIL
for FY 10 was Rs. 132342 lakhs as compared to Rs.128313 lakhs for FY 09
on a consolidated basis.
GIL, alongwith its subsidiaries, is currently owning/operating 5
Platform Supply Vessels (PSVs), 8 Anchor HandlingTug cum Supply Vessels
(AHTSVs), 1 Multipurpose Platform Supply & Support Vessel (MPSSVs) and
2 Jack up Rigs.
Out of the 4207000 warrants (convertible into equity shares) of GIL,
allotted to the promoter directors of the Company in FY 07-08, 2103500
warrants were converted into equal nos. of equity shares on April 30,
2010. The balance 2103500 warrants which were not converted lapsed.
Upon allotment of the said equity shares, your Companys holding is
97.62% of the total equity share capital of GIL. GIL has now ceased to
be a wholly owned subsidiary of the Company. During FY 10, GIL granted
492200 stock options under various Employee Stock Options Schemes. As
on date GIL has 1554100 stock options outstanding.
As part of its growth plans, GIL is from time to time looking at
various options to raise finances for its business and proposes to
raise funds through an initial public offering. Any offering and its
timing would be subject to market conditions, obtaining necessary
shareholder and regulatory approvals. GIL has filed a draft red herring
prospectus with the Securities and Exchange Board of India on May
12,2010.
GIL has the following wholly owned subsidiaries:
a) Greatship Global Holdings Ltd., Mauritius
b) Greatship Global Offshore Services Pte. Ltd., Singapore
c) Greatship Global Energy Services Pte. Ltd., Singapore
d) Greatship DOF Subsea Projects Private Limited
Other subsidiaries
Apart from GIL and its subsidiaries, your Company has the following
wholly-owned subsidiaries :
a) The Great Eastern Shipping Co. London Ltd.
b) The Greatship (Singapore) Re. Ltd.
c) The Great Eastern Chartering LLC (FZC).
Subsidiaries accounts
The Central Government, in exercise of the powers conferred by
sub-section (8) of Section 212 of the Companies Act, 1956, has directed
that the provisions contained in sub-section(l) of Section 212 of the
Companies Act, 1956 shall not apply in respect of the subsidiaries of
the Company for the financial year ended March 31, 2010. Accordingly,
the annual accounts of the subsidiary companies have not been attached
to the Balance Sheet of the Company as at March 31, 2010. The annual
accounts of the subsidiary companies and the related detailed
information will be made available to the investors of the Company and
subsidiary companies seeking such information at any point of time. The
annual accounts of the subsidiary companies are also available for
inspection, during business hours, at the Registered Officeof the
Company and at the head offices of the respective subsidiary companies.
As per the terms of the exemption letter, a statement containing brief
financial details of the Companys subsidiaries for the year ended
March 31,2010 is included in the Annual Report.
Debt Fund Raising
During the year, the Company has raised funds amounting to Rs. 156079
lakhs as against Rs. 37098 lakhs during the previous financial year.
Apart of the debt was raised to fund capital expenditure for vessels
delivered, and new-building instalments paid, during the year. Apart
from this, Rs. 120000 lakhs has been raised by way of Non-Convertible
Debentures with a view to fund the remaining order-book, and also to
have cash in reserve for any opportunities that may arise.
Due to this level of borrowings, the Companys gross debt: equity ratio
was 0.68: land net (of cash) debt: equity ratio was 0.04:1 as on March
31,2010.
Quality, Safety, Health & Environment
During the year, the quality management system of your Company was
audited and certified to updated ISO 9001:2008 standard.
The management system now addresses the requirements of Environmental
Management System to ISO 14001: 2004 and Occupational Health and Safety
Management System to ISO 18001: 2008 and your Company would be seeking
certification to these standards in next financial year.
Training of Floating Staff
Your Company has initiated several forms of training programmes for the
floating staff and these range from class room training ashore to video
/ computer based training on board ships to shipboard training by
visiting trainers. From this financial year the Company has initiated a
compulsory shore-based training programme for all fresh Class IV
Engineers and 2nd Mate COC holders prior to placing them on board for
the first time as officers.
Introduction of Periodical Safety Campaign
Since June 2009 your Company has initiated a system of bimonthly safety
campaign covering safety and pollution prevention aspects with a view
to maintain a pro-active safety culture and to assess the operational
readiness of the equipments/systems on board the Companys fleet of
vessels. Some of the safety campaigns held include Personal Life Saving
Equipment and Survival Crafts, Windlass and Mooring Equipment, etc.
Reduction of Green House Gas Emission from Ships
Your Company has introduced a system for measurement of C02 emission
per tonne-mile of cargo moved by the ships as per MEPC.l/Circ.684 -
Guidelines for Voluntary Use of the Ship Energy Efficiency Operational
Indicator (EEOI). The information is available on line for analysis and
to facilitate initiating strategy for reduction of emission and
consequently fuel oil consumption. The IT based programme has been
developed in-house.
AMVER Award from US Coast Guard
During the year 19 vessels of your Company were conferred award by
United States Coast Guards in recognition of these vessels
participation and contribution under their Automated Mutual-Assistance
Vessel Rescue System (AMVER). It is a unique, computer- based and
voluntary global ship reporting system used worldwide by search and
rescue authorities to arrange for assistance to persons in distress at
sea. With AMVER, rescue coordinators can identify participating ships
in the area of distress and divert the best-suited ship or ships to
respond. AMVERs mission is to quickly provide search and rescue
authorities, on demand, accurate information on the positions and
characteristics of vessels near a reported distress.
H1N1 Virus Threat
As a proactive measure, immediately at the outbreak of H1N1 Virus
infection, your Company had engaged a medical expert of eminence and
had developed and issued procedure detailing preventive actions and
combating actions for H1N1 virus attacks and issued to the fleet.
Necessary medicines and medical equipments have been also provided on
vessels.
Internal Control Systems and their Adequacy
Your Company has instituted internal control systems which are adequate
for the nature of its business and the size of its operations. In the
beginning of the year, the scope of the audit exercise and the key
business processes and selected risk areas to be audited are decided in
consultation with the Audit Committee. The Internal Audit is carried
out by a firm of external Chartered Accountants and covers all
departments. All significant audit observations and follow up actions
thereon are reported to the Audit Committee. The Audit Committee
comprises of 4 Independent Directors with the Chairman being a person
well qualified and conversant with matters pertaining to Accounts and
Finance. The Audit Committee met five times during the year.
Role of Information Technology
As a part of its strategy to align IT with Business, your Company
attempts to introduce new technology solutions to improve operating
efficiency and quality and reduce operational cost. The major
initiatives that have been undertaken this year are discussed below.
* Disaster Recovery (DR) set up at Hyderabad & Business Continuity
- Your Company has successfully set up a DRdata center in a 3rd party
premises at Hyderabad with an objective to fulfill the Business
Continuity, in case of any disaster to our current data center at
Corporate office.
- Your Company has implemented a technology called Server
Virtualization at the time of DR set up which has saved a significant
amount of cost vis-a-vis a set up of similar capacity without
Virtualization. .
* New Communication system with Ship .-
- Your Company has implemented a new communication system in more than
50% of the current fleet (others are in progress) which has resulted,
in significant savings in ship to shore communication cost, besides
helping in smoother operations.
* YourCompany has developed in-house and implemented a new software
namely LIVIS (Live Vessel Information System) whose objective is to
make all relevant data available to employees from one single central
place, based on their accessing authority defined in the system for day
to day work. The operations, technical and OST department have gained
huge efficiency and increased productivity out of this system.
Human Resources
One of the key areas of focus for the HR function during the year was
improving the performance management system both for shore and floating
staff.
Mid-term review was introduced for shore office employees to enhance
the rigour of the process primarily through feedback and meaningful
goal setting. The intervention is expected to result in better
engagement and alignment of employees.
An improved online appraisal system was implemented for the top 2 ranks
of the floating staff. This initiative has improved timely completion,
neutralize biases and facilitate feedback mechanism. A similar process
has been launched for rest of the officers from September 2009. During
the year, the Company ran several leadership essentials workshops for
the senior ranks.
A 360 degree feedback titled Total Perspective was initiated in the
month of January for all senior and middle management. The multi rater
feedback process was combined with psychometric instrument Workplace
big 5 to aid reflection, self awareness and insights to ones own
behavior.
Simultaneously an online team climate survey Team Perspective was
carried out. The survey focused on clarity of roles, team flexibility,
performance management, recognition, etc. The results of the survey
were shared with respective teams.
The Social Cafe initiatives such as quizzes, sports and cultural events
witnessed enthusiastic response from employees. This approach has
helped the Company to harness informal network and build a positive
social fabric. The Company had record number of participants for Mumbai
Marathon this year.
Your Company had employee strength of 193 on shore and 295 floating as
on March 31,2010.
Directors
Mr. Vineet Nayyar and Mr. Rusi N. Sethna retire by rotation. Mr.
Nayyar, being eligible offers himself for re-appointment. On account of
his advanced age, Mr. Sethna did not offer himself for re-appointment.
Mr. Sethna has been associated as a Director of the Company since 1974.
His active participation and contribution at the meetings of the Board
and various Committees have been invaluable. Your Directors place on
record their appreciation for the valuable guidance and support
extended by him during his tenure as a Director.
Mr. K. V. Kamath was appointed as an Additional Director on the Board
of Directors of the Company with effect from May 22,2010 as an
Independent Director. He ceases to be a Director on the date of the
62nd Annual General Meeting. Notice under Section 257 of the Companies
Act, 1956 has been received in respect of his appointment as Director
on the Board.
The terms of appointment of Mr. K. M. Sheth as Executive Chairman and
Mr. Bharat K. Sheth as Deputy Chairman & Managing Director expire in
September 2011 and that of Mr. Ravi K. Sheth as Executive Director
expires in January 2011. It was thought administratively convenient to
terminate their existing terms with mutual consent and to re-appoint
them for a period of 5 years with effect from April 01,2010 on fresh
terms, particulars of which are set out in the Notice of 62nd Annual
General Meeting.
Corporate Governance
Your Company was Corporate Governance compliant much before SEBI
stipulated deadline in the year 2005. Your Company has complied with
the mandatory provisions of Clause 49 of the Listing Agreement,
relating to Corporate Governance. A separate section on Corporate
Governance forms part of the Directors Report and the certificate from
the Companys auditors confirming the compliance of conditions on
Corporate Governance is included in the Annual Report.
The Company has also complied with the Corporate Governance-Voluntary
Guidelines 2009 issued by the Ministry of Corporate Affairs, to the
extent disclosed in the Annual Report.
Risk Management Process
In accordance with requirements of Clause 49 of the Listing Agreement,
your Company has established a Risk Management programme for its
business risks. The programme is built upon the foundation of the
existing risk management process and practices of the Company and has
evolved a structured approach for risk management to manage significant
risks faced by your Company.
The Risk Management framework and reporting regime enables the Company
to assess and demonstrate whether its significant risks are properly
identified and controlled, and to potentially eliminate unnecessary
control related overheads.
The Risk Management framework involves risk identification, assessment,
treatment/action plan, review and reporting as a continuous process.
Your Directors believe that your Company has a sound risk assessment
and minimisation procedure in place.
Directors Responsibility Statement
Pursuant to the requirement of Section 217(2AA) of the Companies Act,
1956 the Board of Directors hereby state that:
i. in preparation of the annual accounts, the applicable accounting
standards had been followed (alongwith proper explanation relating to
material departures) and that there are no material departures;
ii. they have, selected the accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company at the end of the financial year and of the profit of the
Company for that period;
iii. they 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. they have prepared the annual accounts on a going concern basis.
Companies (Disclosure of Particulars in the Report of Board of
Directors) Rules, 1988
Pursuant to Notification No. GSR 1029 dated 31.12.1988 your Company is
not required to furnish prescribed information regarding conservation
of energy and technology absorption, as Shipping Industry is not
covered by the schedule to the said rules. The details of Foreign
Exchange Earnings and Outgo are:
RS. IN LAKHS
(a) Foreign Exchange earned on account of freight,
charter hireearnings, etc. 162686
(b) Foreign Exchange used including operating
expenses, capital repayment, down payments for
acquisition of 157886
ships (net of loan), interest payment, etc.
Particulars of Employees
Statement pursuant to Section 217(2A) of the Companies Act, 1956 (Act),
read with the Companies (Particulars of Employees) Rules, 1975, is
annexed to this Report. As contemplated by Section 219 of the Act,
members are provided with abridged accounts. Members desirous of
receiving the Statement pursuant of Section 217(2A)will be provided the
same on receipt of written request from them.
Auditors
Messrs Kalyaniwalla & Mistry, the Auditors of your Company, who hold
office until the conclusion of the forthcoming Annual General Meeting
being eligible, offer themselves for re-appointment.
Appreciation
Your Directors express their sincere thanks to all customers,
charterers, vendors, investors, shareholders, shipping agents, bankers,
insurance companies, protection and indemnity clubs, consultants and
advisors for their continued support throughout the year. Your
Directors also sincerely acknowledge the significant contributions made
by all the employees for their dedicated services to the Company.
Your Directors are grateful to the Government of India, Ministry of
Shipping, Transchart, Ministry of Petroleum & Natural Gas, Ministry of
Finance, Directorate General of Shipping, Port Authorities, Mercantile
Marine Department and various other authorities for their co-operation.
Your Directors look forward to their continued support.
For and on behalf of the
Board of Directors
K.M. Sheth
Executive Chairman
Mumbai, May 22, 2010
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