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Notes to Accounts of Gujarat Pipavav Port Ltd.

Dec 31, 2013

Notes :

(A) Nature of security on rupee term loan :

(a) During the previous year, the Company has borrowed Indian Rupee Loan from IDFC Ltd., which is secured by creating a first charge on : immovable properties forming part of Project Assets, movable properties forming part of Project Assets, including movable plant and machinery, machinery spares, tools and accessories, furniture, fixtures, verhicles, charge on cash flows, book debts, receivables and any other revenue of whatsoever nature and wherever arising, present and future pertaining to the project, all intangibles including but not limited to goodwill, uncalled capital present and future pertaining to project, right, title or interest, benefit, claims and demands in project documents including but not limited to Insurance Contract, letter of credit, guarantees, performance bond provided by any party, and Trust and Retention Account including all sub-accounts, Debt service reserve account and all other bank accounts of the Company.

(b) The rate of interest is around 11.00% p.a. This loan is repayable over a period of 12 years in quarterly installments starting from September 2012 upto March 2023 as per repayment schedule.

B) The Company has been sanctioned External Commercial Borrowing (ECB) Loan of USD 152 Million (equivalentRs. 9,452 Million) by International Finance Corporation (IFC), a part of World Bank Group for the proposed Port expansion. The documentation for this loan is complete, charge on assets against the same is duly created by execution of Indenture of Mortgage and the said loan is secured on pari passu basis with borrowings from IDFC Limited by way of first charge and funds are available for draw down. No disbursements have been availed from the ECB Loan.

1. EXCEPTIONAL ITEMS

During the current year, the Company has re-assessed the technical feasibility and future usability of its fixed assets. Based on this physical assessment and considering the current business performance and the financial projections for the foreseeable future, the Company has, reversed a net impairment provision amounting to X 524 Million (net of additional impairment provision ofRs. 108 Million). Further, in accordance with Accounting Standard-28 on Impairment of Assets, in order to bring the carrying value of the assets to its current realisable value that would have been determined had no impairment been recognized in the prior accounting years, the Company has created a depreciation charge amounting to X 232 Million, resulting into a net gain of X 292 Million. Further on basis of future usability, the Company has written off /scrapped assets during the year amounting to Rs. 128 Million. Consequently, the net impact of impairment reversal, depreciation charge on impairment reversal and assets written off/ scrapped amounting to X 164 Million has been disclosed as an exceptional item. Further, the provision for impairment carried forward aggregates X 1,230 Million.

2. QUALIFIED INSTITUTIONAL PLACEMENT (QIP)

On July 11, 2012, the Company has concluded a funds raising exercise of X 3,500 Million, through a Qualified Institutional Placement (QIP) and a preferential issue to its Promoter. Consequently, the Company has issued and allotted:

i. 34,128,668 Equity shares of X 10 each at a premium of X 48.45 aggregating to Rs. 1,994.82 Million to Qualified Institutional Buyers; and

ii. 25,751,571 Equity shares ofRs. 10 each at a premium of Rs.48.45 aggregating to X 1,505.17 Million to Promoter.

The promoter''s shareholding in the Company is maintained at 43.01 % post the QIP and the preferential allotment.

Debt Prepayment

The Company has raised X 3,500 Million through Qualified Institutional Placement (QIP) and Preferential Issue, the entire amount has been used to pre-pay the loan outstanding of Punjab National Bank, IDBI Bank and Export-Import Bank of India.

3. TAXATION

a) Transfer Pricing

The Company''s international transactions with related parties are at arm''s length as per the independent accountants'' report for the year ended 31 March 2013. Management believes that the Company''s international transactions with related parties post 31 March 2013 continue to be at arm''s length and that the transfer pricing legislation will not have any impact on these financial statements, particularly on amount of tax expenses and that of provision of taxation.

b) Tax Holiday

As per the provisions of Indian Tax laws, the Company is eligible for a tax holiday under Section 80IA for a block of 10 consecutive Assessment years out of the 15 years beginning of port operations. Accordingly, the Company is entitled to tax holiday commencing from 1 April 2007 until 31 March 2017. Minimum Alternative Tax will apply after lower of unabsorbed book loss or depreciation is adjusted against book profits during the years of tax holiday.

4. INVESTMENT IN PIPAVAV RAILWAY CORPORATION LIMITED (PRCL)

The Company has an investment of Rs. 830 Million (2012: Rs. 830 Million) in PRCL as at 31 December 2013. As per latest available audited financial statements of PRCL for the year ended 31 March 2013 the book value of our investment is Rs. 802.63 Million. Based on the cash flow projections prepared by the Company and after considering the rise in container and bulk cargo volumes at the port of Pipavav and the business opportunity available to PRCL, the Company believes that the diminution in value of its investment is only temporary in nature and hence no provision is considered necessary to the carrying value of the investment. Further, during the year PRCL has declared an interim dividend @ Rs. 0.50 per share with respect to the performance pertaining to the financial year 2013-14.

5. TRAFFIC GUARANTEE COMMITMENT

The Company has entered into Transportation and Traffic Guarantee Agreement with PRCL to provide minimum volumes of 3 Million metric tonnes in every Financial Year. The Company has already met the commitment for the year 2013-14 and there is no shortfall to be paid to PRCL.

The total claim till date is Rs. 699.33 Million (2012: Rs. 699.33 Million) which the Company has disputed. The liability, if any, is accordingly not currently determinable.

6. CAPITAL AND OTHER COMMITMENTS

Capital Commitments

The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 182.13 Million (2012: Rs. 563.16 Million)

Export Promotion Capital Goods Commitments

The Company had imported capital goods at concessional rate of import duty under Export Promotion Capital Goods (''EPCG'') scheme by executing a legal undertaking in favor of Government of India with an obligation to export goods / services and realize foreign exchange to the extent of Rs. 41.29 Million (2012: Rs. 2,680.81 Million) by 2017 and Rs. 498.11 Million (2012: Rs. 498.11 Million) by 2018. Income arising out of handling container and bulk vessels owned by foreign shipping lines are considered as deemed exports and consequently form export obligations of the Company for the said EPCG commitment.

The Company entered into a 30 year Concession Agreement with Government of Gujarat and Gujarat Maritime Board (GMB) dated 30 September 1998 to engage in the business of developing, constructing, operating and maintaining the port on a BOOT (Build Own Operate Transfer) basis. The Concession Agreement requires the Company to pay GMB a lease rental annually Rs. 7.06 Million (2012: Rs. 6.14 Million) with an escalation in every three years.

Others

The Company has given a total area of 1,111,813 Square Mtr. (2012: 743,875 Square Mtr.) of land on lease to various customers. The lease is up to 2028 which is the end of the concession period.

During the year 2005 and prior to AP Moller Maersk group acquiring the complete shareholding held by the original promoters, SKIL group, the Company had provided commitment of Rs. 350 Million (2012: Rs. 350 Million) towards consortium lending to a SKIL Group Company, Pipavav Shipyard Limited (formerly Pipavav Ship Dismantling & Engineering Limited) conditional to fulfillment of certain obligations by Pipavav Shipyard Limited and other parties. The Company is in the process of seeking discharge from this commitment. IL&FS (lead manager in the consortium) would be releasing the Company of its commitment once it receives a "No Dues certificate" from the Government of Gujarat.

7. PROVISIONS AND CONTINGENT LIABILITIES

Claims against Company not acknowledged as debt aggregates to Rs. 1,750.91 Million (2012: Rs. 1,748.99 Million). Provisions made in respect of the same aggregates to Rs. 355.21 Million (2012: Rs. 364.91 Million).

Other contingent liabilities in respect of taxation matters not acknowledged as debt aggregates to Rs. 52.07 Million (2012: Rs. 47.27 Million). Provisions made in respect of the same aggregates toRs. 21.80 Million (2012: Rs. 13 Million).

8. DISCLOSURE PURSUANT TO ACCOUNTING STANDARD - 15 (REVISED) EMPLOYEE BENEFITS

a. The Company recognised Rs. 14.48 Million (2012: Rs. 13.88 Million) for provident fund contribution in the Statement of Profit and Loss.

b. Gratuity (Defined benefit plan}

The Company makes annual contribution to the Employee''s Group Gratuity-cum-Life Assurance Scheme of the Life Insurance Corporation of India, a funded defined benefit plan for employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

c. Long term compensated absence (Long term employment benefit)

The leave salary is payable to all eligible employees for each day of accumulated leave on death or on resignation or upon superannuation. Compensated absences debited to Statement of Profit and Loss during the year amounts to Rs. 1.41 Million (2012: Rs. 4.62 Million) and is included in Note 24 - ''Employee benefits expense''. Accumulated non-current provision for leave encashment aggregates Rs. 10.29 Million (2012 : Rs. 10.59 Million) and current provision aggregates Rs. 1.20 Million (2012 : Rs. 1.10 Million).

d. The following table sets out the funded status of the gratuity plan and the amounts recognised in the Company''s financial statements based on actuarial valuations being carried out as at 31 December 2013.

9. SEGMENT REPORTING

The Company has only one reportable business segment, which is Port services and only one reportable geographical segment, which is the port at Pipavav. Accordingly, the Company is single segment company in accordance with Accounting Standard 17 "Segment Reporting" notified in Companies (Accounting Standard) Rules, 2006.

a) Prior year figures aggregating Rs. 32.49 Million have been reclassified from "Trade receivables" to "Short term loans and advances" to conform to the current year''s presentation,

b) Information with regard to other matters specified in revised schedule VI of the act, is either Nil or not applicable to the company for the year.


Dec 31, 2012

1. Company Overview

i. Gujarat Pipavav Port Limited, ("the Company") was incorporated on 5 August 1992 to construct, operate and maintain an all weather port at Pipavav, District Amreli, in the State of Gujarat.

ii. The port is designed to handle bulk, container and liquid cargo and to provide port services such as marine services, material handling and storage operations.

iii. The Company has entered into a 30 year Concession Agreement with Government of Gujarat and Gujarat Maritime Board ("GMB") dated 30 September 1998 to engage in the business of developing, constructing, operating and maintaining the port on a BOOT (Build Own Operate Transfer) basis.

iv. During the year 2005, AP Moller-Maersk group together with certain financial investors acquired the complete shareholdings held by the original promoter viz. SKIL group, on receipt of approval from Government of Gujarat, and Gujarat Maritime Board. Accordingly, AP Moller-Maersk group became the key promoter of the Company under the Concession agreement.

2. Qualified Institutional Placement (QIP)

On July 11, 2012, the Company has concluded a funds raising exercise of INR 3,500 million, through a Qualified Institutional Placement (QIP) and a preferential issue to its Promoter. Consequently, the Company has issued and allotted:

i. 34,128,668 Equity shares of INR 10 each at a premium of INR 48.45 aggregating to INR 1,994.82 million to Qualified Institutional Buyers; and

ii. 25,751,571 Equity shares of INR 10 each at a premium of INR 48.45 aggregating to INR 1,505.17 million to Promoter.

The promoter''s shareholding in the Company is maintained at 43.01 % post the QIP and the preferential allotment.

Debt Prepayment

The Company has raised INR 3,500 million through Qualified Institutional Placement (QIP) and Preferential Issue, the entire amount has been used to pre-pay the loan outstanding of Punjab National Bank, IDBI Bank and Export-Import Bank of India.

3. Initial public offer (IPO)

During the year 2010, the Company came out with Initial Public Offer (IPO) of its equity shares aggregating INR 5,000 million.

Balance INR Nil (December 2011: INR 300.49 million) is held in short term deposits with banks.

4. Taxation

a) Transfer Pricing

The Company''s international transactions with related parties are at arm''s length as per the independent accountants'' report for the year ended 31 March 2012. Management believes that the Company''s international transactions with related parties post 31 March 2012 continue to be at arm''s length and that the transfer pricing legislation will not have any impact on these financial statements, particularly on amount of tax expenses and that of provision of taxation.

b) Tax Holiday

As per the provisions of Indian Tax laws, the Company is eligible for a tax holiday under Section 80IA for a block of 10 consecutive Assessment years out of the 15 years beginning of port operations. Accordingly, the Company is entitled to tax holiday commencing from 1 April 2007 until 31 March 2017. Minimum Alternative Tax will apply after lower of unabsorbed book loss or depreciation is adjusted against book profits during the years of tax holiday.

5. Investment in Pipavav Railway Corporation Limited (PRCL)

The Company has an investment of INR 830 million (December 2011: INR 830 million) in PRCL as at 31 December 2012. As per latest available audited financial statements of PRCL for the year ended 31 March 2012 the book value of our investment is INR 623.01 million. Based on the cash flow projections prepared by the Company and after considering the rise in container and bulk cargo volumes at the port of Pipavav and the business opportunity available to PRCL, the Company believes that the diminution in value of its investment is only temporary in nature and hence no provision is considered necessary to the carrying value of the investment.

6. Traffic guarantee commitment

The Company has entered into Transportation and Traffic Guarantee Agreement with PRCL to provide minimum volumes of 3 million metric tonnes in every Financial Year. Due to growth in volumes this figure is already met and there is no shortfall to be paid to PRCL.

The total claim till date is INR 699.33 million (December 2011: INR 699.33 million) which the Company has disputed. The liability, if any, is accordingly not currently determinable.

7. Capital and other commitments

Capital Commitments

The estimated amount of contracts remaining to be executed on Capital Account and not provided for (net of advances) is INR 563.16 million (December 2011: INR 743.12 million)

Export Promotion Capital Goods Commitments

The Company had imported capital goods at concessional rate of import duty under Export Promotion Capital Goods (''EPCG'') scheme by executing a legal undertaking in favor of Government of India with an obligation to export goods/ services and realize foreign exchange to the extent of INR 2,829.71 million (December 2011: INR 2,966.95 million) by 2015, INR 2,680.81 million (December 2011: INR 2,680.81 million) by 2017 and INR 498.11 million (December 2011: INR 498.11 million) by 2018. Income arising out of handling container and bulk vessels owned by foreign shipping lines are considered as deemed exports and consequently form export obligations of the Company for the said EPCG commitment.

Lease Commitments

The Company''s leasing arrangement is in respect of a non-cancellable operating lease for office premises. The future minimum lease payments payable under the said non-cancellable operating lease for rented premises are as follows:

The Company entered into Concession Agreement with Gujarat Maritime Board (GMB) which grants the right to develop operate and maintain the port for 30 years. The Concession Agreement requires the Company to pay GMB a lease rental annually INR 6.14 million (December 2011: INR 6.14 million) with an escalation in every three years.

Others

The Company has given land on lease to Pipavav Shipyard, Central Warehousing Corporation, Aegis, IMC limited and Gulf Petrochemicals. The lease is upto 2028 which is the end of the concession period.

During the year 2005 and prior to AP Moller Maersk group acquiring the complete shareholdings held by the original promoters, SKIL group, the Company had provided commitment of INR 350 million (December 2011: INR 350 million) towards consortium lending to a SKIL Group Company, Pipavav Shipyard Limited (formerly Pipavav Ship Dismantling & Engineering Limited) conditional to fulfillment of certain obligations by Pipavav Shipyard Limited and other parties. The Company is in the process of seeking discharge from this commitment. IL&FS (lead manager in the consortium) would be releasing the Company of its commitment once it receives a "No Dues certificate" from the Government of Gujarat.

8. Provisions and contingent liabilities

Claims against Company not acknowledged as debt aggregates to INR 1,796.26 million (December 2011: INR 1,643,84 million). Provisions made in respect of the same aggregates to INR 377.91 million (December 2011: INR 433.62 million).

9. Disclosure pursuant to Accounting Standard - 15 (Revised) Employee Benefits

a. The Company recognised INR 13.88 million (December 2011: INR 10.01 million) for provident fund contribution in the Statement of Profit and Loss.

b. Gratuity (Defined benefit plan

The Company makes annual contribution to the Employee''s Group Gratuity-cum-Life Assurance Scheme of the Life Insurance Corporation of India, a funded defined benefit plan for employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

c. Long term compensated absence (Long term employment benefit)

The leave salary is payable to all eligible employees for each day of accumulated leave on death or on resignation or upon superannuation. Compensated absence debited to Statement of Profit and Loss during the year amounts to INR 1.67 million (December 2011 :INR 1.88 million) and is included in Note 24-''Employee benefits''.

d. The following table sets out the funded status of the gratuity plan and the amounts recognised in the Company''s financial statements based on actuarial valuations being carried out as at 31 December 2012.

10. Segment reporting

The Company has only one reportable business segment, which is Port services and only one reportable geographical segment, which is the port at Pipavav. Accordingly, the Company is single segment company in accordance with Accounting Standard 17 "Segment Reporting" notified in Companies (Accounting Standard) Rules, 2006.

a) Dues to Micro and Small suppliers

Under the Micro, Small and Medium Enterprises Development Act, 2006 (''MSMED Act'') which came into force from 2 October 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. On the basis of the information and records available with the Company, the details of outstanding dues to the Micro and Small enterprises as defined in the MSMED Act, 2006 as set out in the following disclosures:


Dec 31, 2010

1. Background

i. Gujarat Pipavav Port Limited, ("the Company") was incorporated on 5 August 1992 to construct, operate and maintain an all weather port at Pipavav, District Amreli, in the State of Gujarat.

ii. The port is designed to handle bulk, container and liquid cargo and to provide port services such as marine services, material handling and storage operations.

iii. The Company has entered into a 30 year Concession Agreement with Government of Gujarat and Gujarat Maritime Board ("GMB") dated 30 September 1998 to engage in the business of developing, constructing, operating and maintaining the port on a BOOT (Build Own Operate Transfer) basis.

iv. During the year 2005, AP Moller-Maersk group together with certain financial investors acquired the complete shareholding held by the original promoter viz. SKIL group, on receipt of approval from Government of Gujarat, and Gujarat Maritime Board. Accordingly, AP Moller-Maersk group became the key promoter of the Company under the Concession Agreement.

2. Initial Public Offer (IPO)

During the year pursuant to the approval of the shareholders of the Company in an extra ordinary general meeting held on 17 November 2009 the Company has issued and allotted through Initial Public Offering (IPO) 108,695,652 equity shares of INR 10 each at a premium of INR 36 per share aggregating to a total of INR 5,000 million to all categories of investors. The issue was made in accordance with the terms of the Companys prospectus dated 30 August 2010 and the shares got listed on 9 September 2010 on Bombay Stock Exchange and National Stock Exchange.

3. Taxation

a) Transfer Pricing

The Companys international transactions with related parties are at arms length as per the independent accountants report for the year ended 31 March 2010. Management believes that the Companys international transactions with related parties post 31 March 2010 continue to be alarms length and that the transfer pricing legislation will not have any impact on these financial statements, particularly on amount of tax expenses and that of provision of taxation.

b) Tax Holiday

As per the provisions of Indian Tax laws, the Company is eligible for a tax holiday under section 80IA for a block of 10 consecutive Assessment years out of the 15 years beginning of port operations. Accordingly, the Company is entitled to tax holiday commencing from 1 April 2007 until 31 March 2017. Minimum Alternative Tax will apply after lower of unabsorbed book loss or depreciation is adjusted against book profits during the years of tax holiday.

4. Investment in Pipavav Railway Corporation Limited (PRCL)

The Company has an investment of INR 830 million (2009: INR 830 million) in PRCL as at 31 December 2010. As per latest available audited financial statements of PRCL for the year ended 31 March 2010 the book value of our investment is INR 378.11 million. Based on the cash flow projections prepared by the Company and after considering the rise in container and bulk cargo volumes at the port of Pipavav and the business opportunity available to PRCL, the Company believes that the diminution in value of its investment is only temporary in nature and hence no provision is considered necessary to the carrying value of the investment.

5. Traffic Guarantee Commitment

The Company has entered into Transportation and Traffic Guarantee Agreement with PRCL. Under this agreement shortfall of traffic guarantee claim raised by PRCL aggregating to INR 1,404.85 million upto31 March 2010 has been paid in full.

PRCL has raised further claim of INR 660.41 million during the year which the Company has disputed.

6. Capital and other Commitments

Capital Commitments

The estimated amount of contracts remaining to be executed on Capital Account and not provided for (net of advances) is INR 275.71 million (2009: INR 202.20 million)

Export Promotion Capital Goods Commitments

The Company had imported capital goods at concessional rate of import duty under Export Promotion Capital Goods (EPCG) scheme by executing a legal undertaking in favour of Government of India with an obligation to export goods/ services and realize foreign exchange to the extent of INR 1,616.88 million by 2014, INR 2,966.94 million by 2015, INR 2,680.80 million by 2017 and INR 498.11 million by 2018. Income arising out of handling container and bulk vessels owned by foreign shipping lines are considered as deemed exports and consequently form export obligations of the company for the said EPCG commitment.

Others

During the year 2005 and prior to AP Moller Maersk group acquiring the complete shareholdings held by the original promoters, SKIL group, the Company had provided commitment of INR 350 million (2009: INR 350 million) towards consortium lending to a SKIL Group Company, Pipavav Shipyard Limited (formerly Pipavav Ship Dismantling & Engineering Limited) conditional to fulfilment of certain obligations by Pipavav Shipyard Limited and other parties. The Company will be discharged from this commitment upon Government of Gujarat issuing a "No Dues certificate" to IL&FS (lead manager in the consortium) and consequently IL&FS releasing the Company of its commitment.

Lease Commitments

The Companys leasing arrangement is in respect of a non-cancellable operating lease for office premises. The future

7. Provisions and Contingent Liabilities and Contingent Assets Contingent Liabilities Sr. No. Particulars 2010 2009

a) Claims against Company not acknowledged as debt (Gross)

i. Claims from suppliers/consultants/project contractors 490.55 476.76

ii. Claims received from PRCL 660.41 188.10

iii. Other Claims 513.21 421.89

Grand Total (i + ii + iii) (A) 1,664.17 1,086.75

8. Exceptional items / prior period adjustments

Exceptional items represent loss due to damage of asset in the prior year net of insurance claim. During year 2009, the Company has charged off legal and professional charges pertaining to earlier period.

9. Disclosure pursuant to Accounting Standard - 15 (Revised) Employee Benefits

a. The Company recognised INR9.07 million (2009: INR 9.66 million) for provident fund contribution in the profit and loss account.

b. Gratuity (Defined benefit plan}

The Company makes annual contribution to the Employees Group Gratuity-cum-Life Assurance Scheme of the Life Insurance Corporation of India, a funded defined benefit plan for employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

c. Long term compensated absence (Long term employment benefit)

The leave salary is payable to all eligible employees for each day of accumulated leave on death or on resignation or upon superannuation. Compensated absence debited to profit and loss account during the year amounts to INR 5.33 million and is included in Salaries, Wages and Bonus under Schedule 12 - Personnel Costs.

10. (A) List of related Parties and their Relationship

Relation Party

A. Holding Company (i) APM Terminals Mauritius Limited (upto 03 September 2010)

(ii) APM Terminals Management B.V. (Ultimate Holding Company) (upto 03 September 2010)

B. Party with substantial interest (i) APM Terminals Mauritius Limited (w.e.f. 04 September 2010) and its associates (ii)APM Terminals Management B.V. (w.e.f. 04 September 2010)

(iii) APM Terminals AMi Management DMCEST

(iv) APM Terminals Crane & Engineering Services (Shanghai) Co. Ltd

(v) AP Moller-Maersk A/S.

(vi) Maersk India Private Limited acting as an agent for AP Moller - Maersk A/S and Safmarine Container Lines N.V.

(vii) Gateway Terminals India Private Limited

C. Key management personnel Managing Director

(i) Mr. PrakashTuisiani (ii) Mr. Philip Littlejohn

D. Associate Pipavav Railway Corporation Limited

All transactions above INR 1 million have been disclosed

11. Segment Reporting

The Company has only one reportable business segment, which is Port services and only one reportable geographical segment, which is the port at Pipavav. Accordingly, the Company is single segment company in accordance with Accounting Standard 17 "Segment Reporting" notified in Companies (Accounting Standard) Rules, 2006.

a) Previous years figures have been recast / regrouped wherever necessary to conform to the current years classification/ presentation.


Dec 31, 2009

1. Background

i. Gujarat Pipavav Port Limited, ("the Company") was incorporated on 5 August 1992 to construct, operate and maintain an all weather port at Pipavav, District Amreli, in the State of Gujarat.

ii. The port is designed to handle bulk, container and liquid cargo and to provide port services such as marine services, material handling, transit and storage operations.

iii. The Company has entered into a 30 year Concession Agreement with Government of Gujarat and Gujarat Maritime Board ("GMB") dated 30 September 1998 to engage in the business of developing, constructing, operating and maintaining the port on a BOOT (Build Own Operate Transfer) basis.

iv. AP Moller-Maersk group together with certain financial investors acquired the complete shareholdings held by the original promoter viz. SKIL group, on receipt of approval from Government of Gujarat, and Gujarat Maritime Board during 2005. Accordingly AP Moller-Maersk group has become the key promoter of the Company with management control.

2. Asset Impairment

During the year 2003-04, the Company had identified its assets whose carrying values had been impaired and having regards to the principles of Accounting Standard 28 - Impairment of Assets (AS 28), the Company had made a provision of Rs 2,164.13 million in respect of such impairment as at 31 March 2004. The impairment loss includes Rs 580.82 million of pre-operative expenses (including Rs 489.91 million towards borrowing costs), which was the subject matter of qualification in the audit report for the year ended 31 March 2003, since these expenses were capitalized in that year.

As at 31 December 2009, the Company has re- assessed the impairment provision and retained the existing provision of Rs.1,935.09 million (after reversal of provision of Rs.228.70 million on sale/discard of assets in prior years and Rs.0.34 million on discard of asset during the current year). For the purpose of impairment testing, the entire port has been considered as a single cash generating unit as the port is a composite facility and can be operated in a commercial feasible manner only if it operates as a combined unit. The recoverable amount is the value in use, in the absence of a readily determinable net selling price.

Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the assets and from its disposal at the end of its useful life. The estimated future cash flows have been discounted to their present value using a pre-tax discounting rate

3. Investment in Pipavav Railway Corporation Limited (PRCL)

The Company has an investment of Rs. 830 million (2008: Rs. 830 million) in PRCL as at 31 December 2009.

The net worth of PRCL as per latest available audited financial statements for the year ended 31 March 2009 is lower than the cost. However, taking into account the rise in rail volume and the business opportunity available to PRCL for running container trains, the Company believes that the diminution in value of its investment is only temporary and accordingly does not envisage any diminution in the value of investments and hence no provision is made.

4. Corporate Debt Restructuring (CDR)

The Company had got its debt restructured under the Corporate Debt Restructuring (CDR) Scheme with effect from 1 October 2003. As per the scheme, part of the outstanding debt was converted into foreign currency loan (FCL), 8.40% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) and the interest accrued thereon into 10.50% Non Convertible Debenture (NCD). During the year 2006, Corporate Debt Restructuring Cell approved early redemption of NCDs and replaced with Funded Interest Term Loan on similar terms. One of the conditions for the restructuring of debt was to increase share holding and acquire management control in the Company by AP Moller- Maersk group, which has been fulfilled.

During the year ended 31 December 2009 debt restructured under CDR scheme has been repaid in full. The Company has exited from CDR and received no due certificate from all lenders except for Punjab National Bank (PNB). The Company is in dialogue with PNB to sort out certain issues pertaining to tax treatment of the redemption proceeds received by them and is likely to be resolved shortly.

Pending receipt of no dues certificate from the PNB, the Company is unable to file satisfaction of charges with the Registrar of Companies in respect of old loans.

On 19 May 2009, the Company has availed a new loan of Rs. 12,000 million from various banks repayable over a period of 15 years, the repayment commencing from 1 June 2012.

5. Premium on redemption of Preference Shares

In terms of the Corporate Debt Restructuring (CDR) scheme approved during November 2003, for the restructuring of the debt of the Company, a part of the outstanding debt, due to the lenders of the Company, amounting to Rs. 517.80 million was converted into 8.4 % Optionally Convertible Cumulative Redeemable Preference Shares (preference shares). The preference shares together with accrued dividend had to be redeemed in three years in December 2009, December 2010 and December 2011.

The Company sought variation to the terms of issue of preference shares such that the rate of dividend was reduced from 8.4% to 1% and Cumulative preference shares were made non cumulative. The Company has since altered its Article and Memorandum of Association. Further, the preference shares would be redeemed at such premium as would provide the holders of preference shares similar yield as the original terms of preference shares would have provided. Accordingly, upon receipt of approval for the scheme of variation from CDR, premium on redemption of 1 % Non Cumulative Redeemable Preference Shares has been amortised over its tenure and premium on redemption of preference shares has been adjusted against the Securities Premium. During the year ended 31 December 2009, the aforesaid debt has been repaid in full and the preference shares issued to the lenders under the scheme have been fully redeemed.

6. Commitment

a. The Company had provided commitment of Rs.350 million (2008: Rs.350 million) in the year 2005 towards consortium lending to a SKIL Group Company, Pipavav Shipyard Limited (formerly Pipavav Ship Dismantling & Engineering Limited) conditional to fulfilment of certain obligations by Pipavav Shipyard Limited and other parties. Post APMT takeover, the Company has sought discharge from this commitment, which is awaited.

7. Provisions, Contingent Liabilities and Contingent Assets

As required by the Accounting Standard 29 - Provisions, Contingent Liabilities and Contingent Assets (AS 29), prescribed in the Companies (Accounting Standards) Rules, 2006 issued by the Central Government, in consultation with the National Advisory Committee on Accounting Standards, to the extent applicable, given below are brief description of the nature of contingent liabilities recognised by the Company and movements in provision for claims.

Contingent Liabilities

Sr. Particulars 2009 2008

No.

a) Bank guarantees outstanding 280.52 263.07

b) Claims against Company not acknowledged as debt, including claim from project contractors

i. Claims from suppliers / consultants 476.76 416.79

ii. Interest on Compensation for shortfall in traffic volume based on claim received from PRCL 188.10 46.39

iii. Other Claims 421.89 200.61

Sub Total (i + ii + iii) 1,086.75 663.79

Grand Total (a + b) 1,367.27 926.86

Provisions for claims there against 320.17 305.53



Description of Contingent Liabilities

Sr. Contingent Liability Brief Description No.

1. Bank Guarantees Issued in favour of Government and court

2. Claims against The Company is a party to various Company not legal proceedings and has also acknowledged as debts received various claims in the normal course of business.



Provisions

Movement in provision for claims

2009 2008

Opening balance 305.53 1,155.08

Provision made during the year 14.64 162.68

Utilisation of provision - (1,012.23)

Closing balance 320.17 305.53



The closing provision is based on management estimates which are supported by advice from the Companys legal counsel. This amount will be utilized towards payment of claims as and when the claims are settled.

8. Traffic Guarantee Shortfall

The Company has accepted the claim of Pipavav Railway Corporation Limited (PRCL) under Traffic Guarantee Agreement subject to approval of waiver of interest by Ministry of Railways and provided Rs.1,402.91 million upto 31 December 2009. As per the agreed payment plan between Company and PRCL subject to approval of Ministrys of Railways, Company has paid Rs.1,050 million to PRCL as on 31 December 2009 towards this claim.

9. EPCG Commitment

The Company had imported capital goods at concessional rate of import duty under Export Promotion Capital Goods (EPCG) scheme by executing a legal undertaking in favour of Government of India with an obligation to export goods / services and realize foreign exchange to the extent of Rs 1,616.88 million (2008: Rs. 1,616.88 million) by 2014, Rs.2,966.94 million (2008: Rs. 2,966.94 million) by 2015 and Rs. 2,680.80 million (2008: Nil) by 2017.

10. Disclosure pursuant to Accounting Standard - 15 (Revised) Employee Benefits

a. The Company recognised Rs.9.66 million (2008: Rs. 7.98 million) for provident fund contribution in the profit and loss account.

b. Gratuity (Defined benefit plan)

The Company makes annual contribution to the Employees Group Gratuity-cum-Life Assurance Scheme of the Life Insurance Corporation of India, a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

c. Long term compensated absence (Long term employment benefit)

The leave salary is payable to all eligible employees for each day of accumulated leave on death or on resignation or upon superannuation. Compensated absence debited to profit and loss account during the year amounts to Rs. 0.46 million and is included in Salaries, Wages and Bonus under Schedule 13 - Personnel Cost.

The following table sets out the funded status of the gratuity plan and the amounts recognised in the Companys financial statements based on actuarial valuations being carried out as at 31 December 2009.

11. (A) List of related Parties and their Relationship

In the absence of comprehensive list of related parties as envisaged in Accounting Standard on Related Party Disclosures (AS 18), the names of the related parties with whom transaction have taken place have been disclosed.

Relation Party

A. Holding Company (i) APM Terminals Mauritius Limited

(ii) APM Terminals B.V. (Ultimate Holding Company)

B. Party with (i) Maersk India Private Limited substantial - acting as an agent for AP Moller interest and i - Maersk A/S. ts associates (ii) Maersk India Private Limited - acting as an agent for Safmarine Container Lines N.V.

C. Key management Managing Director

personnel (i) Mr. Prakash Tulsiani (from 28 January 2009)

(ii) Mr. Phillip Littlejohn (upto 28 January 2009)

D. Fellow Subsidiary (i) Gateway Terminals India Private Limited

with whom the (ii) Maersk India Private Limited Company has transaction (iii) Maersk Angola Lda

(iv) APM Terminals Management B.V.

(v) Maersk Training Centre A/S

(vi) APM Terminals Crane & Engineering Services (Shanghai) Co. Ltd

(vii) Maersk Global Services Centres (India) Pvt. Ltd.

(viii) APM Terminals AMI Management DMCEST

(viii) APM Terminals China

E. Associate Pipavav Railway Corporation Limited

12. The Company has only one reportable business segment, which is Port services and only one reportable geographical segment, which is the port at Pipavav. Accordingly, the segment information as required by Accounting Standard on Segment Reporting (AS 17) has not been separately disclosed.

13. Managerial remuneration

Managerial remuneration excludes provisions for/contribution to gratuity and leave encashment, which are based on actuarial valuation determined for all employees, including Directors.

The Company has applied to the Central Government and awaiting its approval for the managerial remuneration paid in excess of the ceiling on remuneration prescribed under Schedule XIII of the Companies Act, 1956 by Rs. 38.49 million (including Rs. 32.96 million in respect of earlier years) to the erstwhile Managing Director, and Rs. 16.12 million to the current Managing Director.

14. In terms of the Concession Agreement with Gujarat Maritime Board (GMB), the Company has sought approval for the Increase In actual capital costs of contracted assets in excess of the approved capital costs of Rs 5,855.30 million as stated in Concession Agreement and the approval is awaited.

15. Transfer Pricing

The Companys international transactions with related parties are at arms length as per the independent accountants report for the year ended 31 March 2009. Management believes that the Companys international transactions with related parties post 31 March 2009 continue to be at arms length and that the transfer pricing legislation will not have any impact on these financial statements, particularly on amount of tax expenses and that of provision of taxation.

16. The Company has charged off legal and professional charges pertaining to earlier period. The same has been disclosed as prior period adjustments.

17. Previous years figures have been recast / regrouped wherever necessary to conform to the current years classification / presentation.


Dec 31, 2008

1. Background

i. Gujarat Pipavav Port Limited, ("the Company") was incorporated on 5 August 1992 to construct, operate and maintain an all weather port at Pipavav, District Amreli, in the State of Gujarat.

ii. The port is designed to handle bulk, container and liquid cargo and to provide ancillary port services such as marine services, material handling, transit and storage operations.

iii. The Company has entered into a 30 year Concession Agreement with Government of Gujarat and Gujarat Maritime Board (GMB) dated 30 September 1998 to engage in the business of developing, constructing, operating and maintaining the port on a BOOT (Build Own Operate Transfer) basis. In certain events of default as per Concession Agreement, GMB has the step-in right by payment of consideration as per the agreement.

iv. AP Moller-Maersk group together with certain financial investors acquired the complete shareholdings held by the original promoter viz. SKIL group, on receipt of approval from Government of Gujarat, and Gujarat Maritime Board during 2005. Accordingly AP Moller-;Maersk group has become the key promoter of the Company with management control.

2. Asset Impairment

D -iring the year 2003-04, the Company had identified its assets whose carrying values had been impaired and having regards to the principles of Accounting Standard 28 Impairment of Assets (AS 28), the Company had made a provision of Rs 2,164.13 million in respect of such impairment as at 31 March 2004. The impairment loss includes Rs 580.82 million of pre-operative expenses (including Rs 489.91 million towards borrowing costs), which was the subject matter of qualification in the audit report for the year ended 31 March 2003, since these expenses were capitalized in that year.

As at 31 December 2008, the Company has re- assessed the impairment provision and retained the existing provision of Rs 1,935.43 million (after reversal of provision of Rs.228.70 million on sale/discard of assets in prior years). For the purpose of Impairment testing, the entire port has been considered as a singlecash generating unit as the port is a composite facility and can be operated in a commercial feasible manner only if it operates as a combined unit. The recoverable amount is the value in use, in the absence of a readily determinable netselling price.

Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the assets and from its disposal at the end of its useful life. The estimated future cash flows have been discounted to their present value using a pre-tax discounting rate.

3. Investment in Pipavav Railway Corporation Ltd (PRO.)

In the year 2005, pursuant to the shareholders agreement entered Into between the Company and Ministry of Railways, the Company had subscribed Rs 260 million to the cash calls raised by PRCL. PRCL has allotted the shares for Rs 210 million and balance of Rs 50 million is allotted during the year.

The net worth of PRCL as per latest available audited financial statements for the year ended 31 March 2008, are lower than the cost. However taking into account the expected rise in rail volume on completion of the project which is under implementation and the new business opportunity available to PRCL for running container trains, the Company believes that the diminution in value of its investment is only temporary and accordingly no provision is made.

4. Corporate Debt Restructuring (CDR) ;

The existing term loans from Banks arid Financial Institutions have been restructured under the Corporate Debt Restructuring i(CDR) scheme with effect from 1 October 2003. As per the scheme, part of the outstanding debt has been converted into foreign currency loan (FCL), 8.40% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) and the interest accrued thereon into 10.50% Non Convertible Debenture (NCD). During the year, the Company obtained approval from CDR Participants to prepay the outstanding loans including early redemption of preference shares issued to CDR lenders. The Company has tied up refinanced debt of Rs.12,000 million and the documentation formalities are underway for completion. Post refinancing debt, the prepayment of CDR, New debt and early redemption of preference shares is intended to be made.

5. Premium on redempt an of Preference Share

In terms of the Corporate Debt Restructuring (CDR) scheme approved during Novemb jr 2003, for the restructuring of the de^t of the Company, a part of the outstanding debt, due to th lenders of the Company, amounting to Rs. 517.80 million was converted into 8.40 % Optionally Conver ib!e Cumulative Redeemable Preference Shares (OCCRPS). The preference shares together with accrue< div jend would be redeemed in three years in December 2009, December 2010 & December 2011.

The Company sought and obtained approval for variation to the terms of issue of preference :hares such that the rate of dividend was reduced from 8.40 % to 1 % and Cumulative Preference Shares were made Non Cumulative and accordingly the required amendments to Memorandum and Articles of Association were carried out. These preference shares would be redeemed at a premium so as to give the same overall yield. Accordingly, the Company has received the approval of CDR cell for early redemption of preference shares. Premium on redemption of 1% Non Cumulative Redeemable Preference Shares aggregating Rs 232.02 million, as at the Balance Sheet date, has been adjusted against the Securities Premium.

6. Initial Public Offer (IPO)

During the year, the Company has filed Draft Red Herring Prospectus (DRHP) with Securities Exchange Board of India (SEBI). Responses to initial comments received from SEBI were furnished by Book Running Lead Managers. In the meeting of Board of Directors held on 26th February 2009, Board of Directors approved withdrawal of IPO. Accordingly expenses aggregating Rs 47.65 million have been charged off.

7. Commitments

a. Consortium lending commitments

The Company has provided commitment of Rs 350 million towards consortium lending to Pipavav Shipyard Limited (formerly Pipavav Ship Dismantling &. Engineering Limited) (SKIL group) conditional to fulfilment of certain obligations by Pipavav Shipyard Limited & other parties. However, the Company has sought discharge from this commitment, which is awaited.

b. Lease Commitments

The Companys leasing arrangement is in respect of a non-cancellable operating lease for the Mumbai office premises.

c. Capital Commitments

The estimated amount of contracts remaining to be executed on capital account and not provided for (net of advances) is Rs. 3,423.15 million (2007: Rs. 916.74 million)

8. Provisions, Contingent Liabilities and Contingent Assets

As required by the Accounting Standard 29 - Provisions, Contingent Liabilities and Contingent Assets (AS 29), prescribed in the Companies (Accounting Standards) Rules, 2006 issued by the Central Government, in consultation with the National Advisory Committee on Accounting Standards, to the extent applicable, given below are brief description of the nature of contingent liabilities recognized by the Company and movements in provision for claims.

A. Contingent Liabilities

Sr. PARTICULARS 31 December 2008 31December 2007 No.

a) Bank guarantees outstanding 263.07 157.35

b) Unpaid dividend on 8.4% Optionally Convertible 0.00 152.50 Cumulative Redeemable Preference Shares (OCCRPS) ( refer note 6 to schedule 14)

c) Dividend distribution tax on unpaid dividend 0.00 25.92

d) Claims against Company not acknowledged as debt, including claim from project contractors

i. Claims from suppliers/consultants416.79 410.87

ii.Interest on Compensation for shortfall in traffic 46.39 volume based on daim received from PRCL

iii. Other Claims 200.61 188.94

Sub Total (i + ii + iii ) 663.79 599.81

Grand Total ( a + b + c + d ) 926.86 935.58

Provisions for claims there against 189.63 33.18

Description of Contingent Liabilities

Sr. N0. Contingent Liability Brief Description

1. Bank Guar ntees Issued in favour of Government and court

2. Claims aga ;st Company not The Company is a party to various legal proceedings and acknowlegded is debts has also received various daims in the normal course of business. The Company does not expect the outcome of t hese proceedings/claims to have a material adverse effect on the Companys financial conditions, results of operation or cash flows

9. Rights Issue

During the previous financial year, the Company issued & subscribed 83,603,757 equity shares of Rs.10/ each at a premium of Rs 40/- per share on rights basis to the existing shareholders. The Company has utilised Rs 3,271.99 million to meet the objects of the issue and balance Rs.908.20 million held as Cash & Bank balances at the end of the year.

10. Traffic Guarantee Shortfall

The Company has accepted the claim of Pipavav Railway Corporation Limited (PRCL) under Traffic Guarantee Agreement subject to approval of waiver of interest by Ministry of Railways and provided Rsl,084.54 million upto 31 March 2008. As per the agreed payment plan between Company and PRCL subject to approval of Ministry of Railways, Company has paid Rs 575 million to PRCL as on 31 December 2008 towards this claim. !so based on actual volume handled, additional provision of Rs 209.93 million has been made for the period 1 April to 31 December 2008.

11. EPCG Commitment

The Company had imported capital goods at concessional rate of import duty under Ex[ ort rornotion Capital Goods (EPCG) scheme by executing a legal undertaking In favour of Government: fInc ia with an obligation to export goods / services and realize foreign exchange to the extent of Rs 4,58.,.83 million by December 2014/2015.

12. Disclosure pursuant to Accounting Standard 15(Revised)Employee Benefits

a. The Company recognised Rs.7.98 million (2007: Rs.4.89 million) for provident fund contribution in the profit and loss account.

b. Gratuity (Defined benefit plan)

The Company makes annual contribution to the Employees Group Gratuity-cum-Life Assuran.e Scheme of the Life Insurance Corporation of India, a funded defined benefit plan for qualifying employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days-salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

Leave Salary (Long term employment benefit)

The leave salary are payable to all eligible employees for each day of accumulated leave on death or on resignation or upon superannuation.

The following table sets out the funded status of the gratuity plan and the amounts recognised in the Companys financial statements based on actuarial valuations being carried out as at 31 December 2008.

13, The Company has only one reportable business segment, which is Port services and only one reportable geographical segment, which is the port at Pipavav. Accordingly, the segment information as required by Accounting Standard on Segment Reporting (AS 17), has not been separately disclosed.

14. In terms of the Concession Agreement with Gujarat Maritime Board (GMB), the Company has sought approval for the increase in actual capital costs of contracted assets in excess of the approved capital costs of Rs 5,855.30 million as stated in Concession Agreement and the approval is awaited.

15. Transfer Pricing

The Companys international transactions with related parties are at arms length as per tn&Jndependent accountants report for the year ended 31 March 2008. Management believes that the Companys international transactions with related parties post 31 March 2008 continue to be at arms length and that the transfer pricing legislation will not have any impact on these financial statements, particularly on amount of tax expenses and that of provision of taxation.

16. Previous years figures have been recast / regrouped wherever necessary to conform to the current periods classification/ presentation.


Dec 31, 2007

1. Background

i. Gujarat Pipavav Port Limited, ("the Company") was incorporated on 5 August 1992 to construct, operate and maintain an all weather port at Pipavav, DistrictAmreli, in the State of Gujarat.

ii. The port is designed to handle bulk, container and liquid cargo and to provide ancillary port services such as marine services, material handling, transit and storage operations.

iii. The Company has entered into a 30 year Concession Agreement with Government of Gujarat and Gujarat Maritime Board (GMB) dated 30 September 1998 to engage in the business of developing, constructing, operating and maintaining the port on a BOOT (Build Own Operate Transfer) basis. In certain events of default as per Concession Agreement, GMB has the step-in right by payment of consideration as per the agreement.

iv. AP Moller-Maersk group (APM-M) together with certain financial investors acquired the complete shareholdings held by the original promoter viz. SKIL group, on receipt of approval from Government of Gujarat, and Gujarat Maritime Board during 2005. Accordingly APM-M has become the key promoter of the Company with management control.

2. Basis of preparation of financial statements:

i. The financial statements have been prepared on a going concern basis and on accrual basis, under the historical cost convention and in accordance with the generally accepted accounting principles, the accounting standards prescribed in the Companies (Accounting Standards) Rules,2006 issued by the Central Government, in consultation with the National Advisory Committee on Accounting Standards, to the extent applicable.

The Ministry of Company Affairs vide letter dated 31 May 2005 has given approval to the Company to show the figures in Balance Sheet and Profit and Loss Account and Other Schedules for the financial year ended on 31 March 2005 and onwards in "Rupees in million" under sub-section (1) of Section 211 of the Companies Act,1956. All figures unless otherwise stated are Rupees in million.

ii. Going Concern

The Companys management believes that the Company will be able to meet its debts and other financial obligations as on 31 December 2007 and in the foreseeable future as and when they fall due based on the following mitigating factors.

a) Debt of Rs 5,962.58 million tied up with IDFC and other lenders, of which Rs 3,281.56 million has been drawn down till 31 December 2007;

b) Expansion plan under implementation;

c) Updated cash flow projections as prepared by the management based on Business plan approved by Board of Directors;

d) Sponsor support provided byA.P.Moller Maersk A/S for an amount not exceeding Rs 3,266 million in terms of Sponsor Support Agreement entered into between the Company, New Lenders and A.P.Moller MaerskA/S; and.

e) Issue of 83,603,757 new equity shares of Rs 10/- each issued at a premium of Rs 40/- per share on rights basis to existing share holders during the year. The issue was fully subscribed and Company has received Rs 4,180.19 million including share premium.

Accordingly these financial statements are prepared on a going concern basis. Further management believes that no adjustments are required to the recoverability and classification of the carrying amounts of the assets.

iii. Use of Estimates:

The preparation of financial statements is in conformity with the generally accepted accounting principles often requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities on the date of the financial statements and reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates. Any revision to accounting estimates is recognised prospectively in current and future periods.

3. During the year the Company has demolished major part of liquid jetty for construction of a new container jetty. Based on the management technical evaluation, the Company has charged off Rs.38.55 million being written down value of demolished portion to profit & loss account after adjusting provision of Rs 83.58 million created last year and the same has been shown as exceptional item.

4. Asset Impairment

During the year 2003-04, the Company had identified its assets whose carrying values had been impaired and having regards to the principles of Accounting Standard 28 Impairment of Assets (AS 28), the Company had made a provision of Rs 2,164.13 million in respect of such impairment as at 31 March 2004. The impairment loss includes Rs 580.82 million of preoperative expenses (including Rs 489.91 million towards borrowing costs), which was the subject matter of qualification in the audit report for the year ended 31 March 2003, since these expenses were capitalized in that year.

As at 31 December 2007, the Company has re- assessed the impairment provision and retained the existing provision of Rs 1,935.42 million after reversal of Impairment provision of Rs 218.30 million on account of demolition of liquid jetty. For the purpose of impairment testing, the entire port has been considered as a single cash generating unit as the port is a composite facility and can be operated in a commercial feasible manner only if it operates as a combined unit. The recoverable amount is the value in use, in the absence of a readily determinable net selling price.

Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the assets and from its disposal at the end of its useful life. The estimated future cash flows have been discounted to their present value using a pre-tax discounting rate.

5. Investment in Pipavav Railway Corporation Ltd (PRCL)

In the year 2005, pursuant to the shareholders agreement entered into between the company and Ministry of Railways, the Company had subscribed Rs 260 million to the cash calls raised by PRCL. PRCL has allotted the shares for Rs 210 million and balance of Rs 50 million is still pending for allotment.

However taking into account the expected rise in rail volume on completion of the project which is under implementation and the new business opportunity available to PRCL for running container trains, the company believes that the diminution in value of its investment is only temporary and accordingly no provision is made.

6. Corporate Debt Restructuring (CDR)

The existing term loans from Banks and Financial Institutions have been restructured under the Corporate Debt Restructuring (CDR) scheme with effect from 1 October 2003. As per the scheme, part of the outstanding debt has been converted into foreign currency loan (FCL), 8.40% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) and the interest accrued thereon into 10.50% Non Convertible Debenture (NCD). Previous year, Corporate Debt Restructuring Cell approved early redemption of NCDs and replaced with Funded Interest Term Loan onsimilarterms.

One of the conditions for the restructuring of debt is to increase share holding and acquire management control in the Company by APM-M group, which has been fulfilled.

7. Rights Issue

During the year, the Company issued & subscribed 83,603,757 equity shares of Rs.10/- each at a premium of Rs.40/- per share on rights basis to the existing shareholders. The rights shares were physically issued/ credited to the dematerialization account of the shareholders, subsequent to the year end on completion of the registration formalities. The Company has utilized Rs 1,863.71 million to meet the objects of the issue.

8. Commitments

a. Consortium lending commitments

The Company has provided commitment of Rs 350 million towards consortium lending to Pipavav Shipyard Limited (formerly Pipavav Ship Dismantling & Engineering Limited) (SKILgroup) conditional to fulfillment of certain obligations by Pipavav Shipyard Limited & other parties which remains unfulfilled and the company has sought discharge of this commitment, which is awaited.

b. Lease Commitments

The Companys leasing arrangement is in respect of a non-cancellable operating lease for the Mumbai office premises. The lease payments recognized in the profit and loss account in respect of the non-cancellable operating leases aggregate to Rs.7.66 (2006: Rs 4.17 million).

9 . Provisions, Contingent Liabilities and Contingent Assets

As required by the Accounting Standard 29 - Provisions, Contingent Liabilities and Contingent Assets (AS 29), issued by the Institute of Chartered Accountants of India, given below are brief description of the nature of contingent liabilities recognized by the Company and movements in provision for contingencies.

A Contingent Liabilities As at As at

No. PARTICULARS 31 December 2007 31 December 2006

a) Bank guarantees outstanding 157.35 46.72

b) Unpaid dividend on 8.4% Optionally Convertible Cumulative

Redeemable Preference Shares (OCCRPS) 152.50 109.01

c) Dividend distribution tax on unpaid dividend 25.92 15.29

d) Claims against company not acknowledged as debt, including claim from project contractors

i. Claims from suppliers / consultants 410.87 651.14

ii. Other Claims 188.94 165.06

Sub Total (i+ii) 599.81 816.20

Grand Total ( a + b + c + d ) 935.58 987.22

iii. Provision for claims there against 33.18 33.93

10. Traffic Guarantee Shortfall

The Company has been in discussions with Pipavav Railway Corporation Limited (PRCL) together with Ministry of Railways for resolution of potential claim under the Transportation & Traffic Guarantee Agreement. During the year a sub committee of the PRCL Board was constituted to review and consider various options in regard to the settlement of such potential claim. Considering the progress of the matter, the management considers prudent to recognize the liability in the books and accordingly have provided for an amount of Rs.621.91 millions, in addition to the provision of Rs.500 million already made in the prior years.

11. EPCG Commitment

The Company had imported capital goods at concessional rate of import duty under Export Promotion Capital Goods (EPCG) scheme by executing a legal undertaking in favour of Government of India with an obligation to export goods/ services and realize foreign exchange to the extent of Rs 3,982.98 million by December 2014/2015.

12. Disclosure pursuant to Accounting Standard 15(Revised)Employee Benefits

a. The Company recognised Rs 4.89 million (2006: Rs.2.23 million) for provident fund contribution in the profit and loss account.

b. Defined benefit plan

Effective 1 January 2007 Company adopted the revised accounting standard on employee benefits. Pursuant to that option, transitional reversal of obligation of the company amounts to Rs. 0.29 million. As required by the standard, this reversal of the obligation has been adjusted in accumulated balance in Profit and Loss Account as at 1 January 2007.

The Company makes annual contribution to the Employees Group Gratuity-cum-Life Assurance Scheme of the Life Insurance Corporation of India, a funded defined benefit plan for qualifying employees. The scheme provides

for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service.

The following table sets out the funded status of the gratuity plan and the amounts recognised in the Companys financial statements based on actuarial valuations being carried out as at 31 December 2007.

13. (A) List of related Parties and their Relationship

In the absence of comprehensive list of related parties as envisaged in Accounting Standard on Related Party Disclosures (AS 18), the names of the related parties with whom transaction have taken place during the year have been disclosed.

14. The Company has only one reportable business segment, which is Port services and only one reportable geographical segment, which is the port at Pipavav. Accordingly, the segment information as required by Accounting Standard on Segment Reporting (AS 17), has not been separately disclosed.

The above figures do not include gratuity and leave encashment, as separate figures for the directors are not available. The Central Government has approved the remuneration to ex Managing Director for a period upto 7 June 2007

Payment to current managing director for the period being in excess of maximum remuneration prescribed under Schedule XIII of the Companies Act, 1956, amounting to 9.14 million, which is subject to the approval of Central Government. The Company has made the necessary application in this regard and the approval is awaited.

15. In terms of the Concession Agreement with Gujarat Maritime Board (GMB), the Company has sought approval for the increase in actual capital costs of contracted assets in excess of the approved capital costs of Rs 5,855.30 million as stated in Concession Agreement and the approval is awaited.

16. On the basis of information available with the Company, total amount payable to Small Scale Industrial Undertakings amounts Rs 1.05 million (2006: Nil) (including amount payable to Neelam Micro Electronics aggregating Rs 0.03 million which is outstanding for more than 30 days).

Under the Micro, Small and Medium Enterprise Development Act 2006 which came into force from 2 October 2006, certain disclosures are required to be made relating to micro and small enterprises. The company is in the process of compiling relevant information from its suppliers about the coverage under the Act. Since the relevant information is not readily available, no disclosures have been made in the accounts. However, in view of the management, the impact of interest, if any, that may be payable in accordance with the provisions of this Act is not expected to be material.

17. Transfer Pricing

The Companys international transactions with related parties are at arms length for the year ended 31 March 2007. Management believes that the Companys international transactions with related parties post 31 March 2007 continue to be at arms length and that the transfer pricing legislation will not have any impact on these financial statements, particularly on amount of tax expenses and that of provision of taxation

18. Previous years figures have been recast/ regrouped wherever necessary to conform to the current years classification /presentation.


Dec 31, 2005

1. Background

i. Gujarat Pipavav Port Limited, ("the Company") was incorporated on 5 August 1992 to construct, operate and maintain an all weather port at Pipavav, District Amreli, in the State of Gujarat.

ii. The port is designed to handle bulk, container and liquid cargo and to provide ancillary port services such as marine services, material handling, transit and storage operations.

iii. The Company has entered into a 30 year Concession Agreement with Government of Gujarat and Gujarat Maritime Board (GMB) dated 30 September 1998 to engage in the business of developing, constructing, operating and maintaining the port on a BOOT (Build Own Operate Transfer) basis. In certain events of default as per Concession Agreement, GMB has the step-in right by payment of consideration as per the agreement.

iv. AP Moller-Maersk group (APM-M) together with certain financial investors acquired the complete shareholdings held by the original promoter viz. SKIL group, on receipt of approval from Government of Gujarat, during the year, subject to consequential changes to the concession agreement with GMB, which are being completed. Accordingly APM-M has become the key promoter of the Company with management control.

2. During the previous year the company entered into a new agreement with Pipavav Ship Dismantling and Engineering Limited (SKIL group), in lieu of the existing land sub-lease agreements with them. Under the new arrangements, in addition to alternative land sites to be provided, the Company has agreed to pay Pipavav Ship Dismantling Engineering Limited (SKIL group) an amount of Rs. 130 million.

3. Asset Impairment

During the year 2003-04, the Company had identified its assets whose carrying values had been impaired and having regards to the principles of Accounting Standard 28 - Impairment of Assets (AS 28), the Company had made a provision of Rs 2,164.13 in respect of such impairment as at 31 March 2004. The impairment loss includes Rs 580.82 of pre-operative expenses (including Rs 489.91 towards borrowing costs), which was the subject matter of qualification in the audit report for the year ended 31 March 2003, since these expenses were capitalised in that year.

As at 31 December 2005, the Company has re- assessed the impairment provision and retained the existing provision of Rs 2,164.13. For the purpose of impairment testing, the entire port has been considered as a single cash generating unit as the port is a composite facility and can be operated in a commercial feasible manner only if it operates as a combined unit. The recoverable amount is the value in use, in the absence of a readily determinable net selling price.

Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the assets and from its disposal at the end of its useful life. The estimated future cash flows have been discounted to their present value using a pre-tax discounting rate

4. Investment in Pipavav Railway Corporation Ltd (PRCL)

a. Pursuant to the shareholders agreement entered into between the company and Ministry of Railways, the Company has subscribed Rs.260 to the cash calls raised by PRCL during the year. PRCL has allotted the shares for Rs.210 and balance of Rs.50 is pending for allotment.

b. The net worth of PRCL as per audited financial statements for the year ended 31s March 2005, are lower than the cost. However taking into account the expected rise in rail volume on completion of the project which is under implementation and the new business opportunity available to PRCL for running container trains, the company believes that the diminution in value of its investment is only temporary and accordingly no provision is made.

5. Corporate Debt Restructuring (CDR)

The existing term loans from Banks and Financial Institutions have been restructured under the Corporate Debt Restructuring (CDR) scheme with effect from 1 October 2003. As per the scheme, part of the outstanding debt has been converted into foreign currency loan (FCL), 8.40% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) and the interest accrued thereon into 10.50% Non Convertible Debenture (NCD).

One of the conditions for the restructuring of debt is to increase share holding and acquire management control in the Company by APM-M group, which has been fulfilled during the year

6. Commitments

a. Consortium lending commitments

The Company has provided commitment of Rs 350 towards consortium lending to Pipavav Ship Dismantling & Engineering Limited (SKIL group) conditional to fulfillment of certain obligations by Pipavav Ship Dismantling & Engineering Limited & other parties which remains unfulfilled and the company has sought discharge of this commitment, during the period , which is awaited.

b. Lease Commitments

The Companys leasing arrangement is in respect of a non-cancelable operating lease for the Mumbai office premises. The lease payments recognised in the profit and loss account in respect of the non-cancelable operating leases aggregate to Rs.4.17 (March 2005: Rs 4.62).

7. Contingent Liabilities

As at As at 31 December 2005 31 March 2005

a) Bank guarantees outstanding 157.60 154.17

b) Unpaid dividend on 8.4% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) 65.51 32.89

c) Dividend distribution tax on unpaid dividend 9.19 4.61

d) Claims against company not acknowledged as debt

i. Claims from suppliers / consultants 410.72 409.76

ii. Compensation for shortfall in traffic volume estimated upto 31 December 2005, including claim received from Pipavav Railway Corporation Limited

(PRCL) upto 31 March 2005 509.89 293.64

iii. Other Claims 145.87 144.41

1,066.48 847.81

Provision for claims there against 100.00 0.00

8. The Company had in earlier years imported capital goods worth Rs 363.15 at concessional rate of duty under Export Promotion Capital Goods (EPCG) scheme by executing a legal undertaking in favour of Government of India with an obligation to export goods / services and realise foreign exchange to the extent of US $ 36.73 million by December 2004.The Company is in receipt of Export Obligation Discharge Certificate after the balance sheet date.

9. In terms of the Concession Agreement with Gujarat Maritime Board (GMB), the Company has sought approval for the increase in actual capital costs of contracted assets in excess of the approved capital costs of Rs 5,855.30 as stated in Concession Agreement and the approval is awaited.

10. The Company has no information as to whether any of its suppliers constitute Small Scale Industrial Undertakings and thereby the amount due to such suppliers has not been identified.

11. The Company has only one reportable business segment, which is Port services and only one reportable geographical segment, which is the port at Pipavav. Accordingly, the segment information as required by Accounting Standard on Segment Reporting (AS 17), has not been separately disclosed.

12. (A) List of related Parties and Relationship

The company is part of AP Moller - Maersk Group, which has large number of companies. Details of transaction during the year with group companies have been provided below:

Relation

A. Party with substantial interest and its associates

(i) Maersk India Private Limited

(ii) Masersk India Private Limited - acting as agents for AP Moller - Maersk A/S.

(ii) Safmarine India Private Limited - acting as agents for Safmarine Container Lines N.V.

(iii) APM Terminals Mauritius Ltd.

(iv) APM Terminals International B.V.

B. Key management personnel

Managing Director

Upto 10th November 2005 Mr. Hans-Ole Madsen

From 10th November 2005 Mr. Rajeeva Sinha

C. Enterprise significantly influenced by

key management personnel

(i) Gateway Terminals India Private Limited

D. Joint Venture

(i) Pipavav Railway Corporation Limited

13. Provisions, Contingent Liabilities and Contingent Assets

As per accounting standard 29 - Provisions, Contingent Liabilities and Contingent Assets (AS 29), issued by the Institute of Chartered Accountants of India, given below are movements in provision for contingencies and a brief description of the nature of contingent liabilities recognised by the Company.

14. The Ministry of Company Affairs vide letter dated 31 May 2005 has given approval to the Company to show the figures in Balance Sheet and Profit and Loss Account and Other Schedules for the financial year ended on 31 March 2005 and onwards in "Rupees in Millions" under sub-section (1) of Section 211 of the Companies Act, 1956. All figures unless otherwise stated are Rupees in Millions.

15. Previous year figures have been recast / regrouped wherever necessary to conform to the current years classification / presentation.


Mar 31, 2005

1. Background

i. Gujarat Pipavav Port Limited, ("the Company") was incorporated on 5 August 1992 to construct, operate and maintain an all weather port at Pipavav, District Amreli, in the State of Gujarat.

ii. The port is designed to handle bulk, container and liquid cargo and to provide ancillary port services such as marine services, material handling, transit and storage operations.

iii. The Company has entered into a 30 year Concession Agreement with Government of Gujarat and Gujarat Maritime Board (GMB) dated 30 September 1998 to engage in the business of developing, constructing, operating and maintaining the port on a BOOT (Build Own Operate Transfer) basis. In certain events of default as per Concession Agreement, GMB has the step-in right by payment of consideration as per the agreement.

iv. AP Moller-Maersk group (APM-M) together with certain financial investors acquired the complete shareholdings held by the original promoter viz. SKIL group, on receipt of approval from Government of Gujarat, subsequent to the Balance Sheet date, subject to compliance of stipulated conditions, including consequential changes to the concession agreement with GMB, settlement of outgoing promoter liabilities and commitments towards consortium lending arrangements for outgoing promoters. Accordingly APM-M has become the key promoter of the Company with management control.

2. During the year the company entered into a new agreement with Pipavav Ship Dismantling & Engineering Limited (SKIL group), in lieu of the existing land sub-lease agreements with them. Under the new arrangements, in addition to alternative land sites to be provided, the Company has agreed to pay Pipavav Ship Dismantling & Engineering Limited (SKIL group) an amount of Rs. 130 million.

3. Asset Impairment

During the previous year, the Company had identified its assets whose carrying values had been impaired and having regards to the principles of Accounting Standard 28 - Impairment of Assets (AS 28), the Company had made a provision of Rs 2,164.13 in respect of such impairment as at 31 March 2004. The impairment loss includes Rs 580.82 of pre-operative expenses (including Rs 489.91 towards borrowing costs), which was the subject matter of qualification in the audit report for the year ended 31 March 2003, since these expenses were capitalized in that year.

As at 31 March 2005, the Company has re- assessed the impairment provision and retained the existing provision of Rs 2,164.13. For the purpose of impairment testing, the entire port has been considered as a single cash generating unit as the port is a composite facility and can be operated in a commercial feasible manner only if it operates as a combined unit. The recoverable amount is the value in use, in the absence of a readily determinable net selling price.

Value in use is the present value of estimated future cash flows expected to arise from the continuing use of the assets and from its disposal at the end of its useful life. The estimated future cash flows ( refer note 2 (ii) to Schedule 15) have been discounted to their present value using a pre-tax discounting rate of 12%.

4. Investment in Pipavav Railway Corporation Ltd (PRCL)

a. Pursuant to the shareholders agreement entered into between the company and Ministry of Railways, the Company is under obligation to subscribe to the cash calls as and when raised by PRCL. Outstanding cash call for Rs 260 has been subscribed by the Company, subsequent to Balance Sheet date.

b. As part of shareholder restructuring, the Company has also acquired 50,000,000 equity shares of Rs.10 each in PRCL, from the original promoters.

5. Corporate Debt Restructuring (CDR)

The term loans from Banks and Financial Institutions have been restructured under the Corporate Debt Restructuring (CDR) scheme with effect from 1 October 2003. As per the scheme, part of the outstanding debt has been converted into foreign currency loan (FCL), 8.40% Optionally Convertible Cumulative Redeemable Preference Shares (OCCRPS) and the interest accrued thereon into 10.50% Non Convertible Debenture (NCD) during the year.

One of the conditions for the restructuring of debt is to increase share holding and acquire management control in the Company by AP Moller - Maersk group, which has been made subsequent to the balance sheet date on receipt of approval from Government of Gujarat (GOG).

6. Commitments

a. Consortium lending commitments

Pursuant to change in shareholding and consequential approvals from regulatory authorities, (see note 1 (iv) the Company has provided a commitment of Rs. 350 million towards consortium lending to Pipavav Ship Dismantling & Engineering Limited (SKIL group) conditional to fulfillment of certain obligations by Pipavav Ship Dismantling & Engineering Limited and other parties which remains unfulfilled to date.

b. Lease Commitments

The Companys leasing arrangement is in respect of a non-cancellable operating lease for the Mumbai office premises. The lease payments recognized in the profit and loss account in respect of the non- cancellable operating leases aggregate Rs 4.62 (2004: Rs Nil).

7. Contingent Liabilities 2004.05 2003.04

Bank guarantees outstanding 154.17 154.17

Claims against the Company not acknowledged as debts 144.41 132.11

Unpaid dividend on 8.4% Optionally Convertible Cumulative

Redeemable Preference Shares (OCCRPS) 32.89 -

Dividend distribution tax on unpaid dividend 4.61 -

In addition to the above,

i. Some suppliers / consultants have filed claims amounting to Rs. 409.76 against the Company. The amounts claimed allegedly pertain to supply of material and services and include interest on unpaid amounts. The Company considers such claims to be frivolous, untenable and based on legal advice, believes that it has a good chance of success. No provision has therefore been made in respect of such claims.

ii. As per the Transportation and Traffic Guarantee Agreement entered into by the Company with Pipavav Railway Corporation Limited (PRCL), the Company is required to guarantee a minimum quantity of freight cargo. The Company is in receipt of request for claim for compensation amounting to Rs 293.64 towards the shortfall in the traffic volume upto 31 March 2005. The Company has represented to PRCL to waive the compensation claim as the shortfall in cargo throughput is due to reasons beyond the control of the Company. The Company is in negotiations with PRCL for waiver of the claim and accordingly no provision is made.

iii. The Company had in earlier years imported capital goods worth Rs 363.15 at concessional rate of duty under Export Promotion Capital Goods (EPCG) scheme by executing a legal undertaking in favour of Government of India with an obligation to export goods / services and realize foreign exchange to the extent of US $ 36.73 million by December 2004.

The Company is in the process of submitting the details of rupee earnings received from port operations, which are clarified by Reserve Bank of India to be in the nature of "Deemed foreign currency receipts" as a discharge toward its export obligation. It is expected that the claim of the Company would be accepted and discharge certificate would be issued soon.

8. In terms of the Concession Agreement with Gujarat Maritime Board (GMB), the Company has sought approval for the increase in actual capital costs of contracted assets in excess of the approved capital costs of Rs 5,855.30 as stated in Concession Agreement and the approval is awaited.

9. The Company has no information as to whether any of its suppliers constitute Small Scale Industrial Undertakings and thereby the amount due to such suppliers has not been identified.

10. The Company has only one reportable business segment, which is Port services and only one reportable geographical segment, which is the port at Pipavav. Accordingly, the segment information as required by Accounting Standard on Segment Reporting (AS 17), has not been separately disclosed.

11. (A) List of related Parties and Relationship

Relation

A. Party with substantial interest and its associates

(i) SKIL Infrastructure Limited

(ii) Pipavav Ship Dismantling & Engineering Limited

(iii) Grevek Investment and Finance Private Limited

(iv) Awaita Properties Private Limited

B. Key management personnel Managing director

C. Enterprise significantly influenced by key management personnel

(i) Maersk India Private Limited

(ii) Safmarine India Private Limited

(iii) Gateway Terminals India Private Limited

D. Joint Venture

(i) Pipavav Railway Corporation Limited

12. Provisions, Contingent Liabilities and Contingent Assets

As per Accounting standard 29 - Provisions, Contingent Liabilities and Contingent Assets (AS 29), issued by the Institute of Chartered Accountants of India, given below are movements in provision for contingencies and a brief description of the nature of contingent liabilities recognized by the Company.

13 The Ministry of Company Affairs vide letter dated 31 May 2005 has given approval to the Company to show the figures in Balance Sheet and Profit and Loss Account and Other Schedules for the financial year ended on 31 March.2005 and onwards in "Rupees in Millions" under sub-section (1) of Section 211 of the Companies Act, 1956. All figures unless otherwise stated are Rupees in Millions.

14 Previous year figures have been recast / regrouped wherever necessary to conform to the current years classification / presentation.

 
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