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Notes to Accounts of Chowgule Steamships Ltd.

Mar 31, 2017

1. Corporate information

Chowgule Steamships Limited (CSL) (“the Company”) is a limited company incorporated & domiciled in India whose shares are publically traded on Bombay Stock Exchange. CSL is a shipping company which presently owns and operates a fleet of 5 vessels (including that of its wholly owned subsidiaries) for seaborne transportation of bulk cargo. CSL is principally engaged in the carriage of goods by sea and is committed to serve its customers to their satisfaction and mutual optimum benefits.

The Company’s registered office address is at Chowgule House, Mormugao Harbour, Goa - 403 803 and the principal place of business is 4th Floor, Bakhtawar, Nariman Point, Mumbai 400 021.

2. Recent accounting pronouncement:

Standards issued but not yet effective:

In March 2017, the Ministry of Corporate Affairs issued the Companies (Indian Accounting Standards) (Amendments) Rules, 2017, notifying amendments to Ind AS 7, ‘Statement of Cash Flows’ and Ind AS 102, ‘Share-based payment.’ These amendments are in accordance with the recent amendments made by International Accounting Standards Board (IASB) to IAS 7, ‘Statement of Cash Flows’ and IFRS 2, ‘Share-based payment,’ respectively. The amendments are applicable from 1st April, 2017.

Amendment to Ind AS 7:

The amendment to Ind AS 7 requires the entities to provide disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash changes, suggesting inclusion of a reconciliation between the opening and closing balances in the Balance Sheet for liabilities arising from financing activities, to meet the disclosure requirement.

The Company is evaluating the requirements of the amendment and the effect on the financial statements is being evaluated. Amendment to Ind AS 102:

The amendment to Ind AS 102 provides specific guidance to measurement of cash-settled awards, modification of cash settled awards and awards that include a net settlement feature in respect of withholding taxes.

The requirements of the amendment have no impact on the financial statements applicable as the Company does not have any share based payments.

3 Employee benefit plans

a) Defined Contribution plans Provident Fund :

The Company makes contributions to Provident Fund which is defined contribution plan for qualifying employees. Under the Scheme, the Company is required to contribute a specified percentage of the payroll costs to fund the benefits. The fund is administered by the Trustees. The contributions payable by the Company are at rates specified in the rules of the schemes. The Company has recognised amount in the statement of profit and loss under the head “Employee Benefit Expenses” as mentioned in the following table.

Superannuation Fund :

All eligible employees are entitled to benefits under superannuation, a defined contribution plan. The company makes yearly contribution until retirement or resignation of the employee. The company recognises such contributions an expense. The Company has no further obligation beyond yearly contribution.

The Company has recognised the following amounts in the Statement of profit and loss as contribution under defined contribution schemes

b) Defined benefit plan

The Company makes annual contributions to the Chowgule Steamships Limited Shore Employees Gratuity Fund (Income tax approved irrevocable trust), which in-turn, has taken group gratuity cum Life assurance scheme of the Life Insurance Corporation of India, which is a funded defined benefit plan for qualifying employees. This scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment as per the Company’s gratuity scheme. Vesting occurs upon completion of five years of service.

The Company offers its employees defined benefit plan in the form of a gratuity scheme (a lump sum amount). For gratuity scheme the Company contributes funds to Gratuity Trust, which is irrevocable. Commitments are actuarially determined at year-end. The actuarial valuation is done based on “Projected Unit Credit” method. These plans typically expose the Company to actuarial risk such as: investment risk, interest rate risk, longevity risk and salary risk.

Investment risk:

The present value of the defined benefit plan liability is calculated using a discount rate which is determined by reference to market yields at the end of the reporting period on government bonds. If the return on plan asset is below this rate, it will create plan deficit.

Interest risk:

A decrease in the bond interest rate will increase the plan liability; however, this will be partially off set by an increase in the plan assets.

Longevity risk:

The present value of the defined benefit plan liability is calculated by reference to the best estimate of the mortality of plan participants. An increase in the life expectancy of the plan participants will increase the plan’s liability.

Salary risk:

The present value of the defined benefit plan liability is calculated by reference to the future salaries of plan participants. As such, an increase in the salary of the plan participants will increase the plan’s liability.

Foot notes:

a) The discount rate is based on the prevailing market yields of Government of India securities as at the Balance Sheet date for the estimated term of the obligations.

b) The estimate of future salary increase considered, takes into account the inflation, seniority, promotion, increments and other relevant factors, such as supply and demand in the employment market.

c) The fair value of the plan assets are based on the LIC Fund balance position as at the balance sheet date. The composition and the categories of plan assets are unavailable with the Company.

d) The expected rate of return on plan assets is based on the average long-term rate of return expected on investment of funds during the estimated term of obligation.

The current service cost and the net interest expense for the year are included in the “Employee benefits expense” line item in the statement of profit and loss. The remeasurement of the net defined liability is included in other comprehensive income.

4 Segment reporting

The Company treats ‘Shipping’ as single reportable segment. All other activities of the company revolve around its main business. Therefore there are no separate reportable segment. Given the nature of the business there are no Geographic Segments either. The segment information has been provided in consolidated financial statements.

5 During the year, the Company had Specified Bank Notes (SBN) or other denomination note as defined in the MCA notification G.S.R. 308(E) dated 31 March, 2017 on the details of SBN held and transacted during the period from 8 November, 2016 to 30 December, 2016, the denomination wise SBNs and other notes as per the notification is given below:

6. Financial instruments

6.1 Capital management

The Company manages its capital to ensure that the Company will be able to continue as a going concern while maximising the return to stakeholder through the optimisation of the debt and equity balance.

The capital structure of the company consists of net debt (borrowings as detailed in note 21 & 23 and off set by cash and bank balance) and total equity of the Company.

6.1.1 Gearing ratio

The gearing ratio at the end of the reporting period was as follows:

6.2 Financial risk management objectives

The Company’s principal financial liabilities, other than derivatives, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the operations. The Company’s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that generates directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. It is the Company’s policy that no trading in derivatives for speculative purposes is undertaken. The Company’s risk management committee, an independent body, monitors risk and policies implemented by the Company to mitigate risk exposures.

6.3 Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: foreign currency risk, interest rate risk and other price risk. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Financial instruments affected by market risk include loans and borrowings, deposits, trade and other receivables and investments.

6.4 Foreign currency risk

The Company undertakes transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The Company’s exposure to currency risk relates primarily to the Company’s operating activities and borrowings when transactions are denominated in a different currency from the Company’s functional currency. The Company evaluates exchange rate exposure arising from foreign currency transactions and follows established risk management policies. The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows.

6.5 Interest risk

Interest risk is the risk that the fair value or future cash flows of the financial instruments will fluctuate because of the changes in the market rate risk, the Company performs a comprehensive corporate interest rate risk management. The Company is not exposed to significant interest rate risk as at the respective reporting dates.

The Company’s exposure to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section.

6.7 Price risk

The Company is affected by the price volatility. The Company’s operating activities comprise of employment of ships on time charter contracts. Due to the cyclical nature of shipping industry, the revenue from shipping operations are subjected to price risk. To mitigate the impact of price risk the Company adopts mixture of short, medium and long term employment contract for its fleet.

6.8 Credit risk management

Credit risk arises from the possibility that counter party may not be able to settle their obligations as agreed. To manage this, the Company periodically assesses the financial reliability of customers taking into account the financial conditions, current economic trends and analysis of historical bad debts and ageing of accounts receivable.

The Company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an on-going basis throughout each reporting period. To assess whether there is significant increase in credit risk the company compares the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date on initial recognition. Financial assets are written off when there is no reasonable expectation of recovery. When loans or receivables have been written off, the company continues to engage in enforcement activity to attempt to recover the receivable due. Where recoveries are made, these are recognized in profit or loss. The Companies operations involves employment of the vessels on time charter contracts where receivables are collected periodically in advance and therefore credit risk is minimal.

6.9 Liquidity risk management

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has established an appropriate liquidity risk management framework for the management of the company’s short-term, medium - term and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate banking facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.

6.9.1 Expected maturity for non-derivative financial liability

The following table details the Company’s remaining contractual maturity for the non-derivative financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flow of financial liabilities based on the earliest date on which the Company may be required to pay. The tables include both interest and principal cash flows. The contractual maturity is based on the earliest date on which the Company may be required to pay.

6.9.2 Expected maturity for non-derivative financial assets

The following table details the Company expected maturity for its non-derivative financial assets. The table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial asset is necessary in order to understand the Company’s liquidity risk management as the liquidity is managed on a net asset and liability basis.

The amount included above for variable interest instruments for both non-derivatives financial assets and liabilities is subject to change if changes in variable interest rates differ to those estimates of interest rates determined at the end of the reporting period.

The Company do not enjoy working capital facility. The Company expects to meet its obligations from operating cash flows and proceeds of maturing financial assets.

6.9.3 Fair value hierarchy

The following table provides the fair value measurement hierarchy of the Companies financial assets and financial liabilities that are measured at fair value or where fair value disclosure is required as at 31st March 2017:

7 Explanation of transition to Ind AS

The Company’s financial statements for the year ended 31st March, 2017 are the first annual financial statements prepared by the Company in order to comply with Ind AS. The adoption of Ind AS was carried out in accordance with Ind AS 101, using 1st April, 2015 as the transition date. The transition was carried out from Previous GAAP (based on the AS framework) to Ind AS. The effect of adopting Ind AS has been summarised in the reconciliations provided below. Ind AS 101 generally requires full retrospective application of the Standards in force at the first reporting date. However, Ind AS 101 allows certain exemptions in the application of particular Standards to prior periods in order to assist companies with the transition process.

Reconciliations

The accounting policies as stated in note 3 have been applied in preparing the financial statements for the year ended 31st March, 2017, the financial statements for the year ending 31st March, 2016 and the preparation of an opening Ind AS statement of financial position as at 1st April, 2015. In preparing its opening Ind AS balance sheet and statement of profit and loss for the year ended 31st March, 2016, the Company has adjusted amounts reported in financial statements prepared in accordance with Previous GAAP. An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s financial position, financial performance and cash flow is set out in the following tables.

iii Explanation of material adjustments to statement of cash flow for the year ended 31st March, 2016

Under Ind AS, bank overdrafts which are repayable on demand and form an integral part of an entity’s cash management system are included in cash and cash equivalent for the purpose of presentation of statement of cash flows. Whereas under previous GAAP, there was no similar guidance and hence, bank overdrafts were considered similar to other borrowings and the movements therein were reflected in cash flows from financing activities. The effect of this is that bank overdrafts of Rs.193.26 Lakhs as at 31st March, 2015 have been considered as part of cash and cash equivalents under Ind AS for the purpose of presentation of statement of cash flows. Consequently, the cash outflow from financing activities as per the statement of cash flows for the year ended 31st March, 2016 prepared as per Ind AS is lower to the extent of this net movement of Rs.193.26 Lakhs

Notes to the reconciliations

a) Under previous GAAP, payment for property, plant and equipment is deferred beyond normal credit terms, its cost is the cash price equivalent unless interest element is specifically identified in the arrangement. Under Ind AS the difference between the purchase price under normal credit terms and the total amount incurred would be recognised as interest expense over the period of the credit term. Accordingly, the Company has derecognised Rs.421.48 lakhs from gross block and Rs.0.14 lakhs from depreciation and an equivalent amount has been recognised in statement of profit and loss as on 31st March, 2016. The net effect of these changes is a decrease in total equity as at 31st March, 2016 of Rs.1.07 lakhs and increase of Rs.1.07 lakhs in Loss before tax and increase of Rs.0.71 lakhs in loss after tax for the year ended 31st March, 2016.

b) Under previous GAAP, current investment were measured at lower of cost or fair value. Under Ind AS, these financial assets have been classified as FVTPL on date of transition. The fair value changes are recognised in profit or loss. On transitioning to Ind AS, these financial assets have been measured at their fair values which is higher than cost as per previous GAAP, resulting in an increase in carrying amount by Rs.18.05 lakhs as at 31st March, 2016 and increase by Rs.57.58 lakhs as at 1st April, 2015 . The net effect of these changes is an decrease in total equity as at 31st March, 2016 of Rs.18.05 lakhs (Rs.57.58 lakhs increase as at 1st April 2015) and increase in loss before tax of Rs.39.53. lakhs.

c) Under the previous GAAP, Interest free security deposit (that are refundable in cash on completion of the lease term) are recorded at their transactional value. Under Ind AS, all financial assets are required to be recognised at fair value. Accordingly, the Company has fair valued the security deposit under Ind AS. Difference between the fair value and transaction value of the security deposit has been considered as advance rent receivable from lessee. This is recognized as additional rental income on a straight line basis over the lease term. Interest will be accreted on the fair value recognised on inception to bring fair value to deposit amount will be repaid. Consequent to this change, the amount of security deposit decreased by Rs.14.96 lakhs as at 31st March, 2016 (1st April 2015 - Rs.21.57 lakhs ) and advance rent Increased by Rs.6.66 lakhs as at 31st March, 2016 (1st April, 2015 - Rs.13.31 lakhs). The loss for the year decreased by Rs.6.65 lakhs due to recognition of additional rental income which is partially off-set by notional interest expense of Rs.6.60 lakhs recognised on security deposit consequently, total equity as at 31st March, 2016, increased by 1.64 lakhs (1st April, 2015 - Rs.1.60 lakhs).

d) Under previous GAAP, actuarial gains and losses were recognised in profit and loss. Under Ind AS, the actuarial gains and losses form part of remeasurement of the net defined benefit liability/ asset which is recognised in other comprehensive income. Consequently, the tax effect of the same has also been recognised in other comprehensive income under Ind AS instead of profit or loss, The actuarial loss for the year ended 31st March, 2016 were Rs.70.47 lakhs and the tax effect thereon Rs.23.30 lakhs . This change does not affect total equity, but there is a decrease in loss before tax of Rs.70.47 lakhs and in total loss of Rs.47.17 lakhs for the year ended 31st March, 2016.

8 Events after the reporting period

There are no events that needs to be reported after balance sheet date.

9 Approval of financial statements

The financial statements were approved and taken on record by the Board of Directors at its meeting held on May 12, 2017.


Mar 31, 2016

1. SEGMENT REPORTING

The Company treats ''Shipping'' as single business segment and therefore details of segments are not separately shown. Given the nature of the business there are no Geographic Segments either.

2. Previous year''s figures have been regrouped / reclassified wherever necessary to correspond with the current year''s classification / disclosure.


Mar 31, 2015

1. Corporate information:

Chowgule Steamships Limited (CSL) ("the Company") is a shipping company which presently owns and operates a fleet of 5 vessels (including that of its wholly owned subsidiaries) for seaborne transportation of bulk cargoes. CSL is principally engaged in the carriage of goods by sea and is committed to serve its customers to their satisfaction and mutual optimum benefits.

2. Rights, Preferences and Restrictions Attached to Equity Shares

The Company has issued only one class of shares referred to as equity shares having a par value of Rs. 10.

Each holder of equity shares is entitled to one vote per share.

The Company declares dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders at the Annual General Meeting except, in the case of interim dividend.

The equity shares are not repayable except, in the case of a buy-back, reduction of capital or winding up. In the event of liquidation of the Company, members of the Company holding equity shares are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.

In last 5 years no classes of shares has been issued or bought back by the Company nor have any bonus issues been made by the Company.

3. CONTINGENT LIABILITIES

a) Sales Tax demand not provided for: (Refer to Note No. 13) 237.00 237.00 Note: The Company has contested the above claims against the Order of the Appellate Assistant Commissioner, Chennai, confirming the Order of the Commercial Tax Officer for the Assessment Year 1995-96 in respect of charter hire of the vessel, ''m.v. Maratha Prudence''. The Company has already deposited Rs. 47.40 lakhs (Refer Note No. 13) (including refunds withheld by the authorities) and executed a bond of Rs. 218.04 lakhs in respect of the said claim. The Company does not expect any liability to devolve on it in respect of the above and therefore no provision is held.

b) Income Tax demand not provided for: 479.71 386.14 The Company has filed appeal in respect of the same. Note : Future cash outflows in respect of the above matters are determinable only on receipt of judgments / decisions pending at various forums / authorities.

4. SEGMENT REPORTING

The Company treats ''Shipping'' as single business segment and therefore details of segments are not separately shown. Given the nature of the business there are no Geographic Segments either.


Mar 31, 2013

The Company has issued only one class of shares referred to as Equity Shares having a par value of Rs. 10.

Each holder of Equity Shares is entitled to one vote per share.

The Company declares and pays dividends in Indian Rupees.

The dividend proposed, if any, by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.

In the event of liquidation of the Company, the holders of Equity Shares will be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However,no such preferential amounts exist currently. The distribution will be in proportion to the number of Equity Shares held by the shareholders.

In last 5 years, no classes of shares has been issued or bought back by the Company nor have any bonus issues been made by the Company. Following are the names of the shareholders together with the number of Equity Shares holding more than 5 percent of the total Equity Shares:

Terns of Repayment

The loan shall be repaid over a period of 8 years in 16 Semi annual installments to be paid durins Septermber & March every year of USD 1,500,000 each plus USD 6,000,000 alongwith last installment. Till date 12 installments of USD 1,500,000 has been paid and USD 8,500,000 has been prepaid.

1 CONTINGENT LIABILITIES AND COMMITMENTS

Sales Tax demand not provided for: (Refer to Note No. 14) 237.00 237.00

Note: The Company has contested the above claims asainst the Order of the Appellate Assistant Commissioner, Chennai, confirmins the Order of the Commercial Tax Officer for the Assessment Year 1995-96 in respect of charter hire of the vessel, ''m.v. Maratha

Prudence''. The Company has already deposited Rs. 47.40 lakhs (Refer Note No.14) (including refunds withheld by the authorities) and executed a bond of Rs. 218.04 lakhs in respect of the said claim. The Company does not expect any liability to devolve on it in respect of the above and therefore no provision is held.

The estimates of future salary increases considered in actuarial valuation take into account inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

The contribution expected to be made by the Company during the financial year 2013-14 is Rs. 19.00 lakhs (2012-13Rs. 25.00 lakhs).

The amounts of the present value of the obligation, fair value of plan assets, surplus or deficit in the plan, experience adjustment arising on plan liabilities and plan assets for the current annual period and previous four periods are as under -

2 SEGMENT REPORTING

The Company treats ''Shipping'' as single business segment and therefore details of segments are not separately shown. Given the nature of the business there are no Geographic Segments either.

3 Previous year''s figures have been regrouped /reclassified wherever necessary to correspond with the current year''s classification /disclosure.


Mar 31, 2011

1. CONTINGENT LIABILITIES (NOT PROVIDED FOR):

In respect of a Sales Tax demand, the Company has contested claims amounting to Rs. 23,700 thousand (2010 - Rs. 23,700 thousand) against the Order of the Appellate Assistant Commissioner, Chennai, confirming the Order of the Commercial Tax Officer for the Assessment Year 1995-96 in respect of charter hire of the vessel, m.v. Maratha Prudence. The Company has already deposited Rs. 14,740 thousand (including refunds withheld by the authorities) and executed a bond of Rs. 21,804 thousand in respect of the said claim. The Company does not expect any liability to devolve on it in respect of the above and therefore no provision is held.

Guarantees given by Bank and counter guaranteed by the Company is Rs. 50 thousand (2010 - Rs. 50 thousand) for due performance of the Companys obligations.

2. i) Miscellaneous Income includes exchange gain (net) Rs. 11,725 thousand (2010- Rs. Nil)

ii) Miscellaneous Expenses include exchange loss (Net) Rs. Nil (2010- Rs. 72,038 thousand)

The revaluation was based on comparable sale approach, taking into consideration situation of buildings, size, specification of construction, existing amenities and demand for such type of buildings in same locality and prevailing market for such type of buildings. Revaluation Reserve was appropriately created for the same.

3. Depreciation provided on the revalued portion of the buildings amounting to Rs. 7,186 thousand (2010- Rs. 7,564 thousand) has been directly adjusted from the Revaluation Reserve.

4.SEGMENT REPORTING

The Company treats Shipping as single business segment and therefore details of segments are not separately shown. Given the nature of the business there are no Geographic Segments either.

5. RELATED PARTY TRANSACTIONS

As per Accounting Standards (AS) 18, the transactions with Companys related parties are disclosed below: Name of the related parties where control exists

a) Chowgule Steamships Overseas Ltd. (CSOL) - Wholly owned subsidiary

b) Sunshine LLC - Wholly owned subsidiary of CSOL

c) Sea Bird LLC - Wholly owned subsidiary of CSOL

d) Sea Lord LLC - Wholly owned subsidiary of CSOL

e) Sea Green LLC - Wholly owned subsidiary of CSOL

f) Sea King LLC - Wholly owned subsidiary of CSOL

The Company has recognised in the Profit and Loss Account the net provision of deferred tax asset of Rs. 54,990 thousand (2010- net provision of deferred tax liability of Rs. 167,134 thousand),

Deferred Tax Asset had been recognized in the previous year on carry forward of Losses to the extent that the reversal of the deferred tax liability will give rise to sufficient future taxable income against which such deferred tax asset can be realized.

Deferred Tax Asset had also been recognized in the previous year on carry forward of long term capital losses on the assumption that the Company would make profits from current investments which are likely to be disposed off.

6. According to the information available with the Company there are no dues payable to micro and small enterprises as defined under Micro, Small and Medium Enterprises Development Act, 2006 as at March 31, 2011. This has been accepted by the Auditors.

7. The Ministry of Corporate Affairs, Government of India vide its notification dated 8th February, 2011 granted general exemption under sub-section (3) of section 211 of the Companies Act, 1956 to certain classes of Companies, including Shipping Companies from disclosing information under paragraphs 4-D(a), (b), (c) and (e) of Part II to Schedule VI of the Companies Act, 1956 in the Profit & Loss Account. The Board of Directors have passed a resolution to avail of the aforesaid exemption for the current financial year.

8. Previous years figures have been regrouped wherever necessary to conform to current years presentation.

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