Mar 31, 2018
Note 2: Critical Accounting Estimates and Judgements
Preparing the financial statements under Ind AS requires management to take decisions and make estimates and assumptions that may impact the value of revenues, costs, assets and liabilities and the related disclosures concerning the items involved as well as contingent assets and liabilities at the balance sheet date. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Company make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
a) Useful lives of vessels
Management of the Company decided the estimated useful lives of vessels and respective depreciation. The accounting estimate is based on the expected wears and tears. Wears and tears can be significantly different following renovation each time. When the useful lives differ from the original estimated useful lives, management will adjust the estimated useful lives accordingly. It is possible that the estimates made based on existing experience are different to the actual outcomes within the next financial period and could cause a material adjustment to the carrying amount of fixed assets.
b) Residual Value
Residual value is considered as 5% of original cost of Vessel. The residual value is reviewed every year on 31st March.
c) Impairment of assets
The recoverable amount of an asset or a cash-generating unit is determined based on value-in-use calculations prepared on the basis of managementâs assumptions and estimates An impairment loss is recognised for the amount by which the assetâs or cash generating unitâs carrying amount exceeds its recoverable amount and is recognised in the Statement of Profit and Loss. Recoverable amount is higher of an assetâs net selling price and its value in use. Value in use is the present value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.
d) Defined benefit obligations
The present value of the defined benefit obligations depends on a number of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for post employments plans include the discount rate. Any changes in these assumptions will impact the carrying amount of such obligations.
Discount Rate for the valuation is determined by reference to market yields at the balance sheet date on Government Bonds. This is the rate that is used to determine the present value of estimated future cash outflows expected to be required to settle the defined benefit obligations.
e) Provision
Estimates of the amounts of provisions recognised are based on current legal and constructive requirements, technology and price levels. Because actual outflows can differ from estimates due to changes in laws, regulations, public expectations, technology, prices and conditions, and can take place many years in the future, the carrying amounts of provisions are regularly reviewed and adjusted to take account of such changes.
f) Impairment of Trade Receivable
The methodology followed by SCI is the use of a provision matrix as a practical expedient to measure expected credit losses on its portfolio of trade receivables. The model uses historical credit loss experience for trade receivables i.e. this model uses aging analysis of trade receivables as at the reporting date.
Considering the different services provided by our company and provisioning made segment wise in SCI, analysis and computation of expected credit loss for trade receivables is done for different segments.
g) Demurrage
Vessel Demurrage income due as per contractual terms is recognized. A provision on estimated basis is made towards deduction from demurrage based on past experience of settlements.
h) Income Tax
Due to Tonnage tax regime applicable on the main part of the company''s activities, resulting in a lower income tax payable in the future, the amount of deferred tax to be recognised is limited. Considering the tonnage tax regime applicable to shipping activities, difference between taxable and book values of assets and liabilities are generally of permanent nature. This is due to the fact that the taxable result for tonnage tax eligible activities has no correlation with either carrying value or the generally applicable tax value of assets and liabilities. As a consequence, temporary differences are limited to those arising from other activities which are subject to normal Income tax provisions.
(A) Sethusamudram Corporation Ltd. (SCL), a Special Purpose Vehicle was incorporated on 06.12.2004 for developing the Sethusamudram Channel Project with Tuticorin Port Trust, Ennore Port Ltd, Visakhapatnam Port trust, Chennai Port Trust, Dredging Corporation of India Ltd., Shipping Corporation of India Ltd. and Paradip Port Trust as the shareholders. SCI participated with an investment of Rs 5000 lakhs (previous year Rs 5000 lakhs). The dredging work is suspended from 17.09.2009 consequent upon the direction of the Hon''ble Supreme Court of India. As there is no progress in the project since then, the Management had provided for diminution towards the investment in FY 2012 - 13.
(B) India LNG Transport Companies No. 1 & 2 Ltd. are two joint venture companies promoted by the Corporation and three Japanese companies Viz. M/S Mitsui O.S.K.lines Ltd. (MOL), M/S Nippon Yusen Kabushiki Kaisha Ltd (NYK Lines) and M/S Kawasaki Kisen Kaisha Ltd (K Line) along with M/S Qatar Shipping Company ( Q Ship), Qatar. SCI and MOL are the largest shareholders, each holding 29.08% shares while NYK Line 17.89%, K Line 8.95% & Q Ship holds 15% respectively. The Shares held by the Corporation and other partners in the two joint venture Companies have been pledged against loans provided by lender banks to these companies. India LNG Transport Company No.1 Ltd owns and operates one LNG tanker SS Disha and India LNG Transport Company No. 2 Ltd owns and operates one LNG Tanker SS Raahi.
(C) India LNG Transport Company No. 3 Ltd. is the 3rd joint venture company which owns and operates one LNG tanker MT Aseem. The company is promoted by the Corporation and its three Japanese partners viz. MOL, NYK Lines, K Line along with M/S Qatar Gas Transport Company (QGTC) and M/s Petronet LNG Limited (PLL) who are the other partners. SCI and MOL are the largest shareholders with 26% share each, while NYK, K Line, QGTC and PLL hold 16.67%, 8.33%, 20% and 3% respectively. The Shares held by the Corporation and other partners in the joint venture company have been pledged against loans provided by lender banks to these companies.
(D) India LNG Transport Company No. 4 Ltd. is a Joint Venture Company incorporated in Singapore in November 2013 and is promoted by the Corporation with its three Japanese partners viz NYK, MOL and K Line along with PLL. SCI, NYK and PLL are the largest shareholders with 26% share each, while MOL and Kline hold 15.67% and 6.33% respectively. The Shares held by the Corporation and other partners in the joint venture company have been pledged against loans provided by lender banks to these companies.
(E) âInland and Coastal Shipping Limited " is wholly owned subsidiary company incorporated in India on 29th September 2016.
a) The Government of India in meeting of cabinet held on 02.04.2013 approved the proposal for dissolution of Irano Hind Shipping Company (IHSC) and splitting the assets/liabilities of IHSC between Joint Venture partners shall be undertaken. The Company holds 49% in IHSC, a joint venture company incorporated in Iran on which sanction has been imposed by United Nations Organisation (UN). Substantive efforts are made to eventually dissolve the JV which is depending on geo political environment and sanctions imposed by UN which is completely beyond SCI''s control. SCI shall remain committed by the decision of cabinet and therefore is making all efforts for dissolution of JV. Further, Government of India vide letter dated 08th May 2018 has advised SCI to go ahead with the dissolution of IHSC. Under Ind AS, investment in Irano Hind has been written off during FY 16-17 to reflect its fair value.
b) The Company entered into a joint venture agreement with Steel Authority of India Ltd. with participation interest in the ratio of 50:50 and promoted a jointly controlled entity SAIL SCI Shipping Pvt. Ltd. (SSSPL). The said company was incorporated on 19.05.2010 with an authorised share capital of Rs 1000 lakhs. The Company has subscribed equity capital of 100000 shares of Rs 10 each amounting to Rs 10 lakhs. It has been decided by the joint venture partners to wind up this company. Under Ind AS, investment in SSSPL has been written down during FY 15-16 to reflect its fair value.
Non-recurring fair value measurements
Investments classified as held for sale during the reporting period is measured at the lower of its carrying amount and fair value less costs to sell at the time of the reclassification, resulting in the recognition of a write down of Rs 42 (Previous year Rs 3) as impairment loss in the statement of profit and loss in FY 2016-17 . The fair value of the investments were determined using the book value approach. This is a level 3 measurement as per the fair value hierarchy as set out in fair value measurement disclosures (refer note 36).
c) For the period of five years immediately preceding the date as at which the Balance Sheet is prepared, no shares have been issued for consideration other than cash, no shares have been issued as bonus shares & no shares have been bought back.
d) Rights/Preference/Restriction attached to Equity Shares
The Company has only one class of Equity shares having par value of '' 10. Each shareholder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holder of equity shares will be entitled to receive the remaining assets of the company after distribution of all preferential allotment in proportion to their shareholding. The dividend whenever proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
e) The Company does not have holding company.
f) There are no shares reserved for issue under option and contract/ commitment for the sale of shares/ disinvestment.
Nature and Purpose of other reserves
Capital Reserve: The amount of sales proceeds in excess of original cost of ships sold by the Company. This is not available for distribution of dividend but can be utilised for issuing bonus shares.
Securities Premium Reserve: The amount received in excess of face value of the equity shares is recognised in Share Premium Reserve. This is not available for distribution of dividend but can be utilised for issuing bonus shares.
Tonnage Tax Reserve: This reserve is a statutory reserve as per requirement of section 115VT of the Income Tax Act, 1961 for the purpose of complying with the conditions for applicability of tonnage tax scheme.
Note: Status of contingent Liabilty with reference to the opening balance as on 01-04-2017
There is a reduction of Rs 554.97 lakhs from opening balance in cases of Central Government Departments There is a reduction of Rs 1850.50 lakhs from opening balance in cases of CPSE There is a reduction of Rs 94.75 lakhs from opening balance in cases of Local Authority There is a reduction of Rs 319.23 lakhs from opening balance in cases of others
* The contingent Liability includes cases decided in favour of SCI amounting to Rs 14800 lakhs. Thereafter, department have gone in appeal.
Note 2 Correction of errors in accounting
In order to decide materiality for determining prior period items as per Ind AS 8, the Company has fixed various thresholds limits for different category of items / transactions depending on the size and nature of amount.
On the basis of various threshold limits for determining prior period items for FY 2017-18, the errors mentioned below are in nature of "Remaining items" i.e., other category item for which transaction level limit decided is Rs 10 lakhs for each item and overall limit is Rs 1 crore for each item.
Due to error and omissions, during the year 2017-18, few expenses/income incurred/receivable on behalf of managed vessels/owned were not correctly booked. The provision for deferred tax liability in previous year was miscalculated due to misinterpretation of letter of allotment of land.
Note 3: Related party transactions
(a) Control
Government of India enterprises controlled by Central Government
(b) Subsidiaries
Inland & Coastal Shipping Ltd. is the 100 percent Subsidiary formed during 2016-17
(c) Joint Venture Companies
1. Irano Hind Shipping Co. Ltd.
2. India LNG Transport Co. (No. 1) Ltd.
3. India LNG Transport Co. (No. 2) Ltd.
4. India LNG Transport Co. (No. 3) Ltd.
5. India LNG Transport Co. (No. 4) Ltd.
6. SAIL SCI Shipping Pvt. Ltd.
(d) Key Management Personnel Executive Director
1. Shri A.K.Sharma
2. Smt H.K Joshi
3. Shri S.V Kher
4. Shri Bipin Bihari Sinha (Resigned w.e.f. 12.08.2017)
5. Shri Sarveen Narula (Superannuated on 31.07.2017)
6. Smt. Sangeeta Sharma (w.e.f. 29.12.2017)
7. Shri Rajesh Sood (w.e.f. 29.12.2017)
8. Shri Surinder Pal Singh Jaggi (w.e.f. 24.04.2018)
9. Shri Dipankar Haldar Non-Executive Director
1. Shri Pradeep Kumar (ceases to be on the Board of SCI w.e.f. 27.07.2017)
2. Shri Pravir Krishn (ceases to be on the Board of SCI w.e.f. 25.07.2017)
3. Smt. Leena Nandan (w.e.f. 03.08.2017)
4. Shri Satinder Pal Singh (w.e.f. 28.08.2017)
5. Shri Arun Balakrishnan
6. Shri Sukamal Chandra Basu
7. Shri Gautam Sinha (w.e.f. 29.09.2017)
8. Shri Raj Kishore Tewari (w.e.f. 29.09.2017)
9. Shri P Kanagasabapathi (w.e.f. 20.11.2017)
Transactions with other government-related entities
Apart from the transactions disclosed in (g) above, the Company also conducts business with other government related entities. The Company has bank deposits ,borrowings and other general banking relations with PSU banks. Other than the substantial amount of bank balances, bank borrowings and the facilities with these banks, transactions with other government related entities are individually insignificant.
(h) Other transactions with related parties
The following transactions occurred with related parties:
Note 4 Segment information
(a) Business Segments
The Company is managed by the Board which is the chief decision maker. The Board has determined the operating segments based on the pattern of vessels deployed by the Company, for the purposes of allocating resources and assessing performance.
Liner segment includes break-bulk, container transport, passenger vessels & research vessels managed on behalf of other organisations.
Bulk Carriers include dry bulk carriers.
(III) Tanker
Tankers segment includes both crude and product carriers, gas carriers, phosphoric acid carriers.
Technical & Offshore services segment includes company owned offshore vessels, offshore vessels managed on behalf of other organisations and income from technical consultancy.
(V) Others
Others segment include income earned from Maritime Training Institute.
(VI) Unallocated
Unallocable items and interest income/expenses are disclosed separately.
Expense and Revenue items are allocated vessel wise wherever possible. Expenses and revenue items that cannot be allocated vessel wise are allocated on the basis of age of the vessel i.e., (Built year - Current year) - 1.
(b) Geographical Segments
Presently, the Companyâs operations are predominantly confined in India.
(c) Adjusted Earnings before Interest & Tax (EBIT)
Adjusted EBIT excludes discontinued operations and the effects of significant items of income and expenditure which may have an impact on the quality of earnings such as restructuring costs, impairments when the impairment is the result of an isolated, nonrecurring event. It also excludes the effects of gains or losses on financial instruments.
Interest income and finance cost are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Company.
Note 5 Employee Benefit Obligations
(A) Description of type of employee benefits
a) The Company offers to its employeeâs defined benefits plans in the form of Gratuity, leave encashment and post-retirement Medical Scheme
a) Represents benefits to employee on the basis of number of years of service rendered
by employee. The employee is entitled to receive the same on retirement or resignation.
i. Gratuity -
b) SCI has formed a trust for gratuity which is funded by the Company on a regular basis. The assets of the trust have been considered as plan assets.
ii. Leave Encashment Represents unavailed leave to the credit of the employee and carried forward in accordance with terms of agreement.
iii. Post-Retirement Medical Benefit Scheme Represents benefits given to employees subsequent to retirement on the happening of any unforeseen event resulting in medical costs to the employee
b) The Company offers to its employees defined contribution plan in the form of provident fund, postretirement medical scheme (New w.e.f. 01.01.2007) and pension contribution
The details of the plan are as follows:-
i. Provident Fund It is a contribution made on monthly basis @ 12% of monthly Basic and DA to the PF
Trust who credits annual interest on PF balances. The corpus accumulated is paid on retirement of the employee.
ii. Post-Retirement Medical Scheme (New It is a contribution @ 4% of monthly Basic and DA towards provision of employeesâ w.e.f. 01.01.2007) medical expenses incurred after retirement.
iii. Pension contribution It is a contribution @ 12% of monthly Basic and DA towards provision of annuity after retirement of employees.
None of the financial assets of SCI have been considered in the fair value of plan assets.
The expected rate of return on plan assets has been estimated on the basis of actual returns of the trust in the past years. The securities of trust have an effect on the fair value of plan assets as the value of the securities vary with the changes in the market interest rates.
Actual Return on plan assets '' 749 lakhs (Prev. period '' 1430 lakhs)
Through its defined benefit plans, the company is exposed to a number of risks, the most significant of which are detailed below:
Asset volatility:
The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan asset investments is in fixed income securities with high grades and in government securities. The Company intends to maintain the above investment mix in the continuing years.
Changes in bond yields:
A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plansâ bond holdings. Life expectancy:
The gratuity plan obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plansâ liabilities. This is particularly significant where inflationary increases result in higher sensitivity to changes in life expectancy. Contribution expected to be paid in the next year is Nil.
The weighted average duration of the defined benefit obligation is 17.15 years (2017 - 17.78 years).
The fair value of financial instruments referred above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active market for identical assets or liabilities (level 1 measurements) and lowest priority to unobservable inputs (level 3 measurements). The categories used are as follows :
Level 1 : Level 1 hierarchy includes financial instruments measured using quoted prices. This includes mutual funds that have a quoted price. The mutual funds are valued using the closing NAV.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities which are included in level.
There were no transfers between any levels during the year.
(ii) Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
- the use of closing NAV for investment in mutual funds
- the use of book values for investment in unlisted equity securities
- the fair value of the remaining financial instruments is determined using discounted cash flow analysis.
(iii) Fair value measurements using significant unobservable inputs (level 3)
The following table presents the changes in level 3 items for the periods ended 31 March 2018 and 31 March 2017:
Note 7 Financial risk management
The Company has exposure to the Credit risk, Liquidity risk and Market risk.
The Company''s Board of Directors has overall responsibility for the establishment and supervision of the Company''s risk management framework. The Board of Directors has established the Risk Management Committee (RMC), which is responsible for developing and monitoring the Company''s risk management policies. The Audit Committee oversees how management monitors compliance with the Company''s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.
(A) Credit Risk :
(i) Credit risk is the risk of financial loss to the Company if a customer to a financial instrument fails to meet its contractual obligations. Company''s exposure to credit risk primarily arises on account of its Trade receivables. Trade receivables consist of a large number of customers spread across diverse geographical areas. A default on a trade receivable is considered when the customer fails to make contractual payments within the credit period. This credit period has been determined by considering the business environment in which the Company operates.
The Company considers dealing with creditworthy customers and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The credit risk due to above is periodically monitored. Based on the periodical analyses, the credit risk is managed by continuous review and follow-up.
(ii) Provision for expected credit losses : The Company provides for expected credit loss on trade receivables based on a provision matrix. This matrix is a simplified basis of recognition of expected credit losses in case of trade receivables. The model uses historical credit loss experience for trade receivables i.e. this model uses aging analysis of trade receivables as at the reporting date and is based on the number of days that a trade receivables is past due. The aging has been done for bracket of 90 days over a period of last 3 years. Receivables that are more than 3 years old are considered uncollectible. Further, customers declaring bankruptcy or failing to engage in repayment plan with the Company, provisioning is made on case to case basis i.e. such customers do not form part of this impairment exercise and provided for separately.
Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
(ii) Maturities of financial liabilities
The tables below analyse the Companyâs non-derivative financial liabilities into relevant maturity groupings based on their contractual maturities.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. In the table below, borrowings include both interest and principal cash flows. To the extent that interest rates are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period.
(C) Market risk
Market risk is the risk that changes in market indicators such foreign exchange rates, interest rates and commodity prices will affect the Company''s income or the value of its financial instruments. The Company''s activities mainly expose it to risks arising from changes in foreign exchange rate and interest rate and freight/charter hire rates.
(i) Foreign currency risk
The Company operates vessels in foreign waters, earns revenues and incurs expenditure in foreign currencies, primarily with respect to USD, EURO and certain other foreign currencies. Foreign currency risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Company''s functional currency (INR).
Considering the business environment in which Company operates, exposure to foreign exchange rate risk is largely managed by collection of income in fore
foreign currencies in short term bank accounts abroad.
(a) Foreign currency risk exposure:
The Companyâs exposure to foreign currency risk at the end of the reporting period expressed in INR, are as follows
(ii) Interest rate risk
Interest rate risk is the risk that the future cash flows of floating interest bearing borrowings will fluctuate because of fluctuations in the interest rates. The Companyâs main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk.
The Company''s fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
The Company manages its interest rate risk by regularly monitoring the interest rate movement and deciding on type of interest rate i.e. fixed or fluctuating.
(iii) Freight/Charter hire risk
Shipping industry is governed by various national and international economic and geopolitical developments. Local and international demand and supply determine freight and charter hire rates. Since Company''s vessels ply in international waters, it is affected by such developments. Also, bunker cost is major component of Company''s cost structure and bunker prices are highly volatile.
Note 38: Capital management
(a) Risk management
The Companyâs objectives when managing capital are to safeguard the companyâs ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Company monitors capital on the basis of the debt equity ratio. This ratio is calculated as debt divided by total equity. Debt is calculated as Long Term Borrowings (including current portion of Long Term borrowings as shown in the Balance Sheet).
(b) Loan covenants
The Company has 11 ECB Loan Agreement wherein 9 of the agreements have a financial covenant of Debt Service Coverage Ratio (DSCR). The Company has not been able to meet the DSCR covenant. However the Company has given an alternate covenant of âMinimum Cash Covenantâ in lieu of the DSCR covenant in 4 of the loans and other 5 lenders have waived the DSCR default.
Note 8 During the year ended 31st March, 2018, the company lost MV SCI Ratna an Offshore Support Vessel 96 nautical miles off the coast of Mumbai on 21st November 2017. The WDV of the vessel was Rs 7535 .61 lakhs. The vessel was insured with Hull Underwriter under Hull & Machinery cover. The Company has submitted total loss claim of USD 11,000,000 to M/s Oriental Insurance Co Ltd and same was settled during the year. The Company has recognised the claim amount and loss of Rs 485.89 lakhs during the year.
Note 9 The following changes were made in accounting policy for recognising of foreign currency transactions and balances during the year:
Old Policy - All foreign currency transactions for each month are recorded at the closing exchange rate of the second last Friday of the preceding month published on xe.com website.
The foreign currency balances other than in US Dollars appearing in the books of account at the period end are translated into US Dollars at the closing exchange rate of the second last Friday of preceding month published on xe.com website. Thereafter, the monetary assets and monetary liabilities as well as the Long Term Loans are translated into rupees at SBI Mean Rate prevailing at the period end.
New Policy - All foreign currency transactions are recorded at the previous dayâs available RBI reference rate/exchange rate. Since the RBI reference rate is available for four major currencies only i.e., USD, UKP EUR, YEN, exchange rates of other currencies are taken from xe.com website. The foreign currency balances in US Dollars, UK Pounds, Euro and Japanese yEn appearing in the books of account at the period end are translated into US Dollars at the available RBI reference rate/exchange rate at the period end. The foreign currency balances other than US Dollars, UK Pounds, Euro and Japanese YEN appearing in the books of account at the period end are translated into US Dollars at the rate available on xe.com website at the period end. Thereafter, the monetary assets and monetary liabilities as well as the Long Term Loans are translated into rupees at RBI reference rate/exchange rate prevailing at the period end.
The effects of above changes are not determinable. However, the Company does not expect any material impact on the financial results for the year.
Note 10The revenue from operations includes reimbursement of management expenses of Rs 120.91 Crores from Customers (Refer note no.19). The management has revised the method of allocation of âManagement Expensesâ on these vessels w.e.f.1st April 2017. The revised method of allocating the expenses has resulted into increase of revenue by Rs 78 Crores (approx.) for the financial year 2017-18. The same is in process of approbation by the respective Customers.
Note 11): Trade Payables, Trade Receivables, Loans & Advances and Deposits are subject to confirmation and reconciliation. During the year, letters for confirmation of balances have been sent to various trade payable and trade receivable parties by the Company and the same are under reconciliation wherever replies have been received. The management, however, does not expect any material changes on reconciliation.
Note 12): The figures of previous year have been regrouped or rearranged wherever necessary to conform to current year''s presentation as per Schedule III (Division II) to the Companies Act 2013.
Mar 31, 2017
Note 1: First time adoption of Ind AS
Transition to Ind AS
These are the Companyâs first Standalone Financial Statements prepared in accordance with Ind AS.
The Company has adopted Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs with effect from 1st April, 2016, with a transition date of 1st April, 2015. These Financial Statements for the year ended 31st March, 2017 are the first Financial Statement the Company has prepared under Ind AS. For all periods upto and including the year ended 31st March, 2016 , the Company prepared its Financial Statements in accordance with the previously applicable Indian GAAP (previous GAAP).
The adoption of Ind AS has been carried out in accordance with Ind AS 101, First-time Adoption of Indian Accounting Standards. Ind AS 101 requires that all Ind AS standards and interpretations that are issued and effective for the first Ind AS Financial Statements be applied retrospectively and consistently for all financial years presented. Accordingly, the Company has prepared Financial Statements which comply with Ind AS for year ended 31st March, 2017, together with the comparative information as at and for the year ended 31st March, 2016. The Companyâs opening Ind AS Balance Sheet has been prepared as at 1st April, 2015, the date of transition to Ind AS.
In preparing its opening Ind AS Balance Sheet, the Company has adjusted the amounts reported previously in Financial Statements prepared in accordance with the Accounting Standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act. An explanation of how the transition from previous GAAP to Ind AS has affected the Companyâs financial position, financial performance and cash flows is set out in the following tables and notes.
A. Exemptions and exceptions availed
In preparing these Ind AS Financial Statements, the Company has availed certain exemptions and exceptions in accordance with Ind AS 101, as explained below. The resulting difference between the carrying values of the assets and liabilities in the Financial Statements as at the transition date under Ind AS and previous GAAP have been recognized directly in equity (retained earnings or another appropriate category of equity). This note explains the adjustments made by the Company in restating its previous GAAP Financial Statements, including the Balance Sheet as at 1st April, 2015 and the Financial Statements as at and for the year ended 31st March, 2016.
Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.
A.1 Ind AS optional exemptions A.1.1 Deemed cost
Ind AS 101 permits a first-time adopter to measure all of its property, plant and equipment as recognized in the Financial Statements as at the date of transition to Ind AS at fair value or previous GAAP carrying value and use that as its deemed cost as at the date of transition. This exemption can also be used for intangible assets covered by Ind As 38 âIntangible Assetsâ .
Accordingly, the Company has elected to measure certain items of its property, plant and equipment (PPE) at their fair values. The Company has elected to use previous GAAP carrying value as deemed cost for Intangible Assets covered by Ind AS 38 âIntangible Assetsâ.
A.1.2 Long term foreign currency monetary items
Ind AS 101 permits a first time adopter to continue the accounting policy adopted for accounting for exchange differences arising on translation of long term foreign currency monetary items outstanding as on 31st March 2016.
The Company has opted to apply this exemption.
A.2 Ind AS mandatory exceptions
The Company has applied the following exceptions from full retrospective application of Ind AS as mandatorily required under Ind AS 101: A.2.1 Estimates
An entityâs estimates in accordance with Ind AS at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.
Ind AS estimates as at 1 April 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP The Company made estimates for following items in accordance with Ind AS at the date of transition as these were not required under previous GAAP:
1) Investment in mutual funds carried at FVTPL;
2) Impairment of Trade Receivables based on expected credit loss model
A.2.2 Classification and measurement of financial assets
Ind AS 101 requires an entity to assess classification and measurement of financial assets (other than equity instruments) on the basis of the facts and circumstances that exist at the date of transition to Ind AS. Consequently, the Company has applied the above assessment based on facts and circumstances exist at the transition date.
C: Notes to first-time adoption:
Note 1: Property, plant and equipment
Under previous GAAP property, plant and equipments were carried at cost less accumulated depreciation and impairment, if any.
On transition to Ind AS, the Company has opted to carry such property, plant and equipments as under:
a) Freehold land has been measured at fair value on transition date and that fair value is used as the deemed cost.
b) Certain items of fleet have been measured at fair value and that fair value is used as deemed cost as on transition date.
c) All other assets which are not fair valued have been measured in accordance with Ind AS 16 retrospectively.
d) Under the previous GAAP dry dock expenses were charged to P&L account based on stage of completion in the same quarter/ financial year. Under Ind AS, last dry dock costs incurred even prior to 01.04.2015 are being capitalized and treated as separate component of vessels and being written off over a effective period of the dry dock.
Consequent to above, the total equity as at 31 March 2016 is increased by Rs, 22334 (1 April 2015 - (-) Rs, 10605) with corresponding adjustment of Rs, 10605 to retained earnings & profit for the year ended 31 March 2016 is increased by Rs, 32939.
Note 2: Prior Period Income and Expenses Adjustment
Under previous GAAP the Company was accounting for prior period items in the year in which errors were identified. Under Ind AS 8, an entity shall correct material prior period errors retrospectively in the first set of Financial Statements approved for issue after their discovery by:
(a) restating the comparative amounts for the prior period(s) presented in which the error occurred; or
(b) if the error occurred before the earliest prior period presented, restating the opening balances of assets, liabilities and equity for the earliest prior period presented. Accordingly, material prior period errors were adjusted by restating the comparative amounts for the prior periods.
Consequent to the above, total equity as at 31 March 2016 has been decreased by Rs, 11075 (1 April 2015 - Rs, 10157) with a corresponding adjustment of Rs, 10157 to retained earning & profit for the year ended 31 March 2016 is decreased by Rs, 967.
Note 3: Borrowing at Amortized cost
Under previous GAAP transaction cost (upfront fee ) for borrowings taken for fixed asset were capitalized and Amortized over useful life of the fixed asset. Ind AS 109 requires transaction costs incurred towards origination of borrowings to be deducted from the carrying amount of borrowings on initial recognition. These costs are recognized in the profit or loss over the tenure of the borrowing as part of the interest expense by applying the effective interest rate method.
Consequent to above, total equity as at 31 March 2016 is increased by Rs, 4512 (1 April 2015 - Rs, 5602) with a corresponding adjustment of Rs, 5602 to retained earnings and profit for the year ended 31 March 2016 decreased by Rs, 1090.
Note 4: Recognition of Revenue and Expenditure
Under previous GAAP Freight & Direct operating expenses i.e. bunker, port dues, cargo handling expenses etc. were recognized in accounts only on completion of a voyage. In case of unfinished voyage, amount booked on account of freight earning and other charges in respect of such voyages are carried forward as unfinished voyage earnings. Direct operating expenses incurred for such unfinished voyages including hire and freight for vessel chartered-in are carried forward as unfinished voyage expenses except in case of time charter. Under Ind AS 18, when the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognized by reference to the stage of completion of the transaction at the end of the reporting period. Therefore, freight is recognized proportionately as per percentage completion method based on the period of voyage till cutoff date and Direct operating expenses incurred till cutoff date are now booked pro rata based on the total period of voyage.
Consequent to above adjustments, total equity as at 31 March 2016 is increased by Rs, 2636 (1 April 2015 - Rs, 2261) with a corresponding adjustment of Rs, 2261 to retained earning and profit for the year ended 31 March 2016 increased by Rs, 375.
Note 5: Expected Credit Loss
Under previous GAAP, Provision is made for all the debtors aged beyond three years and in case of debtors aged below three years, provision is made for cases like bankruptcy, terminated agents. Under Indian Accounting Standard (Ind AS) 109 , the Company is required to apply expected credit loss model for recognizing the allowances for doubtful debts. The Company has applied the simplified approach for providing for expected credit losses and used provision matrix as a practical expedient to measure expected credit losses on its portfolio of trade receivables.
As a result, the allowance for doubtful debts increased by Rs, 1468 as at 31 March 2016 (1 April 2015 - Rs, 5762). Consequently, the total equity as at 31 March 2016 has been decreased by Rs, 1468 (1 April 2015 - Rs, 5762) and profit for the year ended 31 March 2016 increased by Rs, 4294.
Note 6: Fair Valuation of Employee Loan
Under previous GAAP employee loans at concessional rate were carried at amount lent to the employee and interest income was charged to profit and loss on accrual basis. Under Ind AS 109, Employee loans are fair valued on intitial recognition and subsequently measured at Amortized cost with interest income recognized based on effective interest rate method.
Consequent to above adjustments, the total equity as at 31 March 2016 has been decreased by Rs, 30 and profit for the year ended 31 March 2016 decreased by Rs, 30.
Note 7: Remeasurements of post-employment benefit obligations
Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of profit or loss. Under the previous GAAP these remeasurements were forming part of the profit or loss for the year. As a result of this change, the profit for the year ended March 31,
2016 increased by Rs, 952.
Note 8: Fair valuation of investments
Under the previous GAAP investment in equity instruments were classified as long-term investments or current investments based on the intended holding period and realisability. Long-term investments were carried at cost less provision for other than temporary decline in the value of such investments. Current investments were carried at lower of cost and fair value. Under Ind AS, same are required to be fair valued and subsequently to be measured at Fair value through Profit and Loss.
Consequent to above, the Company has fair valued in investments in equity instruments which has resulted in increase in total equity by Rs, 90 as at 31st March 2016 and increase in profit for the year ended 31 March 2016 Rs, 90 .
Note 9: Deferred Tax
Under previous GAAP deferred taxes were recognized for the tax effects of timing differences between accounting profit and taxable profit for the year using the income statement approach. However, the Company was covered under tonnage tax scheme for shipping companies. Accordingly, the Company was not required to give effects to timing differences as contemplated under AS 22 âAccounting for taxes on incomeâ. Under Ind AS, deferred taxes are required to be recognized using the Balance Sheet approach for future tax consequences of temporary differences (other than those are covered in tonnage tax scheme) between the carrying value of assets and liabilities and their respective tax bases.
Consequent to above, the total equity as at 31 March 2016 is decreased by Rs, 35163 (1 April 2015 - Rs, 36199) with corresponding adjustment of Rs, 36199 to retained earnings & profit for the year ended 31 March 2016 is increased by Rs, 1036.
Note 11: Retained earnings
Retained earnings as at 1 April 2015 has been adjusted consequent to the above Ind AS transition adjustments.
Note 12: Other comprehensive income
Under Ind AS, all items of income and expense recognized in a period should be included in profit or loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in profit or loss but are shown in the statement of profit and loss as âother comprehensive incomeâ includes remeasurements of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP
(A) Sethusamudram Corporation Ltd. (SCL), a Special Purpose Vehicle was incorporated on 06.12.2004 for developing the Sethusamudram Channel Project with Tuticorin Port Trust, Ennore Port Ltd., Visakhapatnam Port Trust, Chennai Port Trust, Dredging Corporation of India Ltd., Shipping Corporation of India Ltd. and Paradip Port Trust as the shareholders. SCI participated with an investment of Rs, 5000 lakhs (previous year Rs, 5000 lakhs). The dredging work is suspended from 17.09.2009 consequent upon the direction of the Honâble Supreme Court of India. As there is no progress in the project since then, the Management had provided for diminution towards the investment in FY 2012 - 13.
(B) India LNG Transport Companies No. 1 & 2 Ltd. are two joint venture companies promoted by the Corporation and three Japanese companies Viz. M/S Mitsui O.S.K.lines Ltd. (MOL), M/S Nippon Yusen Kabushiki Kaisha Ltd (NYK Lines) and M/S Kawasaki Kisen Kaisha Ltd (K Line) along with M/S Qatar Shipping Company ( Q Ship), Qatar. SCI and MOL are the largest shareholders, each holding 29.08% shares while NYK Line 17.89%, K Line 8.95% & Q Ship holds 15% respectively. The Shares held by the Corporation and other partners in the two joint venture Companies have been pledged against loans provided by lender banks to these companies. India LNG Transport Company No.1 Ltd owns and operates one lNg tanker SS Disha and India LNG Transport Company No. 2 Ltd owns and operates one LNG Tanker SS Raahi.
(C) India LNG Transport Company No. 3 Ltd. is the 3rd joint venture company which owns and operates one LNG tanker MT Aseem. The company is promoted by the Corporation and its three Japanese partners viz. MOL, NYK Lines, K Line along with M/S Qatar Gas Transport Company (QGTC) and M/s Petronet LNG Limited (PLL) who are the other partners. SCI and MOL are the largest shareholders with 26% share each, while NYK, K Line, QGTC and PLL hold 16.67%, 8.33%, 20% and 3% respectively. The Shares held by the Corporation and other partners in the joint venture company have been pledged against loans provided by lender banks to these companies.
(D) India LNG Transport Company No. 4 Ltd. is a Joint Venture Company incorporated in Singapore in November 2013 and is promoted by the Corporation with its three Japanese partners viz MOL, NYK and K Line. SCI, NYK, MOL are holding 26% share each, while the balance 22% is with K Line. However, M/s Petronet LNG Ltd (PLL), the Charterer had acquired a stake of 26% on 14th February, 2017 for which MOL and K line had foregone 10.33% and 15.67% respectively. The Joint Venture owns and operates Vessel Prachi of about 173,000 CBM and is under 19 year Time Charter Agreement with PLL. The vessel was delivered in November 2016 at Ulsan and is operating from Barrow Islands, Australia to Dahej, India.
(E) âInland and Coastal Shipping Limitedâ is wholly owned subsidiary company incorporated in India on 29th September 2016.
(F) The Company entered into a joint venture agreement with Steel Authority of India Ltd. with participation interest in the ratio of 50:50 and promoted a jointly controlled entity SAIL SCI Shipping Pvt. Ltd. (SSSPL). The said company was incorporated on 19.05.2010 with an authorized share capital of Rs, 1000 lakhs. The Company has subscribed equity capital of 100000 shares of Rs, 10 each amounting to Rs, 10 lakhs. It has been decided by the joint venture partners to wind up this company. Consequently the investment has been transferred to âAssets held for saleâ during fY 15-16.
a) The Company holds 49% interest in Irano Hind Shipping Co. Ltd. a joint venture company incorporated in Iran on which sanction has been imposed by United Nations Organization (UN). It has been decided by the joint venture partners to dissolve this Company. Under Ind AS, investment in Irano Hind has been written off during FY 16-17 to reflect its fair value.
b) The Company entered into a joint venture agreement with Steel Authority of India Ltd. with participation interest in the ratio of 50:50 and promoted a jointly controlled entity SAIL SCI Shipping Pvt. Ltd. (SSSPL). The said company was incorporated on 19.05.2010 with an authorized share capital of Rs, 1000 lakhs. The Company has subscribed equity capital of 100000 shares of Rs, 10 each amounting to Rs, 10 lakhs. It has been decided by the joint venture partners to wind up this company. Under Ind AS, investment in SSSPL has been written down during FY 15-16 to reflect its fair value.
Non-recurring fair value measurements
Investments classified as held for sale during the reporting period is measured at the lower of its carrying amount and fair value less costs to sell at the time of the reclassification, resulting in the recognition of a write down of '' 42 (Previous.year '' 3) as impairment loss in the statement of profit and loss. The fair value of the investments were determined using the book value approach. This is a level 3 measurement as per the fair value hierarchy as set out in fair value measurement disclosures (refer note 34).
c) For the period of five years immediately preceding the date as at which the Balance Sheet is prepared, no shares have been issued for consideration other than cash, no shares have been issued as bonus shares & no shares have been bought back.
d) Rights/Preference/Restriction attached to Equity Shares
The Company has only one class of Equity shares having par value of Rs, 10. Each shareholder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holder of equity shares will be entitled to receive the remaining assets of the company after distribution of all preferential allotment in proportion to their shareholding. The dividend whenever proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
e) The Company does not have holding company.
f) There are no shares reserved for issue under option and contract/ commitment for the sale of shares/ disinvestment.
Nature and Purpose of other reserves
Capital Reserve: The amount of sales proceeds in excess of original cost of ships sold by the Company. This is not available for distribution of dividend but can be utilised for issuing bonus shares.
Securities Premium Reserve: The amount received in excess of face value of the equity shares is recognized in Share Premium Reserve. This is not available for distribution of dividend but can be utilised for issuing bonus shares.
Tonnage Tax Reserve: This reserve is a statutory reserve as per requirement of section 115VT of the Income Tax Act, 1961 for the purpose of complying with the conditions for applicability of tonnage tax scheme.
Note 13: Related party transactions
(a) Control
Government of India enterprises controlled by Central Government
(b) Subsidiaries
Inland & Coastal Shipping Ltd. is the 100 percent Subsidiary formed during 2016-17
(c) Joint Venture Companies
1. Irano Hind Shipping Co. Ltd.
2. India LNG Transport Co. (No. 1) Ltd.
3. India LNG Transport Co. (No. 2) Ltd.
4. India LNG Transport Co. (No. 3) Ltd.
5. India LNG Transport Co. (No. 4) Ltd.
6. SAIL SCI Shipping Pvt. Ltd.
(d) Key Management Personnel Executive Director
1. Shri A.K.Sharma( W.e.f 12.09.2016)
2. Shri B.B. Sinha
3. Shri S.Narula
4. Shri S.V Kher (W.e.f 01.10.2015)
5. Smt H.K. Joshi
6. Shri K.Devadas (Retired on 28.02.2017)
7. Shri A.K. Gupta (Retired on 31.12.2015)
8. Shri S.Thapar (Retired on 30.09.2015)
9. Shri Dipankar Haldar Non Executive Director
1. Shri Sanjeev Ranjan (ceases to be on the Board of SCI w.e.f. 13.01.2017)
2. Shri Barun Mitra (ceases to be on the Board of SCI w.e.f. 02.03.2017)
3. Shri Pravir Krishn (W.e.f. 03.03.2017)
4. Shri Arun Balakrishnan
5. Shri Sukamal Chandra Basu
Note 14: Segment information
(a) Business Segments
The Company is managed by the Board which is the chief decision maker. The Board has determined the operating segments based on the pattern of vessels deployed by the Company, for the purposes of allocating resources and assessing performance.
Liner segment includes break-bulk, container transport, passenger vessels & research vessels managed on behalf of other organisations.
Bulk Carriers include dry bulk carriers.
(III) Tanker
Tankers segment includes both crude and product carriers, gas carriers, phosphoric acid carriers.
Technical & Offshore services segment includes company owned offshore vessels, offshore vessels managed on behalf of other organisations and income from technical consultancy.
(V) Others
Others segment include income earned from Maritime Training Institute.
(VI) Unallocated
Unallocable items and interest income/expenses are disclosed separately.
Expense and Revenue items are allocated vessel wise wherever possible. Expenses and revenue items that cannot be allocated vessel wise are allocated on the basis of unit cum GRT method i.e. 50% allocated on the basis of units & balance 50% on the basis of adjusted GRT. For vessels which are bigger than 20000 GRT, GRT is adjusted to one third of GRT or 20000 GRT, whichever is higher.
(b) Geographical Segments
Presently, the Companyâs operations are predominantly confined in India.
(c) Adjusted Earnings before Interest & Tax (EBIT)
Adjusted EBIT excludes discontinued operations and the effects of significant items of income and expenditure which may have an impact on the quality of earnings such as restructuring costs, impairments when the impairment is the result of an isolated, nonrecurring event. It also excludes the effects of gains or losses on financial instruments.
Interest income and finance cost are not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Company.
Note 15: Employee Benefit Obligations
(A) Description of type of employee benefits
a) The Company offers to its employeeâs defined benefits plans in the form of Gratuity, leave encashment and post retirement Medical Scheme
a) Represents benefits to employee on the basis of number of years of service rendered by employee. The employee is entitled to receive the same on retirement or resignation.
i. Gratuity -
b) SCI has formed a trust for gratuity which is funded by the Company on a regular basis. The assets of the trust have been considered as plan assets.
ii. Leave Encashment Represents unveiled leave to the credit of the employee and carried forward in accordance with terms of agreement.
iii. Post Retirement Medical Benefit Scheme Represents benefits given to employees subsequent to retirement on the happening of any unforeseen event resulting in medical costs to the employee
b) The Company offers to its employees defined contribution plan in the form of provident fund, post retirement medical scheme (New w.e.f. 01.01.2007) and pension contribution
The details of the plan are as follows:-
i. Provident Fund It is a contribution made on monthly basis @ 12% of monthly Basic and DA to the PF
Trust who credits annual interest on PF balances. The corpus accumulated is paid on retirement of the employee.
ii. Post Retirement Medical Scheme (New It is a contribution @ 4% of monthly Basic and DA towards provision of employeesâ w.e.f. 01.01.2007) medical expenses incurred after retirement.
iii. Pension contribution It is a contribution @ 12% of monthly Basic and DA towards provision of annuity after
retirement of employees.
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognized in the Balance Sheet.
Life expectancy:
The gratuity plan obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plansâ liabilities. This is particularly significant where inflationary increases result in higher sensitivity to changes in life expectancy. Contribution expected to be paid in the next year is Nil.
The weighted average duration of the defined benefit obligation is 17.78 years (2016 - 17.85 years).
The weighted average duration of the defined benefit obligation is 17.78 years (2016 - 17.85 years).
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognized in the Balance Sheet.
The fair value of financial instruments referred above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active market for identical assets or liabilities (level 1 measurements) and lowest priority to unobservable inputs (level 3 measurements). The categories used are as follows :
Level 1 : Level 1 hierarchy includes financial instruments measured using quoted prices. This includes mutual funds that have a quoted price. The mutual funds are valued using the closing NAV.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximize the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities which are included in level.
There were no transfers between any levels during the year. significantly different from their carrying amount as there is no significant change in the underlying credit risk of the Companyâs borrowings. The fair values of non-current borrowings (with fixed rate of interest) are based on discounted cash flows using a current borrowing rate. They are classified as level 2 fair values in the fair value hierarchy due to the use of observable inputs.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
Note 16: Financial risk management
The Company has exposure to the Credit risk, Liquidity risk and Market risk.
The Companyâs Board of Directors has overall responsibility for the establishment and supervision of the Companyâs risk management framework. The Board of Directors has established the Risk Management Committee (RMC), which is responsible for developing and monitoring the Companyâs risk management policies. The Audit Committee oversees how management monitors compliance with the Companyâs risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.
(A) Credit Risk :
(i) Credit risk is the risk of financial loss to the Company, if a customer to a financial instrument fails to meet its contractual obligations. Companyâs exposure to credit risk primarily arises on account of its Trade receivables. Trade receivables consist of a large number of customers spread across diverse geographical areas. A default on a trade receivable is considered when the customer fails to make contractual payments within the credit period. This credit period has been determined by considering the business environment in which the Company operates.
The Company considers dealing with creditworthy customers and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The credit risk due to above is periodically monitored. Based on the periodical analyses, the credit risk is managed by continuous review and follow-up.
(ii) Provision for expected credit losses : The Company provides for expected credit loss on trade receivables based on a provision matrix. This matrix is a simplified basis of recognition of expected credit losses in case of trade receivables. The model uses historical credit loss experience for trade receivables i.e. this model uses aging analysis of trade receivables as at the reporting date and is based on the number of days that a trade receivables is past due. The aging has been done for bracket of 90 days over a period of last 3 years. Receivables that are more than 3 years old are considered uncollectible. Further, customers declaring bankruptcy or failing to engage in repayment plan with the Company, 100% provisioning is made i.e. such customers do not form part of this impairment exercise and provided for separately.
(B) Liquidity risk
(i) Prudent liquidity risk management refers to the management of the Companyâs short term and long term funding and liquidity management requirements. The Companyâs treasury maintains flexibility in funding by maintaining availability of funds under committed credit lines. The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
(ii) Maturities of financial liabilities
The tables below analyse the Companyâs non-derivative financial liabilities into relevant maturity groupings based on their contractual maturities.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. In the table below, borrowings include both interest and principal cash flows. To the extent that interest rates are floating rate, the undiscounted amount is derived from interest rate curves at the end of the reporting period.
(C) Market risk
Market risk is the risk that changes in market indicators such foreign exchange rates, interest rates and commodity prices will affect the Companyâs income or the value of its financial instruments. The Companyâs activities mainly expose it to risks arising from changes in foreign exchange rate and interest rate and freight/charter hire rates.
(i) Foreign currency risk
The Company operates vessels in foreign waters, earns revenues and incurs expenditure in foreign currencies, primarily with respect to USD, EURO and certain other foreign currencies. Foreign currency risk arises from future commercial transactions and recognized assets and liabilities denominated in a currency that is not the Companyâs functional currency (INR).
Considering the business environment in which Company operates, exposure to foreign exchange rate risk is largely managed by collection of income in foreign currencies in short term bank accounts abroad.
(ii) Interest rate risk
Interest rate risk is the risk that the future cash flows of floating interest bearing borrowings will fluctuate because of fluctuations in the interest rates. The Companyâs main interest rate risk arises from long-term borrowings with variable rates, which expose the Company to cash flow interest rate risk.
The Companyâs fixed rate borrowings are carried at Amortized cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates.
The Company manages its interest rate risk by regularly monitoring the interest rate movement and deciding on type of interest rate i.e. fixed or fluctuating.
(iii) Freight/Charter hire risk
Shipping industry is governed by various national and international economic and geopolitical developments. Local and international demand and supply determine freight and charter hire rates. Since companyâs vessels ply in international waters, it is affected by such developments. Also, bunker cost is major component of Companyâs cost structure and bunker prices are highly volatile.
Note 17: Capital management
(a) Risk management
The Companyâs objectives when managing capital are to safeguard the Companyâs ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Company monitors capital on the basis of the debt equity ratio. This ratio is calculated as debt divided by total equity. Debt is calculated as Long Term Borrowings (including current portion of Long Term borrowings as shown in the Balance Sheet).
(b) Loan covenants
The Company has 12 ECB Loan Agreements wherein 10 of the agreements have a financial covenant of Debt Service Coverage Ratio (DSCR). The Company has not been able to meet the DSCR covenant. However the Company has given an alternate covenant of âMinimum Cash Covenantâ in lieu of the DSCR covenant in 4 of the loans and other 6 lenders have waived the DSCR default.
Explanation : For the purposes of this clause, the term âSpecified Bank Notesâ shall have the same meaning provided in the notification of the Government of India, in the Ministry of Finance, Department of Economic Affairs number S.O. 3407(E), dated the 8th November, 2016.
Note 18:
Trade Payables, Trade Receivables, Loans & Advances and Deposits are subject to confirmation and reconciliation. During the year, letters for confirmation of balances have been sent to various trade payable and trade receivable parties by the Company and the same are under reconciliation wherever replies have been received. The management, however, does not expect any material changes on reconciliation.
Note 19:
The figures of previous year have been regrouped or rearranged wherever necessary to conform to current yearâs presentation as per Schedule III (Division II) to the Companies Act 2013.
Mar 31, 2016
Rights/Preference/Restriction attached to Equity Shares
The Company has only one class of Equity shares having par value of '' 10. Each shareholder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holder of equity shares will be entitled to receive the remaining assets of the company after distribution of all preferential allotment in proportion to their shareholding.The dividend whenever proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting. The Company does not have any holding company. There are no shares reserved for issue under option and contract/ commitment for the sale of shares/ disinvestment.
For the period of five years immediately preceding the date as at which the Balance Sheet is prepared, no shares have been issued for consideration other than cash, no shares have been issued as bonus shares & no shares have been bought back
*The shares are pledged to banks against loans given by them to joint venture companies.
A Sethusamudram Corporation Ltd. (SCL), a Special Purpose Vehicle was incorporated on 06.12.2004 for developing the Sethusamudram Channel Project with Tuticorin Port Trust, Ennore Port Ltd, Visakhapatnam Port trust, Chennai Port Trust, Dredging Corporation of India Ltd., Shipping Corporation of India Ltd. and Paradip Port Trust as the shareholders. SCI participated with an investment of Rs, 5000 lakhs (previous year Rs, 5000 lakhs). The dredging work is suspended from 17.09.2009 consequent upon the direction of the Hon''ble Supreme Court of India. As there is no progress in the project since then, the Management had provided for diminution towards the investment in FY 2012 - 13.
B India LNG Transport Companies No. 1 & 2 Ltd. are two joint venture companies promoted by the Corporation and three Japanese companies Viz. M/S Mitsui O.S.K.lines Ltd. (MOL), M/S Nippon Yusen Kabushiki Kaisha Ltd (NYK Lines) and M/S Kawasaki Kisen Kaisha Ltd (K Line) along with M/S Qatar Shipping Company ( Q Ship), Qatar. SCI and MOL are the largest shareholders, each holding 29.08% shares while NYK Line 17.89%, K Line 8.95% & Q Ship holds 15% respectively. The Shares held by the Corporation and other partners in the two joint venture Companies have been pledged against loans provided by lender banks to these companies. India LNG Transport Company No.1 Ltd owns and operates one lNg tanker SS Disha and India LNG Transport Company No. 2 Ltd owns and operates one LNG Tanker SS Raahi. The entire operation and management of the two companies was taken over by SCI from 1st January 2009.
C India LNG Transport Company No. 3 Ltd. is the 3rd joint venture company which owns and operates one LNG tanker MT Aseem. The company is promoted by the Corporation and its three Japanese partners viz. MOL, NYK Lines, K Line along with M/S Qatar Gas Transport Company (QGTC) and M/s Petronet LNG Limited (PLL) who are the other partners. SCI and MOL are the largest shareholders with 26% share each, while NYK, K Line, QGTC and PLL hold 16.67%, 8.33%, 20% and 3% respectively. The Shares held by the Corporation and other partners in the joint venture company have been pledged against loans provided by lender banks to these companies. The entire operation and management of the company was taken over by SCI from April 2013.
D India LNG Transport Company No. 4 Ltd. is a Joint Venture Company incorporated in Singapore in November 2013 and is promoted by the Corporation with its three Japanese partners viz MOL, NYK and K Line. SCI, NYK, MOL are holding 26% share each, while the balance 22% is with K Line. The company will construct, own and operate one LNG tanker of about 173,000 CBM and would be under a 19-year Time Charter Agreement with charterers M/s Petronet LNG Limited. The tanker will be delivered in September 2016 and will be operating from Barrow Islands, Australia to Kochi, India.
* 30 Shares are held in the name of SCI Directors and are with Irano Hind Shipping Co. Ltd,Tehran
i The Company holds 49% interest in Irano Hind Shipping Co. Ltd. a joint venture company incorporated in Iran on which sanction has been imposed by United Nations Organization (UN). The exposure of the Company in the Joint Venture is limited to Rs, 39 lakhs. It has been decided by the joint venture partners to dissolve this company.
ii The Company entered into a joint venture agreement with Steel Authority of India Ltd. with participation interest in the ratio of 50:50 and promoted a jointly controlled entity SAIL SCI Shipping Pvt. Ltd. (SSSPL). The said company was incorporated on 19.05.2010 with an authorised share capital of Rs, 1000 lakhs. The Company has subscribed equity capital of 100000 shares of Rs, 10 each amounting to Rs, 10 lakhs. It has been decided by the joint venture partners to wind up this company.
Notes:-
1. Segment definitions - Liner segment includes break-bulk, container transport, passenger vessels and also passenger vessels & research vessels managed on behalf of other organizations. Bulk segment includes tankers (both crude and product), dry bulk carriers, gas carriers, phosphoric acid carriers and LNG vessels managed on behalf of joint venture companies. Technical & Offshore services segment include company owned offshore vessels, offshore vessels managed on behalf of other organizations and income from technical consultancy. Others segment include income earned from Maritime Training Institute. Unallowable items and interest income/expenses are disclosed separately.
2. All expense & revenue items are allocated vessel wise wherever possible. Expense & revenue items that cannot be allocated vessel wise are allocated on the basis of unit cum GRT method i.e. 50% allocated on the basis of units & balance 50% on the basis of adjusted GRT. For vessels which are bigger than 20000 GRT, GRT is adjusted to one third of GRT or 20000 GRT, whichever is more.
3. Agent advances are allocated to segment in the ratio of expenses booked by the agents during the year.
NOTE - â35â Disclosures of Employee benefits as per Accounting Standard-15 âEmployees benefitsâ, as defined there in, are given below
A Description of type of employee benefits
a) The Company offers to its employeeâs defined benefits plans in the form of Gratuity, leave encashment and post retirement Medical Scheme
P The Companyâs Provident Fund is exempted under section 17 of Employeesâ Provident Fund and Miscellaneous Provisions Act, 1952. Conditions for grant of exemption stipulate that the employer shall make good deficiency, if any, in the interest rate declared by the trust vis-a-vis statutory rate.
NOTE - â1â
During the year the company has adopted the useful life of 25 years in respect of Tankers & Offshore vessels which is different from the useful life of 20 years specified in part C of Schedule II to the Companies Act, 2013 based on the technical parameters including design life and the past record. Further, the company while calculating the depreciation for the year has adopted the residual value of all the vessels as 5% of initial cost of vessels as against Re 1/- considered earlier, keeping in view the actual realization in the past and the limit specified in part âCâ of Schedule II to the Companies Act, 2013.
Consequent to the change, the depreciation for the year is lower & the profit for the year is higher by 19878 lakhs.
NOTE - â2â
As per the requirements of Schedule II to the Companies Act, 2013, where cost of a part of the asset is significant to total cost of the asset and useful life of that part is different from the useful life of the remaining asset, useful life of that significant part shall be determined separately for depreciation purpose.
After detailed internal study, the company is of the view that none of the components of the fixed assets is having useful life different from the useful life of the remaining assets. Consequently, the ascertainment of cost of the components whether significant or not to the total cost of asset was not required. However, the option of treating dry docking expenses as a separate component is being examined by the management.
NOTE - â3â
The carrying amounts of Companyâs assets have been reviewed at the Balance sheet date to determine whether there is any indication of impairment. Such indication exists in the case of few vessels. There is an impairment loss of '' 13638 lakhs provided in the statement of profit and loss account for the year which arose out of cash flow projections based on managementâs best estimate of the set of conditions that exists over the remaining useful life of the asset taking into consideration the following assumptions:
a. Time charter yield is taken for next five years based on external evidence i.e, report of Drewry, a reputed research and advisory organization for the maritime sector.
b. For the remaining economic life of the asset, the year wise growth in the time charter yield has been extrapolated based on the historical data of last 15 years for the vessels published by Drewry taking the growth in the year 2003 over the year 2002 as the base year.
c. Budgeted standing charges and management expenses of the year 2016-17 are increased for each year from 2017-18 based on the managementâs best estimate of the likely increase in future.
NOTE - â4â
The agency agreement with the agent at UAE ports was terminated w.e.f. 21.03.2015. The Company has invoked revolving bank guarantee of USD 1.6 million to recover outstanding dues of Rs, 1115 lakhs from the said agent. However, the agent has got injunction through court on encashment of bank guarantee. The company has already submitted all the documents to its appointed lawyers to enable the vacation of the injunction. Till date, 14 hearings/adjournments have taken place. Further, the Company is also simultaneously pursuing the matter with the agent for reconciliation of accounts and the bank has confirmed its liability to honour the bank guarantee once the Court injunction is lifted. Since the matter is still sub-judice in the Court of Fujairah, no provision is made in the books on this account as on 31.03.2016.
NOTE - â5â
Trade Payables, Trade Receivables, Loans & Advances and Deposits are subject to confirmation and reconciliation. During the year, letters for confirmation of balances have been sent to various trade payable and trade receivable parties by the Company and the same are under reconciliation wherever replies have been received. The management, however, does not expect any material changes on reconciliation.
NOTE - â6â
The company has made a provision of Rs,900 lakhs for self lease of staffs and officers from 01/04/2011 to 31/03/2015 on estimated basis, pending final working and also the requirement to enter into individual agreements between the company and each of the eligible employees with retrospective effect.
NOTE - â7â
Company had received a claim of USD 39 millions in respect of explosion of cargo carried on M.V. Amsterdam bridge. Out of USD 39 millions, USD 18 millions is covered under insurance. In respect of remaining USD 21 millions, company has issued security being uncovered portion of claim. Company has agreed for the mediation to settle the claim and management expects settlement of claim within insurance cover. Pending settlement, the uncovered claim has been shown as contingent liability.
NOTE - â8â
The figures of previous year have been regrouped or rearranged wherever necessary to conform to current yearâs presentation as per Schedule III to the Companies Act, 2013.
NOTE - â9â
The figures are rounded off to the nearest lakh rupees.
Mar 31, 2014
Rights/Preference/Restriction attached to Equity Shares
The Company has only one class of Equity shares having par value of Rs.
10. Each shareholder of equity shares is entitled to one vote per
share. In the event of liquidation of the Company, the holder of equity
shares will be entitled to receive the remaining assets of the company
after distribution of all preferential allotment in proportion to their
shareholding.
1. Notes:
A. Tonnage Tax Reserve (Utilised)
Tonnage Tax Reserve [Statutory Reserve, as per requirement of section
115VT of the Income tax Act, 1961] which has been utilised but awaiting
transfer to General Reserve
B. Corporate Social Responsibility Reserve
Reserve created as per the corporate social responsibilty policy of the
company. It is created for contribution to betterment of society and
environment
C. Staff Welfare Fund
This is a fund created for the welfare activities of the employees
Notes:
(1) Additions to Fleet include Rs. 80082 lakhs (Prev. yr. Rs. 44098
lakhs) on account of currency exchange difference adjusted as per
Significant Accounting Policy No. 8 (d)
(2) Borrowing cost and Interest capitalised during the period is Rs.
430 lakhs (Prev. year Rs. 5635 lakhs).
(3) Buildings include cost of Shipping House at Bombay Rs. 134 lakhs
(Prev. yr. Rs. 134 lakhs ) which is on leasehold land where in the
value of lease is considered at Rs. Nil.
(4) Ownership Flats and Residential Buildings include : Cost of shares
and bonds in Cooperative Societies/Company of face value Rs. 0.73 lakhs
(Prev. yr. Rs. 0.73 lakhs ).
(5) During the year, the Company has reviewed its fixed assets for
impairment loss as required by Accounting Standard 28 - "Impairment of
Assets" In the opinion of management no provision for impairment is
considered necessary.
** Shares have been pledged to banks against loans given by them
*** The shares are pledged to banks against loans given by them to
joint venture companies.
A. The Company entered into a joint venture agreement with Steel
Authority of India Ltd. with participation interest in the ratio of
50:50 and promoted a jointly controlled entity SAIL SCI Shipping Pvt.
Ltd. (SSSPL). The said company was incorporated on 19.05.2010 with an
authorised share capital of Rs. 17000 lakhs. The Company has subscribed
equity capital of 5,00,000 shares of Rs. 10 each amounting to Rs. 50
lakhs and during the period SCI has made initial payment of Rs. 10
lakhs towards equity capital.
B. Sethusamudram Corporation Ltd. (SCL), a Special Purpose Vehicle was
incorporated on 06.12.2004 for developing the Sethusamudram Channel
Project with Tuticorin Port Trust, Ennore Port Ltd, Visakhapatnam Port
trust, Chennai Port Trust, Dredging Corporation of India Ltd., Shipping
Corporation of India Ltd. and Paradip Port Trust as the shareholders.
SCI participated with an investment of Rs. 5000 lakhs (previous year
Rs. 5000 lakhs). The dredging work is temporarily suspended from
17.09.2009 consequent upon the direction of the Hon''ble Supreme Court
of India. As there is no progress in the project since then, the
Management had provided for dimunition towards the investment in FY
2012-13 and the same is shown at "Nil" Value.
C. India LNG Transport Companies No. 1 & 2 Ltd. are two joint venture
companies promoted by the Corporation and three Japanese companies Viz.
M/S Mitsui O.S.K.lines Ltd. (MOL), M/S Nippon Yusen Kabushiki Kaisha
Ltd (NYK Lines) and M/S Kawasaki Kisen Kaisha Ltd (K Line) along with
M/S Qatar Shipping Company (Q Ship), Qatar. SCI and MOL are the largest
shareholders, each holding 29.08% shares while NYK Line 17.89%, K Line
8.95% & Q Ship holds 15% respectively. The Shares held by the
Corporation and other partners in the two joint venture Companies have
been pledged against loans provided by lender banks to these companies.
India LNG Transport Company No.1 Ltd owns and operates one LNG tanker
SS Disha and India LNG Transport Company No. 2 Ltd owns and operates
one LNG Tanker SS Raahi. The entire operation and management of the two
companies was taken over by SCI from 1st January 2009.
D. India LNG Transport Company No. 3 Ltd. is the 3rd joint venture
company which owns and operates one LNG tanker MT Aseem. The company is
promoted by the Corporation and its three Japanese partners viz. MOL,
NYK Lines, K Line along with M/S Qatar Gas Transport Company (QGTC) and
M/s Petronet LNG Limited (PLL) who are the other partners. SCI and MOL
are the largest shareholders with 26% share each, while NYK, K Line,
QGTC and PLL hold 16.67%, 8.33%, 20% and 3% respectively. The Shares
held by the Corporation and other partners in the joint venture company
have been pledged against loans provided by lender banks to these
companies. The entire operation and management of the company was taken
over by SCI from April 2013.
E. India LNG Transport Company No. 4 Ltd. is a Joint Venture Company
incorporated in Singapore in November 2013 and is promoted by the
Corporation with its three Japanese partners viz MOL, NYK and K Line.
SCI, NYK, MOL are holding 26% share each, while the balance 22% is with
K Line. The company will construct, own and operate one LNG tanker of
about 173,000 CBM and would be under a 19-year Time Charter Agreement
with charterers M/s Petronet LNG Limited. The tanker will be delivered
in September 2016 and will be operating from Barrow Islands, Australia
to Kochi, India.
2. 30 Shares are held in the name of SCI Directors and are with Irano
Hind Shipping Co. Ltd, Tehran
A. The Company holds 49% interest in Irano Hind Shipping Co. Ltd. a
joint venture company incorporated in Iran on which sanction has been
imposed by United Nations Organisation (UN). The exposure of the
Company in the Joint Venture is limited to Rs. 39 lakhs towards
investment. It has been decided by the JV partners to dissolve this
company.
B. SCI Forbes Ltd. is a joint venture between SCI, Forbes & Co. &
Sterling Investment Pvt. Ltd where SCI has a 50% shareholding.The
Management has provided Rs. 7180 lakhs towards dimunition in the value
of the investment in SCI Forbes Ltd as it has been decided to sell its
entire stake in the joint venture company to other partners.
** Represents provision for expected losses on unfinished voyages. In
FY 2012-13, a provision of Rs. 407 lakhs had been made which was
reversed as the same has been adjusted in the current year. The
provision for FY 2013-14 is Rs. 70 lakhs
NOTE -"3"- Contingent liabilities & Commitments
As at As at
Particulars 31st March, 31st March,
2014 2013
Rs. In lakhs Rs. In lakhs
Contingent Liabilities
i Claim against the company not
acknowledged as debts -
A Claim made by M/s. Chokhani
International Ltd. towards dry
dock expenses 4,443 4,225
pending before High Court, Chennai
B Cargo Loss, Freight, Demurrage,
Slot Payments, Fuel Cost, other
operational 5,927 5,890
claims and Custom duty disputed
demand. (As certified by the
Management)
C Disputed demand of Statutory Dues 18,753 13,566
(As certified by the Management)
a) Income Tax & Sales Tax 18,516 8,027
b) Service Tax 237 5,539
ii Guarantees given by the Banks
A on behalf of the Company 4,216 3,453
B on behalf of the Joint Venture
to the extent of the Company''s share 6,458 3,896
iii Undertaking cum Indemnity given
by Company 1,000 1,000
iv Cargo Claims covered by P&I Club 346 89
v Bonds/Undertakings given by
the Company to Customs Authorities 17,677 23,330
vi Corporate Guarantees/Undertakings
A In respect of Joint Ventures Not Not
Ascertainable Ascertainable
B Others 5,457 6,405
Commitments:
Estimated amount of contracts on
capital account, remaining to be
executed 1,14,404 2,30,475
and hence not provided for (Net
of Advance paid) (As certified
by the Management)
Notes:-
1. Segment definitions - Liner segment includes break bulk and
container transport. Bulk segment includes tankers (both crude and
product), dry bulk carriers, gas carriers and phosphoric acid carriers.
Others include offshore vessels, passenger vessels and services and
ships managed on behalf of other organisations. Unallocable items and
interest income / expenses are disclosed separately.
2. All assets/liabilities and revenue items are allocated vessel wise
wherever possible. Assets/liabilities and revenue items that cannot be
allocated vessel wise are allocated on the basis of unit cum GRT method
i.e. 50% allocated on the basis of units and balance 50% on the basis
of adjusted GRT. GRT is adjusted to one third of GRT or 20000 GRT,
whichever is more in case of vessels which are bigger than 20000 GRT.
3. The components of capital employed that cannot be directly
identified are allocated on the basis of GRT method
4. None of the financial assets of SCI have been considered in the
fair value of plan assets.
5. The expected rate of return on plan assets has been estimated on
the basis of actual returns of the trust in the past years. The assets
of the trust are in the nature of investments in securities, fixed
deposits, Interest accrued, and balances in current accounts with Bank.
The securities of trust have an effect on the fair value of plan assets
as the value of the securities vary with the changes in the market
interest rates.
6. Actual Return on plan assets Rs. 1532 lakh. (Prev. period Rs. 1519
lakhs)
7. Contribution expected to be paid in the next year Rs. NIL
8. Effect of an increase of one percentage point and the effect of a
decrease of one percentage point in the assumed medical cost trend
rates on:
(i) the aggregate of the current service cost and interest cost
components of net periodic post-employment medical costs; and
(ii) the accumulated post-employment benefit obligation for medical
costs. (Rs. In Lakhs)
9. The estimates of future salary increases, considered in the
actuarial valuation, takes into account inflation, security, promotion
and other relevant factors.
10. The Company''s Provident Fund is exempted under section 17 of
Employees'' Provident Fund and Miscellaneous Provisions Act, 1952.
Conditions for grant of exemption stipulate that the employer shall
make good deficiency, if any, in the interest rate declared by the
trust vis-a-vis statutory rate.
NOTE - "4"
During the year the Company has changed its policy for provisions
relating to insurance claims covered by Hull Insurance. Expenses on
account of general average claims/ damages to ships which were being
erstwhile provided for to the extent of deductible limit in the year of
claim are now written off in the year in which they are actually
incurred. Due to this change the expenditure booked under the head
"Insurance and Protection "is lower by Rs. 1090 lakhs and the profit
for the year is higher by Rs. 1090 lakhs.
NOTE - "5"
During the year the Company has changed its estimates of recognizing
Demurrage Income related to Tankers. Due to this change, the Income
booked under "Demurrage income" and Profit for the year are higher by
2884 lakhs.
NOTE - "6"
(i) The Company has been exempted from complying with Para 5 (viii)
(a), (b), (c) & (e) of Part II of Schedule VI of the Companies Act,
1956 vide notification no. F. No 51/12/2007-CL.III dated 08.02.2011
issued by Ministry of Corporate Affairs, Government of India.
(ii) Remittance of dividends in foreign currency Rs. NIL (Previous year
Rs. Nil).
NOTE - "7"
Sundry Creditors, Debtors, Loans & Advances and Deposits are subject to
confirmation and reconciliation. During the year, letters for
confirmation of balances have been sent to various parties by the
Company and the same are under reconciliation wherever replies have
been received. The management, however, does not expect any material
changes.
NOTE - "8"
The figures of previous year have been regrouped or rearranged wherever
necessary/practicable to conform to current year''s presentation based
on new Schedule VI notified by the Ministry of Corporate Affairs.
Further, the figures are rounded off to the nearest lakh rupees.
Mar 31, 2013
NOTE 1 : RELATED PARTY DISCLOSURES
Related Party disclosures, as required by AS - 18 "Related Party
Disclosures" are given below: Names of related party entities with whom
transactions were carried out during the period: Joint Venture
Companies:
1. Irano Hind Shipping Co. Ltd.
2. India LNG Transport Co. (No. 1) Ltd.
3. India LNG Transport Co. (No. 2) Ltd.
4. India LNG Transport Co. (No. 3) Ltd.
5. SCI Forbes Ltd.
6. SAIL SCI Shipping Pvt. Ltd.
Key Management Personnel:
Functional Directors
1. Shri S. Hajara, CMD (up to 31.12.2012)
2. Shri B. K. Mandal, Director (Finance) and CMD (w.e.f. 01.01.2013)
3. Shri Kailash Gupta (up to 31.12.2012)
4. Shri. J. N. Das
5. Shri. A. K. Gupta
6. Shri. S. Thapar
7. Shri. B. B. Sinha (w.e.f. 01.01.2013)
NOTE 2
(i) The Company has been exempted from complying with Para 5 (viii)
(a), (b), (c) & (e) of Part II of Schedule VI of the Companies Act,
1956 vide notification no. F. No 51/12/2007-CL.III dated 08.02.2011
issued by Ministry of Corporate Affairs, Government of India.
(ii) Remittance of dividends in foreign currency Rs. NIL (Previous year
Rs. Nil).
NOTE 3
Sundry Creditors, Debtors, Loans & Advances and Deposits are subject to
confirmation and reconciliation. During the year, letters for
confirmation of balances have been sent to various parties by the
Company and the same are under reconciliation wherever replies have
been received. The management, however, does not expect any material
changes.
NOTE 4
The figures of previous year have been regrouped or rearranged wherever
necessary / practicable to conform to current year''s presentation based
on new Schedule VI notified by the Ministry of Corporate Affairs.
Further, the figures are rounded off to the nearest lakh rupees.
Mar 31, 2012
NOTE 29 : CONTINGENT LIABILITIES & COMMITMENTS
As at As at
Particulars 31.03.2012 31.03.2011
(Rs. in lakhs) (Rs. in lakhs)
Contingent Liabilities
i. Claim against the company not
acknowledged as debts -
A. Claim made by M/s. Chokhani
International Ltd. towards dry
dock expenses pending before
High Court, Chennai 4225 4006
B. Forfeiture of Earnest Money
Deposit, Cargo Loss, Freight, Demurrage,
Slot Payments, Fuel Cost, other
operational claims and Custom duty
disputed demand. (As certified
by the Management) 8204 9217
C. Disputed demand of Statutory Dues
(As certified by the Management) 12392 9175
a) Income Tax 5874 9175
b) Service Tax* 6518 Nil
ii. Guarantees given by the Banks
A. On behalf of the Company 3436 1892
B. On behalf of the Joint Venture to
the extent of the Company's share. 3661 3200
iii. Undertaking cum Indemnity given
by Company 1000 1000
iv. Cargo Claims covered by P&I Club 66 20
v. Bonds / Undertakings given by the
Company to Customs Authorities. 8686 10140
vi. Corporate Guarantees / Undertakings
A. In respect of Joint Ventures Not Not
Ascertainable Ascertainable
B. Others 5617 5023
COMMITMENTS :
i. Estimated amount of contracts on capital account, remaining to be
executed and hence not provided for (Net of Advance paid) (As certified
by the Management) 410101 455490
ii. Commitment towards subscription of shares 40 40
*Service tax department issued show cause notices to the Company
proposing to impose levy of service tax under the category of "Storage
and Warehousing Service" aggregating to (a) Rs. 2679 lakhs (Prev. Yr. Rs.
2679 lakhs) for the period from 01/10/2002 to 31/12/2007 (b) Rs. 754
lakhs (Prev. Yr. Rs. 754 lakhs) for the period from 01/01/2008 to
31/01/2009 and (c) Rs. 405 lakhs (Prev. Yr. Rs. 405 lakhs) for the period
from 01/02/2009 to 30/09/2009 (d) Rs. 274 lakhs (Prev. Yr. Nil) for the
period from 01/10/2009 to 31/03/2010 (e) Rs. 660 lakhs (Prev. Yr. Nil)
for the FY 2010-11 and also interest and penalty alleging that Company
has provided storage & warehousing services to Oil & Natural Gas
Corporation (ONGC) in respect of vessels given to ONGC under Time
Charter arrangement.
Though order dated 13.02.2012 has recently been passed with reference
to show cause notice for the period from 01/10/2002 to 31/12/2007
partly confirming the levy of Service Tax, according to the management,
service tax is not leviable for such chartering arrangement under the
category of "Storage and warehousing Service" and therefore SCI has
challenged the applicability of service tax under this category and has
not accepted any liability towards service tax on this account.
NOTE 30 : RELATED PARTY DISCLOSURES
Related Party disclosures, as required by AS - 18 "Related Party
Disclosures" are given below : Names of related party entities with
whom transactions were carried out during the period : Joint Venture
Companies :
1) Irano Hind Shipping Co. Ltd.
2) India LNG Transport Co. (No. 1) Ltd.
3) India LNG Transport Co. (No. 2) Ltd.
4) India LNG Transport Co. (No. 3) Ltd.
5) SCI Forbes Ltd.
6) SAIL SCI Shipping Pvt. Ltd.
Key Management Personnel : FUNCTIONAL DIRECTORS
1) Shri S. Hajara, CMD
2) Shri B. K. Mandal
3) Shri Kailash Gupta
4) Shri J. N. Das
5) Shri A. K. Gupta
6) Shri S. Thapar
NOTE 34 : DISCLOSURES OF EMPLOYEE BENEFITS AS PER ACCOUNTING
STANDARD-15 "EMPLOYEES BENEFITS", AS DEFINED THERE IN ARE GIVEN BELOW
A. Description of type of employee benefits
The Company offers to its employee's defined benefits plans in the form
of Gratuity, leave encashment and post retirement Medical Scheme
The details under the plan are as follows :
i) Gratuity
a) Represents benefits to employee on the basis of number of years of
service rendered by employee. The employee is entitled to receive the
same on retirement or resignation.
b) SCI has formed a trust for gratuity which is funded by the Company
on a regular basis. The assets of the trust have been considered as
plan assets.
ii) Leave Encashment
Represents unavailed leave to the credit of the employee and carried
forward in accordance with terms of agreement.
iii) Post Retirement Medical Benefit Scheme
Represents benefits given to employees subsequent to retirement on the
happening of any unforeseen event resulting in medical costs to the
employee.
NOTE 36 : CHANGES IN ACCOUNTING POLICIES
The Corporation has with effect from 1st April 2011 changed the
following accounting policies :
a. All foreign currency transactions are recorded at the exchange rate
of the second last Friday of the preceding month published in Financial
Times, London which were earlier recorded at the rate of the last
Friday of the preceding month. As a result of this change, there is no
material impact on profit for the year.
b. The value of stock of bunker is arrived at after charging
consumption on daily "Moving Average Price" method against FIFO (First
In First Out) method followed upto 31st March 2011. This has resulted
decrease in bunker consumption by Rs. 132 lakhs during the year ended
31st March, 2012.
c. The method of providing depreciation on offshore vessels has been
changed. Up to last year, off shore vessels were being written off over
a period of 12 years. In view of the fact that as per SCI's scrapping
guidelines, the life of offshore vessels is to be taken as 20 years, it
has been decided to depreciate these vessels over 20 years w.e.f FY
2011-12. This is in compliance with the rates prescribed in Schedule
XIV to the Companies Act, 1956. Due to this change, the depreciation
for FY 2011-12 is lower by Rs. 440 lakhs and the profit is higher by Rs.
440 lakhs. Consequently, the book value of fixed assets is higher by Rs.
440 lakhs.
d. Spares
The Company had a policy of making provision for consumption of spares
which remain in transit for more than three months. However, with the
introduction of SAP this practice is no more required. The financial
implication due to change in policy is Rs. 79 lakhs.
NOTE 37
The Company has been exempted from complying with Para 4 (D) (a), (b),
(c) & (e) of Part II of Schedule VI of the Companies Act, 1956 vide
notification no. F. No 51/12/2007-CL.III dated 08.02.2011 issued by
Ministry of Corporate Affairs, Government of India.
NOTE 38
Sundry Creditors, Debtors, Loans & Advances and Deposits are subject to
confirmation and reconciliation. During the year, letters for
confirmation of balances have been sent to various parties by the
Company and the same are under reconciliation wherever replies have
been received. The management, however, does not expect any material
changes.
NOTE 39
The figures of previous year have been regrouped or rearranged wherever
necessary / practicable to conform to current year's presentation based
on new Schedule VI notified by the Ministry of Corporate Affairs.
Further, the figures are rounded off to the nearest lakh rupees.
Mar 31, 2011
1. The Company being a shipping company, its activities are based both
in shore and in floating ships. The Company have implemented three
different ERP packages to take care of both shore and the ship related
transactions and they have gone live from 28.02.2011. The accounts for
the period 01.04.2010 to 31.01.2011 (i.e for ten months) are prepared
in the legacy system and for the period 01.02.2011 to 31.03.2011 (i.e
for two months) are prepared in the new system. With all efforts, the
system has been implemented and the accounts for the 4th quarter and
year ending 31.03.2011 are for the first time prepared under the new
system.
In addition to above, supporting documents for income and expenses are
not received by the Company from the agents and transactions have been
recorded based on the amount of the advance released / data received
from the agents for the month of March 2011.
Necessary accounting effects to rectify the migration errors have been
carried out by the management where ever the instances have been
observed and the exercise is continuing and the necessary rectification
will be made appropriately.
Further to above the company is unable to make certain adjustment in
respect of following due to issues arising on migration and uploading
of data in the new system:
i) Translation of certain balances as per policy No. 8(c), where ever
rectification entries have been passed post revaluation of the balances
of the assets and liabilities,
ii) The segmental results disclosed segment report may consist certain
inter segment compensating issues,
iii) In some of the assets, depreciation is accounted where instances
of classification in inter assets class is noticed and date of
capitalisation is taken based on best available information,
iv) Certain transaction relating to payments etc reflected in the bank
reconciliation statements could not be incorporated,
v) During the current year aggregate Net Credit balance of Rs. 25375.49
Lakhs in vendor and accounts payable are shown as Sundry creditors and
other liabilities, which up to previous year were disclosed vendor
wise-Debit and credit separately,
vi) The Foreign currency revaluation effects of various assets and
liabilities are included in the debtors, instead of grouping the same
with the respective assets and liabilities,
vii) The 2nd phase of audit by the Comptroller & Auditor General of
India, has not been completed due to limitation of time.
The impact of items stated in para (i) to (iv) is not material on the
result of the Company. Further the matters stated in para (iv) to (vi)
relates to assets and liabilities and grouping there of under the
various heads of the Balance sheet.
As at As at
31.03.2011 31.03.2010
(Rs. in lakhs) (Rs. in lakhs)
2 Contingent Liabilities not provided for:-
(i) Claim against the company not
acknowledged as debts -
(a) Claim made by M/s. Chokhani
International Ltd. towards dry dock
expenses pending before High Court, Chennai 4,006 3,788
(b) Forfeiture of Earnest Money Deposit,
Cargo Loss, Freight, Demurrage, Slot Payments,
Fuel Cost, other operational claims and
Custom duty disputed demand.
(As certified by the Management) 9,217 9,437
(c) Disputed demand of Income tax
(As certified by the Management) 9,175 5,205
(ii) Guarantees given by the Banks
(a) on behalf of the Company 1,892 2,685
(b) on behalf of the Joint Venture to the
extent of the Companys share. 3,200 3,232
(iii) Undertaking cum Indemnity given by Company 1,000 1,000
(iv) Cargo Claims covered by P&I Club 120 177
(v) Bonds / Undertakings given by the
Company to Customs Authorities. 10,140 7,347
(vi) Corporate Guarantees / Undertakings
- In respect of Joint Ventures Not
Ascertainable Not
Ascertainable
- Others 5,023 5,064
(vii) Commitment towards subscription of shares 40 NIL
3. RELATED PARTY DISCLOSURES:
Related Party disclosures, as required by AS - 18 "Related Party
Disclosures" are given below: (a) Names of related party entities with
whom transactions were carried out during the period: (i) Joint Venture
Companies
1. Irano Hind Shipping Co. Ltd.
2. India LNG Transport Co. (No. 1) Ltd.
3. India LNG Transport Co. (No. 2) Ltd.
4. India LNG Transport Co. (No. 3) Ltd.
5. SCI Forbes Ltd.
6. SAIL SCI Shipping Pvt. Ltd.
(ii) Key Management Personnel Functional Directors
1. Shri S. Hajara, CMD
2. Shri B.K. Mandal
3. Shri Kailash Gupta
4. Shri U.C. Grover (up to 31.08.2010)
5. Shri. J.N. Das
6. Shri K.S. Nair (up to 31.12.2010)
7. Shri. A. K. Gupta (w.e.f. 25.10.2010)
8. Shri. S. Thapar (w.e.f. 11.01.2011)
9. Sethusamudram Corporation Ltd. (SCL),
a Special Purpose Vehicle was incorporated on 06.12.2004 for developing
the Sethusamudram Channel Project with Tuticorin Port Trust, Ennore
Port Ltd., Visakhapatnam Port Trust, Chennai Port Trust, Dredging
Corporation of India Ltd., Shipping Corporation of India Ltd. and
Paradip Port Trust as the shareholders. SCI participated for an
investment not exceeding Rs. 5,000 lakhs (previous year Rs. 5,000
lakhs).The dredging work is temporarily suspended from 17.09.2009,
consequent to the direction of the Hon'ble Supreme Court of India. The
Management does not consider any diminution in the value of the
investment and the same has been carried at cost.
10. The depreciation on additions to / deductions from fixed assets
other than Ships is charged on pro-rata basis which were hitherto
provided for full year in case of additions and no depreciation was
provided in the year the assets were sold / discarded. In respect of
Ships, depreciation on additions to existing fleet is now charged on
pro-rata basis which was hitherto provided for the full year
irrespective of the date of addition. Due to this change, the profit is
higher by Rs. 1321 lakhs.
11. The Company entered into a joint venture agreement with Steel
Authority of India Ltd. with participation interest in the ratio of
50:50 and promoted a jointly controlled entity SAIL SCI Shipping Pvt.
Ltd. (SSSPL). The said company was incorporated on 19.05.2010 with an
authorised share capital of Rs. 17000 lakhs. The Company has subscribed
equity capital of 500000 shares of Rs. 10 each amounting to Rs. 50
lakhs and during the period SCI has made initial payment of Rs. 10 lakhs
towards equity capital. Pending remittance towards the balance
subscribed capital the same has not been considered as investment and
the consequent liability.
12. During the financial year 2010-11, the Company made an investment
of Rs. 1230 lakhs towards acquiring 0% Redeemable preference shares and
further paid an amount of Rs. 1330 lakhs towards partly-paid Equity
share capital in Joint Venture, SCI Forbes Ltd.
13. The Company holds 49% interest in a joint venture company
incorporated in Iran on which sanction has been imposed by United
Nations Organisation (UN). The exposure of the Company in the Joint
Venture is limited to Rs. 39 lakhs towards investment made and Rs. 27
lakhs towards the recoverable expenses. No provision is considered
necessary by the management on the same and the company maintains
status quo as far as investment in JV is concerned.
1) Segment definitions - Liner segment includes break bulk and
container transport. Bulk segment includes tankers (both crude and
product), dry bulk carriers, gas carriers and phosphoric acid carriers.
Others include offshore vessels, passenger vessels and services and
ships managed on behalf of other organisations. Unallocable items and
interest income / expenses are disclosed separately.
2) All assets / liabilities and revenue items are allocated vessel wise
wherever possible. Assets / liabilities and revenue items that cannot
be allocated vessel wise are allocated on the basis of unit cum GRT
method i.e. 50% allocated on the basis of units and balance 50% on the
basis of adjusted GRT. GRT is adjusted to one third of GRT or 20000
GRT, whichever is more in case of vessels which are bigger than 20000
GRT.
3) The components of capital employed that cannot be directly
identified are allocated on the basis of GRT method.
14. Disclosures of Employee benefits as per Accounting Standard-15
"Employees benefits", as defined there in are given below
A) Description of type of employee benefits
The Company offers to its employees defined benefits plans in the form
of Gratuity, leave encashment and post retirement Medical Scheme.
The details under the plan are as follows:
i Gratuity
(a) Represents benefits to employee on the basis of number of years of
service rendered by employee. The employee is entitled to receive the
same on retirement or resignation.
(b) SCI has formed a trust for gratuity which is funded by the Company
on a regular basis. The assets of the trust have been considered as
plan assets.
ii Leave Encashment Represents unavailed leave to the credit of the
employee and carried forward in accordance with terms of agreement.
iii. Post Retirement Medical Benefit Scheme Represents benefits given
to employees subsequent to retirement on the happening of any
unforeseen event resulting in medical costs to the employee.
G) (i) Percentage of category of plan assets to fair value of plan
assets
(i) None of the financial assets of SCI have been considered in the
fair value of plan assets.
(ii) The expected rate of return on plan assets have been estimated on
the basis of actual returns of the trust in the past years. The assets
of the trust are in the nature of investments in securities, fixed
deposits, Interest accrued, and balances in current accounts with Bank.
The securities of trust have an effect on the fair value of plan assets
as the value of the securities vary with the changes in the market
interest rates.
(iii) Actual return on plan assets: Rs. 1168 Lakhs (Previous period Rs.
1703 lakhs).
I) Effect of an increase of one percentage point and the effect of a
decrease of one percentage point in the assumed medical cost trend
rates on:
(i) the aggregate of the current service cost and interest cost
components of net periodic post-employment medical costs; and (ii) the
accumulated post-employment benefit obligation for medical costs.
J) The estimates of future salary increases, considered in the
actuarial valuation, takes into account inflation, security, promotion
and other relevant factors.
K) The Guidance on implementing AS 15, Employee benefits (revised 2005)
issued by Accounting Standard Board (ASB) states benefit involving
employer established provident funds, which requires interest
shortfalls to be recompensed are to be considered as defined benefit
plans. Pending the issuance of the guidance note from the Actuarial
Society of India, the Company's actuary has expressed an inability to
reliably measure provident fund liabilities. Accordingly the Company is
unable to exhibit the related information. However, such interest
shortfall has been recompensed by the Company up to the current period
on accrual basis.
15. Sundry Creditors, Debtors, Loans & Advances and Deposits are
subject to confirmation and reconciliation. During the year, letters
for confirmation of balances have been sent to various parties by the
Company and same are under reconciliation wherever replies have been
received. The management, however, does not expect any material
changes.
16. Pending implementation of pay revision of employees
retrospectively from 1st January, 2007, the Company has made adequate
provisions in the books of accounts as per Managements decision based
on DPE OM dated 26th November, 2008. During the year ended 31st March,
2011, a provision of Rs. 1825 (Prev. Yr. Rs. 3710 lakhs) has been made
and the cumulative balance of provision in this regard stands at Rs.
10736 lakhs (Prev. Yr. Rs. 8911 lakhs).
17. Service tax department has issued show cause notices to the
Company proposing to impose levy of service tax under the category of
"Storage and Warehousing Service" aggregating to (a) Rs. 2679 lakhs for
the period from 01/10/2002 to 31/12/2007 (b) Rs. 754 lakhs for the
period from 01/01/2008 to 31/01/2009 and (c) Rs. 405 lakhs for the
period from 01/02/2009 to 30/09/2009 and also interest and penalty
alleging that Company has provided storage & warehousing services to
Oil & Natural Gas Corporation (ONGC) in respect of vessels given to
ONGC under Time Charter arrangement.
According to the management, service tax is not leviable for such
chartering arrangement under the category of "Storage and warehousing
Service" and therefore SCI has challenged the applicability of service
tax under this category and has not accepted any liability towards
service tax on this account.
18. Borrowing cost and Interest capitalised during the period is Rs.
1562 lakhs (Prev. year Rs. 1514 lakhs).
19. The Company has been exempted from complying with Para 4 (D) (a),
(b), (c) & (e) of Part II of Schedule VI of the Companies Act,1956 vide
notification no. F.No 51/12/2007-CL.III dated 08.02.2011 issued by
Ministry of Corporate Affairs, Government of India.
20. During the year, the Company has reviewed its fixed assets for
impairment loss as required by Accounting Standards 28 - "mpairment of
Assets" In the opinion of management no provision for impairment is
considered necessary.
21. During the quarter ended 31st December, 2010 the government
disinvested 10% of the paid up share capital of the company through a
Follow on Public Offer and the company issued 42345365 equity shares
of Rs. 10 each generating proceeds of Rs. 58245 lakhs including a
premium of Rs. 54010 lakhs. The expenses of the Follow on Public Offer
like commissions, advertisement etc amounting to Rs. 1644 lakhs have
been adjusted against this Securities premium account.
22. The figures of previous year have been regrouped or rearranged
wherever necessary / practicable to conform to current year's
presentation. Further the figures are rounded off to the nearest lakh
rupees.
Mar 31, 2010
31.03.2010 31.03.2009
Rupees Rupees
in lakhs in lakhs
1. Contingent Liabilities not provided for:-
(i) Claim against the corporation
not acknowledged as debts -
(1) Claim made by M/s.
Chokhani International Ltd.
towards dry dock expenses pending
before
High Court, Chennai 3,788 3,569
(2) Forfeiture of Earnest Money
Deposit, Cargo Loss, Freight,
Demurrage, Slot Payments,
Fuel Cost, other operational
claims and
Custom duty disputed demand 9,437 8,325
(As certified by the Management)
(3) Disputed demand of Income tax
(As certified by the Management) 5,205 583
(ii) Guarantees given by the Banks 5,917 7,070
on behalf of the Corporation
(iii) Undertaking cum Indemnity
given by 1,000 1,000
Corporation
(iv) Cargo Claims covered by 177 480
P&I Club
(v) Bonds/Undertakings given by the 7,347 2,789
Corporation to Customs Authorities
(vi) Corporate Guarantees/Undertakings
- In respect of Joint Ventures Not ascer-
tainable Not ascer-
tainable
- Others 5,064 6,025
2. RELATED PARTY DISCLOSURES:
Related Party disclosures, as required by AS - 18 "Related Party
Disclosures" are given below: (a) Names of related party entities with
whom transactions were carried out during the year: (i) Joint Venture
Companies
1. Irano Hind Shipping Co. Ltd.
2. India LNG Transport Co. (No. 1) Ltd.
3. India LNG Transport Co. (No. 2) Ltd.
4. India LNG Transport Co. (No. 3) Ltd.
5. SCI Forbes Ltd.
(ii) Key Management Personnel Functional Directors
1. Shri S. Hajara, CMD 2. Shri B.K. Mandal
3. Shri Kailash Gupta 4. Shri U.C. Grover
5. Shri. J.N. Das 6. Shri K.S. Nair
3. India LNG Transport Companies No. 1 & 2 Ltd. are two joint venture
companies promoted by the corporation and three Japanese companies Vis.
M/S Mitsui O.S.K.lines Ltd. (MOL), M/S Nippon Yusen Kabushiki Kaisha
Ltd (NYK Lines) and M/S Kawasaki Kisen Kaisha Ltd (K Line) and M/S
Qatar Shipping Company (Q Ship), Qatar. SCI and MOL are the largest
shareholders, each holding 29.08% shares while NYK Line 17.89%, K Line
8.95% & Q Ship holds 15% respectively. The Shares held by the
Corporation and other partners in the two joint venture Companies have
been pledged against loans provided by lender banks to these companies.
India LNG Transport Company No.1 Ltd owns and operates one LNG tanker
SS Disha and India LNG Transport Company No. 2 Ltd owns and operates
one LNG Tanker SS Raahi.
The entire operation and management of the two companies was taken over
by SCI from 1st January, 2009 and it has received a management and
accounting fee of US $ 1.19 million (Rs. 568 lakhs) during the
financial year [previous year US $ 313166 (Rs.156 lakhs).
India LNG Transport Company No. 3 Ltd. is a Joint Venture Company
promoted by the corporation along with M/S Mitsui O.S.K. Line Ltd
(MOL), M/S Nippon Yusen Kabushiki Kaisha Ltd (NYK Lines) and M/S
Kawasaki Kisen Kaisha Ltd (K Line), M/S Qatar Gas Transport Company
Ltd. (QGTC) and M/s Petronet LNG Ltd. (PLL) to construct, own and
operate one LNG Tanker of about 155,000 cbm, and is chartered under a
long-term Time Charter Agreement for 25 years. The tanker was delivered
in mid November 2009 and has been operating on the same leg as that of
SS Disha & SS Raahi i.e, Ras Laffan, Qatar to Dahej, India. The Shares
held by the Corporation and other partners in the joint venture Company
have " been pledged against loans provided by lender banks to the
company. _
As per the requirements under the Time Charter Agreement and in
proportion to its shareholding, SCI assumed certain obligations towards
Joint Venture Companies (India LNG Transport companies No.1, No.2 and
No.3) including providing the Performance Bank Guarantee (PBG) to the
charterer totalling to USD 7.1626 million (Rs. 3232 lakhs), which has
been included under contingent liabilities in Note No. 2(ii) of
Schedule 25. It may be noted that the Performance Bank Guarantee of
India LNG Transport companies No.3 Ltd. has been reduced from USD 3.53
million (Rs. 1592 lakhs) to USD 2.35 million (Rs.1060 lakhs) after the
delivery of the vessel MT Aseem on 16.11.09. However, it is expected
that these obligations may not devolve upon SCI in the normal
circumstances on account of highly experienced Japanese LNG operators
who are the partners in the Joint Venture Companies. Corporate
Guarantees / undertakings have also been given in respect of loans
taken by Joint Ventures which have been included under Contingent
Liabilities in Note 2(vi) of Schedule 25 and quantification of the same
is not ascertainable.
4. Sethusamudram Corporation Ltd. (SCL), a Special Purpose Vehicle
was incorporated on 06.12.2004 at Chennai (for developing the
Sethusamudram Channel Project) with Tuticorin Port Trust, Ennore Port
Ltd., Visakhapatnam Port Trust, Chennai Port Trust, Dredging
Corporation of India Ltd., Shipping Corporation of India Ltd. and
Paradip Port Trust as the shareholders. SCI participated for an
investment not exceeding Rs.5,000 lakhs in the proposed project. SCIÃs
total contribution as on 31.03.2010 amounted to Rs. 5,000 lakhs
(previous year Rs. 5,000 lakhs).
5. During the financial year 2009-2010, three vessels of SCI Forbes
were delivered. "M.TAsavari" was delivered on 05.08.2009,
"M.TBhairavii" was delivered on 31.10.2009 and "M.T.Neelambari" was
delivered on 17.03.2010. The fourth vessel "M.TMalhari" is expected to
be delivered in May 2010. The three delivered vessels are being
operated in WOMAR pool.
During the financial year 2009-10, the share capital of SCI Forbes was
revised so as to conform to the norms of ECB taken for ship financing.
The authorised share capital comprising equity and preference share
capital was increased from Rs. 16000 lakhs (during 2008-09) to Rs 33500
lakhs (comprising of equity capital of Rs 16000 lakhs and preference
capital of Rs 17500 lakhs). The paid-up share capital of Rs. 12200
lakhs was increased to Rs.23240 lakhs by way of (i) issuing additional
3,80,00,000 equity share of Rs. 10 each against which Rs. 3 are paid up
and (ii) 9,90,00,000 fully paid up preference shares of Rs. 10 each.
Being 50% owner, SCI contributed Rs. 570 lakhs towards additional
equity contribution and Rs. 4950 lakhs towards Preference Capital.
Notes :-
1) Segment definitions - Liner segment includes break bulk and
container transport. Bulk segment includes tankers (both crude and
product), dry bulk carriers, gas carriers and phosphoric acid carriers.
Others include offshore vessels, passenger vessels and services and
ships managed on behalf of other organisations. Unallocable items and
interest income / expenses are disclosed separately.
2) All assets/liabilities and revenue items are allocated vessel wise
wherever possible. Assets/liabilities and revenue items that cannot be
allocated vessel wise are allocated on the basis of unit cum GRT method
i.e. 50% allocated on the basis of units and balance 50% on the basis
of adjusted GRT. GRT is adjusted to one third of GRT or 20000 GRT,
whichever is more in case of vessels which are bigger than 20000 GRT.
3) The components of capital employed that cannot be directly
identified are allocated on the basis of GRT method.
6. Disclosures of Employee benefits as per Accounting Standard-15
"Employees benefits", as defined there in are given below A Description
of type of employee benefits
The Company offers to its employees defined benefits plans in the form
of Gratuity, leave encashment and post retirement Medical Scheme.
The details under the plan are as follows:
i Gratuity (a) Represents benefits to employee on the basis of
number of years of service rendered by employee
The employee in entitled to receive the same
on retirement or resignation.
(b) SCI has formed a trust for gratuity which is
funded by the Company on a regular basis.
The assets of the trust have been considered as
plan assets.
ii Leave Encashment Represents unavailed leave to the credit of the
employee and carried forward in accordance with
terms of agreement.
iii. Post Retirement
Medical Benefit
Scheme Represents benefits given to employees subsequent
to retirement on the happening of any unforeseen
event resulting in medical costs to the employee.
G. (i) Percentage of category of plan assets to fair value of plan
assets
(i) None of the financial assets of SCI have been considered in the
fair value of plan assets.
(ii) The expected rate of return on plan assets have been estimated on
the basis of actual returns of the trust in the past years. The assets
of the trust are in the nature of investments in securities, fixed
deposits, Interest accrued, and balances in current accounts with Bank.
The securities of trust have an effect on the fair value of plan assets
as the value of the securities vary with the changes in the market
interest rates.
(iii) Actual return on plan assets: Rs. 1703 Lakhs (Previous Year Rs.
1304 lakhs).
Effect of an increase of one percentage point and the effect of a
decrease of one percentage point in the assumed medical cost trend
rates on:
(i) the aggregate of the current service cost and interest cost
components of net periodic post-employment medical costs; and (ii) the
accumulated post-employment benefit obligation for medical costs.
J. The estimates of future salary increases, considered in the
actuarial valuation, takes into account inflation, security, promotion
and other relevant factors.
K. The Guidance on implementing AS 15, Employee benefits (revised 2005)
issued by Accounting Standard Board (ASB) states benefit involving
employer established provident funds, which requires interest
shortfalls to be recompensed are to be considered as defined benefit
plans. Pending the issuance of the guidance note from the Actuarial
Society of India, the Companys actuary has expressed an inability to
reliably measure provident fund liabilities. Accordingly the company is
unable to exhibit the related information. However, such interest
shortfall has been recompensed by the company upto the current period
on accrual basis.
7. Sundry Creditors, Debtors, Loans & Advances and Deposits are
subject to confirmation and reconciliation. During the year, letters
for confirmation of balances have been sent to various parties by the
Corporation and same are under reconciliation wherever replies have
been received. The management, however, does not expect any material
changes.
8. Pending implementation of pay revision of employees
retrospectively from 1st January, 2007, the Corporation has made
requisite provisions in the books of accounts for the years 2006-07,
2007-08, 2008-09 and 2009- 10. During the year 2009-10, a provision of
Rs.3710 lakhs has been made and the cumulative balance of provision in
this regard stands at Rs.8911 lakhs as on 31st March, 2010.
9. Service tax department has issued show cause notices to the
corporation proposing to impose levy of service tax under the category
of "Storage and Warehousing Service" aggregating to (a) Rs.2679 lakhs
for the period from 01/10/2002 to 31/12/2007 (b) Rs.754 lakhs for the
period from 01/01/2008 to 31/01/2009 and (c) Rs. 405 lakhs for the
period from 01/02/2009 to 30/09/2009 and also interest and penalty
alleging
- that corporation has provided storage & warehousing services to Oil &
Natural Gas Corporation (ONGC) in respect of vessels given to ONGC
under Time Charter arrangement.
According to the management, service tax is not leviable for such
chartering arrangement under the category of "Storage and warehousing
Service" and therefore SCI has challenged the applicability of service
tax under this category and has not accepted any liability towards
service tax on this account.
10. Borrowing cost and Interest capitalised during the year is Rs.
1514 lakhs (Previous year Rs. 2888 lakhs).
11. The Corporation has obtained exemption from complying with Para 4
(D) (a), (b), (c) & (e) of Part II of * Schedule VI of the Companies
Act,1956.
12. Loans and Advances include an amount of Rs. 4.04 lakhs (Previous
year Rs 5.23 lakhs) due from whole time directors - maximum amount due
during the year 5.23 lakhs (Previous year Rs.6.51 lakhs)
13. During the year, the Corporation has reviewed its fixed assets for
impairment loss as required by Accounting Standards 28 - "Impairment of
Assets" In the opinion of management no provision for impairment is
considered necessary.
14. The figures of previous year have been regrouped or rearranged
wherever necessary/practicable to conform to current years
presentation. Further the figures are rounded off to the nearest lakh
rupees.