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Notes to Accounts of Shipping Corporation of India Ltd.

Mar 31, 2017

Note 1: First time adoption of Ind AS

Transition to Ind AS

These are the Company’s 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 Company’s 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 Company’s 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 “Intangible Assets” .

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 “Intangible Assets”.

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 entity’s 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 “Accounting for taxes on income”. 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 ‘other comprehensive income’ 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 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 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) “Inland and Coastal Shipping Limited” 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 “Assets held for sale” 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.

(I) Liner

Liner segment includes break-bulk, container transport, passenger vessels & research vessels managed on behalf of other organisations.

(II) Bulk

Bulk Carriers include dry bulk carriers.

(III) Tanker

Tankers segment includes both crude and product carriers, gas carriers, phosphoric acid carriers.

(IV) T&OS

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 Company’s 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 employee’s 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 employees’ 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 plans’ 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 Company’s 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 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, 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 Company’s short term and long term funding and liquidity management requirements. The Company’s 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 Company’s 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 recognized 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 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 Company’s 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 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 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 17: Capital management

(a) Risk management

The Company’s objectives when managing capital are to safeguard the Company’s 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 ‘Minimum Cash Covenant’ 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 ‘Specified Bank Notes’ 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 year’s 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 - “35” 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

a) The Company offers to its employee’s defined benefits plans in the form of Gratuity, leave encashment and post retirement Medical Scheme

P 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 - “1”

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 ‘C’ 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 - “2”

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 - “3”

The carrying amounts of Company’s 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 management’s 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 management’s best estimate of the likely increase in future.

NOTE - “4”

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 - “5”

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 - “6”

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 - “7”

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 - “8”

The figures of previous year have been regrouped or rearranged wherever necessary to conform to current year’s presentation as per Schedule III to the Companies Act, 2013.

NOTE - “9”

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. SCI’s 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.

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