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Chowgule Steamships Ltd.

BSE: 501833 Sector: Infrastructure
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OPEN 14.65
52-Week high 18.33
52-Week low 11.64
Mkt Cap.(Rs cr) 53
Buy Price 0.00
Buy Qty 0.00
Sell Price 14.65
Sell Qty 50.00
OPEN 14.65
CLOSE 15.40
52-Week high 18.33
52-Week low 11.64
Mkt Cap.(Rs cr) 53
Buy Price 0.00
Buy Qty 0.00
Sell Price 14.65
Sell Qty 50.00

Chowgule Steamships Ltd. (CHOWGULSTM) - Director Report

Company director report



The Shareholders

Your Directors present the Fifty Third Annual Report and the Audited Accounts for theyear ended March 31 2016.

2015-16 2014-15
Loss before Financial Charges Depreciation Exceptional Item & Tax (420.62) (1559.71)
Financial Charges (33.93) (52.29)
Depreciation (456.90) (811.40)
Loss before Exceptional Item & Tax (911.45) (2423.40)
Loss on sale of vessel (41.65) NIL
Profit on Sale of Land NIL 552.76
Impairment NIL (530.85)
Loss on Foreign Currency Translation difference NIL (48.83)
Loss before Deferred Tax Provision (953.10) (2450.32)
Reversal of Provision for Deferred Tax (Net) 170.89 406.34
Loss after Tax (782.21) (2043.98)
Brought forward from previous year 888.74 2949.68
Adjustment as per the Companies Act 2013 NIL (16.96)
Surplus in Statement of Profit and Loss 106.53 888.74

In view of the loss the Board of Directors has not recommended any dividend for theyear under review. Further no amount is transferred to Reserves & Surplus.


During the year under review the freight earnings and charter hire receipts amountedto R 467.05 lakhs as against R 731.54 lakhs in the previous year showing a decrease of R264.49 lakhs. The Baltic Dry Bulk Index which started the year at 596 in April 2015 scaleddown to 429 by March 2016. The dry bulk freight markets have remained depressed for mostof the year.

In view of the continued depressed freight market conditions and also in accordancewith its policy of rationalization of fleet the Company disposed off its 1995 builtvessel Maratha Providence in October 2015. The Company acquired a new built river-seavessel to explore opportunities in Indian coastal trade.


The year 2015 saw a significant shift in bulk carrier demand with sea borne dry bulktrade estimated to have declined by 5% y-o-y to 4.7 bn tones following average growth ofaround 7% p.a. in the preceding five year period. The build-up of surplus capacity as wellas limited growth in sea borne trade continued to place pressure on fundamentals in 2015.The bulk carrier fleet expanded by 2.4% in 2015 which was the slowest pace of growthsince 1999. Weak market conditions led to surge in demolition. Deliveries continued at arelatively steady pace but the ordering was very subdued in 2015. However the problem hasnow shifted to the demand side with the dramatic slowdown in Chinese dry bulk imports in2015 contributing to 0.1% decline in sea borne dry bulk trade in 2015 causing a furtherbuild up of oversupply. The average bulker earnings dropped below operating cost of thevessel. The extremely difficult operating environment is leading to aggressive demolition.This is projected to help bulk carrier fleet growth to just 1.5% in 2016 and 0.7% in 2017while new building interest is expected to be subdued. Despite this notable supply-sideadjustment the outlook for sea borne dry bulk trade growth remains difficult. Lookingforward to 2016-17 world sea borne trade is projected to grow at a relatively muted pace.Global GDP expansion is expected to pick up slightly in the short term to reach 3.4% in2016 and sea borne trade volume is expected to grow by 2.2%. Considering existingimbalance between demand and supply the market is likely to remain under pressure in2016-17.


The Board has adopted policies and procedures for ensuring the orderly and efficientconduct of its business including adherence to the Company's policies safeguarding ofassets prevention and detection of frauds and errors accuracy and completeness of theaccounting records and timely preparation of reliable financial disclosures.

The Company has effective systems of internal controls which are periodically reviewedby the Audit Committee of the Board of Directors.


The Indian economy and many developed countries continue to make effort for speedyeconomic recover/. As part of overall strategy however the Governments in variouscountries continue to give priority for development of overall infrastructure. This bodewell for overall trade.


The industrial relations during the year were very cordial and there were no industrialdisputes.


Freight Risks: The Hire income is subject to freight rate risks and therefore theCompany follows the policy of mixture of short period and long period time chartercontracts with first class charters to mitigate volatility in freight rates.

Interest Rate Risk: With a view to avoid uncertainty in the interest rate thenecessary forward cover is taken at regular intervals.

Forex Risk: As major portion of the Company's revenues is generated from internationalbusiness in the US Dollar terms the same creates a natural hedge against foreign exchangeexposures. The Company reviews Rupee - US Dollar parity on regular basis to protect itselffrom currency fluctuation risks.

Counter Party Risks: The Company engages into charter contracts with the reputedcharters to avoid the risks to the freight earnings. Government Policies: The Companyregularly reviews the changes in the applicable government policies affecting operationsof the Company. Human Resources: There is a scarcity of floating staff. In view ofoutsourcing of crew management the Company gets the benefit of having efficient and costeffective floating staff from the Ship Manager's pool.


The statements expressions information given in this Management Discussion andAnalysis Report describing the Company's objectives projections estimates expectationsor predictions may be deemed as 'forward looking statements'. Actual results might differsubstantially or materially from those expressed or implied. Important developments thatcould affect the Company's operations include demand-supply conditions changes inGovernment global economic scenario etc.


During the year the Company has repaid loan of R 1198.14 lakhs (US$ 1.90 million).The total outstanding loan at year end is R NIL.


In terms of the Accounting Standard AS-22 of the Companies (Accounting Standards) Rules2006 there is a reversal of Deferred Tax liabilities amounting to R 170.89 lakhs for theFinancial Year 2015-2016 which is reflected in the Statement of Profit & Loss. Thenet Deferred Tax Liability of R 464.99 lakhs as at March 31 2016 is reflected in theBalance Sheet.


The Company has five overseas subsidiaries including one wholly owned subsidiary andfour step-down subsidiaries. During the year Sea Green LLC ceased to be a subsidiary ofthe Company. The Board of Directors of the Company reviewed the affairs of subsidiaries ofthe Company. In accordance with Section 129(3) of the Companies Act 2013 the Company hasprepared consolidated financial statements of the Company and all its subsidiaries whichform part of the Annual Report. Further a statement containing the salient features ofthe financial statement of the subsidiaries in the prescribed format AOC-1 is appended asAnnexure 2. The Company will make available these documents / details upon request by anymember of the Company. However pursuant to Accounting Standard AS-21 of the Companies(Accounting Standards) Rules 2006 Consolidated Financial Statements presented by theCompany include the financial information of its subsidiaries. The Company does not haveany other joint venture/associate company in which it has significant influence. Thefinancial highlights of its wholly owned subsidiary viz. Chowgule Steamships OverseasLimited are as under:

(US $ in million)

2015-16 2014-15
Income 7.210 12.518
Gross Profit / (Loss) before depreciation and exceptional items (1.327) 2.926
Depreciation (5.182) (5.834)
Impairment (12.630) (10.807)
Write-off for cancellation of new build order (9.344) -
Net Loss (28.483) (13.715)


The fleet of the Company has been adequately insured against Marine and War Risks.


Mr. Vijay V. Chowgule Chairman and Mr. Mangesh Sawant Managing Director & CFOretire by rotation at the ensuing Annual General Meeting and are eligible forre-appointment. Pursuant to the provisions of Section 149 of the Companies Act 2013 theIndependent Directors are not liable to retire by rotation and they shall hold office fora term up to five consecutive years on the Board of a company from the date of theirappointment.

Pursuant to Regulation 36 of the Listing Agreement the background of the Directorsproposed to be re-appointed at the Annual General Meeting is given in the CorporateGovernance Report.

Mr. Vijay V. Chowgule is a brother of Prof. Rohini V. Chowgule Director of theCompany.


Pursuant to the requirements of Section 149 of the Companies act 2013 the Boardappointed all Independent Directors as Independent Directors for a period of five yearsand approval of the shareholders was obtained for the said appointments at the 51st Annualgeneral Meeting held on July 9 2014.

The Independent Directors have submitted declaration pursuant to Section 149 (7)stating that they meet the criteria of independence as provided in Section 149 (6) of theCompanies Act 2013.


Directors are issued a detailed appointment letter which inter alia sets out terms ofappointment duties responsibilities etc. of such director. Each independent director ofthe Company on appointment is given such letter of appointment and also briefed by theManaging Director/ Executive Director about the nature of business of the Company itsfinances operations etc. The Company Secretary also assists the Independent Directors inunderstanding their statutory duties obligations and responsibilities as a Director/Independent Director of the Company. The appointment letter of Independent Directors isavailable on the Company's website


In compliance of the provisions of the Companies Act 2013 and the Listing Agreementthe evaluation of the performance of the Board for the year under review was carried out.A formal mechanism for evaluation of the performance of the Board its ChairmanCommittees and Directors was adopted. The process was carried out through structuredevaluation process covering various important attributes such as composition of Board andCommittees qualifications experience and competencies performance of specific dutiesattendance of directors at meetings contribution at the meetings etc.

The evaluation of Independent Directors for the year under review was carried out bythe entire Board and that of Chairman and Non Independent Directors was carried out by theIndependent Directors.


In terms of the listing agreement with the Bombay Stock Exchange Ltd. the CorporateGovernance Report is annexed hereto and forms a part of this Report.


The Board of Directors has laid down a Code of Conduct for all the Board Members andSenior Management of the Company. The said Code has been hosted on the website of theCompany. All the Board Members and Senior Management have affirmed compliance to the Code.


The Directors state: "That

In the preparation of annual accounts the applicable accounting standards have beenfollowed along with proper explanation relating to material departures.

The Directors have selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe loss of the Company for that period.

The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities.

The Directors have prepared the annual accounts on a "going concern basis".

The Directors have laid down internal financial controls to be followed by the Companyand such internal financial controls are adequate and are operating effectively.

The Directors have devised proper system to ensure compliance with the provisions ofall applicable laws and that such systems are adequate and operating effectively.

14. AUDITORS Statutory Auditors

The shareholders at their Fifty First Annual General Meeting held on July 9 2014approved appointment of M/s S B Billimoria & Co Chartered Accountants as theAuditors of the Company for a term of consecutive three years subject to ratification bythe shareholders every year as per the provisions of Section 139 of the Companies Act2013 read with Rules made there under. Accordingly ratification of the shareholders forthe appointment of M/s. S.B. Billimoria & Company Chartered Accountants as Auditorsfrom conclusion of this Annual General Meeting till the conclusion of the next AnnualGeneral Meeting is being obtained at the ensuing Annual General Meeting. The Auditorsbeing eligible have given their consent for re-appointment.

Secretarial Auditors

V. N. Deodhar & Co. Practicing Company Secretaries were appointed to conduct thesecretarial audit of the Company for the financial year 2015-16 as required under Section204 of the Companies Act 2013 and Rules thereunder. The secretarial audit report for FY2015-16 forms part of the Annual Report as Annexure 5 to the Board's Report.

15. THE COMPANIES (Appointment and Remuneration of Managerial Personnel) RULES 2014

There are no employees covered under the above Rules in respect of whom particulars arerequired to be furnished.

16. THE COMPANIES (Accounts) RULES 2014

In accordance with the requirements of Rule 8 (A) of the Companies (Accounts) Rules2014 a statement annexed hereto gives the particulars as required under the said rulesand forms part of this Report (Annexure I).

17. Material Changes and Commitments affecting Financial Position

There have been no material changes and commitments which have occurred between the endof financial year and the date of this report which can have impact on financial positionof the Company.

18. The policy on appointment and remuneration of directors is discussed inCorporate Governance Section annexed to this Report.

19. There have been no significant material orders passed by courts tribunals orregulatory authorities which can have impact on going concern status of the Company andits operations.

20. Loans Investment and Guarantees etc - There have been no loans / guaranteesgiven or investments made in the group companies during the year.

21. The Company has not accepted/renewed any Fixed Deposits during the year endedMarch 31 2016.

22. Disclosure pursuant to The Companies (appointment and Remuneration ofManagerial Personnel) Rules 2014.

Sr. Requirements Disclosure
1 Ratio of remuneration of Director to median remuneration of employees for the financial year MD & CFO - 6X
2 Percentage increase in remuneration of Managing Director & CFO and Company Secretary MD & CFO -NIL Company Secretary -NIL
3 Percentage increase in median remuneration of employees in the financial year NIL
4 Number of permanent employees 8 employees
5 Explanation on average increase in remuneration and company performance The Company has incurred loss for the year ended March 31 2016. However there was an increase in overall remuneration of employees of the Company at an average rate of 4% excluding the Managing Director & CFO. The increase in remuneration is on account of normal annual increments as per the grade. Such increase was granted after considering the increased cost of living industry standard performance of particular employees and the same is in line with the Company's policy on remuneration.
6 Comparison of the remuneration of the Key Managerial Personnel against the performance of the Company Not Applicable as the Company suffered loss


7 Variation in the market capitalization PE ratio as at the closing Particulars 31.03.16 31.03.15
date of current financial year and previous financial year and percentage increase over /decrease in the market quotations of the shares in comparison Market Cap. 50.10 Cr 86.95 Cr
P/E ratio EPS (2.15) (5.63)
Decrease in Market Cap 42.38 %


8 Average percentile increase already made in the salaries other than the Managerial Personnel in the last financial year and its comparison with the percentile in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration. There was an increase of about 4% in salaries of employees other than Managerial Personnel during the year 2015-16. The remuneration of Managerial Personnel was increased by 59% on account of elevation of the Executive Director & CFO to Managing Director & CFO effective April 1 2015. The remuneration of Managerial Personnel is in line with industry standard and as approved by the Shareholders.
9 Comparison of each remuneration of the key managerial personnel against the performance of the Company Not Applicable since the Company has incurred loss
10 The key parameters for any variable component of remuneration availed by directors NA. The Company does not have any variable pay structure for its directors
11 The ratio of remuneration of the highest paid director to employees who are not directors but receive remuneration in excess of highest paid directors Nil. The Company did not have any employee who was not a director and who was in receipt of remuneration in excess of that of highest paid director.
12 Remuneration as per Policy The Remuneration paid to Directors/ senior management personnel was as per the Remuneration policy of the Company.

23. CEO / CFO Certification

The Managing Director & CFO has issued a certificate pursuant to the provisions ofRegulation 17 of the Listing Agreement certifying that the financial statements do notcontain any untrue statement and these statements represent a true and fair view of theCompany's affairs.


The provisions of Corporate Social Responsibilities are not applicable to the Company.


In accordance with section 134(3)(a) of the Companies Act 2013 an extract of annualreturn in form MGT-9 is appended as Annexure 4.


The Board of Directors expresses its appreciation for the help and co-operationextended by the Ministry of Surface Transport Maharashtra Maritime Board Ministry ofFinance The Directorate General of Shipping Reserve Bank of India and the Company'sBankers and Agents. The Board of Directors also appreciates the loyal services renderedand co-operation extended by the Company's officers and staff both ashore and afloat.

For Chowgule Steamships Limited
Place : Mumbai VIJAY V. CHOWGULE
Date : May 06 2016 Chairman

Declaration by the Managing Director & CFO under Regulation 34 of the ListingAgreement

I Mangesh Sawant Managing Director & CFO of Chowgule Steamships Limited confirmthat all the members of the Board of Directors and senior management personnel haveaffirmed compliance with the Code of Conduct for the year ended March 31 2016.

Date : May 06 2016 Managing Director & CFO