Essar Ports Ltd.
|BSE: 500630||Sector: Infrastructure|
|NSE: ESSARPORTS||ISIN Code: INE282A01024|
|BSE 15:29 | 23 Dec||Essar Ports Ltd|
|NSE 15:29 | 23 Dec||Essar Ports Ltd|
|Mkt Cap.(Rs cr)||5,597|
|Mkt Cap.(Rs cr)||5597.36|
Essar Ports Ltd. (ESSARPORTS) - Director Report
Company director report
To the Members of Essar Ports Limited
Your Directors take pleasure in presenting the Fortieth Annual Report of your Companytogether with Audited Accounts for the year ended March 312016.
1. FINANCIAL RESULTS
The summary of consolidated and standalone financial results of your Company for theyear ended March 31 2016 are furnished below:
(Rs. in crore)
Your Directors have not recommended any dividend for the year ended March 312016.
3. MANAGEMENT DISCUSSION & ANALYSIS
The discussion and analysis below covers the financial results and business outlook ofEssar Ports Limited and its subsidiaries for the financial year 2015-16. This outlook isbased on assessment of the current business environment and Government policies. Thechange in future economic and other developments are likely to cause variation in thisoutlook.
Indian Economy and Infrastructure Sector
Economic expansion in India continued to be at a faster pace than other emergingmarkets. Inflation continued to be on a decline backed by lower global oil prices. TheIndian economy grew by 7.6% in financial year FY2016 as compared to 7.2% in the financialyear FY2015.
The Reserve Bank of India (RBI) has reduced the repo rate by 125 bps from 7.5% in April2015 to 6.25% in October 2015 25 bps in four tranches given the easing of inflation.There is an expectation of further cuts in interest rates resulting in a revival ofinfrastructure investments in the country.
Based on the overall cues of economy growth and improving investment scenario it isbelieved that a further pickup in economic growth is expected. GDP is expected to grow atover 7.5% backed by policy initiatives focused on attracting FDI inflows and largeinvestments.
Infrastructure sector in India looks well placed to attract investments and experiencehigh growth. Infrastructure sector is core to the Indian growth story due to massivehistoric shortfall in physical infrastructure and growing economic activity. The sector isexpected to be resilient and continue to attract investor interest.
RBI continued to take measures over the past year under 5/25 financing scheme forelongated maturity strategic debt restructuring and S4A to facilitate the infrastructureand manufacturing sectors. These initiatives are aimed at easing financing terms forinfrastructure and manufacturing projects which will increase the pace of investments inthe sector.
During 2015-16 major and non-major ports in India have accomplished a total cargothroughput of 1072.47 million tonnes reflecting an increase of 1.9% over 2014-15. Thegrowth in cargo handled at major and non-major ports in 201516 were 4.3% and -1.0%respectively compared to 4.7% and 12.9% achieved in 2014-15. The share of major port inthe total traffic handled at Indian ports increased from 55% in 2014-15 to 57% in 2015-16.
At a broad commodity level during 2015-16 POL coal container and other cargo postedgrowth of 8.2 5.5% 3.1% and 2.9% respectively. Cargo traffic in food grains iron oreand fertilizer and FRM was affected during 2015-16 and dropped by 22.2% 14.7% and 2.4%respectively. The decline in iron ore traffic is mainly attributed to restrictions inmining of iron ore.
During the year under review your Company has delivered consistent growth and resultswere in line with the targets. The Company is now well poised for next level of growth andcontinues to be the 2nd largest private sector port operator in India by handling 58.27MMT during FY2015-16 as against 53.1 MMT of cargo during FY 2014-15 across all its ports.
Your Company has delivered another year of consistent growth in financial performance.The emphasis continues to be on development of world class facilities and to complete theprojects under implementation in time. Your Company has received all pending approvalsrelated to environment and land clearances. Your Company is also happy to announcetakeover of operations of Vizag outer harbor iron ore terminal which is an existingoperational project with no gestation period.
Your Company's capacity as on March 31 2016 was 120 MMTPA. During the year underreview your Company had four operational port terminals at Hazira Vadinar Paradip andVizag. The Hazira port is an all-weather deep-draft port with 30 MMTPA of dry bulk andbreak bulk cargo handling capacity. Vadinar is also an all-weather deep-draft port with58 MMTPA of liquid cargo handling capacity. The Paradip dry bulk terminal is also anall-weather deep-draft port with 16 MMTPA of dry bulk cargo handling capacity. The Vizagterminal is an operational berth taken over on May 14 2015 having capacity of 16 MMTPA.
Your Company has completed the construction of berth and stockyard for dry bulkterminal at Salaya with a capacity of 20 MMTPA. Your Company expects to complete the bundstrengthening and conveyor related works for Salaya project soon. Additionally plans toexpand the Hazira port capacity by 20 MMTPA - taking its capacity at Hazira to 50 MMTPAare underway. Your Company is also undertaking capacity addition by developing additionaliron ore berths at Visakhapatnam Port with a total capacity of 8 MMTPA.
Strategic developments / Approvals received during the year
Your Company's Hazira terminal has received construction approval from GujaratMaritime Board (GMB) for 1100m berth expansion and berth construction has commenced.Hazira terminal has also received inprinciple approval for allotment of 140 ha of backupland from GMB.
Outer harbour iron ore terminal at Vizag Port was taken over by your Company'ssubsidiary - Essar Vizag Terminals Limited on May 14 2015. The terminal is an existingoperational terminal with all relevant approvals in place.
Vadinar Liquid Terminal Limited has signed a Concession Agreement withKandlaPort Trust for 2nd SPM and two product berths on April 16 2015 for expanding theterminal at Vadinar.
Awards and Accolades
Your Company has been awarded over the year by various institution for best practicesin Health Safety & Environment Operations and Quality related categories. Below isthe list of awards and accolades won by your Company and its subsidiaries:
Essar Ports Limited:
Cll SCALE 2015 Award under Terminal Operator Category.
Maritime & Logistics Award for CSR Activities.
Maritime Standard Award Dubai for CSR Activities.
Gujarat StarAward 2015 under CSR Category.
Vadinar Oil Terminal Limited:
"Port / Terminal of the year for Health Safety and Environment".
"RUNNER-UP for Port / Terminal of the year for (Non Containerized) -Specific" at Gujarat Star Awards - 4th Edition.
Lloyd's list Middle East and Indian Subcontinent Safety Award.
Certificate of Appreciation from KPT as a major contributor for KPT's milestoneof 100 MMT for the FY 2015-16 from Hon'ble Union Shipping Minister Shri. Nitin Gadkari.
Essar Bulk Terminal Limited
Rashtra Vibhushan Award 2015 (Platinum) in Health & Safety of Workers and onoutstanding contribution for National Economic & Social Development.
Essar Bulk Terminal Paradip Limited
15th Annual Greentech Environment Award 2015 in Silver Category in ServiceSector.
4th Annual Greentech CSR Award 2015 in Silver Category in Service Sector.
Operational Performance Highlights
Vadinar terminal handled 38.3 MMT of cargo during FY2015-16 as against 41.25 MMTduring FY2014-15.
Hazira terminal handled 12.66 MMT during FY2015-16 as against 10.63 MMT duringFY2014-15.
Paradip dry bulk terminal handled 2.24 MMT cargo during FY2015-16 as against1.05 MMT during FY2014-15.
Vizag iron ore terminal handled 5.07 MMT cargo during FY2015-16 since take overon 14th May 2015.
4. DELISTING AND DEMERGER OF THE COMPANY Delisting
The shares of your Company with effect from December 31 2015 have been delisted fromBSE Limited and National Stock Exchange of India Limited pursuant to voluntary delistingof the equity shares by the majority shareholder. The delisting exit offer is open for themembers of the Company who may want to tender their shares in the said offer upto December30 2016.
All members who may wish to tender their shares in the Delisting Exit Offer may tendertheir shares after filling the Exit Offer form which has been forwarded to you by theacquirer and send the same to Link Intime India Pvt. Ltd. being the Registrar to theDelisting Exit Offer.
Members can also download the Exit Offer
Documents available on the website of the Company i.e.: www.essarports.com under theInvestors Section.
The Hon'ble Gujarat High Court has approved the Scheme of Arrangement (the Scheme)which has taken effect from the appointed date i.e. June 30 2016 for the demerger of thevarious business undertakings of the Company. The shares post the effectiveness of theScheme of your Company and those of the other resulting companies have been issued to theeligible members of the Company.
The Exit Offer pursuant to the delisting of your Company is also available on theshares being issued of all the companies post the demerger at the same price as that ofEssar Ports Limited.
5. RISK MANAGEMENT & INTERNAL CONTROL
Implementation and operation of port and terminal facilities are dependent on variousregulatory approvals and government policies. Changes in macroeconomic factors likeinflation interest rate world trade and natural catastrophes also play an important rolein the trade of goods and cargo.
Any adverse change in the above may affect the performance of your Company. YourCompany periodically reviews the risks associated with the business and takes steps tomitigate and minimise the impact of risks.
Your Company has a Risk Assessment and Mitigation procedure in place. Major risksidentified by the businesses and functions if any are systematically addressed throughmitigating actions on a continuing basis.
The Company's internal control systems are commensurate with the nature of its businessand the size and complexity of operations. These systems are routinely tested by theInternal Auditor and cover all key business areas. Significant audit observations andfollow up actions thereon are reported to the Audit Committee. The Audit Committee reviewsadequacy and effectiveness of the Company's internal control environment and monitors theimplementation of audit recommendations including those relating to strengthening of theCompany's risk management policies and systems.
The details of foreign exchange earnings and outgo as required under Section 134 andRule 8(3) of Companies (Accounts) Rules 2014 are mentioned below:
Foreign Exchange Earnings & Outgo
6. CORPORATE SOCIAL RESPONSIBILITY
In accordance with the requirements of Section 135 of Companies Act 2013 your Companyhas constituted a Corporate Social Responsibility Committee (CSR). The CSR Committeecomprises of Shri. P K. Srivastava Shri. Rajiv Agarwal and Shri. V. G. Raghavan.
Your Company has also formulated a Corporate Social Responsibility Policy which isavailable on the websites of the Company at www.essar.comand www.essarports.com.The Company statutorily is not required to incur CSR spend asthe Company has negative profits. The Company has initiated CSR activities through itssubsidiaries. Annual report on CSR activities as required under the Companies (CorporateSocial Responsibility Policy) Rules 2014 has been appended as Annexure to this Report.
7. BOARD INDEPENDENCE
Based on the confirmation / disclosures received from the Directors and on evaluationof the relationships disclosed all Independent Directors comply with the Independencecriteria in terms of Section 149(6) of the Companies Act 2013.
8. DIRECTORS APPOINTMENT AND TENURE
The Directors of the Company are appointed by members at the General Meetings. Inaccordance with the Articles of Association of the Company two-third of the Directors ofthe Board are liable to retire by rotation. Out of this one-third of the eligibleDirectors retire every year. The appointment and tenure of Independent Directors areconsistent with the Companies Act 2013.
Shri. K. K. Sinha (DIN 00843258) retires at the ensuing Annual General Meeting of theCompany and being eligible offers himself for re-appointment.
During the year Shri. N. C. Singhal Shri. Michael Pinto Dr. Jose Paul Shri. JesperKjaedegaard and Shri. Deepak Kumar Varma have resigned from the directorship of yourCompany. Shri. A. S. Bali has resigned with effect from June 29 2016. Your Board placeson record its appreciation for the valuable contributions made by the above Directors inthe growth and progress of the Company during their tenure as Directors.
Shri. V. G. Raghavan (DIN 00008683) has been appointed as an Additional IndependentDirector of the Company with effect from June 27 2016. It is proposed to appoint Shri.Raghavan as an Independent Director for a consecutive period of five years from the dateof the ensuing Annual General Meeting.
9. HUMAN RESOURCE
Human resources have always been the key to success of your Company's business. Abalance of internal and external talent was maintained to ensure right skills areavailable to initiate project activities. Your Company is known for developing futureleaders and having the best people practices. This coupled with the ability to attract thebest talent provides a competitive edge to the organisation.
10. INFORMATION TECHNOLOGY
Your Company successfully implemented SAP in its financial and related systems. For drybulk as well as oil terminals systems have been implemented to capture end-to-endworkflow covering all activities from pre-arrival intimations to actual departure ofvessels. Expected berth occupancy is being plotted thereby optimising the berthutilisation and increasing berth efficiency. Various dashboard reports have beenimplemented in the system for berth performance and resource monitoring.
As on March 31 2016 the following were the subsidiaries of your Company:
1. Vadinar Oil Terminal Limited
2. Vadinar Ports & Terminals Limited
3. Essar Vizag Terminals Limited
4. Essar Bulk Terminal Limited
5. Essar Bulk Terminal Paradip Limited
6. Essar Bulk Terminal (Salaya) Limited
7. Essar Paradip Terminals Limited
8. Petro Tankages India Limited
9. Essar Dredging Limited
10. Vadinar Liquid Terminals Limited
11. LNG Terminals Hazira Limited
12. Essar Ports Netherland Cooperatief U.A
Your Company's Auditors Messrs. Deloitte Haskins & Sells Chartered AccountantsAhmedabad the Statutory Auditors of the Company hold office until the conclusion of theensuing Annual General Meeting and are eligible for re-appointment. Since Messrs. DeloitteHaskins & Sells have been functioning as Auditors of your Company for more than tenyears as per Section 139 of the Companies Act 2013 they can be appointed for a maximumfurther period of one year.
Your Company's Auditors Messrs. Deloitte Haskins & Sells Chartered AccountantsAhmedabad the Statutory Auditors of the Company were appointed for a period of two yearsat the previous AGM which appointment is required to be ratified by the members at theAnnual General Meeting (AGM) each year. Accordingly the Statutory Auditors will continueto be the Auditors of the Company from the conclusion of the ensuing AGM until theconclusion of the next AGM.
The Company has received a letter from them to the effect that their appointment ifmade would be within the prescribed limits under the Companies Act 2013 and that theyare not disqualified to be Auditors of the Company.
Suitable resolution for their re-appointment has been included in the Notice conveningthe ensuing Annual General Meeting.
The Report given by the Auditors on the financial statements of the Company forms partof the Annual Report. There has been no qualification reservation adverse remark ordisclaimer given by the Auditors in their Report.
13. CORPORATE GOVERNANCE
The Company had delisted its shares from all the Stock Exchanges and presently notcovered under the listing regulations of SEBI.
However as a good practice your Company follows the Corporate Governance practice inits business activities
14. DISCOLSURES WITH RESPECT TO THE REMUNERATION UNDER SECTION 197 OF THE COMPANIESACT 2013
A statement of Disclosure of Remuneration under section 197 of Companies Act 2013 andRule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is attached and forms part of this Report.
15. SECRETARIAL AUDIT REPORT
During the year your Company has undertaken the Secretarial Audit for the year2015-16 which inter alia includes audit of compliance with the Companies Act 2013 andthe Rules made under the Act Listing Agreement (to the extent applicable) and regulationsand guidelines prescribed by the Securities and Exchange Board of India and ForeignExchange Management Act 1999.
The Secretarial Audit was carried out by CS. Martino Ferrao of M/s. Martinho FerraoAssociates Company Secretaries the Secretarial Auditor of the Company for the financialyear 2015-16. The Secretarial Audit Report is appended as an Annexure to this Report.
16. EXTRACT OF ANNUAL RETURN
The extract of annual return in Form MGT 9 as required under Section 92(3) and Rule 12of the Companies (Management and Administration) Rules 2014 is appended as an Annexure tothis Report.
17. BOARD EVALUATION
The Nomination and Remuneration Committee of the Company has approved an evaluationpolicy which was adopted by the Board of Directors. The policy provides for evaluation ofthe Board the Committees of the Board and individual Directors including the Chairman ofthe Board. Your Company has initiated the process of Board evaluation which is underway.The results of the evaluation will be shared with the Board post which action plan willbe drawn to improve the identified parameters.
18. RELATED PARTY TRANSACTIONS
In line with the requirements of the Companies Act 2013 your Company has formulated aPolicy on Related Party Transactions which is also available on Company's websites at
This Policy specifically deals with the review and approval of Material Related PartyTransactions keeping in mind the potential or actual conflicts of interest that may arisebecause of entering into these transactions. All Related Party Transactions are placedbefore the Audit Committee for review and approval.
All Related Party Transactions entered during the year were in Ordinary Course of theBusiness and on Arm's Length basis.
The disclosure of Related Party Transactions as required under Section 134(3)(h) of theCompanies Act 2013 in Form AOC 2 is annexed to this report.
19. DISCLOSURES PURSUANT TO SECTION 186 OF THE COMPANIES ACT 2013
Details of loans guarantee or investments made by your Company under Section 186 ofthe Companies Act 2013 during the financial year 2015-16 are appended as Annexure to thisReport.
20. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY
There were no material changes and commitments affecting the financial position of theCompany which occurred between the end of the financial year to which this financialstatements relate and the date of this Report except for the Scheme of Arrangement asmentioned elsewhere in this report.
21. PREVENTION OF SEXUAL HARASSMENT AT WORK PLACE
As per the requirement of The Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 and Rules made thereunder your Company has framedthe Prevention of Sexual Harassment Policy.
22. STATEMENT OF DIRECTORS RESPONSIBILITIES
Pursuant to the requirement of Section 134(5) of the Companies Act 2013 and based onthe information provided by the management your Directors state that:
a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
b) accounting policies selected were applied consistently and made judgments andestimates that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company at the end of the financial year and of the profit or loss ofthe Company for that period;
c) proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d) the annual accounts of the Company have been prepared on a going concern basis;
e) the Company had laid down internal financial controls to be followed by the Companyand that such internal financial controls are adequate and were operating effectively; and
f) proper systems are in place to ensure compliance with the provisions of allapplicable laws and such systems are adequate and operating effectively.
23. APPRECIATION AND ACKNOWLEDGEMENTS
Your Directors express their sincere thanks and appreciation to all the employees fortheir commendable team work and contribution to the growth of the Company.
Your Directors also thank its bankers and other business associates for their continuedsupport and co-operation during the year
For and on behalf of the Board