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Essar Shipping Ltd.

BSE: 533704 Sector: Infrastructure
NSE: ESSARSHPNG ISIN Code: INE122M01019
BSE LIVE 15:44 | 17 Oct 25.50 0
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NSE 15:45 | 17 Oct 25.65 0.15
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OPEN 24.85
PREVIOUS CLOSE 25.50
VOLUME 7853
52-Week high 36.75
52-Week low 23.15
P/E
Mkt Cap.(Rs cr) 528
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 24.85
CLOSE 25.50
VOLUME 7853
52-Week high 36.75
52-Week low 23.15
P/E
Mkt Cap.(Rs cr) 528
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Essar Shipping Ltd. (ESSARSHPNG) - Auditors Report

Company auditors report

To

The Members of

Essar Shipping Limited.

Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of Essar ShippingLimited (‘the Company') which comprise the Balance Sheet as at March 31 2016 theStatement of Profit and Loss and the Cash Flow statement for the year then ended and asummary of significant accounting policies and other explanatory information.

Management's Responsibility for the Standalone Financial Statements

The Company's Board of Directors is responsible for the matters stated in Section134(5) of the Companies Act 2013 ("the Act") with respect to the preparationand presentation of these standalone financial statements that give a true and fair viewof the financial position financial performance and cash flows of the Company inaccordance with the accounting principles generally accepted in India including theAccounting Standards specified under Section 133 of the Act read with Rule 7 of theCompanies (Accounts) Rules 2014. This responsibility also includes maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting frauds and otherirregularities; selection and application of appropriate accounting policies; makingjudgments and estimates that are reasonable and prudent; and design implementation andmaintenance of adequate internal financial controls that were operating effectively forensuring the accuracy and completeness of the accounting records relevant to thepreparation and presentation of the financial statements that give a true and fair viewand are free from material misstatements whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these standalone financial statementsbased on our audit.

We have taken into account the provisions of the Act the accounting and auditingstandards and matters which are required to be included in the audit report under theprovisions of the Act and the Rules made thereunder.

We conducted our audit in accordance with the Standards on Auditing specified undersection 143(10) of the Act. Those Standards require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetherthe financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts andthe disclosures in the financial statements. The procedures selected depend on theauditor's judgment including the assessment of the risks of material misstatement of thefinancial statements whether due to fraud or error. In making those risk assessments theauditor considers internal financial control relevant to the Company's preparation of thefinancial statements that give a true and fair view in order to design audit proceduresthat are appropriate in the circumstances. An audit also includes evaluating theappropriateness of the accounting policies used and the reasonableness of the accountingestimates made by the Company's Directors as well as evaluating the overall presentationof the financial statements.

We believe that except for the matter described in Basis for Qualified opinionparagraph the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion on the standalone financial statements.

Basis for Qualified Opinion

Attention is invited to note 13(a)(ii) of the financial statements regardingManagements ongoing assessment of ‘other than temporary' decline in the value of longterm investment of Rs.4747.78 crores as at March 31 2016 in equity shares of EssarOilfileds Services Limited Mauritius a wholly owned subsidiary of the Company in termsof Accounting Standard 13 ‘Accounting for Investments'. We have been informed thatthe Management has not yet concluded the process of validating various operationalassumptions impacting the estimated future cash flows from the operations of the rigs ofthe said subsidiary and the consequent effect on the valuation of the subsidiary todetermine whether there is a decline other than temporary in the value of the aforesaidinvestment. Pending conclusion of the said exercise we are unable to comment on theextent of diminution if any which may be required in respect of the carrying amount ofthe said investment.

Qualified Opinion

In our opinion and to the best of our information and according to the explanationsgiven to us except for the possible effects of the matters described in the Basis forQualified Opinion paragraph above the aforesaid standalone financial statements give theinformation required by the Act in the manner so required and give a true and fair view inconformity with the accounting principles generally accepted in India of the state ofaffairs of the Company as at March 312016 and its loss and its cash flows for the yearended on that date.

Emphasis of matter paragraph

Managerial Remuneration paid to a Director of the Company for the year ended March 312016 to the extent of Rs.0.16 crores exceeds the requisite approvals mandated by theprovisions of Section 197 read with Schedule V to the Companies Act 2013. We have beeninformed by the management that approval has already been sought for the same and iscurrently awaited.

Our opinion is not modified in respect of this Matter.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor's Report) Order 2016 ("the Order")issued by the Central Government of India in terms of sub-section (11) of section 143 ofthe Act we give in the ‘Annexure A' a statement on the matters specified in theparagraph 3 and 4 of the order.

2. As required by Section 143 (3) of the Act we report that:

(a) We have sought and except for the possible effects of the matter described inBasis for Qualified Opinion paragraph above obtained all the information and explanationswhich to the best of our knowledge and belief were necessary for the purposes of ouraudit.

(b) In our opinion except for the possible effects of the matter described in Basisfor Qualified Opinion paragraph above proper books of account as required by law havebeen kept by the Company so far as it appears from our examination of those books;

(c) The Balance Sheet the Statement of Profit and Loss and the Cash Flow Statementdealt with by this Report are in agreement with the books of account;

(d) In our opinion except for the possible effects of the matter described in Basisfor Qualified Opinion paragraph above the aforesaid standalone financial statementscomply with the Accounting Standards specified under Section 133 of the Act read withRule 7 of the Companies (Accounts) Rules 2014;

(e) The matter described in the Basis for Qualified Opinion paragraph above in ouropinion may have an adverse effect on the functioning of the Company.

(f) On the basis of the written representations received from the directors as on March31 2016 taken on record by the Board of Directors none of the directors aredisqualified as on March 31 2016 from being appointed as a director in terms of Section164 (2) of the Act;

(g) The qualification relating to the maintenance of accounts and other mattersconnected therewith are as stated in the Basis for Qualified Opinion paragraph above.

(h) With respect to the adequacy of the internal financial controls over financialreporting of the Company and the operating effectiveness of such controls refer to ourseparate report in ‘Annexure B'; and

(i) With respect to the other matters to be included in the Auditor's Report inaccordance with Rule 11 of the Companies (Audit and Auditors) Rules 2014 in our opinionand to the best of our information and according to the explanations given to us:

(i) The Company has disclosed the impact of pending litigations on its financialposition in its financial statements - Refer note 27(a) to the financial statements.

(ii) The Company has made provision as required under the applicable law or accountingstandards for material foreseeable losses if any on long term contracts includingderivative contracts- Refer note 31 to the financial statements.

(iii) There were no amounts that were required to be transferred to the investoreducation protection fund by the Company.

For CNK & ASSOCIATES LLP
Chartered Accountants
Firm's registration number: 101961W
Himanshu Kishnadwala
Partner
Mumbai May 25 2016 Membership number: 37391

ANNEXURE - A TO THE INDEPENDENT AUDITORS' REPORT

(Referred to in paragraph 1 under ‘Report on Other Legal and RegulatoryRequirements' section of our report of even date)

(i) (a) The Company is maintaining proper records showing full particulars includingquantitative details and situation of fixed assets;

(b) During the year the fixed assets were physically verified by the Management inaccordance with a regular programme of verification which in our opinion provides forphysical verification of all the fixed assets at reasonable intervals. According to theinformation and explanations given to us no material discrepancies were noticed on suchverification;

(c) The title deeds of immovable properties are held in the name of the company;

(ii) As informed to us the inventory has been physically verified by the Management atreasonable intervals during the year and no material discrepancies have been noticed onsuch verification;

(iii) The Company has granted unsecured loan to one company covered in the registermaintained under Section 189 of the Companies Act 2013;

(a) In respect of the aforesaid loan the terms and conditions of the grant of suchloan are not prejudicial to the company's interest;

(b) In respect of the aforesaid loan since the loan is repayable on demand theregularity of the repayments of principal and payment of interest cannot be commentedupon;

(c) In respect of the aforesaid loan since the loan is repayable on demand the overdueamounts cannot be determined;

(iv) In our opinion and according to the information and explanations given to us theCompany has complied with the provisions of section 185 and 186 of the Act with respectto the loans Investments guarantees and security;

(v) The Company has not accepted any deposits within the meaning of Sections 73 to 76of the Act and the rules framed there under to the extent notified;

(vi) According to the information and explanations given to us the Company is notrequired to maintain cost records pursuant to the Companies (Cost Records and Audit)Rules 2014 as amended and prescribed by the Central Government under sub-section (1) ofsection 148 of the Companies Act 2013;

(vii) (a) According to the information and explanation given to us and the records ofthe Company examined by us in our opinion the Company is regular in depositingundisputed statutory dues including provident fund duty of customs and value added taxand other material statutory dues as applicable with appropriate authorities. Howeverdelays in deposits of tax deducted at source and service tax were observed ranging from228 to 289 days. The extent of the arrears of tax deducted at source and service taxoutstanding as at March 31 2016 for a period of more than six months from the date thesame became payable is Rs.27.38 crores and Rs.7.66 crores due for 206 to 238 days and 206to 694 days respectively;

(b) According to the information and explanations given to us and the records of theCompany examined by us the particulars of dues of income tax and duty of customs at March31 2016 which have not been deposited on account of a dispute are as follows:

Name of the Statute Nature of Dues Amount in crores Period to which the amount relates Forum where the matter is pending
Income Tax Act 1961 Income Tax 7.29 1993-94 The High Court of Bombay
Foreign Trade (Development and Regulation Act 1992) Custom Duty 27.40 2006-07 The High Court of Bombay

(viii) According to the records of the Company examined by us and the information andexplanations given to us except for the loans borrowings and dues mentioned in the belowtable the Company has not defaulted in repayment of loans or borrowings to any FinancialInstitution Bank Government or dues to Debenture Holders as at the balance sheet date;

(Amounts in crores)

Amount of Default

Period of Default
Lender Name Principal Interest Total
Debenture Holders
Life Insurance Corporation 700.00 178.00 878.00 1 to 740 days
CSEB (Chattisgarh State Electricity Board) Gratuity and Pension fund Trust 1.38 1.38 4 to 300 days
MTNL - Employees Provident Fund Trust - 0.16 0.16 15 days
Rajasthan Rajya Vidyut Prasaran Nigam Limited - 0.54 0.54 53 to 145 days
Banks
State Bank of India 3.52 - 3.52 1 day
State Bank of Patiala 1.35 - 1.35 1 day
State Bank of Bikaner & Jaipur 2.43 - 2.43 1 day
State Bank of Travancore 1.50 - 1.50 1 day
Syndicate Bank 5.57 - 5.57 63 to 155 days
Indian Overseas Bank 4.58 - 4.58 67 to 159 days
Export Import Bank of India 2.35 - 2.35 31 days
Financial Institutions
IL&FS Financial Services Limited 1.40 - 1.40 1 day
Total 722.70 180.08 902.78

(ix) According to the records of the Company examined by us and the information andexplanation given to us the Company has not raised money by way of initial public offeror further public offer (including debt instruments) during the year and in case of termloans taken during the year the same were applied for the purposes for which those wereraised;

(x) According to the information and explanations given to us no fraud by the Companyor on the Company by its officers or employees has been noticed or reported during thecourse of our audit;

(xi) According to the records of the Company examined by us and the information andexplanations given to us managerial remuneration to the extent of Rs.0.16 crores exceedsthe requisite approvals mandated by the provisions of Section 197 read with Schedule V tothe Companies Act 2013. Approval has already been sought for the same and is currentlyawaited;

(xii) The Company is not a Nidhi company and therefore the provisions of clause 3 (xii)of the Order are not applicable to the company;

(xiii) According to the records of the Company examined by us and the information andexplanation given to us all transactions with the related parties are in compliance withsections 177 and 188 of Companies Act 2013 where applicable and the details thereof havebeen disclosed in the Financial Statements etc. as required by the applicable accountingstandards;

(xiv) The company has not made any preferential allotment or private placement ofshares or fully or partly convertible debentures during the year under review. Thereforeclause 3(xiv) is not applicable to the Company;

(xv) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company has not entered into non-cashtransactions with directors or persons connected with him. Accordingly clause 3(xv) ofthe Order is not applicable to the Company;

(xvi) According to the information and explanations given to us and based on ourexamination of the records of the Company the Company is not required to be registeredunder section 45-IA of the Reserve Bank of India Act 1934;

For CNK & ASSOCIATES LLP
Chartered Accountants
Firm's registration number: 101961W
Himanshu Kishnadwala
Partner
Membership number: 37391
Mumbai May 25 2016

ANNEXURE - B TO THE AUDITORS' REPORT

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section143 of the Companies Act 2013 ("the Act")

We have audited the internal financial controls over financial reporting of EssarShipping Limited ("the Company") as of March 31 2016 in conjunction with ouraudit of the standalone financial statements of the Company for the year ended on thatdate.

Management's Responsibility for Internal Financial Controls

The Company's management is responsible for establishing and maintaining internalfinancial controls based on the internal control over financial reporting criteriaestablished by the Company considering the essential components of internal control statedin the Guidance Note on Audit of Internal Financial Controls over Financial Reportingissued by the Institute of Chartered Accountants of India (‘ICAI'). Theseresponsibilities include the design implementation and maintenance of adequate internalfinancial controls that were operating effectively for ensuring the orderly and efficientconduct of its business including adherence to company's policies the safeguarding ofits assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation as required under the Companies Act 2013.

Auditors' Responsibility

Our responsibility is to express an opinion on the Company's internal financialcontrols over financial reporting based on our audit. We conducted our audit in accordancewith the Guidance Note on Audit of Internal Financial Controls over Financial Reporting(the "Guidance Note") and the Standards on Auditing issued by ICAI and deemedto be prescribed under section 143(10) of the Companies Act 2013 to the extentapplicable to an audit of internal financial controls both applicable to an audit ofInternal Financial Controls and both issued by the Institute of Chartered Accountants ofIndia. Those Standards and the Guidance Note require that we comply with ethicalrequirements and plan and perform the audit to obtain reasonable assurance about whetheradequate internal financial controls over financial reporting was established andmaintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy ofthe internal financial controls system over financial reporting and their operatingeffectiveness. Our audit of internal financial controls over financial reporting includedobtaining an understanding of internal financial controls over financial reportingassessing the risk that a material weakness exists and testing and evaluating the designand operating effectiveness of internal control based on the assessed risk. The proceduresselected depend on the auditor's judgment including the assessment of the risks ofmaterial misstatement of the financial statements whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate toprovide a basis for our audit opinion on the Company's internal financial controls systemover financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designedto provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generallyaccepted accounting principles. A company's internal financial control over financialreporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that in reasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financial statements inaccordance with generally accepted accounting principles and that receipts andexpenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition use or disposition of thecompany's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financialreporting including the possibility of collusion or improper management override ofcontrols material misstatements due to error or fraud may occur and not be detected.Also projections of any evaluation of the internal financial controls over financialreporting to future periods are subject to the risk that the internal financial controlover financial reporting may become inadequate because of changes in conditions or thatthe degree of compliance with the policies or procedures may deteriorate.

Opinion

In our opinion the Company has in all material respects an adequate internalfinancial controls system over financial reporting and such internal financial controlsover financial reporting were operating effectively as at 31 March 2016 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India.

For CNK & ASSOCIATES LLP
Chartered Accountants
Firm's registration number: 101961W
Himanshu Kishnadwala
Partner
Membership number: 37391
Mumbai May 25 2016