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Essar Shipping Ltd.

BSE: 533704 Sector: Infrastructure
NSE: ESSARSHPNG ISIN Code: INE122M01019
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OPEN 27.00
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VOLUME 7126
52-Week high 36.75
52-Week low 23.15
P/E
Mkt Cap.(Rs cr) 530
Buy Price 0.00
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Sell Price 0.00
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OPEN 27.00
CLOSE 26.15
VOLUME 7126
52-Week high 36.75
52-Week low 23.15
P/E
Mkt Cap.(Rs cr) 530
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Essar Shipping Ltd. (ESSARSHPNG) - Director Report

Company director report

To

The Members of

Essar Shipping Limited.

Your Directors are pleased to present the Sixth Annual Report and Audited FinancialStatements of the Company for the financial year ended March 31 2016.

FINANCIAL RESULTS:

The Company's financial performance for the year ended March 31 2016 is summarizedbelow:

Rs. in Crore

Consolidated

Standalone

Particulars For the year ended 31-03-2016 For the year ended 31-03-2015 For the year ended 31-03-2016 For the year ended 31-03-2015
Total Income 1985.56 2153.29 877.32 998.90
Total Expenditure 1479.11 1683.60 558.11 647.12
EBITDA 506.45 469.69 319.21 351.78
Less: Interest & Finance charges 479.32 477.13 280.37 286.32
Less: Provision for Depreciation 458.25 424.06 149.07 143.96
Less: Exceptional Item - - - -
Profit/(Loss) before Tax (431.12) (431.50) (110.23) (78.50)
Less: Tax (21.94) (27.38) (3.39) (4.50)
Profit/(Loss) for the year before share of profit of associate (453.06) (458.88) (113.62) (83.00)
Add: Share in Loss of associate (0.03) (0.07)
Profit/(Loss) for the year (453.09) (458.95) (113.62) (83.00)

DIVIDEND

In view of loss during the year 2015-16 the Board of Directors has not recommended anydividend for the year under review.

MANAGEMENT DISCUSSION AND ANALYSIS

Overview of the World Economy & Shipping Industry

Global growth remains moderate with uneven prospects across the main countries andregions. Growth rate is expected to be 3.4 percent in 2016 and 3.6 percent in 2017 asestimated by International Monetary Fund. Relative to last year the outlook for advancedeconomies is improving while growth in emerging market and developing economies isprojected to be lower primarily reflecting weaker prospects for some large emergingmarket economies and oil-exporting countries.

Throughout the last century shipping industry has seen a general trend of increases intotal trade volume. Increasing industrialization and the liberalization of nationaleconomies have fuelled free trade and a growing demand for consumer products. Followingseveral years of incredibly buoyant shipping markets much of the international shippingindustry has fallen prey to the worldwide economic downturn.

Overview of the Indian Economy

Notwithstanding the current situation the longer term outlook for the industry remainsgood. The world's population continues to expand and emerging economies will continue toincrease their requirements for the goods and raw materials that shipping transports sosafely and efficiently. Emerging economies such as India have undertaken severalinitiatives such as development of coastal shipping advanced technology ports incentivesto the domestic ship repair and ship building industry port led development revival ofthe manufacturing sector & infrastructure development of the country as a whole.Amongst the developing economies IMF expects India to report the highest GDP growth of7.5% in 2016-17 against the growth of world economy.

As per the latest Global Economic Prospects (GEP) report by World Bank India isleading The World Bank's growth chart for major economies. India's maritime trade isexpected to grow at a CAGR of 9.6% increasing India's share to the global sea borne tradeto 17% by 2025. Thus leading to an opportunity to increase cargo handling capacity from1Bn MTPA to 2.5 Bn MTPA.

BUSINESS PERFORMANCE OPPORTUNITIES AND OUTLOOK

The business performance is attributed to the demand & supply in the world tradeindustry. With focus on crude and dry bulk carriers port to plant logistics and oilfieldservices your Company intends to build an integrated value chain by providing end-to-endlogistics solutions to its customers in a very cost effective manner.

a) Sea Transportation Business

The Company currently operates a diversified fleet of 15 vessels which includes VeryLarge Crude Carriers Bulk carriers such as Capsize Mini-capes Supramaxes andHandy-size. Company's revenue has declined in the recent past due to decline in charterrates as a result of continuous slowdown in the Shipping industry. The sector is in acrisis mode as it navigates oil price volatility a drop in global demand and a glut ofsupply in ship capacity. The benchmark Baltic Dry Index which tracks sea trade priceshit an all-time low of 290 in February'16. It's recovered somewhat since then butprospects still appear bleak. The shipping industry is experiencing its largest dry bulkmarket recession since the 1980s. The uncertain global economic outlook and the increasedimbalance between supply and demand have led to historical low freight rates.

Given the current oversupply of vessels in the marketplace that has built up over thepast five years rates are expected to remain at depressed levels for at least two moreyears as the market struggles to find a new equilibrium.

Your company is taking a series of initiatives to weather the difficult marketconditions on the operational front as well as on the financing end to make a sustainablebusiness model for its shipping business. The initiative includes using a collective mixmodel for deployment of vessels into long term contracts to ensure assured returns &to employ few vessels on spot contracts to take advantage of the volatility in the market.In addition to the same the company plans to optimise its fleet by scrapping its oldertonnage (commercially non- viable) & therefore reduce OPEX in the subsequent financialyear. Further your Company has provided a business plan to its lenders on its plan torefinance the existing borrowings in line with the useful life of its assets. All theseinitiatives will insure sustainable operations in the current challenging marketconditions in the shipping industries especially in the dry bulk segment.

Dry Bulk Market

Dry-bulk vessels aren't in demand principally because China's industrial slowdown hasreduced its appetite for raw materials such as iron ore bauxite and cement. Despite thereduction the import demand of emerging developing economies in particular China andIndia remained the main driver of growth in dry bulk cargo shipments in 2014.

The state of the dry bulk market especially indicates that economies worldwide arelikely to stay weak much to the disappointment of central banks FX traders minerssteel makers trading houses and commodity economies.

The dry bulk shipping market is not expected to return to profitability until 2017despite a modest recovery in earnings anticipated over the next two years.

So far this year there have been a record number of dry bulk demolitions and at ayounger age. The year 2014- 15 witnessed the highest number of demolitions increased to36% from 2013 while deliveries increased a mere 7.7%. With the older tonnage beingreplaced with a young fleet the year also witnessed highest number of lay ups in theindustry. All this effecting a net change of 2.2% in comparison to 2.9% in 2014 in theglobal dry bulk fleet. While some improvement in earnings through 2016 is expected thisis unlikely to be sufficient for freight rates to reach breakeven. However the sector isanticipated to return to profitability by 2017 provided current rates of demolitionspersist and ship owners refrain from placing new orders.

India's thermal coal imports are however projected to grow which may compensate thedecline in coal transport caused by China's reduced coal import. With growing impetus tothe power sector by the Indian government coal trade is expected to increase by 10-12 %in the following year while the Steel industry is expected to ramp up its capacity fromthe current 81% to 83% utilisation levels with an estimated increase in growth of 6-7% inthe year 2016. Overall the trade growth is projected to remain steady in short term.

Tanker Market

Crude oil tankers are classified according to their sizes as Ultra Large Crude Carriers(ULCC) Very Large Crude Carriers (VLCC) Suezmax Aframax Panamax Long Range (LR) andMedium Range (MR) tankers.

In stark contrast to dry bulk carriers tankers that transport oil have in recentmonths enjoyed their best earnings in years. As crude prices have plummetedbargain-buying has driven up demand.

Demand for oil tankers and the rates they command have surged to their highest levelssince 2008 in the past months.

China has been looking to boost strategic reserves of crude taking advantage ofmulti-year lows in prices which has helped the oil tanker market rally. Earlier thismonth China said it more than doubled the size of its strategic crude oil reserves betweenNovember 2014 and the middle of this year a rate exceeding analysts' estimates.

Increasing crude output will drive search for new markets for the produce leading toexpansion in trade routes. Reduced ordering continued slippages and sizeable scrappage ofold vessels have caused net addition in fleet to remain at a moderate level. The scrappingof tankers which picked up in 2011 has also shrunk the fleet adding to its advantage.Tankers witnessed a net change of 3.4 % in 2015 in comparison to 1.4 % in 2014 having anet addition of 16718k dwt in the recent year.

(b) Oilfields Services Business Offshore Segment:

As the oil price has tumbled since June 2014 Exploration & Production (E&P)companies have continued to curb discretionary spending including both brownfielddevelopment investments and exploration activity and sanctioned few projects withnear-term start-up an effort to match near or medium term investments with operating cashflow. The absence of oil price stabilization and clarity on future investment capacity isalso continuing to postpone investment decisions for new longer term projects. Theshort-term nature of supplier contracts is also resulting in pricing concessions beingrealized quickly enabling the E&P's to drill more for less.

Demand projections will remain erratic given the current crude prices. The loomingoversupply of floating rigs that has been a feature of the market for some time has beenjoined by a sudden significant drop in oil prices resulting in a less favorable outlookfor drilling contractors. On the back of lower oil price projections floater demand isexpected to drop almost 50% from 2014 levels to approximately 150 rigs (Pareto16-Mar-2016). With few new contracts with near term start-up and some more terminationsexpected as oil companies right-size their drilling capacity the 150 rig level isexpected to be reached around YE'2016 or early 2017 and a recovery is expected afterthat. Should the oil price take another hit and remain volatile for some more time thedemand recovery would be postponed further.

The marketed utilization in the worldwide semisubmersible market is expected to furtherdrop to an average of 61.7% in 2016 from the December 2015 level of 67.4%. The marketedutilization of the worldwide jackup market is expected to drop from 73.2% in December 2015to an average of 66.7% in 2016. The dayrate for 2G/3G mid water floaters is expected to bein the range of $100000 to $110000 against a dayrate levels of USD 190000 a year back.

The oilfields services business of your company has been going through extremelychallenging market conditions due to continuous low crude oil prices. This has resulted invarious assets of the Company being unemployed for prolonged duration resulting intofinancial stress. The Management of the oil field business is in active discussion withits creditors both lenders and vendors to reschedule/extend the payment obligations.

Onshore Segment:

Considering the market for onshore drilling services in India it has been highlyskewed towards the customers such as ONGC Oil India Limited and Indian Oil CorporationLtd. In the regime of 12th five year plan the government is expected to focus majorly onE&P activities including intensive exploration of existing hydrocarbon reserves andgeographical focus on the east coast for exploring oil fields. While ONGC and IOC areexpected to make substantial investments in exploration activities it is essential tocapitalize upon key opportunities that are put forth to maximize deployment of land rigassets on longer duration with these companies. Apart from these two in the privatesector the E&P companies like Cairn Energy & other marginal field operator inIndia are expected to increase their spending on exploration of wells. This apartdevelopment of the unconventional energy sources such as shale gas & CBM poses largeropportunities for the deployment of land rig business.

SUBSIDIARIES

As on March 31 2016 your Company has five direct subsidiaries and three indirectsubsidiary. Essar Oilfields Services Limited Mauritius; Arkay Logistics Limited India(Formerly known as Essar Logistics Limited); Energy Transportation International LimitedBermuda; Energy II Limited Bermuda; and Essar Shipping DMCC (incorporated/ registered onAugust 5 2015) are direct subsidiaries of the Company. Essar Oilfield Services IndiaLimited Cosmic Driling Services Limited (Incorporated/Registered on March 15 2016) andEssar Oilfields Middle East DMCC are step down subsidiary of the Company.

A report on the performance and financial position of each of the subsidiaries andassociates companies as per the Companies Act 2013 is provided as Annexure to this reportand hence not repeated here for the sake of brevity. The Policy for determining materialsubsidiaries is available on Company's website www. essar.com.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Companies Act 2013 and Accounting Standard (AS) - 21 onConsolidated Financial Statements read with AS - 23 on Accounting for Investments inAssociates the audited Consolidated Financial Statements are provided in the AnnualReport. The audited Consolidated Financial Statements together with Auditors' Reportthereon form part of the Annual Report.

AWARDS AND RECOGNITIONS

• In August 2015 your Company received the ‘Bulk Operator of the Year' awardat the Gateway Awards for the fourth time consecutively in appreciation of theimpressive performance in dry bulk segment for the year 2014-15. The Gateway Awards is oneof the most coveted awards in the maritime industry honouring individuals organizationsand companies from across India's maritime industry. The awards promote best practicesinnovation and motivation encompassed in the performance of such companies that havecontributed to the Indian maritime industry.ESL was recognized apart from its performancefor the initiatives taken in the areas of safety environment technological innovationfor fleet operations & sustainability reporting amongst others.

• ESL also won the Samudra Manthan award organized by Bhandarkar Shipping Eventsfor the "Line of the Year (Dry Bulk) - Diamond category'' recognizing the companiesoperational performance in the year 2014-15 in the Dry Bulk category

• "Sailor Today Awards" that recognize talent & performance amongemployees in the Shipping Industry awarded Ms. Sunita Kotian (Fleet personnel department)with the "Exemplary Achievement Award for Women on Shore" in the IndianShipping industry. Ms. Kotian has been associated with ESL for 29 years & hascontributed significantly to the growth of the company. Our company focuses on recognizingtalent within the organization & ensuring business excellence with such employeeengagement practices.

SUSTANABILITY REPORTING

Since the launch of the first sustainability report by the Company for the year2010-11 the Company has demonstrated progress based on a systematic approach ofintegrating sustainability into the business. Over the years the focus on energyefficiency has helped reduce the costs and environmental footprint related to the shippingbusiness.

The Company's fifth Sustainability Report titled "Sustainability- A process for+ve Change has been released on March 31 2016. Most of the sustainability indicators haveshown improvement over the years. During the year further steps have been initiated tostrengthen the sustainability governance framework. The sustainability report is availableat http://www.essar.com/upload/pdf/ Essar Sustainability Report Final.pdf.

The report has been independently audited as per Global Reporting Initiative (GRI)2011& assured by DNV GL Business Assurance using DNV's Verification Protocol forSustainability Reporting.

HUMAN RESOURCE

Your Company believes that employee competence and motivation are necessary to achieveits business objectives. Your Company has undertaken many training initiatives to enhancetechnical and managerial competence of the employees and to further leverage theircapabilities to enhance their performance. The Company has taken a series of initiativesto enhance emotional and intellectual engagement of employees. During the year underreview the Company held many employees engagement programs at the Company premises andoutside. Families of employees were invited and attended these programs.

The Company has policies on conduct sexual harassment of women at workplace whistleblower corporate governance insider trading etc. guiding the human assets of theCompany. For the year under review there was no instance of the sexual harassmentreported pursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013.

DIRECTORS

In accordance with the provisions of the Companies Act 2013 and the Article ofAssociation of the Company Ms. S. Gayathri retires by rotation at the ensuing AnnualGeneral Meeting and being eligible has offered herself for re-appointment. The Company hasreceived requisite notice in writing from a member proposing Ms. S. Gayathri forappointment as Director.

The brief resume of the Director being re-appointed the nature of her expertise inspecific functional areas names of companies in which she hold directorships committeememberships/ chairmanships their shareholding etc. are provided in the Notes to theNotice of the ensuing Annual General Meeting. Your Directors recommend her reappointmentat the ensuing Annual General Meeting.

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet with the criteria of independence as prescribed both undersub-section (6) of Section 149 of the Companies Act 2013 and under Regulation 16 (b) (iv)of SEBI (LODR) Regulations 2015.

The information on Policy for performance evaluation of Independent Directors BoardCommittees and other individual Directors; Separate meeting of Independent Directors;Familiarization programme for Independent Directors etc. is provided under CorporateGovernance Report annexed with this Report and the relevant policies are also available onthe website of the Company www.essar.com .

BOARD MEETINGS

During the year ended on March 31 2016 five (5) meetings of the Board were held onMay 21 2015 June 24 2015 August 14 2015 November 06 2015 and February 112016.

DIRECTORS' RESPONSIBILITY STATEMENT

Your Directors state that:

(a) in the preparation of the annual accounts for the year ended March 31 2016 theapplicable accounting standards had been followed and there are no material departuresfrom the same;

(b) the Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2016 and of the loss ofthe Company for the year ended on that date;

(c) the Directors had 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;

(d) the Directors had prepared the annual accounts on a going concern basis asexplained in Note No. 35 of Standalone Financial Statements .

(e) the Directors had laid down internal financial controls followed by the Companyand that such internal financial controls are adequate and were operating effectively asendorsed by Statutory Auditor in their separate report annexed to the Annual Report

(f) the Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

RISK MANAGEMENT

Your Company has a Risk Management Policy that outlines the framework and procedures toassess and mitigate the impact of risks and to update the Board and the senior managementon a periodical basis on the risk assessed actions taken for mitigation and efficacy ofmitigation measures. With efficient Risk Management Framework your Company is able tomanage:

(a) Economic Risks by entering into long term contracts with reputed global majors ineach of its divisions thereby ensuring long term profitability of the Company and assuredcash flows;

(b) Interest Rate Risk by undertaking suitable hedging strategies to overcome anyadverse interest rate risks. It has formulated internal target rates at which any openinterest rate risk can be hedged;

(c) Control over the operational matrix of various vessels to reduce cost and reducedowntime of vessels; and

(d) Control over various OPEX cost of the organization.

As per LODR Regulation 2015 Compliance related with Risk Management Committee isrequired to be done by top 100 Companies as per list released by NSE since our Companydoesn't fall in that category hence the Compliance of Risk Management was not needed butyour Company do believe in mitigation/minimisation of risk therefore the management hadput its best effort to minimise/mitigate the risk.

INTERNAL CONTROL SYSTEMS AND ITS ADEQUACY

Your Company has a well-established framework of internal operational and financialcontrols including suitable monitoring procedures systems which are adequate for thenature of its business and the size of its operations. The detailed report on InternalFinance Control and Risk Management Systems is given in Corporate Governance Report.

CORPORATE GOVERNANCE

The Company has complied with all mandatory provisions of SEBI (LODR) Regulations 2015relating to Corporate Governance. A separate report on Corporate Governance as stipulatedunder the SEBI (LODR) Regulations 2015 forms part of this Report. The requisitecertificate from the Auditors of the Company regarding compliance with the conditions ofcorporate governance is attached to the report on Corporate Governance.

VIGIL MECHANISM

The Company has in compliance with Section 177 of the Companies Act 2013 hasestablished Vigil Mechanism by adopting the ‘Whistle Blower Policy' for Directorsand Employees. The Whistle Blower Policy provides for adequate safeguards againstvictimization of persons who use such mechanism and have provision for direct access tothe Chairperson of the Audit Committee in appropriate cases. A copy of the Whistle BlowerPolicy is available on the website of the Company www.essar.com .

CORPORATE SOCIAL RESPONSIBILITY

The Corporate Social Responsibility Committee comprises Captain B. S. Kumar - Chairman;Captain Anoop Kumar Sharma; and Ms. S. Gayathri.

Since the Company has incurred losses in preceding three financial years hence it isnot required to spend on CSR Activities.

EMPLOYEE STOCK OPTION SCHEME

The Company has implemented the "Essar Shipping Employees Stock OptionScheme-2011" ("Scheme") in accordance with the Securities and ExchangeBoard of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme)Guidelines 1999 ("the SEBI Guidelines"). The Nomination and RemunerationCommittee of the Board of Directors of the Company administers and monitors the Scheme.The applicable disclosures as stipulated under the SEBI Guidelines as at March 31 2016are provided in the Annexure - B to this Report.

During the year Company has allotted equity shares to Essar Shipping-Employee OptionsStock Scheme Trust which had remitted the Share Application Money considering the numberof options vested to the eligible employees the same was approved by Board of Directorsand allotment was made and listing for the trading of the same was approved by NSE andBSE.

AUDITORS

Your Company's Statutory Auditor M/s. CNK & Associates LLP (Registration No.101961W) will retire at the conclusion of the ensuing Annual General Meeting.

The Board of Directors of the Company recommend M/s CNK & Associates LLP CharteredAccountants Mumbai (Registration No. 101961W) for appointment as Statutory Auditors ofthe Company by the Members at the ensuing Annual General Meeting. The Company has receivedletter from M/s CNK & Associates LLP Chartered Accountants Mumbai to the effect thatif their appointment is made would be within the prescribed limits laid down underSection 141 (3)(g) of the Companies Act 2013 and they are not disqualified for suchappointments under the provisions of applicable laws.

AUDITORS' REPORT

With regard to the Auditors' observation the Note no. 13 (a) (ii) of StandaloneFinancial Statement and Note no. 37 of the consolidated Financial Statements areself-explanatory.

Further with regard to the observations made in Annexure 1 to the Auditors' Report themanagement explanation is as under:

a) TDS & Service Tax dues:

The Company is making all efforts to clear outstanding statutory dues at earliest.

b) Regarding the dues to the Bank/FI/Debenture-holders

The Company is continuing its negotiation with lenders to refinance the existing loanswith balance useful life of its asset in view of depressed market conditions in theshipping industry.

The delay in repayment of instalments and Interest has been unavoidable due to cashflow mismatch and efforts are being made to avoid the recurrence thereof.

c) With regard to the apparent excess Managerial Remuneration paid to the ManagingDirector:

The remuneration paid to the Managing Director includes the performance linkedincentive amounting Rs.3099004 pertaining to the financial year 2014-15 accordinglythere has been no excess remuneration paid to the Managing Director.

However an application has been made to the Central Government as matter of abundantcaution.

SECRETARIAL AUDIT

The Board has appointed M/s. Martinho Ferrao & Associates Practising CompanySecretaries to conduct Secretarial Audit for the financial year 2015-16. The SecretarialAudit Report for the financial year ended March 31 2016 is annexed herewith marked asAnnexure - C to this Report. The Secretarial Audit Report does not contain anyqualification reservation or adverse remark.

APPOINTMENT AND REMUNERATION POLICY FOR DIRECTORS AND SENIOR MANAGEMENT

The Board of Directors on recommendation of the Nomination & Remuneration Committeehas adopted a policy for appointment of Directors remuneration of Directors KeyManagerial Personnel and other employees. The brief details on the above are provided inCorporate Governance Report and the policy is available on the website of the Companywww.essar.com . The details of remuneration as required to be disclosed pursuant to theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are annexedas Annexure - D to this Report.

PARTICULARS OF EMPLOYEES

In terms of the provisions of Section 197(12) of the Companies Act 2013 read withRules 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 a statement showing the names and other particulars of theemployees drawing remuneration in excess of the limits set out in the said rules togetherwith disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided in the Annexure - E to thisReport.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

All contracts/arrangements/transactions entered by the Company during the financialyear with related parties were in the ordinary course of business and on an arm's lengthbasis. During the year the Company had entered into one contract/arrangement/transactionwith Essar Steel India Limited a Fellow Subsidiary which could be considered material inaccordance with the policy of the Company on materiality of related party transactions.

The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the Company's websitewww.essar.com . The information on each of the transactions with the related party as perthe Companies Act 2013 is provided in note 33 of notes forming part of the financialstatement and hence not repeated. The disclosure required pursuant to clause (h) ofsub-section (3) of Section 134 of the Companies Act 2013 and Rule 8(2) of the Companies(Accounts) Rules 2014 in Form AOC-2 is annexed herewith as Annexure - F to this Report.

EXTRACT OF ANNUAL RETURN

The extract of the Annual Return in Form MGT 9 is annexed herewith as Annexure - G tothis Report.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

Particulars of Loans Guarantees and Investments covered under the provisions ofSection 186 of the Companies Act 2013 are given in the notes to the financial statements.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and Company's operations in future.

ARBITRATION AWARD

Subsequent to the closure of Financial Year the Company has won arbitration award inMay 2016. The tribunal has passed award in favour of the Company as compensation(including intrest) to be paid by SAIL amounting to Rs.323 Crores approx.

ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO

Conservation of energy and Technology absorption

Your company is committed for continual environmental improvement. The Company hastaken several initiatives towards conservation of energy. The Company initiated theprocess of monitoring carbon emissions as per IMO GHG Guidelines and also exploredopportunities to improve energy efficiency onboard the ships. Due to the nature of thebusiness (transportation) fuel and lubricants are necessary to deliver the services.

Following are few steps taken towards conservation of energy and use of alternatesource of energy:

Ship Energy Efficient Management Plan (SEEMP):

In line with current guidelines that have been established by IMO this plan has beenimplemented all across fleet vessels. The capturing and monitoring of the data on regularbasis prompts to take appropriate corrective measures on a timely basis. Onboardperformance monitoring systems will give a holistic approach to ship operations with theaim of reducing fuel consumption and emissions while achieving optimum vessel performance.The Company have already completed energy efficiency evaluation on our assets and are nowin the process of implementing fuel efficiency measures. These include trim speedreduction and weather routing. These fuel efficiency measures will not only reduce energyconsumption but also benefit customers through lower fuel cost where applicable.

Alternate source of energy:

In order to reduce fuel consumption the Company's vessels utilize shore power duringrepair lay-up period and thereby reduce carbon foot print. Periodical cleaning of ship'shull and propellers apart from routine dry-docking of floating assets is another stepwhich has been taken towards conservation of energy with insignificant investment orexpenses.

Technology Absorption

The Company has successfully implemented SAP in its financial and budget managementsystems. The Company has also now implemented various methods of automation so as to havegreater visibility and control over its assets and further improve the turnaround timethereby increasing asset utilisation and profitability. Planned maintenance and purchasemanagement system of all the vessels are now being integrated with SAP in order to haveuniform platform. The Company has implemented a robust Document Management System thusimproving the availability of critical information in e-mode thereby reducing the use ofpaper. Ship-staff payroll system has been developed and implemented successfully.

In-house developed software EIS system has now been upgraded to monitor all the aboveenergy conservation measures and is now available online. Various energy and cargo relateddata are available in e-mode and helps in close monitoring and control of energyconservation related matters. Due to in-house developed software your company has notonly saved on investment towards purchase of third party software but also reduceddependency on third party service provide.

Foreign Exchange Earnings and Outgo

The details of Foreign Exchange Earnings and Outgo during the year are as follows:

Foreign Exchanged Earned (including loan receipts sale of ships freight charter hire earnings interest income etc.):- Rs. 359.04 Crore
Foreign Exchanged Used (including cost of acquisition of ships loan repayments interest Operating expenses etc.):- Rs. 699.53 Crore

PUBLIC DEPOSITS

Your Company has not accepted any public deposits under section 73 of the CompaniesAct 2013 during the Financial Year under report.

APPRECIATION AND ACKNOWLEDGEMENTS

Your Directors express their appreciation of commendable teamwork of all employees.Your Directors express their thanks to all the offices of the Ministry of ShippingDirectorate General of Shipping Ministry of Petroleum and Natural Gas Indian NavyIndian Coast Guard Mercantile Marine Department State Government and Central GovernmentClassification societies Oil Companies and Charterers for the valuable support help andcooperation extended by them to the Company.

Your Directors also thank its Bankers and other business associates including theMembers of the Company for their continued cooperation and support extended towards theCompany.

For and on behalf of the Board
Captain Anoop Kumar Sharma P.K. Srivastava
Managing Director Chairman
(DIN : 03531392) (DIN : 00843258)
Mumbai
May 25 2016