Your Directors present the Fifty Sixth Annual Report and the Audited Accounts for theyear ended March 31 2019.
|1. FINANCIAL RESULTS & APPROPRIATIONS: || ||(Rs. in Lakhs) |
| ||2018-19 ||2017-18 |
|Loss before Financial Charges Depreciation Exceptional Item & Tax ||(82.53) ||(76.67) |
|Financial Charges ||(72.93) ||(149.09) |
|Depreciation ||(131.21) ||(161.69) |
|Loss before Exceptional Item & Tax Impairment ||(286.67) ||(387.45) |
|Impairment ||NIL ||(262.05) |
|Loss before Deferred Tax Provision ||(286.67) ||(649.50) |
|Reversal of Provision for Deferred Tax (Net) ||93.28 ||246.73 |
|Loss after Tax ||(193.39) ||(402.77) |
|Other Comprehensive Income ||(37.77) ||43.53 |
|Total Comprehensive Income ||(231.16) ||(359.24) |
|Brought forward from previous year ||1010.60 ||1369.84 |
|Surplus in Statement of Profit and Loss ||779.44 ||1010.60 |
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.
2. MANAGEMENT DISCUSSION AND ANALYSIS/OPERATIONS REPORT COMPANY'S PERFORMANCE
During the year under review the freight earnings and charter hire receipts amounted toRs. 6.35 Lakhs as against Rs. 12.26 Lakhs during the previous year showing a decrease ofabout Rs. 6 Lakhs. The BDI which started the year at 1016 in April 2018 was down to 689 byMarch 2019. The average dry bulk freight earnings increased by 11% year on year during.2018. However earnings fell sharply in the first quarter of 2019. The Company had oneRiver-Sea Vessel which was sold in December 2018. The Company had not been able to getany meaningful business opportunities in coastal trade for this vessel.
INDUSTRY REVIEW & FUTURE OUTLOOK
After growing by about 4% in 2017 seabornse dry bulk tade expanded by 1.7% in 2018 dueto firm growth in coal and minor bulk tradewhile iron ore and grain volumes remainedsteady year-on-year. During the current year seaborne dry bulk trade is projected to growby 2.2% although outlook for iron ore may be revised downwards. Dry bulk trade is expectedto grow at a rate of 2% in year 2020.
The bulk fleet expanded by 2.9% in dwt terms during 2018. Overall balance offundamentals in the dry bulk sector appears slightly negative during 2019 with fleetexpansion expected at similar level of 2.9%.
Looking further ahead fleet expansion of 3% is forecast for 2020 potentially allowingfor an improvement to the balance of fundamentals in the sector supported in part bynumber of wild cards relating to IMO 2020 sulphur for scrubber retrofits slower operatingspeeds and increased demolition.
INTERNAL FINANCIAL CONTROL SYSTEM
The Company has effective systems of internal controls which are periodically reviewedby the Audit Committee of the Board of Directors. Based on its evaluation (as defined insection 177 of Companies Act 2013 and Clause 18 of SEBI Regulations 2015) our auditcommittee has concluded that as of March 31 2019 our internal financial controls wereadequate and operating effectively.
The Indian economy and many developed countries continue to make effort for speedyeconomic recovery. As part of overall strategy however the Governments in variouscountries continue to give priority for development of overall infrastructure. This bodeswell for overall trade.
The industrial relations during the year were very cordial and there were no industrialdisputes.
THREATS RISKS & CONCERNS
Freight Risks: The Hire income is subject to freight rate risks and therefore theCompany at group level follows the policy of mixture of short period and long periodtime charter contracts 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 theGroup's revenues is generated from international business in the US Dollar terms the samecreates a natural hedge against foreign exchange exposures. The Company reviews Rupee - USDollar parity on regular basis to protect itself from currency fluctuation risks.
At the Company stand alone level the Company is engaged in coastal trade where incomeas well as expenses mostly is in rupee term. As such there is very limited forex risk forthe Company.
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 of outsourcing of crewmanagement the Company gets the benefit of having efficient and cost effective floatingstaff 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 mightdiffer substantially or materially from those expressed or implied. Important developmentsthat could affect the Company's operations include demand-supply conditions changes inGovernment global economic scenario etc.
3. LOAN REPAYMENT
During the year the Company has obtained an unsecured loan of Rs. 1420 Lakhs fromChowgule And Company Private Limited which was utilized for providing financialassistance to Chowgule Steamships Overseas Limited for its working capital requirementsand payment of loan installments. The total outstanding loan at year end was Rs. 1420Lakhs.
4. DEFERRED TAx LIABILITY
In terms of the Accounting Standard AS-12 of the Companies (Accounting Standards) Rules2016 there is a reversal of Deferred Tax liabilities amounting to Rs. 93.28 Lakhs for theFinancial Year 2018-2019 which is reflected in the Statement of Profit & Loss. Thenet Deferred Tax Asset of Rs. 97.39 Lakhs as at March 31 2019 is reflected in the BalanceSheet.
The Company has five overseas subsidiaries including one wholly owned subsidiary andfour step-down subsidiaries. The Board of Directors of the Company reviewed the affairs ofsubsidiaries of the Company. In accordance with Section 129(3) of the Companies Act 2013the Company has prepared consolidated financial statements of the Company and all itssubsidiaries which form part of the Annual Report. Further a statement containing thesalient features of the financial statement of the subsidiaries in the prescribed formatAOC-1 is appended as Annexure 2. The Company will make available these documents / detailsupon request by any member of the Company. However pursuant to Accounting Standard AS-21of the Companies (Accounting Standards) Rules 2016 Consolidated Financial Statementspresented by the Company include the financial information of its subsidiaries. TheCompany does not have any other joint venture/associate company in which it hassignificant influence. The financial highlights of its wholly owned subsidiary viz.Chowgule Steamships Overseas Limited are as under: The financial highlights of CSOL'soperations are as under:
| ||2018-19 ||2017-18 |
| ||(In US $ million) ||(In US $ million) |
|Income ||12.902 ||10.201 |
|Gross Profit before depreciation ||1.964 ||0.985 |
|Depreciation ||(4.395) ||(4.378) |
|Reversal of Impairment/ (Impairment) || ||4.637 |
|Loss on sale of vessels ||(10.279) || |
|Net Profit / (Loss) ||(12.711) ||1.244 |
The fleet of the Company has been adequately insured against Marine and War Risks.
Prof. Rohini Chowgule retires by rotation at the ensuing Annual General Meeting andbeing eligible will be re-appointed. Mr. Nathan Chowgule who also retires by rotationhas expressed desire not to seek re-appointment. The Board of Directors has at itsmeeting held on May 16 2019 decided not fill up the vacancy caused by retirement of Mr.Nathan Chowgule. The Board places on record its sincere appreciation for the servicesrendered by Mr. Nathan Chowgule during his tenure as a Director of the Company. Mr.Mangesh Sawant Managing Director and CFO having attained the age of superannuation hasexpressed desire to relinquish office as Director after the ensuing Annual GeneralMeeting. Mr. Sawant has been with the Company for more than three decades and has servedthe Company at various levels. The Board places on record its sincere appreciation for theservices rendered by Mr. Sawant during his tenure as Managing Director & CFO of theCompany.
8. INDEPENDENT DIRECTORS
Pursuant to the provisions of Section 149 of the Companies Act 2013 the IndependentDirectors hold office for a term up to five consecutive years on the Board of a companyfrom the date of their appointment. Accordingly the term of the Independent Directorswill expire on July 8 2019. In terms of the provisions of Section 149 of the CompaniesAct 2013 (the Act) the Independent Directors may be re-appointed for a second term ofmaximum 5 (five) years by obtaining approval of the shareholders by a way of a specialresolution. Mr. Dhananjay Mungale and Admiral Arun Prakash (Retd) have expressed desirenot to seek re-appointment and accordingly they will cease to be Directors on expiry oftheir term as Independent Directors. The Board places on record its deepest sense ofgratitude for the services rendered by Mr. Mungale and Admiral Arun Prakash as Directors/Independent Directors of the Company. Mr. Sanjiv Shah Mr. Ravindra Kulkarni and Mr.Farokh Guzder are proposed to be re-appointed as Independent Directors at the ensuingAnnual General Meeting for another term of five years. All the Independent Directors haveconfirmed that they meet the criteria of independence as mentioned under Regulation16(1)(b) of the SEBI Listing Regulations read with Section 149 of the Act. Pursuant to theprovisions of Listing Regulations the background of the Directors proposed to beappointed / re-appointed at the Annual General Meeting is given in the Notice calling theFifty Sixth Annual General Meeting of the Company.
9. INDUCTION AND TRAINING OF THE BOARD MEMBERS
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 Director 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 www.chowgulesteamships.co.in
10. EVALUATION OF PERFORMANCE OF THE BOARD COMMITTEES AND DIRECTORS
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 attendance of directors at meetings contribution at the meetingsqualifications experience and competencies performance of specific duties 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 byIndependent Directors.
11. CORPORATE GOVERNANCE
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.
12. CODE OF CONDUCT
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.
13. DIRECTORS' RESPONSIBILITY STATEMENT
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 haveselected such accounting policies and applied them 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 loss of the Companyfor 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 concernbasis". The Directors have laid down internal financial controls to be followed bythe Company and such internal financial controls are adequate and are operatingeffectively.
The Directors have devised proper system to ensure compliance with the provisions ofall applicable laws and that such systems are adequate and operating effectively.
The shareholders at their Fifty Fourth Annual General Meeting held on July 21 2017approved appointment of M/s CNK & Associates LLP Chartered Accountants (FirmRegistration No. 101961W) for a term of consecutive five years from conclusion of 55thAnnual General Meeting to conclusion of the 59th Annual General Meeting. The Auditorsbeing eligible have given their consent for appointment.
During the year the Auditors have been paid remuneration as under:
|Description ||Amount (R in Lakhs) |
|Audit Fees ||4.70 |
|Other services ||2.63 |
|Reimbursements ||NIL |
The notes on financial statement referred to in Auditors Report are self explanatoryand do not call for any further comments. The Auditors report does not contain anyqualification reservation or adverse comment. Secretarial Auditors
M/S V.N. Deodhar & CO. Company Secretaries were appointed to conduct thesecretarial audit of the Company for the Financial year 2018-19 as required under Section204 of the Companies Act 2013 and the Rules made thereunder. The Secretarial Audit Reportfor financial year 2018-19 forms part of the Annual Report.
15. 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).
16. 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. 17. The Directors confirm that the revised Secretarial Standardsissued by the Institute of Company Secretaries of India have been complied with. 18.The policy on appointment /remuneration of directors is discussed in Corporate Governancesection annexed to this Report. 19. There have been no significant material orderspassed by courts tribunals or regulatory authorities which can have impact on goingconcern status of the Company and its operations. 20. During the year fourmeetings of the Board of Directors of the Company were held viz. on May 9 2018 July 202018 October
25 2018 and January 17 2019.
21. Loans Investment and Guarantees etc During the year the Company hasgiven a loan of about US $ 2 million to its subsidiary company viz. Chowgule SteamshipsOverseas Limited which is outstanding.
22. The Company has formulated a policy on materiality of Related PartyTransactions for dealing with such transactions in line with the requirements of ListingRegulations. The policy on Related Party Transactions is available on the Company'swebsite viz. chowgulesteamships.co.in. Particulars of Contract or arrangement with relatedparties as referred to in Section 188 of the Companies Act 2013 in the format AOC 2 isenclosed as Annexure 3.
23. The Risk Management Policy of the Company evaluates various risks surroundingthe business of the Company and its subsidiaries and seeks to review and upgrade its riskmanagement process. The Board of Directors formulates strategies and takes necessary stepsin mitigating these risks. 24. The Company has not accepted /renewed any FixedDeposits during the year ended March 31 2019.
25. Disclosure pursuant to The Companies (appointment and Remuneration of ManagerialPersonnel) Rules 2014 Information pursuant to Rule 5 (1) of the above mentioned Rules:
|Name of Director ||Designation ||% Increase compared to previous year ||Ratio to median remuneration of employees |
|Mr. Vijay Chowgule ||Chairman- Non Executive ||NIL ||0.09 |
|Mr. Dhananjay Mungale ||Independent Director ||NIL ||0.09 |
|Mr. Jaywant Chowgule ||Non Executive Director ||NIL ||0.03 |
|Mr. Sanjiv Shah ||Independent Director ||NIL ||0.05 |
|Mr. Nathan Chowgule ||Non Executive Director ||NIL ||0.04 |
|Prof. Rohini Chowgule ||Non Executive Director ||NIL ||0.05 |
|Mr. Ravindra Kulkarni ||Independent Director ||50%* ||0.06 |
|Mr. Farokh Guzder ||Independent Director ||NIL ||0.07 |
|Admiral Arun Prakash ||Independent Director ||NIL ||0.05 |
|Mr. Mangesh Sawant ||Managing Director & CFO ||36.40 ||7.41 |
* Increase in sitting fees was due to appointment of Mr. Kulkarni as a Member in theAudit Committee during the year.
Non Executive Directors and Independent Directors are paid Sitting Fees for attendingmeetings of the Board of Directors and Committees thereof. Information pursuant to Rule 5(2) of the above mentioned Rules in respect of Mr. Mangesh Sawant Managing Director &CFO
|Name ||Mangesh Sawant |
|Remuneration ||109.41 lakhs |
|Designation ||Managing Director & CFO |
|Nature of Employment ||Contractual |
|Qualification and experience ||B.Com. Ll.B. ACA member CMA |
|Date of Commencement ||22.09.1986 |
|Age of employee ||60 |
|Last employment held ||A.F. Ferguson & Co. Chartered Accountant |
|Percentage of equity shares held ||0.0003 (133 equity shares) |
|Whether relative of any Director/ Manager ||No |
|Sr. Requirements ||Disclosure |
|1 Percentage increase in remuneration of Managing Director & CFO ||36.40 |
|2 Percentage increase in remuneration of Company Secretary ||9.03 |
|3 Percentage increase in median remuneration of employees in the financial year ||10.20 |
|4 Number of permanent employees ||7 employees |
|5 average percentile increase in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof ||The increase in remuneration of the employees excluding Managerial Personnel for the financial year ended on March 31 2019 was about 10%. The Managing Director & CFO was reappointed w.e.f. April 1 2018. Accordingly the remuneration of the Managing Director & CFO was revised. In view of this the remuneration stood increased by 36.40%. The revision in the |
| ||remuneration can not be effectively compared to the annual increment in the salaries of employees. The remuneration of Managing Director & CFO is commensurate with the market condition and the experience and expertise of incumbent. |
|6 Remuneration as per Policy ||The Remuneration paid to Directors/ senior management personnel was as per the Remuneration policy of the Company. |
Details of remuneration of Employee pursuant to Rule 5 of the Companies (appointmentand Remuneration of Managerial Personnel) Rules 2014
|Sr. ||Employee Name ||Designation ||Educational Qualification ||Age ||Experience in years ||Date of joining ||Gross Remuneration ||Previous employment |
|1 ||M.S. Sawant ||Managing Director & CFO ||B.Com; CA ICWA LLB ||60 ||33 ||22.09.1986 ||109.41 lakhs ||A.F.Ferguson & Co Chartered Accountants |
|2 ||Suhas Joshi ||Company Secretary ||B. Com; LLB ACS ||53 ||11 ||10.01.2008 ||27.99 lakhs ||Consultancy Services by forming own company |
|3 ||Capt. Suresh Verlekar ||Vice President - Commercial ||B.Sc;Master Mariner MICS EMBA ||51 ||12 ||01.02.2007 ||33.07 lakhs ||Petronet LNG Limited |
26. CEO / CFO Certification
The CEO/CFO has issued a certificate pursuant to the provisions of the ListingRegulations certifying that the financial statements do not contain any untrue statementand these statements represent a true and fair view of the Company's affairs.
27. Corporate Social Responsibility.
As the Company does not fullfill criteria laid down in Section 135 of the CompaniesAct 2013 the provisions of Corporate Social Responsibility are not applicable to theCompany.
28. Extract of Annual Return
In accordance with Section 134 (3) (a) of the Companies Act 2013 an extract of annualreturn in form is available on the Company' website www.chowgulesteamhsipsin theInvestor Information' section.
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 16 2019 ||Chairman |