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Cochin Shipyard Ltd.

BSE: 540678 Sector: Others
NSE: COCHINSHIP ISIN Code: INE704P01017
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OPEN 329.00
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VOLUME 18206
52-Week high 491.15
52-Week low 209.00
P/E 6.69
Mkt Cap.(Rs cr) 4,263
Buy Price 324.10
Buy Qty 20.00
Sell Price 325.00
Sell Qty 15.00
OPEN 329.00
CLOSE 323.10
VOLUME 18206
52-Week high 491.15
52-Week low 209.00
P/E 6.69
Mkt Cap.(Rs cr) 4,263
Buy Price 324.10
Buy Qty 20.00
Sell Price 325.00
Sell Qty 15.00

Cochin Shipyard Ltd. (COCHINSHIP) - Director Report

Company director report

Dear Shareholders

1. Your Directors have pleasure in presenting the 47th Annual Report of your Companyalong with the audited financial statements for the year ended March 31 2019.

Financial Performance

2. Your Company posted yet another year of impressive performance despite theshipbuilding market scenario remaining lackluster. Diversified operational segments andproduct profile helped the Company to achieve a turnover of 2962.16 crores for the yearas compared to 2355.12 crores in the year 2017-18. The profit before tax was 751.38crores for the year as against 604.86 crores in the previous year. The net profit was481.18 crores as compared to 396.75 crores for the previous year.

3. The authorised share capital of the Company is 2500000000/- divided into250000000 equity shares of face value of 10/- each. The paid up share capital of theCompany is 1315403900/- divided into 131540390 equity shares of face value of 10/-each. In December 2018 the Company went in for a buyback of 4395610 equity shares offace value of 10/- each at a price of 455/- per equity share. The amount of outflow on thebuyback was approx. 200 crores. In consequence of the buyback the post buyback paid upequity share capital of CSL decreased from 1359360000/- (pre-buyback) to1315403900/- (post buyback).

Financial Highlights

(? in Crs)

Sl. No. Particulars 2018-19 2017-18
(i) Gross Income 3190.27 2544.28
(ii) Profit before finance cost depreciation & tax 799.83 653.78
(iii) Finance costs 14.30 11.41
(iv) Depreciation & write off 34.16 37.51
(v) Profit Before Tax 751.38 604.86
(vi) Tax Expense 270.20 208.11
(vii) Net profit 481.18 396.75

Dividend

4. As per Office Memorandum F.No.5/2/2016-Policy dated May 27 2016 issued byDepartment of Investment and Public Asset Management (DIPAM) every CPSE have to pay aminimum annual dividend

of 30% of PAT or 5% of the net-worth whichever is higher. Accordingly your Directorsare pleased to recommend a dividend of 13/- per share on the 131540390 fully paidequity shares of 10/- each. The total outgo for dividend and dividend tax would beapproximately 206.15 crores. No unclaimed dividend (previous years') is due to betransferred to the Investor Education and Protection Fund (IEPF).

Dividend Distribution Policy

5. As per Regulation 43A of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 the top five hundred listedentities shall formulate a dividend distribution policy. Accordingly dividenddistribution policy has been adopted to set out the parameters and circumstances that willbe taken into account by the Board in determining the distribution of dividend to itsshareholders and/or retaining the profit into the business. The policy is enclosed asAnnexure 1 to the this report and is available on the CSL's website at https://www.cochinshipyard.com/links/Dividend%20Distribution%20Policy.pdf

Transfer to Reserves

6. During the year an amount of 2.88 crores was transferred to Debenture RedemptionReserve in terms of Section 71(13) of the Companies Act 2013. The company alsotransferred 4.39 crores to Capital Redemption Reserve being the nominal value of theshares brought back in terms of Section 69 of the Companies Act 2013. As on March 312019 the Company has Reserves and Surplus amounting to 3200.54 crores which reflects theinherent financial strength of the Company.

Contribution to Exchequer

7. The total contribution made during the year by way of income tax customs duty GSTbuyback of shares and dividend including dividend distribution tax was approximately863.34 crores.

Shipbuilding

8. The Company achieved a total shipbuilding income of 2130.18 crores during 2018-19as against 1731.86 crores in 2017-18. During the year 2018-19 CSL delivered three TunaLong Liner Cum Gilnetter Fishing Boats for the beneficiaries of Tamil Nadu. The yard alsocompleted various major milestones on the projects which are under construction such aslaunching of SH 21 and SH 22 - 500 pax vessels start of erection of SH 23 - 1200 Paxvessel commenced grand assembly of hull blocks of SH 24 - 1200 Pax vessel steel cuttingand erection start of BY 98-99 - the Ro-Pax vessels for Inland Waterways Authority ofIndia (IWAI).

9. Indigenous Aircraft Carrier (IAC) project progressed satisfactorily. Trials of 6 outof 8 Nos. 3 MW DGs have been completed. Gas turbine starting and trials scheduled fromSeptember 19 2019. STW of ship systems such as salvage heeling & trimming bilge andfiremain etc. has been completed. 72000 Mtrs. out of estimated 82500 Mtrs. piping has beencompleted. 1475 km (75% of the estimated cable length) has been laid on board as on March31 2019. Trials of part of IPMS (Integrated Platform Management System) have beencommenced. Installation & operations checks of electrical power distribution systems& internal communication systems and installation of Ship Data Network (SDN) are inprogress. Installation of 2 Nos. restraining gear has been completed. Installation ofother AFC equipments and systems such as arresting gear AFC PSS ammunition magazineetc. have progressed well. 3D modelling of the super structure is nearing completionwhich will lead to the culmination of the design phase of the ship. Outfitting of superstructure shall commence soon after above 3D modelling completion. Preparation

has been commenced for the Basin Trials (BT) of the carrier scheduled in February 2020.Phase 3 contract negotiations are at an advanced stage and are expected to be concluded bymid of FY 2019-20.

Ship Repair

10. During the year the Company achieved a total ship repair income of 831.97 croresas compared to 623.27 crores during the financial year 2017-18. Major vessels repairedduring the year include INS Vikramaditya INS Shardul Modu Sagar Bhushan ICGS Samar INSSagardhwani RV Sindhu Sadhana INS Jamuna etc.

Shipbuilding Order Book Position

11. As on date of the report CSL has been successful in securing against intensecompetition shipbuilding orders for 8 Nos. of ASW corvettes for Indian Navy 4 Nos. ofmini bulk carriers for a JSW group concern and 9 Nos. of floating border outposts for BSF.The Company also received on nomination 8 Nos. of Ro-Pax vessels & 2 Nos. of Ro-Rovessels for Inland Waterways Authority of India 3 Nos. of marine ambulance boats forKerala Fisheries Department and 2 Nos. of brows and pontoons for Indian Navy. The orderbook position as on March 31 2019 is as follows:-

Vessel Type Nos
Indigenous Aircraft Carrier for the Indian Navy P-71 01
Technology Demonstration Vessel (Special Purpose Vessel) for DRDO 01
500 passenger cum 150 MT cargo vessel for A&N Administration 02
1200 passenger cum 1000 MT cargo vessel for A&N Administration 02
Tuna Longliner Cum Gil netter Fishing Boat (3 boats delivered) for Tamil Nadu 16
Ro-Pax vessels for Inland Waterways Authority of India for NW1/ NW2 08
Ro-Ro vessels for Inland Waterways Authority of India for NW3 02
Brows & Pontoons for Indian Navy 02
Marine Ambulance Boat for Kerala Government 03
Mini Bulk Carrier of 8000 T for Utkarsh Advisory Services Limited (JSW group) 04
Floating Border Outpost vessels for Ministry of Home Affairs 09

Expansion Projects

12. Details of major projects and initiatives taken up during 2018-19 are as follows:

i) International Ship Repair Facility (ISRF) at Cochin Port Trust

CSL continued to operate the dry-dock & existing facilities in the leased area(first phase) at Cochin Port premises. CSL completed the repairs of seven ships during thefinancial year 2018-19. Meanwhile gate of the existing dry-dock was successfully replacedduring the period March - October 2018. The construction works which commenced onNovember 17 2017 is progressing in full swing. More than 60% of the piling works arecompleted and the facility is expected to be commissioned in FY 2020-21. As a part of ourefforts to develop Kochi as a maritime hub of India CSL is setting up a maritime parkadjacent to the ISRF premises to house major OEMs and service providers of the ship repairindustry. Civil construction is almost complete and we expect to allocate the initialunits to service providers during Q3 2019-20. CSL expects to position Kochi as a

major ship repair hub with major operations in the present ship repair dock coupledwith increased capacities that would be available when the ISRF is commissioned.

ii) New Dry-dock Project

The new dry-dock measuring 310 x 75/60 x 13m with 600T gantry crane will be located atthe northern end of the existing premises of the Company. The new dock will augment theCompany's shipbuilding and ship repair capacity essentially required to tap the marketpotential of building specialized and technologically advanced vessels such as LNGCarriers Aircraft Carriers of higher capacity jack up rigs drill ships large dredgersand repairing of offshore platforms and larger vessels. Turnkey contract for constructionworks of plant and machinery for the new dry-dock project was awarded on April 27 2018and construction activities commenced on June 01 2018. Shri Pinarayi Vijayan the Hon'bleChief Minister of Kerala and Shri Nitin Gadkari Hon'ble Union Minister for Shipping RoadTransport Highways Water Resources River Development and Ganga Rejuvenation did thehonours of ground breaking ceremony of the dry-dock project on October 30 2018. Groundimprovement works and RCC piling are in progress and five hundred piles have beencompleted. Contract for the supply & commissioning of 600 T gantry crane was issued onMarch 14 2019.

iii) Hooghly Cochin Shipyard Limited (HCSL)

The new Joint Venture Company Hooghly Cochin Shipyard Limited was incorporated onOctober 23 2017. Cochin Shipyard has invested 60.28 crores (16.28 crores by way of equityand 44 crores by way of debentures) for building up the infrastructure of the Company. Inthis respect a Detailed Project Report (DPR) has been submitted by the project managementconsultant. The proposed developmental work in Nazirgunge shall be carried out in a phasedmanner as operational phase & expansion phase. Operation phase will cater to therefurbishment of existing slipways development of related shops allied facilities andexpansion phase is intended to establish the side launching facilities and associatedoutfit berthing facilities. The expected total project cost including operational andexpansion phase would be 169.76 crore including GST.

The Construction contract for civil work for the new yard was awarded on January 102019.

Tendering activities with regard to other work packages like external electrical gaspiping fire fighting etc. are under process. The groundbreaking ceremony of theconstruction of new yard at HCSL was performed by Shri Madhu S Nair Chairman (HCSL) andCMD (CSL) at Nazirgunge on February 16 2019 in the presence of Shri Vinit Kumar IRSEEChairman (KoPT) Shri S Balaji Arunkumar Dy. Chairman (KoPT)/CMD (HDPEL) and theDirectors of CSL. The operational phase of the project is expected to be completed within18 months and the unit to be operational by 2020. The establishment will promotesocioeconomic development in the region and will also help development of ancillary units.

A separate statement containing the salient features of the financial statement ofsubsidiaries/ associates/joint venture companies in form AOC - 1 pursuant to theprovisions of section 129 (3) of the Companies Act 2013 is attached along with thefinancial statements.

iv) New Initiatives

CSL has entered into an agreement with the Mumbai Port Trust on October 20 2018 toupgrade operate and manage Ship Repair Facility at Hughes dry-dock and berth nos. 5 6 7and 8 of Indira Dock of Mumbai Port. Subsequent to the execution of the agreement CSL hascommenced the ship repair operations in Mumbai on January 18 2019. As on date nine shipswere repaired in the facility. It is expected that once stabilized the ship repairoperations will add significant strength to CSL's overall ship repair portfolio. CSLsigned the agreement with Kolkata Port Trust on March 28 2019 for operations andmanagement of ship repair facility at Netaji Subhas Dock which shall be focusing on theship repair requirements at Kolkata area and inland waterways. CSL has also signed a MoUwith Andaman & Nicobar (A&N) Administration for setting up its unit at Port Blairin September 25 2018. The agreement with A&N is in the administrative phase and isexpected to be cleared in the current FY. By entering into this arrangement with A&NAdministration CSL shall be developing an integrated ship repair ecosystem at A&Nislands that includes modernisation of facilities maintenance of Administration ownedvessels and skill development for the islanders.

Utilisation of IPO Proceeds

13. Details of utilization of funds from proceeds of IPO as

on March 31 2019 is given below:

Particulars Crs
Proceeds from Initial Public Offer (IPO) 961.95
Less: Amount estimated towards IPO expenses (Company's share) 21.72
Net IPO proceeds 940.23
Add interest amount reinvested 60.41
Total proceeds plus interest 1000.64
Less utilisation of proceeds for:
General Corporate Purpose (GCP) 165.22
Construction of New Dry-dock 256.38
ISRF 210.60 632.20
Fund balance as on March 31 2019 368.44
Parking of funds in Fixed Deposits 368.39
Parking of Funds in Current Accounts 0.05
Parking of funds as on March 31 2019 368.44

Buyback of Shares

14. The Board of Directors of Cochin Shipyard Limited at its meeting held on October16 2018 announced the Buyback of upto 4395610 (Forty Three Lakh Ninety Five ThousandSix Hundred and Ten) fully paid-up equity shares of 10/- (Rupees Ten only) each from theshareholders / beneficial owners of equity shares of the Company as on the record datei.e. October 31 2018 on a proportionate basis. The buyback was through the "tenderoffer" route at a price of 455/- (Rupees Four Hundred and Fifty Five Only) per equityshare for an aggregate amount not exceeding 2000002550/- (Rupees Two Hundred Crore TwoThousand Five Hundred and Fifty Only) excluding any expenses incurred or to be incurredfor the buyback.

15. The above buyback represented approximately 3.23% of the total number of equityshares in the issued subscribed and paid-up equity share capital of the Company as atMarch 31 2018. The buyback size is 6.41% of the aggregate of the fully paid-up equityshare capital and free reserves as per the audited standalone financial statements of theCompany for the financial year ended March 31 2018.

16. Accordingly the tendering period for the buyback offer opened on WednesdayNovember 28 2018 and closed on Tuesday December 11 2018.

17. The Company received 26810 valid bids for 20296677 (Two Crore Two Lakh NinetySix Thousand Six Hundred and Seventy Seven) equity shares in response to the buybackresulting in the tender of approximately 4.62 times the maximum number of equity sharesproposed to be bought back.

18. The payment to the shareholders was made on December 18 2018 and the 4395610equity shares bought back was extinguished on December 20 2018. The President of Indiaacting through the Ministry of Shipping Government of India participated in the buybackoffer and tendered 3017558 equity shares. An amount of 1372988890/- (Rupees OneHundred and Thirty Seven Crore Twenty Nine Lakh Eighty Eight Thousand Eight Hundred andNinety only) was paid to the Government of India towards the consideration for the saidshares. Post buyback the shareholding of the Government of India has increased to 75.21%from 75%.

19. The shareholding pattern of the Company pre buyback and post buyback is as under:

Pre buyback

Post buyback

Particulars No. of shares % of shares No. of shares % of shares
President of 101952000 75.00 98934442 75.21
India acting through Ministry of Shipping Government of India
Public 33984000 25.00 32605948 24.79
Total 135936000 100.00 131540390 100.00

Manpower Status

20. The manpower strength of the Company as on March 31 2019 was 1744 consisting of340 executives 152 supervisors and 1252 workmen.

Industrial Relations

21. CSL continued to maintain and foster cordial industrial relation atmosphere duringthe year. There was no loss of man hours on account of labour unrest due to reasonsattributable to the Company exclusively.

22. Process of collective bargaining for framing a Long Term Settlement (LTS) for CSLpermanent workmen by recognized trade unions of the Company continued amicably. Afterprotracted discussions at different levels in a series of 46 meetings a memorandum ofagreement for wage revision of workmen was signed on March 28 2019. This memorandum ofagreement is expected to be made as a long term settlement under section 12(3) of theIndustrial Disputes Act 1947 after due approval of the same by the competent authorities.As per the agreement and in line with the guidelines issued by Department of PublicEnterprises vide its OM. No. W-02/0015/2016-DPE (WC-GL-XIV/17) dated November 24 2017the period of settlement is for ten years from April 01 2017 to March 31 2027 andfitment at the rate of 15 percent on the aggregate of basic pay as on March 31 2017 andcorresponding industrial DA at the rate of 119.50 percent of the basic pay. This milestoneLTS for wage revision kindled general contentment and happiness among the workmen of theCompany. The recognized trade unions with their pro-active approach during the course ofthe negotiation have once again exhibited their true allegiance to the enhancedproductivity and economic sustainability of the Company.

23. The executives and non-unionised supervisors also continued to contribute theirbest to the Company during the year.

24. The joint management fora like joint councils shop council central safetycommittee shop level safety committees contract worker safety committee canteenmanagement committee employees' contributory provident fund trust etc. continued tofunction effectively.

25. Employees and their dependents welfare and wellbeing are well taken care throughvarious voluntary schemes like Employees Medical Assistance Scheme Employees PensionScheme Shipyard Parivar Prathibha Puraskar Scheme Employees Educational AssistanceScheme etc.

Human Resource Development

Learning and Development Activities During 2018-19

26. The Company continued to conduct the "Young Officers Competency DevelopmentProgramme" covering young managers upto the level of Deputy

Managers. A second batch comprising of 25 executives have completed 46 sessions. Thirdbatch also commenced with 6 sessions completed for a total of 32 executive trainees. Thefaculty for this programme is primarily drawn from in-house talent as well as retiredexecutives. As part of facilitating knowledge transfer a structured training programmefor workmen in the trades of welder pipe fitter structural & engineering fitters andelectrical covering 174 workmen was held during the year.

27. Company continued to nominate executives at all levels to attend specificmanagement development programmes at IIMA IIMK IIMC ASCI ISB etc. The Companycontinued with the six customized management development programmes in association withthe Indian Institute of Management (IIMK) Kozhikode. Two comprehensive one weekprogrammes on "General Management"' were conducted at the IIMK main campuscovering 48 executives up to the level of AGMs. Three day programmes were conducted atIIMK Kochi campus covering 75 executives on communication effectiveness contractmanagement and finance for non-finance managers etc. Further twelve in-house programmeswere conducted in CSL on a wide range of topics ranging from GST updation to vigilancesensitization. The prominent technical programmes conducted in-house include programmes onElectrical Safety Confined Space - Gas Safety" programme on "QCInspection" conducted by renowned classification society M/s. Indian Register ofShipping (IRS) on FRP structures talk on ergonomics coupler scaffolding system. Seniormanagement cadre executives including CMD & Directors had attended programmes underigniting minds scheme in various premier institutes in the country like ISB HyderabadIIMA IIMC etc. on various topics relevant to senior executives.

28. Women Development Programme: Sessions were given exclusively to women employees& executives on topics like Nuero Lingusitic Programming (NLP) work-life balance etc.

29. Retirement Orientation Programme: In addition to the above all the employees &executives retiring on superannuation from the roles of the Company were given a one dayorientation programme consisting of topics like Investment planning and tax planninghealthy lifestyle tips after retirement motivation etc. in association with the educationofficers of Dattopant Thengadi National Board for Workers Education Ministry of LabourGovt. of India.

Encouraging Leadership

30. "Nethruthwa Samvriddhi Yojana - Leadership Acceleration Programme (LEAP) waslaunched in the year 2016 to encourage and motivate executives in the grades E1 to E4 forpursuing higher studies in premier institutes both in India and abroad. The core benefitunder the scheme is not only a grant of study leave for two years but reimbursement oftuition fees in installments after they come back and join for duty. A maximum of threeapplicants are considered on a yearly basis under LEAP scheme. Last year three executiveshad been granted study leave to pursue Post Graduation in various IITs/ IIMs and all ofthem have re-joined after completing M Tech at IIT. During January 2019 again freshapplications were invited for considering under LEAP scheme and accordingly threeexecutives have been selected for granting study leave. One of the executives has alreadyjoined IIM for pursuing higher studies.

Educational Scholarships to Wards of Employees

31. "Shipyard Pariwar Prathibha Puraskar" an educational scholarship schemeintroduced from the year 2016 aims to reward and promote the star performers among thewards of regular employees of CSL. A scholarship of 25000/- per year for a maximum periodof 5 years shall be bestowed in the order of highest marks scored by the wards in classXII final examination. During the year 2018-19 43 eligible students have been grantedscholarship under the said scheme.

32. CSL launched special financial assistance scheme applicable to SC/ST apprenticetrainees in 2018 to provide monthly financial assistance of 1500/- for meeting theirexpenses towards rental accommodation in Kochi. The monthly financial support is extendedto a maximum of 10 trainees during the period of apprenticeship training subject toperiodical review by CSL. Under the scheme 10 trainees were provided financial assistanceduring the year.

Recognising Excellence

33. CSL has introduced the Employee Excellence Awards Scheme envisaging reward andrecognition of innovative ideas and practices among the employees below the level of AGMs.The highest award under the scheme is Chairman's award with a citation and cash price of15000/-. The awards are presented to the winners on the occasion of Independence day andRepublic day celebrations every year to the permanent employees while fixed term contractemployees and advanced trainees are honoured during the valedictory ceremony of"Productivity Month Celebrations" or on "Safety Day" "SwachtaDiwas" etc. In 2018-19 71 permanent employees and 16 contract personnel/traineeshave been honored with Chairman's commendation which carries 2000/- cash prize.

Encouraging Thought Provoking Ideas

34. The talk series ‘Prajyoti' where eminent personalities who have excelled intheir professional field share their thoughts with the executives of CSL continued. Duringthe year three such talk sessions were held by Dinesh P Thampi Vice President andDelivery Centre Head Tata Consultancy Services Limited Dr. V A Joseph former MD SouthIndian Bank Limited Rameshan Paleri Chairman Uralungal Labour Contract CooperativeSociety Ltd.

35. ‘Prajnan' talk series is a technical talk series launched in the year 2018which is aimed at spreading knowledge about latest technologies and changes happeningaround us. This will promote continuous learning among executives create avenues forstructured internal discussions on new technological areas emerging fields and otherareas of topical relevance. Two sessions were conducted during 2018-19 on topics AccuracyControl in Shipbuilding and Robotics Automation and Distortion Control in Welding.

36. Atmajyoti' series of inner awakening discourse was held on July 21 2018 at CSL.Dr. E Sreedharan Principal Advisor to DMRC & LMRC and former CMD of CSL fondly knownas "Metro Man" of India has addressed the employees of CSL. The talk wasfollowed by an interactive session with all employees of the Company including contractemployees and trainees.

37. Apart from the above prominent persons also addressed a gathering of executives onprocurement procedures and policies. Experts from Lloyds Register UK also addressed aselect gathering of executives.

38. Mentor-Mentee scheme launched in the year 2016 continued this year also forensuring personalized special attention by a senior executive. It is extended to all newexecutives/executive trainees joining CSL. This collaboration gives junior executives whoare freshers a feeling of engagement belongingness and significant improvement in theinter and intra personal relationship in the organization which lead to better retention.

39. Buddy scheme was launched in the year 2019 with the induction of new batch ofexecutive trainees. The objective of the scheme is to encourage the younger

executives in CSL to be a guide to the new entrants especially executive traineesjoining CSL. The scheme will help the new entrants especially those from outside Kochi tosocialize and get a support/ guidance during their organizational entry as well asexperience a smooth transition from campus to corporate life.

40. CSL Star Board - a new mobile application for executives was introduced in 2017 forthe purpose of knowledge sharing. The objective of Star Board is to enable the executivesto share their technical knowledge latest technical information and to provide a platformfor innovative minds on matters related to their profession/work. Star Board will promoteknowledge sharing culture in CSL which is essential for the existence and success of anybusiness. This platform has provisions for sharing of both explicit knowledge and tacitknowledge.

41. The ‘Sandbox' is an online platform introduced in 2019 to act as a launch padof new ideas formed primarily with the vision of becoming a collaboration platform forofficers of CSL. ‘Sandbox' is envisaged to act as a people engagement platform whichwill provide each executive of the organization an opportunity to express their innovativeideas and to implement those ideas associating with likeminded people while getting guidedby mentors and experts in the relevant areas. The platform is expected to nurturecreativity encouraging innovation technology induction and thereby to try a changeculture within the organisation which would contribute towards a larger transformation oforganisation. A three day session was imparted by faculty from the Indian Institute ofManagement Kozhikode IIMK for the sandbox team members in CSL.

42. Samanvay knowledge management portal developed by Department of Public Enterpriseswas introduced in CSL in 2018. This portal intends to share the best practices casestudies tacit knowledge break through innovations etc. in respective functional domainsamong CPSEs. All executives in CSL are allowed access to Samanvay portal for knowledgesharing. CSL has enabled the knowledge management application in the SAP portal for allsupervisors and officers. Department wise knowledge repositories has been created whichcan be viewed across CSL for knowledge enrichment.

Professional Assessments

43. Through an elaborate competency mapping exercise four cultural competencies namelyteaming execution excellence constraint breaking and continuous learning have beenidentified for CSL. It has been decided that

these cultural competencies will be incorporated in all HR sub systems likerecruitment training performance management career development etc. in future.

44. During the year 2018 M/s. Korn Ferry Hay group a leading HR consultancyorganization in Asia was awarded the work order for conducting executives' AssessmentDevelopment Centre (ADC) and creation of Individual Development Plans (IDPs) forsuccession planning. ADC was conducted to assess the competencies of 100 executivesvis-avis the required competencies. During the year ADC was conducted successfully for100 selected executives in the grades of SMs and above. M/s. Korn Ferry Hay group assessedthe strengths and areas for development of the executives using various assessment toolsand prepared detailed IDP. In addition to formulation of succession plan the ADC wasbeneficial to CSL as it provided right direction for planning HR interventions.

People Capability Maturity Model (PCMM)

45. During the year the Company commenced activities for obtaining a level 3 PCMMcertification. The timeline for obtaining the same is as follows:

(a) Conduct of SCAMPI-B readiness Audit - October 2020;

(b) Conduct of SCAMPI-A Final Audit - six months after completion of readiness auditi.e. by March 2021.

46. PCMM is a maturity framework that focuses on continuously improving the managementand development of the human assets of an organization. The PCMM helps organizationscharacterize the maturity of their workforce practices establish a program of continuousworkforce development set priorities for improvement actions integrate workforcedevelopment with process improvement and establish a culture of excellence. The PCMMconsists of five maturity levels; Level 1 to Level 5. Each maturity level is awell-defined evolutionary plateau that institutionalizes new capabilities for developingthe organization's workforce. Unlike other HR models PCMM requires that key functions/process areas improvements interventions policies procedures and practices areinstitutionalized across the organization irrespective of function or level. Thereforeall improvements have to percolate throughout the organization to ensure emphasis on aparticipatory culture embodied in a team-based environment and encouraging individualinnovation and creativity.

Training

47. Under the Apprentices Act the Company has imparted training to 181 ITI tradeapprentices 14 engineering graduates 08 diploma holders and 05 vocational trainees in2018. Furthermore specialized training mainly in the technical streams was extended to473 trainees under the Company scheme. The Company during the year had also inducted 38executive trainees for one year training. The GME course approved by Director General ofShipping Govt. of India was undergone by 134 engineering cadets during the year toqualify for marine engineering jobs onboard vessels.

48. The Company constituted a Strategic Human Resource Committee of the Board with ShriBejoy Bhasker Director (Technical) Shri Jiji Thomson Non Official Part Time(Independent) Director and Prof. Biju Varkkey of IIMA as members to bring further focusand oversight on the transnational human resource practices.

Status on Affirmative Action to Implement Presidential

Directives on Reservations

49. Cochin Shipyard has been strictly complying with the Presidential directives andguidelines on reservation for Scheduled Caste (SC)/ Scheduled Tribes (ST)/ Other BackwardClasses (OBC) and Persons with Disabilities (PWD) issued by the Government of India fromtime to time. Shipyard has appointed a liaison officer for SC/ST/PWD/Ex-Servicemen and aseparate liaison officer for OBCs to oversee the implementation of reservation policies.Reservation percentage is ensured through the maintenance of post based roster system asprescribed by the Government of India. During the year training was imparted exclusivelyfor employees belonging to these categories. The sessions were handled by an expert DeputySecretary from the Ministry. Regular meetings with the associations of the employeesbelonging to these categories were conducted to discuss and redress their grievances.Pursuant to Government orders special recruitment drive was resorted during the year forfilling up of vacancies reserved for Persons with Disabilities and out of 15 vacanciesnotified 4 candidates were selected. In order to support employees belonging to theSC/ST/OBC/PWD employees who fall under the zone of consideration for promotion specialcrash courses were arranged with the aid of expert external faculty for 50 employees onthe topics procedures and provisions related to reservation policies. As directed byGovt. of India under the accessibility India campaign accessibility audit for PWD and asession on the provisions was carried out by an accredited agency M/s. Ekansh Trust Pune.

Representation of SC/ST employees

50. The representation of SC and ST employees in various groups of posts as on March31 2019 is given under:

Category CSL’s Total Strength SC ST
Group A 274 42 12
Group B 146 25 13
Group C 836 107 9
Group D 488 70 10
Total 1744 244 44

Representation of OBC employees

51. The representation of OBC employees in various groups of posts as on March 31 2019is given under:

Category CSL’s Total Strength OBC
Group A 274 67
Group B 146 15
Group C 836 331
Group D 488 265
Total 1744 678

Representation of Minority Employees

52. The representation of minority employees in various groups of posts as on March 312019 is given under:

Category CSL’s Total Strength Minority
Group A 274 79
Group B 146 41
Group C 836 226
Group D 488 132
Total 1744 478

Representation of Persons with Disabilities Employees

53. The representation of Persons with Disabilities in various groups of posts as onMarch 31 2019 is given under:

Category CSL’s Total Strength PWD
Group A 274 5
Group B 146 7
Group C 836 22
Group D 488 21
Total 1744 55

Provision for Safeguard of Women

54. The Sexual Harassment of Women at Work Place (Prevention Prohibition andRedressal) Act 2013 and Rules framed thereunder are strictly complied with. An InternalComplaints Committee has been constituted in accordance with the Act chaired by a seniorwoman executive. The Committee has received one complaint during the financial year2018-19 which is pending for disposal as on March 31 2019.

Integrated Management System (IMS)

55. Cochin Shipyard upgraded its Integrated

Management System (IMS) by getting certified under the ISO 9001:2015 Quality ManagementSystem and ISO 14001:2015 Environmental Management System standards in September 2018. CSLwill be upgrading its Health and Safety Management system to the latest ISO 45001:2018 bySeptember 2019.

Facility Upgrade and Capital Expenditure

56. The total capital expenditure incurred in 2018-19 amounted to 545.65 crores. Thisrelated to renewals and replacements modernization and expansion dry- dock ISRFinfrastructure for IAC investment in joint venture etc.

Implementation of Official Language Policy

57. In pursuance of sub rule (4) of rule 10 of the Official Language (Use for theOfficial Purposes of the Union) Rules 1976 Government of India have notified in theGazette of India that 80% of ministerial staff of the Company have acquired workingknowledge/ proficiency in Hindi.

58. Cochin Shipyard was awarded ‘Rajbhasha Kirti Puraskar' in recognition of theachievements of the PSUs and Government departments in implementation of the OfficialLanguage (OL). CSL stood third among all the PSUs category in ‘C' region whichincludes the Southern States and some states of North East. Shri Madhu S Nair Chairman& Managing Director received the award from the Hon'ble Vice President of India onSeptember 14 2018.

59. For Best Official Language Implementation Cochin Shipyard was awarded RajbhashaShield (second prize) for the year 2016-17 and 2017-18 from Ministry of Shipping.

60. Late Shankar Dayal Singh Memorial Award Scheme was introduced in CSL during 2013 asper directions from Ministry of Heavy Industries and Public Enterprises. This year theaward was given to Smt. Jilsy Pinhero Junior Commercial Assistant. Incentive scheme fordoing original work in Hindi has been made more attractive with a view to encourageemployees to do more work in Hindi.

61. Various competitions in Hindi were organized in connection with Hindi fortnightcelebrations 2018 for employees children of employees trainees and employees on contractof CSL. As a special programme competitions were organised to State school students ofKochi. Hindi books were given to Pandit Karuppan Memorial Library. As part ofimplementation of Official Language Policy of Govt. of India CSL observes first Wednesdayof every month as Hindi Day.

62. Three Hindi workshops were organized in the year 2018-19 in which a total of 75employees participated. Spoken Hindi class was organised in which 26 employeesparticipated. Tenth issue of Hindi house journal ‘Sagar Ratna' was released duringthis year.

63. Joint Hindi fortnight celebrations were organized from November 16 to November 302018 under the auspices of Kochi TOLIC. 11 employees attended in

various competitions organized in this connection. Out of the above 7 employees wonprizes.

64. Cash incentives for obtaining high marks in Hindi in 10th std. during the academicyear 2017-18 were given to the children of employees. Cash incentive was given to fourteenchildren.

65. Computer training in Hindi was organised from July

03 2018 to July 09 2018 under the aegis of CUSAT. Fourteen employees attended theabove programme. Cash incentive and certificates were awarded to the participants.

66. Training in Hindi Stenography is being conducted within the Company premises forthree stenographers. Faculty from Dakshina Bharat Hindi Prachar Sabha (DBHPS) Ernakulamis handling the classes. Upon completion examination will be conducted by DBHPS.

67. With a view to promote Official Language Hindi among students an Official LanguageSeminar was organised for P.G. Diploma (Translation) students of CUSAT and Dakshina BharatHindi Prachar Sabha on December

04 2018 at The Mercy Hotel Ravipuram.

68. Under the auspices of Kochi TOLIC CSL and FACT jointly organised an OfficialLanguage Seminar for Hindi Staff at FACT Udyogmandal on December 21 2018.

Particulars of Employees and Related Disclosures

69. In accordance with Ministry of Corporate Affairs notification no. GSR 463(E) datedJune 05 2015 government companies are exempt from Section 197 of the Companies Act 2013and its rules thereof.

Conservation of Energy Technology Absorption and

Foreign Exchange Earnings and Outgo

70. Details are placed at Annexure-2. The Company's major initiative in theconservation of energy was installation of solar panels on the rooftop of variousbuildings inside CSL premises. The programme was commenced from the financial year2013-14. As of March 31 2019 solar power plant having capacity of 835 kWp has beencommissioned in CSL.

Risk Management

71. CSL constituted a Board level Risk Management Committee (RMC) on February 08 2019for an overall review of the corporate risks. The Company's risk management policy aims toput in place a comprehensive risk management system consisting of a defined process ofrisk management and methodology of identification assessment response monitoring andreporting of risks. The policy provides the management and Board of Directors an assurance

that key risks are being properly identified and effectively managed.

72. As per the policy CSL Board at the helm will review the risk management system inCSL. The Board shall discharge its responsibility of risk oversight by ensuring the reviewat periodical intervals. Board may also delegate to any other person or committee thetask of independently assessing and evaluating the effectiveness of the risk managementsystem. The CSL management comprising of CSL Board level and below Board level executiveshas been entrusted with the implementation of the risk management process. In this respectthe Company have RMC and Risk Management Steering Committees (RMSCs) to implement thepolicy in CSL. The RMC and the Board of Directors review the risk management process andpolicy. The yard's product mix comprising of defense and commercial shipbuilding and shiprepair gives the Company a natural hedge against market risk.

Research and Development (R&D) Activities

73. R&D policy of CSL is to enhance the Company's preeminence in shipbuilding shiprepair and other chosen fields and products through research and development. In-houseR&D activities have been undertaken during the year 2018-19 in the areas of weldingprocedure development and qualification of welders.

74. Welding of lower thickness plates with submerged arc welding processes (SAW) usingceramic backing is a new technique for which capability building in developing the weldprocedure is of paramount importance to the yard. In the above context weld proceduredevelopment has been undertaken inhouse for welding of lower thickness grade A plate usingSAW process with ceramic backing and a weld procedure specification has been prepared.This new process saves considerable amount of man hour and effort since turning of largewelded plates is avoided and helps in completing the weld pass in single side. Theprocedure has been validated by ABS Classification Society.

75. A Memorandum of Understanding has been made in the period with Welding ResearchInstitute (WRI) Tiruchirappalli a research institute under Bharat Heavy ElectricalsLimited (BHEL). The objective of the MoU is to carry out R&D activities capacitydevelopment and training in welding and allied fields. The MoU is valid till year 2024.

Health Safety & Environment (HSE)

76. In the aftermath of the major industrial accident in February 2018 CSL has takenvarious major initiatives such as review of gas management system man entry system etc.in order to prevent any major industrial mishaps. The Company is in the process ofengaging

a leading international consultant to improve HSE culture in the organisation. TheCompany continued to stress HSE as a core area. Initiatives such as safety moment HSEbriefings publishing of HSE alerts and tool box talks at all work sites were taken up toimprove the HSE awareness amongst the workforce. The focus areas during the year includedimparting refresher trainings to contractors' workmen and our employees and conduct ofsafety audit by international agency. CSL has published 12 salient safety rules andeverybody in the organization has the authority and responsibility to stop and correct anyof the violation of these rules. Environment management system of CSL has beenre-certified to ISO 14001:2015. CSL has initiated the process for ISO 45001 accreditation.

77. HSE performance for the last 3 calendar years is tabulated below:

Category 2016 2017 2018
Fatal 0 0 6
Reportable accidents 7 2 25
Non Reportable Accidents 148 100 98
Frequency Rate (Reportable accidents in one million man hours) 0.68 0.20 6.95

Industrial security

78. Special security attention is being accorded to the Indigenous Aircraft Carrier(IAC). Total security of the Company continued to be robust without causing any serioussecurity concern during the year. All security systems and measures introduced andinstalled in the Company are of international standards. Periodic joint survey wasconducted by the Company and CISF. Twenty four hours waterfront patrolling in a dedicatedspeed boat with armed personnel and wireless surveillance (CCTV) system covering allcritical locations and installations are in place. As per the security plan and policy ofthe Company periodic security drills were conducted to ensure prompt mitigating action inthe event of any security breach crisis or calamities.

79. Effective access control systems including biometric embedded turnstile gates arein place in the Company. A full-fledged visitor's facilitation center is operated forscrutiny and verification of the credentials of the visitors to the Company. Baggagescanning system has also been installed at the main entry gate of the Company. Apart fromthese special systems and measures such as exclusive photo entry pass and specialsurveillance system additional waterside security net around IAC etc. are positioned andoperated towards total security of the IAC. A robust cyber security policy has also beenadopted by the Company.

80. Materials entry and exit have been integrated with ERP module which ensureseffective and vigilant monitoring of materials movement into and out of the Company. Nocase of theft sabotage leakage of information etc. was reported during the year.

81. The physical security of the Company has been entrusted to the Central IndustrialSecurity Force (CISF) contingent of 133 personnel headed by an officer of the rank ofAssistant Commandant.

82. CSL has also engaged DGR approved ex-servicemen security services for supplementingexisting forces mainly catering to external properties of CSL and also internal specificlocations.

Awards and Recognitions

83. During the financial year CSL received following awards:

(a) KMA CSR award 2018 for the category Education.

(b) KMA CSR award 2018 for the category Health and Hygiene.

(c) Rajbhasha Kirti Puraskar in recognition of the achievements of the PSUs andGovernment departments in implementation of the Official Language.

(d) Rajbhasha Shield (second prize) for the year

2016- 17 and 2017-18 from Ministry of Shipping for best official languageimplementation.

(e) Rajbhasha Trophy (first prize) for the year

2017- 18 from Kochi Town Official Language Implementation Committee (TOLIC) for thebest implementation in the Official Language field.

(f) Second prize for Hindi Home Magazine ‘Sagar Ratna' from TOLIC.

(g) Kerala State Akshaya Urja award.

(h) FACT MKK Nair Memorial award for the second best productivity performance in Statelevel from

Kerala State Productivity Council in the category of Large Industries.

Board of Directors & Key Managerial Personnel

84. As on March 31 2019 the Board of CSL comprises of 9 Directors consisting of aChairman & Managing Director 3 Whole Time Directors 3 Non-Official Part Time(Independent) Directors and 1 Official Part Time (Nominee) Director each of Government ofIndia and Government of Kerala respectively.

85. Shri Bejoy Bhasker (DIN: 08103825) took over charge as Director (Technical) witheffect from April 05 2018 vide Ministry of Shipping letter no. SY-11012/4/2017- CSL datedApril 04 2018. The Ministry of Shipping Government of India vide letter no.SY-11012/1/2017- CSL dated April 20 2018 appointed Shri K.R Jyothilal IAS (DIN:01650017) Principal Secretary (Transport) Govt. of Kerala as Official Part Time(Nominee) Director on the Board of CSL in place of Shri Elias George IAS (Retd.) (DIN:00204510) with effect from April 20 2018.

86. Pursuant to the Ministry of Shipping Government of India letter no.SS.11012/05/2014-SY.II dated March 21 2016 the 3 years tenure of Smt. Roopa Shekhar Rai(DIN: 07565156) Shri Radhakrishna Menon (DIN: 07518727) and Shri Krishna Das E (DIN:02731340) as Non-Official Part Time (Independent) Directors on the Board of CSL came to anend on March 20 2019.

87. The Ministry of Shipping Government of India vide letter F. No.SY.11012/1/2009-CSL. Vol. II dated January 07 2019 extended the term of Shri D PaulRanjan (DIN: 06869452) Director (Finance) for a further period of 3 months till July 312019 i.e. the date of his superannuation.

88. Details of changes in Key Managerial Persons during the financial year 2018-19 andalso upto the date of this report are given below:

Sl. No. Name DIN Designation Date of Appointment Date of Cessation Changes if any
1 Shri Madhu S Nair 07376798 Chairman & Managing Director January 01 2016 Continuing No Change
2 Shri D Paul Ranjan 06869452 Director (Finance) & Chief Financial Officer May 01 2014 Continuing* No Change
3 Shri Suresh Babu N V 07482491 Director (Operations) April 26 2016 Continuing No Change
4 Shri Bejoy Bhasker 08103825 Director (Technical) April 05 2018 Continuing Appointment
5 Smt. Kala V - Company Secretary May 02 1998 Continuing No Change

* As per the Ministry of Shipping letter F. No.SY-11012/1/2009-CSL. Vol.II datedJanuary 07 2019 the tenure of Shri D Paul Ranjan Director (Finance) ends on July 312019 i.e the date of his superannuation. Shri D Paul Ranjan was

re-appointed as Director by way of retirement by rotation at the 46th Annual GeneralMeeting held on August 14 2018.

Declaration and Meeting of Independent Directors

89. The Company has received declarations from all the Independent Directors of theCompany confirming that they meet the criteria of independence as prescribed under theCompanies Act 2013. A separate meeting of Independent Directors was held on February 072019 which was attended by all the Non Official Part Time (Independent) Directors viz.Smt. Roopa Shekhar Rai Shri Radhakrishna Menon Shri Krishna Das E Shri Pradipta Banerjiand Shri Nanda Kumaran Puthezhath except Shri Jiji Thomson IAS (Retd.).

Details of Board Meetings held during 2018-19

90. Seven Board Meetings were held during the year

2018-19 and the gap between two meetings did not exceed 120 days. The dates on whichthe Board Meetings were held are as follows:

Sl. No. Date Board Strength No. of Directors present
1 May 24 2018 12 11
2 June 30 2018 12 9
3 August 13 2018 12 8
4 October 16 2018 12 10
5 October 31 2018 12 10
6 February 08 2019 12 10
7 March 19 2019 12 10

91. For more details with respect to the Directors Board and Committee meetings heldduring the year and attendance of these meetings refer Corporate Governance Report whichforms part of Directors' Report.

Remuneration Policy/Evaluation of Board's Performance

92. Cochin Shipyard is a Government of India company under Ministry of Shipping.Presently the Directors of the Company are presidential appointees and their remunerationis fixed in accordance with the DPE guidelines. Accordingly Article 21(a) of the Articlesof Association of CSL states that President will appoint Directors and determine theirremuneration. Since the Board level appointments are made by President of India theevaluation of performance of such appointees is also done by the GOI. The IndependentDirectors evaluated the performance of the Board as a whole in a separate meeting ofIndependent Directors held on February 07 2019.

Report of the Nomination & Remuneration Committee on

Company's Policy on Directors' Remuneration

93. Presently the remuneration of Board level appointees is determined in accordancewith DPE guidelines. CSL at its 228th Board meeting held on December 14 2016 adopted theNomination and Remuneration Policy in compliance with the provisions of section 178 of theCompanies Act 2013. CSL in its 241st Board meeting held on May 24 2018 and further inits 245th Board meeting held on October 31 2018 amended the Policy. The Policy isavailable in the website of the Company at http://www.cochinshipyard.com/investors.htm

Directors Responsibility Statement

94. Your Directors state that:

a) in the preparation of the annual accounts for the year ended March 31 2019 theapplicable accounting standards read with requirements set out under Schedule III to theAct have been followed and there are no material departures from the same;

b) the Directors have 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 2019 and of the profit ofthe Company for the year ended on that date;

c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

d) the Directors have prepared the annual accounts on a ‘going concern' basis;

e) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and

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

Contracts and arrangements with related parties

95. During the year the Company had not entered into any contract/ arrangement/transaction with related parties which could be considered material. Your Directors drawattention of the members to Note 47 to the financial statements which set out relatedparty disclosures as per Indian Accounting Standard (I nd AS) 24. Form AOC-2 has beenattached as Annexure-3 as required under section 134(3)(h) of the Companies Act 2013.

Corporate Social Responsibility & Sustainable

Development Committee (CSR & SD Committee)

96. As on March 31 2019 the CSR & SD Committee of CSL comprises of Shri JijiThomson (DIN: 01178227) Non-Official Part Time (Independent) Director as Chairman of theCommittee Shri Nanda Kumaran Puthezhath (DIN: 02547619) Non-Official Part Time(Independent) Director Shri D Paul Ranjan (DIN: 06869452) Director (Finance) and ShriBejoy Bhasker (DIN: 08103825) Director (Technical) as members. The Corporate SocialResponsibility and Sustainable Development Committee (CSR & SD) has formulated andrecommended to the Board a Corporate Social Responsibility Policy (CSR Policy) indicatingthe activities to be undertaken by the Company which has been approved by the Board. TheCSR Policy can be accessed on the Company's website at the link: https:// www.cochinshipyard.com/csr_policy.htm

97. Cochin Shipyard started CSR activities in the year 2010-11 based on the guidelinesissued by the Department of Public Enterprises (DPE) applicable to Government Companies.CSL has put in place an effective CSR Policy and implementation machinery. The CSRimplementation machinery consists of three tier system: Tier I CSL Board Tier II CSLBoard Level CSR Committee consisting four members of the Board headed by an IndependentDirector and Tier III CSL CSR Executive Committee consisting of seven executives acrossvarious departments of the Company.

98. During the year 2018-19 the Company could engage in meaningful CSR initiativesthat received appreciation both within Kerala and also nationally.

99. The mandatory CSR spending for the year is 1015 lakhs.

100. In all the Board identified 91 Projects which includes both Major and Minorprojects.

101. The CSL CSR projects undertaken were mostly from Kerala where the Company islocated covering the most common fields of CSR interventions appearing in Schedule VII ofCompanies Act 2013. Particular focus was paid on Swachh Bharat initiatives of theGovernment of India the national initiative of sanitation. Special initiatives were takenup focusing on programs including toilet construction in schools and villages including incoastal areas of Kerala where the problem of sanitation and personal hygiene is a majorissue.

102. CSL has contributed 10 crore to the Chief Minister's Distress Relief Fund (CMDRF)for rebuilding devastated

flood affected areas in Kerala during the monsoon months in 2018. Further a total of 1crore was spent towards various re-building activities varying from support to khadiartisans who lost their livelihood and rebuilding of anganwadis in flood affected areas.Workmen and supervisors of CSL have contributed one day salary and the executives havecontributed two days salary to the CMDRF. All Independent Directors also joined theemployees to contribute to the CMDRF. Total amount so contributed was 37.38 lakhs.

103. As per the new Guidelines promulgated by the Department of Public Enterprises(DPE) the theme for the current year 2018-19 should be ‘school education' and‘health care'. At least 60% of annual CSR expenditure should be made towards schooleducation and health.

104. Most of the Company's projects undertaken during the year are focused around orcatering towards the health care and education and hence is able to achieve the targetfixed by the DPE on this theme.

105. Also as per the new guidelines preference should be given to the"Aspirational Districts" in CPSE CSR spending. Out of the 112 Districts aspromulgated by the Niti Aayog only the District "Wayanad" is the loneAspirational District in Kerala. The Company has conveyed its keenness to give preferenceto Wayanad District in Kerala and a meeting with the District Collector was held onFebruary 22 2019 to undertake projects in that District.

106. During the year CSL has spent 1041.16 lakhs for various ongoing and completedCSL CSR projects and related indirect expenses. The Annual Report on CSR activities isplaced at Annexure-4.

Audit Committee

107. As on March 31 2019 the Audit Committee of CSL is constituted with Shri NandaKumaran Puthezhath (DIN: 02547619) Non-Official Part Time (Independent) Director asChairman Shri Jiji Thomson (DIN: 01178227) Non-Official Part Time (Independent) Directorand Shri Pradipta Banerji (DIN: 00630615) Non Official Part Time (Independent) Directoras members. During the year all recommendations of the Audit Committee were accepted bythe Board of Directors. Particulars regarding the Audit Committee are provided under theSection ‘Board Committees' in the Report on Corporate Governance.

Corporate Governance

108. The Company is committed to maintaining the highest standards of corporategovernance and has put in place an effective corporate governance system. The Companycomplies with the applicable regulations of Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations

2015 and also the Guidelines on Corporate Governance issued by the Department ofPublic Enterprises which are within its purview. The Company also submits its quarterlyprogress reports on corporate governance within 15 days from the close of each quarter tothe Ministry of Shipping as recommended by the DPE in this regard. The Report on CorporateGovernance forms part of the Directors' Report.

Management Discussion and Analysis

109. A separate section ‘Management Discussion and Analysis Report' has beenincluded in the Annual Report and the same forms part of the Directors' Report.

Internal Financial Controls

110. The Company has in place adequate internal financial controls with reference tofinancial statements. During the year the Company had engaged M/s. Varma & Varma(Firm Registration No. 004532S) Chartered Accountants for reviewing and installingadequate Internal Financial Controls and to ensure proper and adequate systems forcompliance with the provisions of all applicable laws. Such controls were tested and noreportable material weakness in the design or operation was observed. In order to providefor functional autonomy the Company has a system wherein financial powers of the Board ofDirectors are delegated to the CMD. These powers are further sub-delegated to officers atvarious levels for smooth and efficient day to day functioning. An independent internalaudit mechanism is in place for conducting extensive audit of various operational andfinancial matters. C&AG conducts proprietary audit. An independent Audit Committee ofthe Board of Directors also examines internal/statutory audit observations and providesguidance based on the same. The Audit Committee also looks into the internal controlsystem Company procedures and internal audit performance and reports to the Board ofDirectors. The Company has implemented an integrated ERP System (SAP) since July 2014which is enabling better management control. Being a frontrunner in adapting to andleveraging digital technology for optimizing its procedures and operations CSL tookanother step further in this direction by introducing Legatrix a digitally enabled legaland regulatory compliance and support service interface. CSL is the first shipping sectorPSU to implement this novel system for streamlining its legal and regulatory compliancerequirement.

Statutory Auditors

111. M/s. Elias George & Co. (Firm Registration No. 000801S) CharteredAccountants Ernakulam were

appointed as the Statutory Auditors of the Company by the Comptroller & AuditorGeneral of India for the year 2018-19. The shareholders have delegated the power to fixthe remuneration of Statutory Auditors to the Board and accordingly the same has beenfixed by the Board.

Auditors Report

112. M/s. Elias George & Co. Statutory Auditors have submitted their report on thestandalone and consolidated financial statements of the Company for the year ended March31 2019 on May 21 2019. The Report does not contain any qualification reservation oradverse remark or disclaimer.

Comments of C&AG

113. The comments of the Comptroller and Auditor General of India under Section 143 (6)(b) of the Companies Act 2013 are placed at Annexure-5.

Cost Auditors

114. The Board has appointed M/s. Felix & Co. (Firm Registration No. 100416) CostAccountants as the Cost Auditors for conducting the audit of cost records of the Companyfor the financial year 2018-19. The remuneration of Cost Auditor for the financial year2018-19 was ratified by the shareholders at the 46th AGM held on August 14 2018.

Secretarial Auditor

115. The Board has appointed M/s. SVJS & Associates Practicing CompanySecretaries to conduct Secretarial Audit for the financial year 2018-19. The SecretarialAudit Report for the financial year ended March 31 2019 is annexed herewith marked asAnnexure-6 to this Report. There is no qualification reservation or adverse remark ordisclaimer in the Secretarial Audit Report.

Internal Auditor

116. The Board has appointed M/s. Varma & Varma Chartered Accountants Kochi toconduct Internal Audit for the financial year 2018-19.

Extract of Annual Return

117. The extract of annual return in Form MGT 9 as per Rule 12(1) of the Companies(Management & Administration) Rules 2014 is placed at Annexure-7. Further the annualreturn of the Company as required under section 92(3) of the Companies Act 2013 isavailable in the website of the Company at http://www.cochinshipyard.com/investors.htm

Investor Services

118. The shares of the Company are listed in BSE Limited ("BSE") and NationalStock Exchange of India Limited ("NSE"). CSL has paid listing fees to BSE andNSE on time. Link Intime India Private Limited Mumbai are the Registrar & TransferAgents in respect of these equity shares. The tax free bonds issued by the Company in2013-14 are fully dematerialized with both the depositories NSDL and CDSL. These bondsare listed on Wholesale Debt Market ("WDM") segment of BSE. CSL has paid thelisting fees to BSE on time in respect of these bonds. Link Intime India Private LimitedMumbai is the Registrar & Transfer Agents and SBICAP Trustee Company Limited is theDebenture Trustees in respect of these bonds.

Vigilance

119. Vigilance department functions advocating transparency equity and competitivenessin all procurement. Important CVC guidelines are discussed with Heads of Departments forits strict compliance. Emphasis was given to vigilance sensitization among the officersand supervisors for preventive vigilance.

120. Submission of annual property returns of executives was made online with a link toview the same to vigilance and the vigilance department is scrutinizing the same.

121. Vigilance department is scrutinizing the qualification and experience certificatessubmitted by the candidates for the selection of various posts particularly experiencecertificate issued by private firms considered as eligible.

122. Vigilance department is scrutinizing the third party inspection certificatesissued by procurement of materials for its genuineness.

123. Materials department has been directed to update the vendor list and the action isunderway.

124. Further the department has conducted 26 surprise/ periodic inspection for the yearin various areas of operations and suggested corrective actions on vigilance angle. Allreports to the Central Vigilance Commission are submitted in time and no reference ispending with CVC.

125. One vigilance case and one departmental action on a vigilance case is pending.

Right to Information Act

126. In order to promote transparency and accountability your Company has implementedthe provisions of the RTI Act 2005 in its true letter and spirit and an appropriatemechanism has been set up in the

Company with a dedicated centralized RTI Cell to provide information to the citizensunder the provisions of this Act. All the RTI applications and the appeals received bothon line and off line during the year 2018-19 have been processed and information wasprovided in a time bound manner as stipulated in the Act.

127. There have been no instances of non-compliance by the Company. No penalties orstrictures were imposed on the Company by any statutory authority during the last threeyears with respect to RTI.

Vigil Mechanism

128. The Cochin Shipyard Vigil Mechanism and Whistle Blower Policy of CSL adopted bythe Board of Directors at 228th Meeting held on December 14 2016 is functioning as VigilMechanism of CSL. The Whistle Blower Policy of CSL is available at the link https://www.cochinshipyard.com/links/CSLVIGILMECHANISMANDWHISTEBLOWERPOLICY.pdf

Details of frauds reported by Auditors under Section 143

129. Nil.

Particulars of loans guarantees or investments

130. During the year under Report the Company has not

a) given any loan to any person or other body corporate;

b) given any guarantee or provided security in connection with a loan to any other bodycorporate or person; and

c) acquired by way of subscription purchase or otherwise the securities of any otherbody corporate as prescribed under Section 186 of the Companies Act 2013 except aninvestment of 44 crores towards subscription of unsecured redeemable non-convertibledebentures in the subsidiary company viz. Hooghly Cochin Shipyard Ltd. The saidinvestment is within the limit of Section 186 of the Companies Act 2013.

Material changes and commitments

131. No material changes and commitments affecting the financial position of theCompany have occurred between the end of the financial year of the Company and the dateof this Report.

Details of change in nature of business

132. There has been no change in the nature of business of the Company during the yearunder report.

Deposits

133. Your Company has not accepted any deposits from the public under Chapter V of theCompanies Act 2013.

Secretarial Standards

134. The Company has complied with the applicable Secretarial Standards issued by theInstitute of Company Secretaries of India.

Significant and Material orders

135. No significant and material orders were passed by the regulators or any courts ortribunals impacting the going concern status of the Company and affecting its operations.

Business Responsibility Report

136. The Securities and Exchange Board of India (SEBI) has mandated inclusion ofBusiness Responsibility Report ("BR report") as part of the Annual Report fortop 500 listed entities based on market capitalization. This SEBI mandate is also insertedas Regulation 34(2)(f) of SEBI (LODR) Regulations 2015. The SEBI (LODR) Regulations 2015provide a format for BR reports. It also contains a list of nine key principles andvarious core elements under each principle to assess compliance with environmental socialand governance norms. The Company's BR report for the year forms part of the AnnualReport.

Acknowledgment

137. The Board of Directors are extremely thankful for the continued patronage andsupport extended by the Hon'ble Prime Minister Hon'ble Minister of Shipping and allofficers of the Ministry of Shipping. The Board would also like to express their gratefulappreciation for the support and co-operation from various offices of the Government ofIndia Government of Kerala Government of West Bengal Government of Maharashtra variouslocal bodies the Comptroller & Auditor General of India Statutory AuditorsSecretarial Auditors Cost Auditors Internal Auditors Suppliers Sub-contractorsCompany's Bankers and our valued customers. The Board also places on record itsappreciation for the contribution and support extended by all employees of Cochin ShipyardLtd. Your Directors express their appreciation and gratitude to all theshareholders/investors for the trust and confidence reposed in the Company and lookforward to their continued support and participation in sustaining the growth of theCompany in the coming years.

For and on behalf of the Board of Directors
Madhu S Nair
Kochi Chairman & Managing Director
May 21 2019 DIN: 07376798

Annexure-1

Dividend Distribution Policy

1. Preamble

1.1. The shares of CSL are listed on Bombay Stock Exchange Ltd and National StockExchange of India Ltd. As per regulation 43A of Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 the top five hundredlisted entities based on market capitalization (calculated as on March 31st of every year)need to formulate a dividend distribution policy which shall be disclosed in the AnnualReport and on their websites.

1.2. This policy lays down the general framework for considering and deciding thedistribution of dividend to the Company's shareholders and/or retaining of earnings forsustained growth.

2. Policy framework

2.1. The purpose of the policy is to specify in broad terms the external and internalfactors including financial parameters that will be considered while deciding on thedistribution of dividend the circumstances under which shareholders of the Company mayor may not expect dividend and the policy relating to retention and utilisation ofearnings. This policy is not an alternative to the decision of the Board for recommendingdividend every year based on all relevant factors namely factors enumerated in thispolicy and also other additional factors that the Board may consider relevant in theoverall interest of the Company. However such additional factors if any resulting inamendment of the policy will be disclosed in the Annual Report as well as the website ofthe Company.

2.2. The policy will be implemented by the Company keeping in view the provisions ofSEBI (LODR) Regulations the Companies Act 2013 and also taking into considerationguidelines issued by SEBI DPE DIPAM Ministry of Shipping as also other guidelines tothe extent applicable to the Company.

3. Effective date

3.1. The policy will be effective from the financial year 2017-18.

4. Exclusions

4.1. The policy shall not apply to:

a) Distribution of dividend in kind i.e. by issue of fully or partly paid bonus sharesor other securities subject to applicable law;

b) Distribution of cash as an alternative to payment of dividend through Buyback ofequity shares.

5. Factors considered while declaring dividend

5.1

a. In pursuance of Section 123 of the Act no dividend shall be declared or paid by theCompany for any financial year except out of the profits of the Company for that year orout of the profits of the Company for any previous financial year or years arrived atafter providing for depreciation. However normally the Company will decide to declaredividend only out of current year's profits after providing for depreciation in accordancewith the law and after transfer to the reserves of the Company such portion of the profitsas may be considered appropriate for future growth.

b. Interim dividend will be based on profits of the current year as per unauditedresults after providing for depreciation in accordance with law and Management estimatesof profits for full financial year.

c. Dividend distribution tax payable by the Company on dividend paid to shareholderswill also be considered.

5.2. The quantum of dividend declared by the Company would depend upon the followingexternal and internal factors:

a. The external factors that shall impact the decision to pay dividend will inter-aliainclude economic environment market conditions expectation of shareholders statutoryrequirements and applicable Government directives as may be applicable from time to time.

b. The internal factors that shall be considered for dividend will be profitability ofthe

Company its net worth its requirement for funds for its Capital Expenditure towardsrenewals & replacement/upgradation/R&D and expansion (CAPEX) investment insubsidiaries/JVs stability of earnings past dividend trends obligation to creditors andany other factors as may impact the decision to declare dividend.

c. The Company may endeavor to pay minimum annual dividend of 30% of Profit after Tax(PAT) or 5% of net worth whichever is higher subject to the maximum dividend permittedunder the extant legal provisions.

6. Utilisation of retained earnings

6.1. The Company is a major player in the shipbuilding and ship repair sector and isacutely conscious of the need to plough back adequate profits for operations and capitalinvestment in order to maintain and more importantly improve its market position in theface of emerging new technologies requiring investments to stay abreast of currenttechnologies competition arising from the private players both domestic and foreign. TheCompany has an ambitious expansion programme Capex requirements which includesmulti-locational ship repairing/ building facility two major capital projects viz. adry-dock at the existing premises and a new ship repair complex at Cochin Port Trustpremises and also has necessarily to invest in upgrading & renewals and replacement ofits existing facility and R&D projects. Further with the anticipated higher growth insales year on year the incremental working capital requirements also will have to be metincreasingly from cash and reserves of the Company.

7. Circumstances under which the shareholders may or may not expect dividend

7.1. The Company has been consistently paying dividends to its shareholders and that itwill continue to do so in future is a reasonable expectation unless circumstances warrantthe contrary.

7.2. The shareholders of the Company may or may not expect dividend depending upon thecircumstances including but not limited to the following:-

a) In the event of inadequacy of profits or whenever the Company has incurred losses;

b) Whenever the Company undertakes or proposes to undertake significant capitalexpenditure or investment in new areas of business whether in CSL itself or in jointventures/subsidiaries;

c) Significantly higher working capital requirement adversely impacting cash flows; or

d) Whenever the Company proposes to utilise the surplus cash for buyback of securities;

e) Any other circumstance/instance which the Board of Directors may consider relevantto the dividend declaration decisions.

7.3. The Company will take a decision on the dividend distribution keeping all externaland internal factors in view and duly adopting a judicious balance between directlyrewarding the shareholders through dividend declaration on the one hand and increasingshareholders wealth in future through appropriate retention of projects and itsrealisation for sustainable growth on the other.

8. Parameters to be adopted with regard to various

classes of shares

8.1. The Company has issued only one class of shares i.e. equity shares with equalvoting rights. All the members of the Company are entitled to receive the same amount ofdividend per share.

9. Interpretation & amendments

9.1. Any word used in this Policy shall have the same meaning as defined under theCompanies Act 2013 SEBI Listing Regulations 2015 and any other applicable statutoryregulations.

9.2. The Board of Directors may review amend and modify the policy at any point oftime as it may deem necessary and /or as may be required from time to time in accordancewith subsequent amendments in Companies Act 2013 & Companies Rules CircularsNotifications Guidelines thereto SEBI Listing Regulations 2015 the relevant guidelinesof Ministry of Finance Ministry of Shipping DPE DIPAM etc. and other applicablestatutes.

10. Disclosure

10.1.This policy shall be disclosed in the Annual Report and hosted on the Company'swebsite to meet statutory requirements if any.

A. Conservation of Energy

a. Steps taken or impact on conservation of energy during the year 2018-19. STEPS TAKEN
• Installed 300 KW grid connected solar power plant on the roof top of hull shop.
• Electrification of new buildings is carried out with LED lights instead of conventional discharge lamps.
• Replacement of high pressure mercury vapour lights with LED's at HA bay of Hull Shop.
• Installation of pedestal type LED lighting system at Quay 3 and building dock instead of conventional flood lights.
• Use of energy efficient Brushless Direct Current (BLDC) / 5 star fans instead of regular ceiling fan.
• Leakages in the compressed air distribution system and other industrial gas lines are regularly monitored and rectified.
• Switching off main air compressor during lunch break.
• Switching off main power supply to shops quays & docks momentarily at 12:15 Hrs. This trips man coolers roof extractors (controlled through starters) etc. which are not required during the lunch break.
• Displayed energy saving stickers & posters conducted seminar and quiz competition for inculcating awareness among employees for energy conservation aimed at optimum use of electric power.
• Power factor is continuously monitored and maintained near unity.
• Variable Frequency Drive (VFD) Installed for 40T OBE LLTT crane at Ship Repair for hoist motions.
IMPACT
Energy saving is approx. 8.64 lakhs units per annum with the implementation of measures specified above.
b. Steps taken for utilizing alternate sources of energy. • Installed 300 kWp grid connected solar power plant on the roof top of hull shop.
• Installation of 450 kWp grid connected solar power plant at roof top of outfit warehouse and bonded store is in progress.
c. Capital investment on energy conservation equipments • An amount of approximately 191 lakhs has been invested for conservation of energy.

B. Technology Absorption Adaptation and Innovation

a. Efforts made towards technology • Implemented the latest ship resistance and propulsion power prediction software HydroComp NavCad. It also provides capability for the selection of suitable propulsion system components -engines gears and propellers etc.
absorption. • Implemented 3D modelling/rendering software from AutoDesk Inc. for generating high quality images as well as animations of concept designs.
• In-house development of 3D modelling for accommodation & other outfit systems in accommodation spaces for the Technology Demonstration Vessel (Ship - 020) for DRDO/500 Pax for A&N Administration in Tribon under progress.
• In-house development of 3D modeling for machinery and electrical systems for 1200 Pax for A&N Administration using TRIBON is in progress in compliance with SRtP requirements.
• In-house development of 3D modeling for hull machinery and electrical systems for fishing vessels.
• External workshops/training provided in :
High fidelity computational fluid dynamics simulations for marine applications sponsored by Shri Gopal Rajgarhia International Faculty Outreach Programme (SGR IFOP) at IIT Kharagpur.
Large Eddy Simulations (LES) for ship research at IIT Kharagpur.
Finite element analysis of structures conducted by Bhabha Atomic Research Centre Mumbai.
Composite design and engineering conducted by DIAB Core Materials Chennai.
b. Efforts made towards Technology Innovation. • Development of concept design of Pollution Control Vessel for Coast Guard.
• Development of concept design of 100 Pax Hybrid Catamaran for Kochi Water Metro.
• Development of concept design of River Cruise Vessel for Exotic Heritage Group.
• Development of basic design of Work Boat for Ship Repair Department of CSL.
• Basic design of 38 m Ro-Pax Vessel & 56 m Ro-Ro vessel for IWAI.
• Basic design of Fishing Vessels for Tamil Nadu Fisheries Department.
• Development of in-house software tools for various Basic Design calculations such as equipment number calculation weight estimation.
• Functional design drawings developed for electrical cable routes for DRDO systems onboard Technology Demonstration Vessel Ship-020 considering the stringent requirements from DRDO for segregation of different types of cables and EMI/EMC compliance.
• Development of suitable specification for the power system and batteries for battery powered vessel which is having 3 modes of operation i.e. pure electric pure diesel and hybrid mode in progress.
• Software is being developed in-house by yard to assess and ensure that the required stipulations of the class notation Safe Return to Port (SRtP) for 1200 Pax project are met with.
• Software upgrades for "Cable Manager" - In-house developed cable scheduling and nesting software for usage onboard projects.
• Software upgrades for "Electrical Apps" - In-house developed production design customization tool for Tribon M3 for usage in ongoing projects.
• In-house design & development of gillnet winch for fishing vessels.
• In-house design & development of long line winch for fishing vessels.
• Development of design for Integrated Hydraulic System for operating winches steering gear bilge pump FW pump and ER ventilation.

Disclosure of Particulars in respect of Absorption

c. Benefits derived like product improvement cost reduction product development or import substitutions. • Improved self-reliance better control and focus on productivity improvement.
• Access to high end clientele and enhanced credibility on account of high quality design solutions.
• Reduction of cost due to minimized rework as interface of the systems can be viewed and corrected in 3D modelling on computer.
• Considerable improvement in time and cost saving for production of vessels being built at Shipyard.
• Yard has developed expertise and skill to produce productionengineering drawings by extracting relevant data from Tribon model.
• Carried out modelling of the entire hull facilitating very short cycle time for drawing issue.
• Capability achieved in undertaking multiple projects concurrently.
• Considerable improvement in time for estimation of cables and optimal route design for cables.
• Yard has developed a new step towards product development - standard gillnet winches and standard long line winches for small fishing vessels.
• Developed a design for all integrated hydraulic system for small fishing vessel which can be used as a standard cost-effective solution for all fishing vessels.
d. In case of imported technology (imported during the last three years reckoned from the beginning of the financial year) following information may be furnished.
i. The details of technology imported • HydroComp NavCad software for resistance and propulsion calculation;
• 3DS MAX design software for generating high quality 3D imagery and animation.
ii. The year of import 2018-19
iii. Whether the technology been fully absorbed HydroComp NavCad and 3DS MAX design software are currently being used for basic design of ships developed in-house and can be considered as 100% absorbed.
iv. If not fully absorbed areas where absorption has not taken place and the reasons thereof Not applicable
e. Expenditure incurred on Research and Development Nil

C. Foreign Exchange Earnings and Outgo

Income from Foreign Exchange 2018-19 2017-18
From Shipbuilding 0.00 0.00
From Ship repair 0.00 496.90
Total 0.00 496.90
Expenditure in Foreign Exchange
Materials (CIF Value) 82543.51 94984.50
Design & Documentation 0.00 2.65
Service Charge & Others 12523.09 3539.79
Total 95066.60 98526.94

 

For and on behalf of the Board of Directors
Madhu S Nair
Kochi Chairman & Managing Director
May 21 2019 DIN:07376798

Form No. AOC-2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Companies Act 2013and Rule 8(2) of the Companies (Accounts) Rules 2014)

Form for disclosure of particulars of contracts/agreements entered into by the Companywith related parties referred to in subsection (1) of section 188 of the Companies Act2013 including certain arms length transactions under third proviso thereto:

1. Details of contracts or arrangements or transactions not at arm's length basis

(a) Name(s) of the related party and nature of relationship Not Applicable
(b) Nature of contracts/arrangements/transactions Not Applicable
(c) Duration of the contracts/arrangements/transactions Not Applicable
(d) Salient terms of the contracts or arrangements or transactions including the value if any Not Applicable
(e) Justification for entering into such contracts or arrangements or transactions Not Applicable
(f) Date(s) of approval by the Board Not Applicable
(g) Amount paid as advances if any Not Applicable
(h) Date on which the special resolution was passed in general meeting as required under ( first proviso to section 188 Not Applicable
2. Details of material contracts or arrangements or transactions at arm's length basis
(a) Name(s) of the related party and nature of relationship Not Applicable
(b) Nature of contracts/arrangements/transactions Not Applicable
(c) Duration of the contracts/arrangements/transactions Not Applicable
(d) Salient terms of the contracts or arrangements or transactions including the value if any Not Applicable
(e) Date(s) of approval by the Board Not Applicable
(f) Amount paid as advances if any None