To the Members of Essar Ports Limited
Your Directors take pleasure in presenting the Forty-first Annual Report of yourCompany together with Audited Accounts for the year ended
March 31 2017.
1. FINANCIAL RESULTS
The summary of consolidated and standalone financial results of your Company for theyear ended March 31 2017 are furnished
| || || || ||( Rs. in lakhs) |
| ||Consolidated ||Standalone |
|Particulars ||For the year ended March 31 2017 ||For the year ended March 31 2016 ||For the year ended March 31 2017 ||For the year ended March 31 2016 |
|Total Revenue ||75004.60 ||175591.28 ||3524.58 ||9105.81 |
|Total Expenses ||64599.91 ||182235.93 ||8169.79 ||24554.46 |
|EBITDA ||47985.38 ||118592.88 ||(1409.27) ||3683.03 |
|Profit / (Loss) for the year ||1322.66 ||(5509.89) ||(4106.30) ||(15095.89) |
Considering the funds requirement for meeting the operations the Board has notrecommended any dividend for the financial year ended March 31 2017.
3. MANAGEMENT DISCUSSION & ANALYSIS
The discussion and analysis below covers the financial results and business outlook ofEssar Ports Limited and its year 2016-17. This outlook is subsidiaries for the financialbased on assessment of the current business environment and Government policies. Thechange in future economic and other developments are likely to cause variation in thisoutlook.
Economy and Infrastructure Sector
Global economic growth had slowed to 3.1% during 2016 with moderation in both advancedas well as emerging economies. Commodity prices which had declined sharply in calendaryear 2015 partially recovered during calendar year 2016 particularly those of crude oiland metals. Global trade showed an improvement towards the later part of the year partlyled by the rise in commodity prices.
India's Gross Domestic Product (GDP) grew by 7.1% for financial year 2016-2017 comparedto a growth of 8.0% during the financial during the financial year due to deceleration inindustry throughput. However with new reforms like GST put in place by the IndianGovernment the growth trajectory for India's economy is expected to continue.
Reserve Bank of India during the monetary policy review during the year has reducedthe repo rate by 50 basis points during the financial year which included a 25 basispoints reduction from 6.75% to 6.50% in April 2016 and further 25 basis points reductionto 6.25% in October 2016. This has resulted in overall reduction in the repo rate by 175basis points since the policy rate reduction cycle began in January 2015.
Based on the overall cues of economy growth and improving investment scenario it isbelieved that a further pickup in economic growth is expected. GDP growth is expected tocontinue to grow at over 7.5% backed on policy initiatives focused on attracting FDIinflows and large investments.
Indian Government has emphasized on the infrastructure growth to build a robusteconomy. Creation of a world-class port facilities is an important factor for thecountry's sustained growth. Port Infrastructure sector in India looks well placed toattract investments and experience high growth. Infrastructure sector is core to theIndian growth story due to massive historic shortfall in physical infrastructure andgrowing economic activity. The sector is expected to be resilient and continue to attractinvestor interest. Based on this your Company sees good potential in the growth of portsbusiness.
During 2016-17 Major and Non-major Ports in India have accomplished a total cargothroughput of 1132 million tonnes reflecting an increase of 5.6% over 2015-16 cargothroughput of
1072 million tonnes. The growth in cargo handled at Major and Non-major ports in2016-17 were 6.8% and 4.0% respectively.
The share of Major Port in the total traffic handled at Indian Port increased from56.5% in 2015-16 to 57.2% in 2016-17.
2015-2016. The growth was largely impacted
At a broad commodity level during 2016-17 POL Coal Iron ore and Other Cargo postedgrowth of 5.8% -6.5% 129.4% and 3.5% respectively. The decline in coal traffic ismainly attributed to increase in domestic coal production and India's efforts to reducedependency on imported fossil fuels.
During the year under review your Company has delivered consistent growth and resultswere in line with the targets. The Company is now well poised for next level of growth.The Company's subsidiaries handled 8.4 MMT during FY2016-17 as against 5.1 MMT of cargoduring FY 2015-16 across the same companies.
Your Company has delivered another year of consistent financial performance. Theemphasis continues to be on development of world class facilities and to complete theprojects under implementation in time.
Your Company has one operational port terminals at Vizag which is being simultaneouslybeing modernized to improve the handling at the port. Essar Vizag Terminals Limited("EVTL") a subsidiary of Essar Ports Limited is a special purpose vehicle("SPV") incorporated on June 19 2013 for the purpose of upgradation of theexisting iron ore handling facility at the Outer Harbour Complex and creation of newfacility at the Inner Harbour for handling iron ore and iron ore pellets at VisakhapatnamPort Trust under DBFOT basis. The Vizag port is an operational port since May 14 2015.The upgradation & operations are being undertaken simultaneously. EVTL has taken overthe outer harbor project facilities and operations from Vishakhapatnam Port Trust on 14thMay 2015. The Outer harbor project is an existing operational terminal with no gestationperiod for operations. Up-gradation of the outer harbor facility is being donesimultaneously along with operations
As reported in the previous year pursuant to a composite scheme of arrangement underrelevant provisions of the Companies Act 1956 and the Companies Act 2013 with effectfrom 30 June 2016 as an appointed date Tankage Business of Vadinar Ports & TerminalsLimited ("VPTL") and certain strategic investments on a going concern basis wasdemerged and transferred to and vested in the Company. With effect from 1 July 2016 as anappointed date the Tankage Business was demerged from the Company and along withinvestments in Vadinar Oil Terminal Limited and VPTL and related liabilities weretransferred to and vested in Essar Power & Minerals Limited. Further with effect from1 July
2016 as an appointed date identified business undertaking of the Company whichincluded one tug floating crane and investments in Essar Bulk Terminal Limited andrelated liabilities were demerged into Hazira Cargo Terminals Limited (earlier known asYash Hotels Private Limited). Also Further with effect from 1 July 2016 as an appointeddate identified business undertaking related to one floating crane and investments inEssar Bulk Terminal (Salaya) Limited and related liabilities were demerged into SalayaBulk Terminals Limited (earlier known as Hazira Coke Limited). The above transaction insubstance involved demerger of Vadinar Hazira Paradip and Salaya businesses (port andterminal facilities to handle the receipts storage and dispatch of commodities) from theCompany. The above scheme was approved by the court on 1st July 2016 and became effectivefor the purpose of accounting from appointed dates as mentioned above. The financialsaccordingly reflect discontinuing operations with respect to these demerged businesses.
Key Financial Performance highlights for the year are as below
Total Revenue contribution on consolidated basis was Rs. 75004.60 lakhs
EBITDA for the year on consolidated basis was Rs. 47985.38 lakhs
Net Profit for the year on consolidated basis was Rs. 1322.66 lakhs Awards andAccolades
Your Company has been awarded over the year by various institution for best practicesin Health Safety Environment and Quality related categories. Below is the list of awardsand accolades won by your Company:
Essar Ports Limited was conferred CII SCALE Award under Terminal Operator Category 2016
Essar Ports Limited was conferred Maritime & Logistics
Award for CSR Activities
Essar Ports Limited was conferred Maritime Standard
Award Dubai for CSR Activities
Essar Vizag Terminals Limited was conferred
Construction Times Award for Best Executed Port & Harbour Project of the Year 2017
4. RISK MANAGEMENT & INTERNAL CONTROL
Proper risk management and internal control help organizations understand the risksthey are exposed to put controls in place to counter threats and effectively pursuetheir objectives. They are therefore an important aspect of an organization's governancemanagement and operations. Professional accountants can and should play a leading role inhelping their organizations achieve an integrated organization-wide approach to riskmanagement and internal control which ultimately helps create enhance and protectstakeholder value.
Implementation and operation of port and terminal facilities are dependent on variousregulatory approvals and government policies. Changes in macro economic factors likeinflation interest rate world trade and natural catastrophes also play an important rolein the trade of goods and cargo. Any adverse change in the above may affect theperformance of your Company. Your Company periodically reviews the risks associated withthe business and takes steps to mitigate and minimise the impact of risks. Your Companyhas a Risk Assessment and Mitigation procedure in place. Major risks identified by thebusinesses and functions if any are systematically addressed through mitigating actions ona continuing basis.
The Company's internal control systems are commensurate with the nature of its businessand the size and complexity of operations. These systems are routinely tested by theInternal
Auditor and cover all key business areas. Significant audit observations and follow upactions thereon are reported to the
Audit Committee. The Audit Committee reviews adequacy and effectiveness of theCompany's internal control environment and monitors the implementation of auditrecommendations including those relating to strengthening of the Company's riskmanagement policies and systems.
The details of foreign exchange earnings and outgo as required under Section 134 andRule 8(3) of Companies
(Accounts) Rules 2014 are mentioned below:
Foreign Exchange Earnings & Outgo
( Rs. Lakhs)
|Particulars ||For the year ended 31st March 2017 |
|Foreign Exchange earnings ||72.41 |
|Foreign Exchange outgo ||40.16 |
As on March 31 2017 the following were the subsidiaries of your Company:
1. Essar Vizag Terminals Limited
2. Essar Paradip Terminals Limited
3. Essar Dredging Limited
6. RELATED PARTY TRANSACTIONS
All Related Party Transactions entered during the year were in ordinary course of thebusiness and on an arm's length basis. Details of material related party transactionentered during the financial year 2016-17 are provided in the prescribed form
AOC-2 as an annexure to this report.
7. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THECOMPANY
There were no material changes and commitments affecting the financial position of theCompany which occurred between the end of the financial year to which this financialstatements relate and the date of this Report.
8. FIXED DEPOSITS
The Company has not accepted any fixed deposits during the year under review.
9. DETAILS OF DIRECTORS AND KEY MANAGERIAL PERSONNEL APPOINTED / RESIGNED DURINGTHE YEAR
1. As on the date of the report the Key Managerial Personnel of the Company are
1. Shri. Rajiv Agarwal Managing Director & CEO
2. Shri. K. K. Sinha Wholetime Director
3. Smt. Neelam Jagdish Thanvi Company Secretary
2. Shri. A. S. Bali Director Finance and Shri Manoj Contractor Company Secretary haveresigned.
3. Approval of the members is being sought at the ensuing Annual General Meeting of theCompany for the re-appointment of Shri. K. K. Sinha (DIN 00009113) as Wholetime Directorfor a further period of 3 years.
10. NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS / COMMITTEES AND ATTENDANCE OF THEDIRECTORS
The details of meetings of the Board of Directors and Committees thereof and theattendance of each director thereat are provided as an annexure to this report.
11. DECLARATION OF INDEPENDENCE
The Company has received Declarations of Independence as stipulated under Section149(6) of the Companies Act 2013 from Independent Directors.
12. COMPOSITION OF THE AUDIT COMMITTEE
As on the date of this report the Audit Committee of the Board comprised of 3Non-Executive Directors all of them are Independent. Shri. Dilip J. Thakkar acts as theChairman of the Committee and Shri. V. G. Raghavan and Shri. P. K. Srivastava are theother members of the Committee. All the recommendations of the Audit Committee have beenaccepted by the Board.
13. CORPORATE SOCIAL RESPONSIBILITY
As required under Section 135 of Companies Act 2013 your
Company had constituted a Corporate Social Responsibility Committee. The compositionand terms of reference of the
Corporate Social Responsibility Committee had been fixed by the Board of Directors ofyour Company. Your Company had also formulated a Corporate Social Responsibility Policywhich is available on the websites of the Company at www.essar.com. The Companystatutorily is not required to incur CSR spend as the Company has negative profits. TheCompany has initiated CSR activities through its subsidiaries. Annual report on CSRactivities as required under the Companies (Corporate Social Responsibility Policy) Rules2014 has been appended as Annexure to this Report.
14. DIRECTORS' APPOINTMENT AND TENURE
The Directors of your Company are appointed by members at the General Meetings. Inaccordance with the Articles of Association of the Company two-third of the Directors ofthe Board are liable to retire by rotation. Out of this one-third of the eligibleDirectors shall retire every year. The appointment and tenure of Independent Directors areconsistent with the Companies Act 2013. In accordance with the provisions of theCompanies Act 2013 and the Articles of Association of the Company Shri. Rajiv Agarwal(DIN 00903635) retires at the ensuing Annual General Meeting of the Company and offershimself to be re-appointed in the ensuing AGM.
During the year Shri. T. S. Narayanasami had resigned with effect from December 232016. Shri A. S. Bali and Ms. S. Gayathri Directors have also resigned from the Board ofthe Company.
Your Board places on record its appreciation for the valuable contributions made byShri. Narayanasami Shri. Bali and Ms. Gayathri in the growth and progress of the Companyduring their tenure as Directors.
15. PERFORMANCE EVALUATION OF THE BOARD ITS COMMITTEES AND DIRECTORS
All Directors responded through a structured questionnaire giving feedback about theperformance of the Board its Committees individual Directors and the Chairman. Thequestionnaire included inputs on composition functioning information availabilityeffectiveness etc. The questionnaire also covered in the case of individual directorsqualitative assessment and in the case of Chairman additional criteria like leadershipqualities and other key aspects of his role.
The inputs received were circulated to the members of the Nomination and RemunerationCommittee of the Board and was also discussed at the subsequent meeting of the Board.
16. EXTRACT OF ANNUAL RETURN
The extract of annual return in Form MGT 9 as required under
Section 92(3) and Rule 12 of the Companies (Management and Administration) Rules 2014is appended as an Annexure to this Report.
17. INTERNAL CONTROL FRAMEWORK
Your Company conducts its business with integrity and high standards of ethicalbehaviour and in compliance with the laws and regulations that govern its business. YourCompany has a well-established framework of internal controls in its operations includingsuitable monitoring procedures. In addition to an external audit the financial andoperating controls of your Company at various locations are reviewed by Internal Auditorswho report their observations to the Audit Committee of the Board.
18. HUMAN RESOURCE
Human resources focuses on maximizing employee productivity. Your HR professionalsmanage the human capital of our organization and focus on implementing policies andprocesses. Our HR is specialised on recruiting training employee-relations or benefitsrecruiting specialists and hire top talent. Your HR always ensures that employees aretrained and have continuous development. This is done through training programsperformance evaluations and reward programs. Employee relations deal with concerns ofemployees when policies are broken such as in cases involving harassment ordiscrimination. Human resources have always been the key to success of your Company'sbusiness. A balance of internal and external talent was maintained to ensure right skillsare available to initiate project activities. Your Company is known for developing futureleaders and having the best people practices. This coupled with the ability to attract thebest talent provides a competitive edge to the organisation.
19. CONSOLIDATED FINANCIAL STATEMENTS
Your Directors have pleasure in attaching the Consolidated Financial Statementspursuant to Section 129(3) of the Companies Act 2013 and prepared in accordance with theapplicable Accounting Standards.
Messrs. Deloitte Haskins & Sells the Statutory Auditors of the Company wereappointed as Statutory Auditors to hold office upto the conclusion of the Annual GeneralMeeting of the Company to be held for the financial year 2016- 2017. The StatutoryAuditors have laid down their office as Statutory Auditors of the Company in terms ofSection 139 (8) of the Companies Act 2013 and the casual vacancy in the office of theauditor was filled in by the appointment of Messrs. MSKA &
Associates Chartered Accountants Floor 2 Enterprise Centre Nehru Road Vile Parle(East) Mumbai 400 099 by the Board of Directors subject to the approval of the members atthe ensuing Annual General Meeting to be held within three months of the recommendation ofthe Board and the Auditor shall hold the office till the conclusion of the 45 thannual general meeting if approved by the members in the ensuing annual general meeting ofthe Company to be held in Calendar year 2021.
The Company has received a certificate from the proposed Statutory Auditor to theeffect that their appointment if made shall be in compliance with the provisions ofsection 139 and 141 of the Companies Act 2013. Accordingly the Board proposesappointment of Messrs. MSKA & Associates Chartered Accountants (ICAI FormRegistration Number: 105047W) as the new statutory Auditor of the Company to hold officefor one term of Five (5) years commencing from conclusion of the ensuing 41st AGM uptothe Annual General Meeting of the Company to be held in Calendar year 2021.
MSKA & Associates specialize in providing high-end services in Tax Regulatory andAudit Assurance domain. MSKA is today positioned as one of the largest mid-sized firms inIndia. With a strong presence in Bengaluru Chennai Kolkata Hyderabad Mumbai New Delhi- Gurgaon and Pune they plan to establish their foot-print across all major Indian citiesthus creating a pan-Indian identity.
The firm is renowned for its Tax & Regulatory expertise and has been lauded for itshandling of such cases/transactions that have provided significant benefits to theclients. As India tries to cope with the overwhelming plethora of Tax and RegulationsMSKA with its robust Knowledge Management process is in position to deal with the variouscomplexities of the business world. Their partners are reputed with being entrepreneurialand take pride in a work culture that is both client-centric and knowledge driven. Theirwell-founded internal training programs ensure that their teams of young and talentedmanagers render timely and efficient services to their clients.
The Report given by M/s. MSKA & Associates Chartered Accountants the StatutoryAuditors on the financial statements of the Company is part of the Annual Report.
21. EXPLANATIONS TO QUALIFICATIONS IN THE AUDITOR'S REPORT ON STANDALONE ANDCONSOLIDATED FINANCIAL STATEMENTS
There is no qualification under Basis for Qualified Opinion in the Auditor's Report onStandalone and Consolidated Financial Statements for the year ended March 31 2017.
22. REPORTING OF FRAUD
There were no instances of fraud committed against the Company by its officers oremployees as specified under Section 143(12) of the Companies Act 2013 and accordingly nosuch reporting was done by the Auditors of the Company.
23. INFORMATION TECHNOLOGY
The field of information technology (IT) covers the design administration and supportof computer and telecommunications systems. Some of the positions in this field includedatabase and network administrators support specialists computer scientists softwareprogrammers and system analysts. The majority of career tracks in IT entail design andoperational tasks related to computer hardware components networks and softwareapplications.
Professionals in the IT field work with businesses and organizations to set up andsupport viable computer networks that will keep systems efficient and reliable. ITencompasses all hardware and software used in the storing creation and accessing ofinformation. Examples of technologies that professionals work with are firewallsdatabases media storage devices networks and the Internet.
Your Company successfully implemented SAP in its financial and related systems. For drybulk systems have been implemented to capture end-to-end workflow covering all activitiesfrom pre-arrival intimations to actual departure of vessels. Expected berth occupancy isbeing plotted thereby optimising the berth utilisation and increasing berth efficiency.
Various dashboard reports have been implemented in the system for berth performance andresource monitoring.
24. VIGIL MECHANISM
Your Company has adopted a Whistle Blower Policy as part of the vigil mechanism toprovide appropriate avenues to the Directors and employees to report their genuineconcerns which is perceived to be in violation of or in conflict with the fundamentalbusiness principles of the Company.
25. PROTECTION OF WOMEN AT WORKPLACE
The Company has formulated a policy on Prevention of Sexual Harassment at workplace asper the provisions of The Sexual Harassment of Women at Workplace (Prevention Prohibition& Redressal) Act 2013 (Act') and Rules made thereunder. During the financialyear no cases were filed under the above said Act.
26. DISCLOSURE PURSUANT TO SECTION 186 OF THE COMPANIES ACT 2013 IN RELATION TO LOANSGIVEN INVESTMENTS MADE GUARANTEES GIVEN OR SECURITY PROVIDED BY THE COMPANY
The Company is providing infrastructural facilities in terms of Section 186 read withSchedule VI to the Companies Act 2013 and hence is exempted from the provisions ofSection 186 of the Companies Act 2013 with respect to loans and guarantees given andsecurity provided.
27. POLICY ON APPOINTMENT OF DIRECTORS AND REMUNERATION
The policy formulated by the Board of Directors under Section 178 of the Companies Act2013 for appointment and remuneration of the Directors and Senior Management employees isannexed as an annexure to this report.
28. STATEMENT OF DIRECTORS RESPONSIBILITIES
Pursuant to the requirement of Section 134(5) of the
Companies Act 2013 and based on the information provided by the management yourDirectors state that: a) in the preparation of the Financial Statements the applicableaccounting standards had been followed along with proper explanation relating to materialdepartures; b) accounting policies selected were applied consistently and judgments andestimates were made that are reasonable and prudent so as to give a true and fair view ofthe state of affairs of the Company at the end of the financial year and of the profit orloss of the Company for that period; c) proper and sufficient care has been taken for themaintenance of adequate accounting records in accordance with the provisions of theCompanies Act 2013 for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities; d) the Financial Statements of the Company havebeen prepared on a going concern basis; e) the Company has laid down internal financialcontrols to be followed by the Company and that such internal financial controls areadequate and were operating effectively; and f) proper systems are in place to ensurecompliance with the provisions of all applicable laws and such systems are adequate andoperating effectively.
29. CORPORATE GOVERNANCE
The Company had delisted its shares from all the Stock Exchanges and presently notcovered under the listing regulations of SEBI. However as a good practice your Companyfollows the Corporate Governance practice in its business activities.
30. DISCLOSURES WITH RESPECT TO THE REMUNERATION UNDER SECTION 197 OF THE COMPANIESACT 2013
Since your Company is not a listed company the statement of Disclosure of Remunerationunder section 197 of Companies Act 2013 and Rule 5(1) of Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is not applicable.
31. AFFIRMATION AND DISCLOSURE
The Company had delisted its shares from the Stock Exchanges and presently not coveredunder the listing regulations of SEBI. Since the reporting under the Corporate Governanceis not mandatory for your Company the declaration in relation to the compliance with theCode of Conduct is not attached with the Annual Report.
32. GENERAL DISCLOSURES
Your Directors state that for the year ended March 31 2017 no disclosure is requiredin respect of the following items and accordingly confirm as under:
The Executive Director did not receive any remuneration from the holding and/orsubsidiary companies.
The Company has neither revised the financial statements nor the report of Boardof Directors.
The Company has not issued equity shares with differential rights as todividend voting or otherwise or sweat equity shares.
No significant or material orders were passed by the
Regulators or Courts or Tribunals which impact the going concern status or Company'soperations in future.
33. APPRECIATION AND ACKNOWLEDGEMENTS
Your Directors express their sincere thanks and appreciation to all the employees fortheir commendable team work and contribution to the growth of the Company.
Your Directors also thank its bankers and other business associates for their continuedsupport and co-operation during the year.
| ||For and on behalf of the Board || |
|Mumbai ||Rajiv Agarwal ||K. K. Sinha |
|November 15 2017 ||Managing Director ||Wholetime Director |