Your Directors are pleased to present the 70th Annual Report on the businessoperations and the Financial Statements of your Company for the financial year ended March312018.
The financial results of the Company (standalone) for the financial year ended March312018 are presented below:
(Rs. in crores)
| ||2017-18 ||2016-17 |
|Total Revenue ||2399.27 ||2224.71 |
|Total Expenses ||2232.08 ||1583.32 |
|Profit before tax ||167.19 ||641.39 |
|Less : Tax Expenses ||7.00 ||40.00 |
|Profit for the period ||160.19 ||601.39 |
|Retained Earnings || || |
|Balance at the beginning of the year ||1405.71 ||1558.29 |
|Add : || || |
|- Profit for the year ||160.19 ||601.39 |
|- Other Comprehensive Income ||3.42 ||(2.14) |
|Less : || || |
|- Transfer to Tonnage tax reserve ||15.00 ||100.00 |
|- Transfer to Debenture redemption reserve ||28.75 ||591.25 |
|- Interim Dividend on Equity Shares ||- ||54.28 |
|- Final Dividend on Equity Shares (FY - 2016-17) ||98.01 ||- |
|- Dividend Distribution Tax ||14.63 ||6.30 |
|Balance at the end of the year ||1412.93 ||1405.71 |
The net worth of the Company as on March 31 2018 was Rs. 5225.42 crores as compared toRs. 5162.02 crores for the previous year.
The financial statements have been prepared in accordance with the Indian AccountingStandards (IndAS) notified under the Companies (Indian Accounting Standards) Rules 2015.
Your Directors recommend a final dividend of Rs.7.20 per share which will result in anoutflow of Rs.126.08 crores (inclusive of tax on dividend). This represents a payout ratioof 78.71% (previous year 28.90%). The dividend will be paid after your approval at theensuing Annual General Meeting.
MANAGEMENT DISCUSSION AND ANALYSIS
In Financial Year (FY) 18 the Company recorded a total income of Rs.2399.27 crores(Previous year Rs. 2224.71 crores) and earned a PBIDT of Rs.986.88 crores (previous yearRs. 1261.97 crores).
CRUDE TANKER MARKET
The crude tanker market in FY 18 witnessed lower earnings than FY 17 due to thefollowing factors:
In November 2016 the OPEC and certain Non-OPEC nations decided to curtailproduction to help support the crude oil prices. By the end of FY 17 and throughout FY 18the market witnessed a strong compliance to these allocated cuts. This led to two majorconsequences:
1. Lower production and consequently lower exports from these nations.
2. The reduced production led to the oil price increasing however the forward curveremained in backwardation (as the market believes these oil prices are artificially heldhigh). When the oil curve is in backwardation oil consumers prefer to draw down fromtheir inventories which has occurred at the expense of trade.
Overall the trade growth was healthy from a historical context but due to thefactors mentioned above the trade growth was not strong enough to support freight rates.
Fleet supply was a major challenge during the year due to a large number of newbuilding vessels being delivered floating storage (in vessels) being released and tankerstrading in the clean sector switching to the dirty crude sector.
The excessive growth in the fleet supply during the year exacerbated the supplyoverhang of vessels which existed at the beginning of the year.
Therefore the freight market was very weak throughout the year. This weaknessshould have led to increased scrapping but unfortunately it did not pick up until thefourth quarter.
The table below captures the average spot earnings of the Suezmax and the Aframax typeof ships over the financial year (in $/day).
| ||FY 18 ||FY 17 ||YOY CHANGE |
|Suezmax ||13171 ||22904 ||-42% |
|Aframax ||11720 ||20075 ||-42% |
PRODUCT TANKER MARKET
The product tanker market in FY 18 witnessed lower earnings than in FY 17 due to thefollowing factors:
Similar to the crude market inventories in the product tanker market had alsobuilt up over the previous year. Therefore in FY 18 despite a healthy demand growth forproducts trade growth was weaker than FY 17 as consumers relied upon drawing downinventories.
Another consequence of excessive inventory was the lack of arbitrageopportunities an important component of demand for product tankers.
Unfortunately short haul intra-regional trade which did not contribute much tothe tonne-mile expansion was the major source of whatever trade demand growth was seen.
Fleet growth was strong during the year with minimal scrapping.
Newbuilding Suezmaxes and VLCCs carried product cargoes on their maiden voyageswhich further reduced cargoes available for product tankers.
Clearly the year was challenging for product tankers as the dearth of cargoesand excess fleet was the perfect combination for a weak freight rate.
The table below captures the average spot earnings of the LR and MR type of ships overthe financial year (in $/day).
| ||FY 18 ||FY 17 ||YOYCHANGE |
|MR ||9976 ||10698 ||-7% |
|LR1 MEG - Asia ||7875 ||10247 ||-23% |
The Company bought (and took delivery of) a modern MR tanker and a modern LR2 tankerduring FY 18. The Company believes that these acquisitions will be value accretive in thelong term.
LPG CARRIER MARKET
The rise of the gas market over the last few years has been broadly attributed to twomajor reasons:
First the increase in shale production in the US has led to a large amount ofLPG being produced in the region. The export of this new supply of gas (especially toAsia) has led not only to trade growth but also tonne mile expansion. To put it inperspective US exports grew from 1.8 Mn tons in 2006 to about 33 Mn tons in 2017.
The second factor was the strong growth in demand from the Asian countriesespecially China and India.
However on the back of a very strong freight market in 2014-16 ship owners hadordered a large number of vessels most of which were delivered in 2016 and 2017. Thegrowth in trade demand was unable to keep pace with FY 17 witnessing a softening of thefreight market. The supply overhang along with delivery of new vessels and limitedscrapping. has led to a depressed freight market for FY 18.
On top of the excessive fleet supply during FY 18 low oil prices capped the growth ofshale production and as a consequence LPG production growth. Local demand in the US alsopicked up due to an extremely cold winter as well as industrial demand for propane. As aresult local prices picked up closing the arbitrage between the US and Asia. Thereforewhile the fundamental story of exports to Asia remains strong there was a slowdown ingrowth over the last year due to local factors.
The table below captures the average spot earnings of VLGC type of ships over thefinancial year (in S/day).
| ||FY 18 ||FY 17 ||YOY CHANGE |
|VLGC ||14366 ||15760 ||-9% |
The weak state of the freight market has led to weak asset values and the Company hascapitalized on this opportunity to increase its exposure to the LPG sector. The Companyhas purchased two MGCs and one VLGC during the financial year of which one MGC has beendelivered to the Company in FY 18 and one VLGC in FY 19. The remaining MGC is expected tobe delivered in FY 19.
DRY BULK CARRIER MARKET
Dry bulk markets began the financial year on a strong note. The market had sufferedover the last few years due to excessive fleet supply; however FY 18 has seen animprovement in freight earnings.
The defining characteristic of the dry bulk market over the last few years is that itis intrinsically dependent on the growth in Chinese cargo volumes.
The following events lent strength to the market:
Fiscal stimulus in China has supported steel demand which in turn has supportediron ore imports.
Due to a focus on reducing pollution from steel mills China increased importsof high grade ore from longer haul destinations such as Brazil.
Coal demand for China and other South East Asian countries was strong and aidedby longer haul exports from the US.
The Latin American grain season has been exceptionally strong this year.
Some minor bulk commodities such as bauxite also played their part as Chinadiversified its sources from longer haul destinations such as Guinea.
The table below shows the average spot earnings of the various categories of dry bulkships over FY 18 (in $/day).
| ||FY 18 ||FY17 ||YOYCHANGE |
|Capesize ||15600 ||9497 ||64% |
|Panamax ||10596 ||6868 ||54% |
|Supramax ||10017 ||7264 ||38% |
FLEET SIZE AND CHANGE DURING THE FINANCIAL YEAR
As of 31st March 2018 the fleet of your Company stood at 47 shipsaggregating 3.88 Mn dwt with an average age of 10.58 years. During the financial yearyour Company took delivery of 2 product tankers 1 medium gas carrier and 1 dry bulkcarrier aggregating 0.24 Mn dwt. The Company also sold 1 Supramax dry bulk carrier in thefinancial year.
MOVEMENT OF ASSET VALUES
Despite a weak freight market the asset values for crude and product tankers movedwithin quite a narrow range of 5-10% during the year.
On the back of a strengthening dry bulk freight market asset values gained by 5% to30% depending on the age of the vessel with a higher gain for older vessels.
Given the weak state of the gas market asset values have corrected by 10-20% at theolder end.
Over the next 12 months the Company believes that asset values could stabilize forcrude and LPG tankers and may increase for product and dry bulk vessels.
ORDER BOOK AND OUTLOOK
The crude tanker order book stands at 13% while the product tanker order book is 9%.
Over the next 12 months oil demand is expected to remain strong along with refineryruns. As inventories for both crude and products have reduced the sector should witnessan increase in flow of cargoes. On the supply side crude tankers are being scrapped asquickly as they are being delivered which should help the sector work through theoverhang of fleet supply. However the next 12 months are expected to be challenging.
For product tankers the pace of deliveries has moderated and the strong demandscenario may result in an improved freight market later in the year. Arbitrageopportunities should re-open providing an additional increase to trade demand.
The VLGC orderbook stands at 12.8%. LPG production in the US is expected to pick up onthe back of increased shale oil drilling. However US LPG demand has been surprisinglystrong which may result in limited growth in US exports. Therefore the LPG freightmarkets are expected to remain challenging for another 6/12 months.
The dry bulk order book stands at 9.9%. The market has strengthened over the pastcouple of years working its way through the overhang of excessive fleet supply. Over thenext 12 months demand is expected to grow at a healthy pace with only moderate supplygrowth. Therefore freight rates may improve somewhat over the next 12 months.
RISKS AND CONCERNS
Your Company has carried out a detailed exercise to identify the various risks faced bythe Company and has put in place mitigation control and monitoring plans for each of therisks. Risk owners have been identified for each risk and these risk owners areresponsible for controlling the respective risks. The efficacy of these processes ismonitored on a regular basis by Risk Committees for the different areas in order to makecontinuous improvement and is further reviewed by the Risk Management Committee consistingof the three Whole-time Directors and the Compliance Officer.
The material risks and challenges faced by the Company are as follows:
Shipping is a global business whose performance is closely linked to the state of theglobal economy. Therefore if the global economic situation is adversely impacted itcould have an effect on the state of the shipping market.
OPEC nations control more than one third of the oil supply. Therefore their decision onwhether to comply (or extend) with crude production targets can have a material impact onthe crude product and LPG freight markets.
Many politically unstable countries such as Libya Nigeria and Venezuela producesignificant amounts of crude oil. Any instability in these counties (or resumption ofstability in some countries such as Venezuela) may alter the supply/demand scenario. Thiswill have a consequential impact on the tanker market.
Issues such as sanctions and wars may affect the shipping markets.
The recent trade dispute between the US and China may turn into a trade war. The mannerin which it may unfold if at all could be a serious cause for concern.
China has been a major source of global growth especially for commodities. If theeconomy falters or changes its policy towards import of various goods the consequentialdamage to shipping will be significant.
CHALLENGES FACED BY THE SHIPPING BUSINESS
The shipping industry is a truly global business with a host of issues potentiallyimpacting the supply demand balance of the industry. This results in tremendous volatilityin freight earnings and asset values.
Your Company attempts to manage that risk in various ways. If the Company believes thatthe freight market could weaken it may enter into time charter contracts ranging from 6months to 3 years. Another method of managing risk is by adjusting the mix of assets inthe fleet through sale or purchase of ships. The Company also ensures that assets arebought at cheap prices as capital cost is a major cost component. The Company hopes toweather the depressed markets better than most players in the business by having among thelowest fleet break-evens. The Company also operates ships in different asset classes anddifferent markets. This ensures that the Company's fortunes are not reliant upon a singlemarket.
The sale and purchase market and time charter markets are not always liquid. Thereforethere could be times when the Company is not able to position the portfolio in the idealmanner.
Our business is predominantly USD denominated as freight rates are determined in USDand so are ship values. The Company has its liabilities also denominated in USD. Anysignificant movement in currency or interest rates could meaningfully impact thefinancials of the Company.
Indian officers continue to be in great demand all over the world. Given theunfavorable taxes on a seafarer sailing on Indian flagged vessels it is becomingincreasingly difficult to source officers capable of meeting the modern day challenges ofworldwide trading.
A new and worrying threat to our business is cyber risk. The Company is taking steps tosecure its assets and systems from this threat including by having suitable protection inplace and by constant training to employees on how to avoid such issues.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has instituted internal financial control systems which are adequate forthe nature of its business and the size of its operations. The policies and proceduresadopted by the Company ensure the orderly and efficient conduct of its business includingadherence to Company's policies safeguarding of its assets prevention and detection offrauds and errors accuracy and completeness of the accounting records and timelypreparation of reliable financial information.
The systems have been well documented and communicated. The systems are tested andaudited from time to time by the Company and internal as well as statutory auditors toensure that the systems are reinforced on an ongoing basis. Significant audit observationsand follow up actions thereon are reported to the Audit Committee.
No reportable material weakness or significant deficiencies in the design or operationof internal financial controls were observed during the year.
The internal audit is carried out by a firm of external Chartered Accountants andcovers all departments. In the beginning of the year the scope of the internal auditexercise including the key business processes and selected risk areas to be audited arefinalised in consultation with the Audit Committee. All significant audit observations andfollow up actions thereon are reported to the Audit Committee.
During the year the Company decided to rotate the internal auditors. AccordinglyErnst & Young LLP have been appointed as new internal auditors of the Company in placeof CNK & Associates LLP w.e.f. April 01 2018.
CNK & Associates LLP (earlier A. J. Shah & Company) were associated with theCompany for the last 26 years. Your Directors place on record their appreciation for thevaluable services rendered by CNK & Associates LLP (earlier A. J. Shah & Company)during their long tenure as Internal Auditors of the Company.
The Audit Committee comprises of Mr. Cyrus Guzder (Chairman) Mr. Berjis Desai Mr.Farrokh Kavarana and Ms. Rita Bhagwati all of whom are Independent Directors on Board ofthe Company.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared by your Company in accordancewith Ind ASs notified under the Companies (Indian Accounting Standards) Rules 2015. Theaudited Consolidated Financial Statements together with Auditors' Report thereon form partof the Annual Report.
The group recorded a consolidated net loss of Rs.209.57 crores for the year underreview as compared to net profit of Rs.754.96 crores for the previous year. The net worthof the group as on March 31 2018 was Rs. 6929.22 crores as compared to Rs. 7223.33 croresfor the previous year.
The statement containing the salient features of the financial statements of theCompany's subsidiaries for the year ended March 31 2018 has been attached along with thefinancial statements of the Company. The report on performance of the subsidiaries is asfollows:
GREATSHIP (INDIA) LIMITED MUMBAI
Greatship (India) Limited (GIL) wholly owned subsidiary of your Company and one ofIndia's largest offshore oilfield services providers has completed another challengingyear of operations. In FY 18 GIL has recorded a total income of Rs.1057 crores (previousyear Rs. 1310.56 crores) on a standalone basis and Rs. 1001.54 crores (previous year Rs.1424.66 crores) on a consolidated basis. The Company earned a profit before interestdepreciation (including impairment) & tax of Rs.598.06 crores (previous year Rs.449.71 crores) and Rs. 541.88 crores (previous year Rs. 885.87 crores) on a standalone andconsolidated basis respectively.
GIL alongwith its subsidiaries currently owns and operates nineteen vessels and fourjack up drilling rigs. The operating fleet of nineteen vessels comprises of four PSVseight Anchor Handling Tug cum Supply Vessels (AHTSVs) two Multipurpose Platform Supply& Support Vessels (MPSSVs) and five ROVSVs.
During the previous financial year GIL had commenced the group restructuring exercisewhereby GIL had acquired full ownership of its Singapore subsidiary Greatship GlobalEnergy Services Pte. Ltd. (GGES) in March 2017.
As a part of the restructuring exercise during the year GIL has acquired four jack-uprigs along with its Plant Machinery & Equipments/ Owner Furnished Eguipments (theRigs) from GGES in dune 2017. As part consideration for acquisition of the Rigs GIL hastaken over the outstanding bank borrowings of GGES and the balance outstandingconsideration is to be settled by dune 2018 in accordance with the Memorandum ofAgreement (as amended).
Further during the year under review the Board of Directors of GIL and its whollyowned subsidiary in Mauritius Greatship Global Holdings Ltd. (GGHL) have approved across border merger of GGHL with GIL. GIL and GGHL have commenced the process for themerger and made the necessary applications to the relevant authorities for their approval.
GIL has the following wholly owned subsidiaries:
Greatship Global Energy Services Pte. Ltd. Singapore (GGES)
As mentioned above in dune 2017 GGES has sold all its Rigs to GIL. GGES has incurreda profit of USD 8.54 Mn for the current financial year as against the loss of USD 198.54Mn after accounting for impairment of USD 223.7 Mn in the asset values in the previousyear.
Greatship Global Holdings Ltd. Mauritius (GGHL)
As mentioned above during the year GIL and GGHL have commenced the process of mergerof GGHL with GIL. GGHL is the holding company of GGOS.
Greatship Global Offshore Services Pte. Ltd. Singapore (GGOS)
GGOS owns and operates three offshore support vessels which include one Anchor HandlingTug cum Supply Vessel (AHTSV) and two Multipurpose Platform Supply and Support Vessels(MPSSVs). GGOS after accounting for an impairment of USD 15.62 Mn in asset valuesincurred a loss of USD 20.14 Mn for the current financial year as against the loss of USD19.96 Mn in the previous year after accounting for an impairment of USD 16.32 Mn in assetvalues.
Greatship (UK) Limited United Kingdom (GUK)
During the year under review the term of the charter party for the remaining/ secondROV Support Vessel (ROVSV) inchartered from the Company was completed. GUK's loss for thecurrent financial year amounted to USD 0.02 Mn as against the profit of USD 0.41 Mn in theprevious year.
Greatship Oilfield Services Limited India (GOSL)
GOSL did not carry out any operations during the year.
THE GREATSHIP (SINGAPORE) PTE. LTD. SINGAPORE
The Greatship (Singapore) Pte. Ltd. is a wholly owned subsidiary of your Company. TheGreatship (Singapore) Pte. Ltd. does shipping agency business for the ships owned by yourCompany. During the year ended March 312018 there were 104 ship calls at Singapore. Thecompany's profit after tax for the current financial year amounted to S$ 0.15 Mn asagainst the profit of S$ 0.13 Mn in the previous year.
THE GREAT EASTERN CHARTERING LLC (FZC) U.A.E.
The Great Eastern Chartering LLC (FZC) is a wholly owned subsidiary of your Company.During the year ended March 31 2018 the company made a profit of USD 0.22 Mn (previousyear loss of USD 0.59 Mn). The 3 year charter of the in-chartered suezmax tanker ended onduly 1 2017 when the vessel was redelivered. The company deposited an amount of USD10650000 with DNB Luxembourg S. A. for the purpose of investment in shares of shippingcompanies. Out of this amount the company has utilized USD 9949166 for investment inequity shares as above. As on March 31 2018 the fair value of the shares was USD10535491. During the the year ended March 31 2018 the company booked a loss of USD80765 on equity shares investments of which USD 739662 was dividend/gain booked on saleof equity shares and USD 820427 was loss recognised on revaluation of equity shares atmarket value at the end of the period.
During the year the company made a further investment of USD 0.25 Mn in the sharecapital of The Great Eastern Chartering (Singapore) Pte Ltd. its wholly owned subsidiary.
THE GREAT EASTERN CHARTERING (SINGAPORE) PTE LTD. SINGAPORE
The Great Eastern Chartering (Singapore) Pte. Ltd. is a wholly owned subsidiary of TheGreat Eastern Chartering LLC (FZC) UAE. During the year ended March 31 2018 the companymade a loss of USD 0.01Mn as against loss of USD 0.05 Mn in the previous year. There wasno trading activity in the company during the year since trading conditions were notsuitable for intended trades.
During the year the company had issued and allotted 250000 Ordinary Sharesaggregating to USD 0.25 Mn to The Great Eastern Chartering LLC (FZC) U.A.E. it's holdingcompany.
GREAT EASTERN CSR FOUNDATION INDIA
Great Eastern CSR Foundation (Foundation) is a wholly owned subsidiary of your Companywhich handles the CSR activities of your Company and its subsidiaries. The Foundationreceived a total contribution of Rs.12.81 crores from the Company and Greatship (India)Limited during the year ended March 31 2018. The Foundation spent Rs. 10.35 crores on CSRactivities during the year.
Details of CSR activities carried out by Great Eastern CSR Foundation are set out inthe reports on CSR activities which form part of this Annual Report.
GLOBAL DEPOSITORY RECEIPTS (GDRS)
Considering the low number of GDRs outstanding the Company decided to terminate theGDR programme and subsequent delisting from Euro MTF Market of Luxembourg Stock Exchangein accordance with the terms of Deposit Agreement with The Bank of New York MellonDepository (BNY) and the regulations of Luxembourg Stock Exchange. Accordingly the GDRprogramme was terminated and the GDRs were delisted from Euro MTF Market of LuxembourgStock Exchange with effect from November 20 2017. Upon such termination BNY has givendelivery of underlying shares upon surrender of GDRs or the net proceeds of sale of theunderlying shares to the GDR holders.
DEBT FUND RAISING
During the year the Company issued 3000 Non-convertible Debentures of Rs.1000000each aggregating to Rs. 300 crore with the object of refinancing existing debt fundingthe capital expenditure requirements and general corporate purposes of the Company.
The Company redeemed Non-convertible Debentures aggregating to Rs. 185 crore during theyear.
The gross debt : equity ratio as on March 31 2018 was 0.81:1(0.91:1 including effectof currency swaps on rupee debt) and the debt : equity ratio net of cash and cashequivalents was 0.30:1(0.40:1 including effect of currency swaps) on standalone basis.
QUALITY SAFETY HEALTH & ENVIRONMENT
High levels of safety on board the assets has been maintained during the year onCompany's vessels by continued efforts of the seafarers and the office staff. Thisrequirement continues to be emphasised during the scheduled meetings with the managementlevel floating staff and the Company's top management. Lost Time due to Injury (LTI) to3.19 per million exposure hours is slightly more than the Company's KPI of 2.0 whileTotal Recordable Case Frequency (TRCF) to 4.73 per million exposure hours is around theKPI of 4.80.
Oil Companies International Marine Forum (OCIMF) had extensively revised their qualityrequirements tool - Tanker Management and Self Assessment (TMSA) programme and compliancewith these amended quality requirements (TMSA 3) had to be completed by 31stDecember 2017. The Company had completed the transition and has subsequently been auditedto the new requirements of TMSA 3 by two oil majors.
The Company has also commenced benchmarking its fleet against its performance inenvironmental performance energy efficiency and technical performance against vessels ofother companies through an industry based data base made available by the Baltic andInternational Marine Council (BIMCO).
To ensure that the assets are maintained in good condition the Company carried outadditional inspections of vessels. The Company's assets continued to perform well duringoil major inspections. It was also ensured that new acquisitions into the fleet were takeninto the Company's quality management system seamlessly during the fleet expansion phaseof the Company.
TRAINING AND ASSESSMENT
Training and Assessment is a newly formed department fully operational for the lastone year. Prime aim of this department is to create a pool of competent well trained andconfident seafarers for the fleet vessels.
This department moved to the newly acquired training centre at Worli in October 2017.
In dan 2018 a full mission Bridge Simulator Steering Simulator and ECDIS (ElectronicChart Display and Information System) Simulators were installed and subsequently approvalof classification society DNV-GL was obtained. At this training centre LVHS (Large VesselHandling Simulator) courses ECDIS Type Specific courses (Make: TRANSAS & dRC) andSteering Tests are being conducted for seafarers.
In addition to the above seafarers undergo various on-shore training at prestigiousmaritime training institutes in India and also on-board training by seasoned maritimeprofessionals of the industry.
With such arrangements in place the Company is very much hopeful to achieve the goalof placing competent well trained and motivated complement on board its fleet vessels tooperate them in the most efficient and safe manner.
In this financial year IT has focused on the following major initiatives:
In recent times cyber threats have come to the fore and the shipping industry hasbeen a new target area for cyber attackers. Last year the Company assessed the threats toits computer network. This year the Company implemented almost all the measuresrecommended both in the office and on board its ships. The Company also commissioned anindependent cyber security organization to carry out an ethical hacking exercise of itson-board computer systems to assess their vulnerability.
While the on-board systems proved to be robust the Company is in the process ofimplementing a few more measures on board to ensure that the computer systems are evenbetter protected.
The Company understands that building protection against cyber threats is a journeyrather than a destination and that the Company will have to continuously update itssystems to deal with new developments.
The Company also runs a regular awareness program on cyber security for all employeesboth on ship and ashore.
DIGITAL TRANSFORMATION INITIATIVE
The Company has implemented computerized systems to automate the few remaining manualprocesses especially for business functions. Many mobile apps have been implemented andthese have brought significant amount of flexibility among employees in their day to dayoperations.
The expansion of the fleet during the year necessitated additional human resourcerequirements both for floating and shore staff. Market correction of compensation for Top4 ranks along with introduction of performance incentive scheme for Master and Chiefengineer enabled to attract and retain shipping talent. The recruitment process forfloating staff was streamlined to improve effectiveness of hiring.
The Company continued to invest in its people through various developmental programslike Business Simulation Critical thinking Mentoring and Leadership. Engagementinitiatives like Quiz Marathon and Town Hall continued to attract employee participation.The percentage of actively engaged employees has shown a significant increase in theCoffman engagement survey. Most of the survey parameters reflected a positive pictureabout the Company.
Shore staff Attrition stood at a healthy 4 % during the fiscal year. Total number ofpermanent shore staff and floating staff was 212 and 804 respectively.
GREAT EASTERN INSTITUTE OF MARITIME STUDIES (GEIMS)
The Great Eastern Institute of Maritime Studies Lonavla (GEIMS) has trained 3463cadets since inception. These cadets upon passing out serve on merchant ships asNautical Officers Graduate Marine Engineers and Electro-Technical Officers. About 50% ofthe passed out cadets serve on the Company's vessels whereas almost 70% of the Officers onthe Company's vessels have been trained at GEIMS. This percentage will increase in thenext few years. The first General Purpose Rating (GP Rating) batch of traineessuccessfully passed at GEIMS in duly 2017. After successful completion of their training34 trainees are placed on Company's vessels.
For the first time GEIMS has inducted seven Angolan cadets (including two femalecadets) to be trained as Electro-Technical officers.
During the last Annual Comprehensive Inspection Programme (CIP) conducted under theenhanced guidelines of DG Shipping GEIMS has improved on its earlier score and was onceagain awarded Grade A1 (Outstanding). This gradation places GEIMS as one of the premierMaritime Training Institutes in the country and confirms the high level of compliance withall Merchant Shipping rules and associated orders circulars and guidelines issued by DGShipping from time to time.
To further enhance training at the Institute GEIMS has installed a full sizeforecastle of a ship procured from the shipbreaking yard at Alang. This will providehands-on training to trainees on aspects of seamanship anchor operations navigationallights electrical and hydraulics machinery and ship construction.
Also a Modern Bridge Simulator encompassing the current technologies and types andsizes of ships has been set-up in the campus for practical training of nautical officers.An advanced Electrical and Control Laboratory is being set up for training of Engineeringand ElectroTechnical officers at GEIMS.
Forty computer work stations have been included in the Institute library to enabletrainees to browse the digital library for technical reference.
Above training facilities have been included in the campus in addition to the alreadyexisting "Centers of Excellence" for marine boiler and high voltage simulationand a fully functional marine diesel engine.
To enhance the security within the campus 29 high resolution CCTV cameras have beenmounted at vulnerable locations. Also as per DG shipping requirement in order to ensurethe required attendance of lectures by all trainees biometric recording has beeninitiated at the entrance of each classroom.
CORPORATE SOCIAL RESPONSIBILITY
The Company has always been conscious of its role as a good corporate citizen andstrives to fulfill this role by running its business with utmost care for the environmentand all the stakeholders. The Company looks at Corporate Social Responsibility (CSR)activities as significant tool to contribute to the society.
The Board of Directors of the Company has constituted a Committee of Directors knownas the Corporate Social Responsibility Committee comprising of Mr. Vineet Nayyar(Chairman) Mr. Cyrus Guzder and Mr. Bharat K. Sheth to steer its CSR activities.
Copy of the Corporate Social Responsibility Policy of the Company as recommended by theCSR Committee and approved by the Board is enclosed as 'Annexure A'. The CSR Policy isalso available on the website of the Company : www.greatship.com .
The CSR Policy is implemented by the Company through Great Eastern CSR Foundation awholly owned subsidiary of the Company specifically set up for the purpose.
The Annual Report on CSR activities is enclosed herewith as "Annexure B".
Mr. G. Shivakumar shall retire by rotation at the ensuing Annual General Meeting andbeing eligible offers himself for re-appointment.
Necessary resolution for re-appointment of Mr. G. Shivakumar has been included in theNotice convening the ensuing Annual General Meeting.
As per the provisions of the Companies Act 2013 Independent Directors have beenappointed for a period of five years and shall not be liable to retire by rotation. TheIndependent Directors of your Company have given the certificate of independence to yourCompany stating that they meet the criteria of independence as mentioned under Section149(6) of the Companies Act 2013 and under Regulation 16(1)(b) of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.
The policies on Director's appointment and remuneration including criteria fordetermining qualifications positive attributes independence of Directors and alsoremuneration for key managerial personnel and other employees are enclosed herewith asAnnexure 'C' and 'D'.
During the year Mr. Bharat K. Sheth who is also a Non-Executive Chairman of Greatship(India) Ltd. (GIL) a wholly owned subsidiary of the Company was in receipt of commissionof Rs.13000000 from GIL.
The details of remuneration as required to be disclosed pursuant to the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 are enclosed asAnnexure 'E'.
During the year 5 meetings of the Board were held. The details of Board meetings aswell as Committee meetings are provided in the Corporate Governance Report.
Annual performance evaluation of Board its committees (namely Audit Nomination andRemuneration Corporate Social Responsibility and Stakeholders' Relationship Committees)and all the Directors individually has been done in accordance with the PerformanceEvaluation Framework adopted by the Nomination and Remuneration Committee of the Company.The Performance Evaluation Framework sets out the performance parameters as well as theprocess for performance evaluation to be followed. During the year the PerformanceEvaluation Framework was revised to elaborate the evaluation parameters and process inline with the Guidance Note on Board Evaluation issued by SEBI vide its circular dateddanuary 05 2017.
In accordance with the new Performance Evaluation Framework performance evaluationforms were circulated to all the Directors to record their evaluation of the Board itsCommittees and Non-executive Directors of the Company. The performance evaluation of theCompany and Executive Directors was done on the basis of presentation made by themanagement.
Pursuant to the provisions of the Companies Act 2013 a separate meeting ofIndependent Directors reviewed performance of the Company Board as a whole andNon-Independent Directors (including Chairman) of the Company.
The Board of Directors reviewed the performance of Independent Directors and Committeesof the Board. Nomination and Remuneration Committee also reviewed performance of theCompany and every Director.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 134 (3) of the Companies Act 2013 the Board ofDirectors hereby state that:
a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;
b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit and
loss of the company for that period;
c) the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;
d) the directors had prepared the annual accounts on a going concern basis; and
e) the directors in the case of a listed company had laid down internal financialcontrols to be followed by the company and that such internal financial controls areadequate and were operating effectively.
f) the directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
Maintaining high standards of Corporate Governance has been fundamental to the businessof your Company since its inception. A separate report on Corporate Governance is providedtogether with a Certificate from the practicing Company Secretary regarding compliance ofconditions of Corporate Governance as stipulated under Listing Regulations.
The extract of annual return in Form MGT-9 as required under Section 92(3) of theCompanies Act 2013 and Rule 12 of the Companies (Management and Administration) Rules2014 is enclosed herewith as Annexure 'G'.
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
With a view to create safe workplace the Company has formulated and implemented SexualHarassment (Prevention Prohibition and Redressal) Policy in accordance with therequirement of the Sexual Harassment of Women at Workplace (Prevention Prohibition &Redressal) Act 2013. For the purpose of handling and addressing complaints regardingsexual harassment the Company has constituted Internal Complaint Committee with anexternal lady representative (who has the requisite experience in this area) as a memberof the Committee. To build awareness in this area the Company also conducts awarenessprogrammes within the organisation.
During the year no complaints with allegations of sexual harassment were received bythe Company.
The Company has established a vigil mechanism (Whistle Blower Policy) for Directors andemployees to report genuine concerns. The Whistle Blower Policy provides for adequatesafeguards against victimisation of persons who use such mechanism and makes provision fordirect access to the Chairperson of the Audit Committee in appropriate or exceptionalcases.
A copy of the Whistle Blower Policy is available on the website of the Company:www.greatship.com
RELATED PARTY TRANSACTIONS
The Company has formulated policy on dealing with Related Party Transactions a copy ofwhich is available on the website of the Company: www.greatship.com
The particulars of contracts or arrangements with related parties in Form AOC 2 isannexed herewith as "Annexure F".
All the related party transactions have been entered into by the Company in theordinary course of business and on arm's length basis.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Particulars of Loans Guarantees and Investments covered under the provisions ofSection 186 of the Companies Act 2013 are given in the notes to the financial statements.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and Company's operations in future.
DIVIDEND DISTRIBUTION POLICY
The Dividend Distribution Policy of the Company is enclosed as 'Annexure H'. TheDividend Distribution Policy is also available on the website of the Company :www.greatship.com .
ENERGY CONSERVATION AND TECHNOLOGY ABSORPTION
CONSERVATION OF ENERGY
In order to contribute to and prepare for a low carbon future your Company has beenundertaking various initiatives with regard to enhancing energy efficiency in its businessoperations.
ENERGY SAVING DEVICES
During the financial year under consideration following Energy Saving Devices wereretrofitted for reducing fuel consumption of main propulsion system:
a) dag Aparna dag Rishi dag Prakash dag Pushpa dag Aanchal and dag Prerana wereretrofitted with Propeller Boss Cap Fins / EcoCap a device which improves propulsiveefficiency. The propeller's rotational motion forms a strong vortex at the center whichcauses overall loss of propulsive efficiency. The finned features of a PBCF-EcoCap breakup this vortex thereby reducing the loss of energy.
Total cost incurred on above six ships: USD 354293.
b) For a typical Bulk Carrier or Tanker loss of energy through hull resistance isaround 30% and this increases with growth of hull roughness due to bio-fouling. Tominimize growth of bio-fouling the Company has applied superior anti-fouling coatings ondag Laadki dag Prakash dag Pushpa and dag Prerana during their respective dry dockingsduring the financial year.
The additional cost incurred for application of the superior anti-fouling coatings wasUSD 669038.
During the financial year saving of USD 1.77 Mn was achieved in fuel cost from energysaving retrofits and use of superior anti-fouling hull coatings alone. This fuel savingalso resulted in reduction of CO2 emission by 15771 MT
Your Company has identified and absorbed several technologies on fleet vessels. Theseare reflected in paragraphs above.
COMPLIANCE WITH EU MRV (MONITORING REPORTING VERIFICATION) REGULATION
With effect from 1st danuary 2018 all vessels above GT 5000 engaged incarrying cargo to and from and within European Union (EU) ports are mandatorily requiredto report their fuel consumption CO2 emission and certain other parameterspertaining to work done during such voyages to European Commission as per their Regulation(EU) 2015/757 (on the monitoring reporting and verification of carbon dioxide emissionsfrom maritime transport) annually. Your Company has developed ship specific requiredMonitoring Plans which describes the procedure of collection quality control storage andtransmission of relevant data and the same have been approved by accredited VerificationBody. Data for the first calendar year 2018 duly reviewed by Verification Body will haveto be submitted to EC by 30th April 2019.
QUANTIFICATION AND REPORTING OF GREENHOUSE GAS (GHG) EMISSION
Since FY 2015-2016 your Company has started to capture and quantify GHG emission fromits business operations in a transparent and standardized manner for the information ofstakeholders of the Company on a voluntary basis. The GHG emission quantification andreporting has been done taking into account:
ISO 14064-1 (2006) "Greenhouse gases - Part 1: Specification with guidanceat the organization level for quantification and reporting of greenhouse gas emissions andremovals and
The Greenhouse Gas Protocol - A Corporate Accounting and Reporting Standard(revised edition) published by World Business Council for Sustainable Development andWorld Resources Institute.
FOREIGN EXCHANGE EARNINGS AND OUTGO
The details of Foreign Exchange Earnings and Outgo are as follows:
(Rs. in crores)
|a) Foreign Exchange earned on account of freight charter hire earnings etc. ||1132.03 |
|b) Foreign Exchange used including operating expenses capital repayment down payments for acquisition of ships (net of loan) interest payment etc. ||2183.27 |
Pursuant to the provisions of Section 139 of the Companies Act 2013 Deloitte Haskins& Sells LLP were appointed as the Statutory Auditors of your Company to hold officeuntil the conclusion of the Annual General Meeting of the Company to be held in thecalendar year 2022.
The Report given by the Auditors on the financial statements of the Company is part ofthis Report. There has been no qualification adverse remark or disclaimer given by theAuditors in their Report.
Pursuant to the provisions of Section 204 of the Companies Act 2013 the Companyappointed M/s. Mehta & Mehta Company Secretaries to undertake the Secretarial Auditof the Company for the financial year ended March 312018.
The Secretarial Audit Report is annexed herewith as "Annexure I".
Your Directors express their sincere thanks to all customers charterers vendorsinvestors shareholders shipping agents bankers insurance companies protection andindemnity clubs consultants and advisors for their continued support throughout the year.Your Directors also sincerely acknowledge the significant contributions made by all theemployees through their dedicated services to the Company. Your Directors look forward totheir continued support.
| ||For and on behalf of the Board of Directors |
| ||K.M. Sheth |
| ||Chairman |
| ||(DIN : 00022079) |
|Mumbai May 04 2018 || |