Ladies and Gentlemen
On behalf of the Board of Directors of The Shipping Corporation of India Ltd. Iwelcome you all to the 67th Annual General Meeting of your Company. I am pleased to placebefore our esteemed shareholders the 67th Annual Report of the Company for the financialyear 2016-2017. This report describes in detail the working of your Company for thefinancial year ended 31st March 2017. However I would like to summarise some salientfeatures of your Company's performance during the last financial year.
It gives me immense pleasure and satisfaction to inform you that SCI has reported astandalone net profit of ' 135.52 crores (consolidated net profit '175.62 crores)excludingOther Comprehensive Income for the year ended 31st March 2017 as against a restatedstandalone net profit of '753.28 excluding Other Comprehensive Income for the year ended31st March 2016.
Your Company being a diversified company has been able to absorb the losses in certainsegments. Losses in the bulk and container segments have been offset by the profits ofTanker and Offshore fleet. While the revenue from operations has decreased over theprevious year the overall financial health of the company has improved substantially ourborrowings have reduced lenders are more comfortable and our creditability in the marketis better.
Global Shipping Scenario
Maritime transport is the backbone of globalization and lies at the heart ofcross-border transport networks that support supply chains and enable international trade.Gone are those days of cyclical shipping booms and busts. The period of recession in theshipping markets intertwined with depressed world economic activity has lasted for overnine years now. This has broken the back of the industry. The longer global economicgrowth remains weak and lacks investment the lower future growth potential for shipping.However the industry is surviving and limping back to normalcy. The full restoration ofshipping markets will need several years of solid improvements to lift fleet utilisationrates. Sector overcapacity almost everywhere must be reduced.
The last year has been a mixed bag with the return of Iran continued production cut bySaudi led OPEC increasing Crude Oil output from North America bankruptcy of HanjinMaersk Line-Hamburg Sud merger slowdown in China cyberattacks on maritime assetsgeopolitical incidents in Syria Libya and now recently in Qatar. Tanker markets ralliedfor a while before going into a downward spiral BDI recovered from its lowest mark andquadrupled container revenues in the Europe sector rose significantly while the Offshoresegment is marred by the low world crude oil prices.
I believe we are at the cusp of the emergence of a new phase in modern internationalshipping.
Last couple of years have been bad for the dry bulk shipping industry. After the BalticDry Index (BDI) reached an all-time- low of 290 last year it improved steadily. This wasdriven by and benefitted mainly the capesize ships as they transported the key commoditiesof iron ore into China. As the year progressed the situation eased as demand growthoutstripped the impact of the net supply growth of the fleet.
During the last year strong freight market was created by an increased throughput atglobal refineries causing up-front oil demand to run ahead of end-consumption and amoderate supply side growth for crude oil tankers. In 2016-17 the world fleet grew by 6%for both tanker segments. This unbalanced the market because demand growth eased off.Tanker demand growth in the next couple of years is expected to come predominantly fromthe greater Asian region led by China and India.
Global oil supply continued to grow last year despite many disruptions to production inkey exporting countries. The reentry of Iran into international oil stood as thesingle-most disruptive event to an established oil market. On lifting of Iran sanctionsyour company after a gap of almost four years resumed shipments of Crude Oil from Iranin July 2016. This shipment was performed by your company Suezmax tanker MTAnkleshwar'. Whether the changes to trade patterns end up benefitting the tankermarkets remains to be seen.
As regards Containers last year stands out in terms of consolidation both in the formof outright mergers but also in the newer and larger alliances being forged to cut cost.Additionally the very low number of newbuilding orders was backed up by an all-time highof demolition capacity reducing the harmful effects of new ships being delivered.Container lease rentals of companies which were unwilling to negotiate have been broughtdown substantially through concerted discussions negotiations and reduction in idleinventory. As a result liner losses are coming down. As a matter of fact during the Q1 ofFY 2017-18 Liner segment has reported marginal profits.
On the finance side your company has entered into attractive loan agreements with EXIMBank for General Corporate Purposes at attractive borrowing rates and Your Company hasalso been successful in achieving a reduction in the interest margins of the existing FCNRloans. This has helped free up funds making them available for working capital andimproved the cash flow of the company.
Ship Acquisition Programme
Over the years your company has successfully retained its position as the largest andmost diversified shipping company of the country and has been a frontrunner in terms ofgrowth diversification and replenishment of its tonnage. I am also very proud to declarethat your company's tonnage recently touched the historic mark of six million deadweightfor the first time ever.
The decline in the prices of secondhand tonnage across the world has presented anopportunity for your company to strategically expand through this route. Your company hasduring the last few months acquired two secondhand Multipurpose Support Vessels viz.SCI Sabarmati' and SCI Saraswati' one secondhand Suezmax tanker DeshAbhimaan' and one Very Large Gas Carrier Nanda Devi'. Tender for acquisition of yetanother secondhand Suezmax tanker is in the pipeline.
Your company has also been periodically phasing out economically unviable ships fromtime to time. During the last few months two container vessels viz. MV RajivGandhi' and MV Indira Gandhi' have been sold and handed over. Your company is alsolooking to sell two more economically unviable ships in the coming months.
With a younger and modern fleet your company is fully geared up to take advantage ofthe much anticipated upswing in the markets.
Other Corporate developments
A wholly owned subsidiary Inland & Coastal Shipping Ltd.' has beenincorporated on 29th September 2016 for undertaking/ providing transportation servicesthrough inland waterways coastal shipping and end to end logistics.
Your Company was awarded the Emergency Towing Vessel contract by Directorate General ofShipping (DGS) for the period from 24.06.2016 to 30.11.2016 during the monsoon period.
Your company has restructured its SMILE Service w.e.f. 09.06.2016 connecting MiddleEast with the East and West Coasts of India. Your company has entered into a VesselSharing Agreement with Shreyas Shipping Line in PIX2 Service by inducting one 1600 TEUvessel w.e.f. 11.06.2016 which connects Middle East with Indian Subcontinent and CoastalMovement from West Coast of India to Vishakhapatnam and Kolkata / Haldia Port.
Your company's Maritime Training Institute has become a study centre of YCMOU(Yashwantrao Chavan Maharashtra Open University).
The 353.5 kWp Solar Photo Voltaic Power Plant installed at Maritime Training Institute(MTI) at Powai (Mumbai) was inaugurated early this year by Shri Rajive Kumar Secretary tothe Government of India Ministry of Shipping. The plant capacity would be increased to0.5 GW within this year.
LNG Carrier M.T Prachi was constructed at M/s Hyundai Heavy Industries Ulsan anddelivered on 30.11.2016. This vessel is owned by a Joint Venture Company in which yourcompany holds 26% share and your company is also the manager for this vessel.
Rescue operation in Gulf of Oman: Your Company owned Suezmax tanker Desh Shanti'was involved in a rescue operation on 03.02.2017 in the Gulf of Oman approx. 50 nauticalmiles off Fujairah saving seven (7) Indians from the dhow FRTK- 1'. The rescue wasmeticulously planned saving all the seven crew onboard the dhow.
Awards & Accolades won by your company during FY 2016-2017
'Most Compassionate Employer of Indian Seafarers' at National Maritime DayCelebrations 2016.
'The Indian Shipping Company with the Highest Growth of Indian Flag vessels' atthe National Maritime Day Celebrations 2016.
Training Institute of the Year' to Maritime Training Institute at theSamudra Manthan Awards 2016.
Shipping Company of the Year (Indian Flag)' at the Samudra Manthan Awards2016.
Awarded the Best Enterprise Award (Navratna category) - Third Prize' atthe 27th National Meet of Forum of Women in Public Sector (WIPS) held on 11th& 12thFebruary 2017 at Nagpur Maharashtra.
Captain Radhika Menon Master of SCI's product tanker "SampurnaSwarajya" became the first female seafarer ever to receive the "IMO Award forExceptional Bravery at Sea 2016"
I would like to express my gratitude to the Government of India for its support to yourCompany. I wish to thank the Hon'ble Union Minister of Shipping Shri Nitin J. Gadkari forleading the growth of India's maritime sector and for providing hiskind support to yourcompany. I would also like to thank the Hon'ble Ministers of State for Shipping Shri PonRadhakrishnan and Shri Mansukh L.Mandaviya for their encouragement to your Company. I wishto also express my indebtedness towards Shri Rajive Kumar former Secretary (Shipping) andShriRavi Kant existing Secretary (Shipping) for their guidance provided to your Company.
My sincere thanks are also due to the other officials of the Administrative Ministryother Ministries and Departments of the Government of India. I would also like to expressmy sincere appreciation towards Directorate General of Shipping for its support and kindunderstanding of various problems being faced by the Indian shipping industry andspecifically by your Company. I also wish to express my deep sense of gratitude towardsall the shareholders stakeholders my colleagues on the Board of Directors and all thefloating and shore employees for their continued support over the years.
Captain Anoop Kumar Sharma
Chairman & Managing Director