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Shipping Corporation of India Ltd.

BSE: 523598 Sector: Infrastructure
NSE: SCI ISIN Code: INE109A01011
BSE 12:19 | 30 Jul 110.70 1.15
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OPEN 109.50
PREVIOUS CLOSE 109.55
VOLUME 38600
52-Week high 134.60
52-Week low 49.80
P/E 8.34
Mkt Cap.(Rs cr) 5,156
Buy Price 110.75
Buy Qty 1.00
Sell Price 110.85
Sell Qty 582.00
OPEN 109.50
CLOSE 109.55
VOLUME 38600
52-Week high 134.60
52-Week low 49.80
P/E 8.34
Mkt Cap.(Rs cr) 5,156
Buy Price 110.75
Buy Qty 1.00
Sell Price 110.85
Sell Qty 582.00

Shipping Corporation of India Ltd. (SCI) - Director Report

Company director report

To the Members

Your Directors have pleasure in presenting the 70th Annual Report onthe working of your Company for the Financial Year ended 31st March 2020.

FINANCIAL PERFORMANCE

The comparative position of the working results for the year underreport vis - a vis earlier year is as under:

(Rs in Crores)

Particular Current Financial Year (2019-2020) Previous Financial Year (2018-2019)
Revenue from Operations 4425.44 3872.85
Other Income 242.95 232.23
Profit/loss before Depreciation Finance Costs Exceptional items and Tax Expense 1382.91 942.66
Less: Depreciation/ Amortisation/ Impairment 671.27 658.46
Profit /loss before Finance Costs Exceptional items and Tax Expense 711.64 284.20
Less: Finance Costs 364.13 359.05
Profit /loss before Exceptional items and Tax Expense 347.51 -74.85
Add/(less): Exceptional items - -
Profit /loss before Tax Expense 347.51 -74.85
Less: Tax Expense (Current & Deferred) 45.16 47.14
Profit /loss for the year (1) 302.35 -121.99
Other Comprehensive Income/loss (2) 14.62 5.64
Total (1+2) 316.97 -116.35
Balance of profit /loss for earlier years 306.32 422.67
Less: Transfer to Tonnage Tax Reserve 21.00 -
Balance carried forward 602.29 306.32

The above figures have been extracted from the standalone financialstatements as per Indian Accounting Standards (Ind-AS).

Appropriations:

The working results for your company for the year 2019-20 shows a netprofit of Rs. 302.35 crore. A sum of Rs 21 crore has been transferred to Tonnage TaxReserve for the financial year 2019-20. After adjusting an opening credit balance of Rs.306.32 crores (being balance Retained earnings brought forward from previous year) andadding items of other comprehensive income of Rs. 14.62 crores that are recognizeddirectly in retained earnings there is a credit balance in Retained earnings of Rs.602.29 crores as on 31st March 2020.

Dividend:

The Board of Directors of your company is pleased to recommend adividend of Rs.0.75/- per equity share of the face value of Rs.10/- each (@ 7.5%) for theyear ended 31st March2020.

The dividend subject to approval of the Members at the Annual GeneralMeeting scheduled to be held on 18.9.2020. The Members whose names appear in the Registerof Members / list of Beneficial Owners as on Thursday September 10 2020 i.e. the dateprior to the commencement of book closure will be paid the Dividend for the financialyear ended 31st March 2020 as recommended by the Board if approved at the AGM.

The payment of dividend will be subject to deduction of tax at source.The dividend pay-out is in accordance with the company's dividend distributionpolicy which is available on the Company's websitehttp://shipindia.com/upload/policies/SCI_Dividend_Distribution_Policy1.pdf

Share Capital:

The Company has not issued any Equity Shares with differential votingrights. Hence no information as required under Section 43(a) (ii) of the Companies Act2013 read with Rule 4(4) of the Companies (Share Capital and Debentures) Rules 2014 isfurnished. The Company has only one class of Equity Shares having face value of Rs 10/-each.

Brief Analysis of Financial Performance

SCI has reported a net profit after tax of Rs. 302.35 crores for thefinancial year 2019-20. The Tanker segment has outperformed other

segments due to high demand of tanker vessels resulting into high TCY(time charter yield). Bulk segment performance has remained steady and at par with marketconditions. The Technical & Offshore segment has shown improvement in terms of revenueas well as profit due to long term contracts and better utilization of vessels. The Linersegment has also shown improved performance in terms of revenue but could not reflect thesame in segment results due to higher operational costs. Apart from above low sulphurbunker cost and devalution of rupee has also adversely affected result of the company.

The consolidated net profit for the company for Financial Year 2019-20was Rs 336.48 crores.

Performance and Financial positions of joint ventures and subsidiaryincluded in consolidated financial statements:

Fig. (Rs in Lacs)

Particulars ILT 1 ILT 2 ILT 3 ILT 4 ICSL
As on 31.03.2020 31.03.2020 31.03.2020 31.03.2020 31.03.2020
Total Income 17375 17107 18673 18884 0.32
PAT 6747 6701 653 4654 (0.082)
Equity capital 17 17 8 32000 5
Number of equity shares 10000 10000 10000 42448300 50000
EPS (Rs/share) 67470 67010 6532 11 0
Dividend - - - - -
Net worth 40042 39688 (13680) 24179 (5)

Net Impact on Consolidated profits for the year ended 31st March 2020is increase of Rs 34.14 crores upon consolidation of above joint ventures and subsidiary .

1.0 Subsidiaries and Associates

Your company has one subsidiary Company and has six Joint Ventures.Investment in subsidiary "Inland and Coastal Shipping Limited" was done on 29thSeptember 2016. It is a wholly owned subsidiary of your company. Pursuant to section129(3) of the Companies Act 2013 a statement containing salient features of oursubsidiary and associates companies in form AOC-1 is appended to the Director'sReport.

In accordance to section 136 of the Companies Act 2013 the auditedfinancial statements of the company are available on our website www.shipindia.com

SUBSIDIARY

2.0 Inland and Coastal Shipping Limited

India has a long coastline admeasuring 7500 km and a large network ofriver systems. Despite this very little attempt has been made to interlink these naturalassets for a seamless environment friendly transport system. In a bid to remedy thislacuna during the Maritime India Summit 2016 the Inland Waterways Authority of India(IWAI) entered into a Memorandum of Understanding with The Shipping Corporation of India(SCI) on 15th of April 2016 to develop this field of domestic transport. Both partiesagreed to work towards tapping the synergies of high sea shipping coastal shipping andinland waterways to establish an integrated system of water transportation across thehinterland the coasts and the high seas.

For this purpose the SCI Board approved the formation of a dedicatedsubsidiary company of SCI based in Kolkata. The Company has been named as "INLANDand COASTAL SHIPPING LIMITED" (ICSL). The subsidiary company is working ondevelopment of a viable business plan on this segment.

JOINT VENTURES

3.0 India LNG Transport Co.(No.1) (No.2) and (No.3) Ltd

SCI has entered into three JVCs with three Japanese Companies viz.Mitsui O.S.K.Lines (MOL) Nippon Yusen Kabushiki Kaisha (NYK) and Kawasaki Kisen KaishaLtd (K Line) along with Qatar Shipping Company (Q Ship) in case of ILT No. 1 & 2 andQatar Gas Transport Company (QGTC) in case of ILT No. 3 each owning and operating an LNGtanker deployed in the import of a total of 7.5 million metric ton per annum of LNG forthe Dahej Terminal of M/s Petronet LNG Ltd (PLL). SCI is the first and only Indian companyto enter into the high-technology oriented & sunrise sector of LNG. SCI is the managerfor these three companies managing the techno-commercial operations of 3 LNG tankers.

4.0 India LNG Transport Co. No. 4 Ltd

SCI had entered into 4th JV formed in Singapore with the same threeJapanese companies viz. Mitsui O.S.K.Lines (MOL) Nippon Yusen Kabushiki Kaisha (NYK) andKawasaki Kisen Kaisha Ltd (K Line) and Petronet LNG to own and operate one 173000 CBMLNGTanker for transporting 1.44 million metric tons of LNG primarily from Gorgon Australiato India for charterers Petronet LNG Limited . The vessel is now novated to Exxonmobil byPetronet LNG and operating world-wide with a focus on India and Far East region. SCI isthe manager for this company and is managing the techno-commercial operations of thetanker.

5.0 Irano Hind Shipping Company

The Company holds 49% in Irano Hind Shipping Company PJ.S (IHSC) ajoint venture company. As per directives received from the Govt. of India it has beenagreed to dissolve the Company. Therefore investment in IHSC is classified as asset heldfor sale.

6.0 SAIL SCI Shipping Pvt Ltd (SSSPL)

SCI and SAIL had co-promoted a JVC "SAIL SCI Shipping PvtLtd" (SSSPL) which was primarily to cater to SAILs shipping requirements. The JVCwas incorporated on 19.05.2010. However due to continued depressed freight levels theJVC could not justify tonnage acquisition and both the Boards of SCI & SAIL decided tovoluntarily wind up the company. The company has completed the process of winding up anduploading of details is awaited by ROC.

1.0 Fleet Position during the Year:

During the year under report while there has been NIL additions to thefleet two vessel (m.t. Ankleshwar and m.t. Maharaja Agrasen) were disposed off from theSCI fleet. Thus the overall fleet position of SCI stood at 59 vessels of 5.311 million DWTat the end of the year.

Fleet Profile during the Year

tr>
Particulars As on 31.03.2019 Additions Deletion As on 31.03.2020
No. DWT No. DWT No. DWT No. DWT
1. (a) Crude Oil Tanker* 20 3526550 - - 2 294948 18* 3231602
(b) Product Tankers 13 862925 - - - - 13 862925
(c) Gas Carriers 1 53503 - - - - 1 53503
2. Bulk Carriers 15 1022344 - - - - 15 1022344
3. Container vessels 2 115598 - - - - 2 115598
4. Offshore vessels 10 25238 - - - - 10 25238
Total 61 5606158 - - 2 294948 59* 5311210

* - Instrument of Sale for m.t. Maharaja Agrasen (Crude oil tanker) wassigned with the Buyer on 26.03.2020 while physical delivery of vessel took place on27.04.2020.

2.0 During the period under report following vessels were disposed offfrom SCI fleet:

Vessel Name Type Year Built DWT
Ankleshwar Crude oil Tanker 1994 147474
Maharaja Agrasen * Crude oil Tanker 1995 147474

* Instrument of Sale for m.t. Maharaja Agrasen (Crude oil tanker) wassigned with the Buyer on 26.03.2020 while physical delivery of vessel took place on27.04.2020.

2.1 At the end of the year the Company had no new built vessels onorder.

2.2 Particulars of Loans Guarantees and investments

Details of Loans Guarantees and Investments are given in the notes tofinancial statements.

2.3 Extract of Annual Return

In accordance with section 134 (3) (a) and section 92(3) of thecompanies Act 2013 read with relevant rules an extract of annual return in form MGT-9 ason 31st March 2020 is appended to the Directors' Report. A copy of the Annual Returnis available at http://shipindia.com/investors/downloads

2.4 Particulars of contracts/arrangements with related parties

Particulars of contracts/arrangements with related parties referred toin Section 188(1) of the Companies Act 2013 in the prescribed form AOC-2 is appended tothe Director's Report. These transactions are at arm's length and entered in thenormal course of business.

2.5 Particulars of Employees

Your Company being a Govt. Company is exempted to furnish informationunder Section 197 of Companies Act 2013 vide Ministry of Corporate Affairs (MCA)Notification dated 05.06.2015.

2.6 Employees Stock Option Scheme

The Company does not have any Employee Stock Option Scheme.

2.7 Company's Policy on Directors appointment and remuneration

The terms of Directors appointment and remuneration are fixed by theGovernment of India.

2.8 Receipt of Remuneration by Managing Director from SubsidiaryCompanies

Smt. H.K. Joshi Chairperson & Managing Director also holdingAddl.charge of Director (Finance) of the Company has not received any remuneration fromany of its subsidiary companies.

2.9 Details of Presidential Directives issued by the Central Governmentand their compliance during the year and also in the last three years are as follows:

Presidential Directive dated 28.02.2018 regarding implementation ofPay revision of Board level and below Board level Executives and Non- UnionizedSupervisors of Central Public Sector Enterprises (CPSEs) w.e.f. 01.01.2017 was receivedand the same was implemented in March 2018.

SCI-Maritime Training Institute has fully complied with therequirements of Directorate General of Shipping pertaining to conduct of courses and hasalso complied with the Indian Maritime University guidelines.

MTI is actively participating in Swachh Bharat drive within the campusand in public places. Cadets trainees faculties and staff are involved in the activitiesplanned at regular intervals. In line with Govt.'s vision SCI-MTI contributedmassively in the swacchta pakhwada from 17.09.2019 to 02.10.2019 and organized variouscleaning drives wall painting poster making competition essay writing competition etc.in the vicinity of MTI Powai for increasing awareness.

SCI-Maritime Training Institute organized a March Past by uniformedcadets of MTI on the occasion of "Rashtriya Ekta Diwas (National Unity Day)"

3.0 Risk Management

Pursuant to Regulation 21 of the SEBI (LoDR) Regulations 2015 andamendments thereon a Risk Management Committee was constituted in the Board Meeting heldon 3.8.2019 consisting of all Functional Directors and HOD (IT). During the Financial Yearthe Chief Financial Officer was also nominated in the Risk Management Committee witheffect from 1.11.2019. The senior Most Director is the Chairperson of the Committee. SCIhas approved Risk Management framework and risk register to build up a strong RiskManagement Culture within SCI in achieving company's goals and objectives. The entitylevel Risk Assessment includes;

i) Strategic Risk

ii) Operational Risk

iii) Financial Risk

iv) Compliance Risk

In specific SCI has identified risks which includes volatility infreight rates bunker procurement exposure delay in revenue transfer etc. In SCIconcerted efforts are made for mitigating / containing and controlling risks.The toppriority in the present situation includes the implications arising from endemiccircumstance and continuing with the business as per the business continuity model byidentifying the critical functions.

3.1 Conservation of Energy Technology Absorption

The information pertaining to conservation of energy technologyabsorption is forming a part of the Management Discussion and Analysis Report.

3.2 Foreign exchange earnings and outgo

(Rs in crores)

Particulars 2019-20 2018-19
Foreign exchange earned* 4500.52 4035.27
Foreign exchange outgo* 4422.91 4221.69

* includes deemed foreign exchange earning and outgo.

3.3 Public Deposit

During the financial year 2019-20 your Company has not accepted anydeposit within the meaning of Section 73 and 76 of the Companies Act 2013 read with theCompanies (Acceptance of Deposits) Rules 2014 and as such no amount of principal orinterest was outstanding as on the date of the Balance Sheet.

3.4 Proposed Strategic Disinvestment of SCI

During the year ended 31st March 2020 Department of Public AssetManagement (DIPAM) Government of India has appointed the following respectively asTransaction Advisor (TA) Legal Advisor (LA) and Asset Valuer (AV) for StrategicDisinvestment of the Government of India's

63.75% equity shareholding in SCI.

i) M/s. RBSA Capital Advisors LLP;

ii) M/s. Luthra & Luthra Partners and

iii) M/s. Protocol Insurance Surveyors & Loss Assessors Pvt Ltd

Information sought by the three Advisors is being furnished by SCI fromtime to time.

MANAGEMENT DISCUSSION AND ANALYSIS

The following remaining information w.r.t. to addition of new subclause (i) under clause 1 in Part B (‘Management Discussion and Analysis) of scheduleV of SEBI (LODR) Regulations 2015. The Company has identified the following ratios as keyfinancial ratios :

Particulars Standalone Consolidated
2019-20 2018-19* 2019-20 2018-19*
Debtors Turnover 7.30 6.10 7.30 6.10
Inventory Turnover 7.70 8.00 7.70 8.00
Interest coverage Ratio 1.95 0.79 2.05 0.96
Current Ratio 0.53 0.60 0.53 0.60
Debt Equity 0.38 0.53 0.37 0.51
Operating Profit Margin (%) 0.02 -0.08 0.03 -0.06
Net Profit Margin (%) 0.07 -0.03 0.08 -0.02
Return on Net worth (%) 4.14 -1.75 4.50 -0.87

* Ratios of comparative period i.e 2018-19 are based on previous yearfigures which have been regrouped and rearranged wherever necessary to confirm to currentyear presentation of the financial statements as per Schedule III (Division II) to theCompanies Act 2013.

Ratio - Details of Significant changes and explanation thereto:

1) Interest coverage Ratio - Interest Coverage ratio for standalone hasincreased to 1.95 in F.Y 2019-20 as compared to 0.79 in F.Y 201819. This is due toincrease EBIT of Rs. 28420 lakhs in 2018-19 to Rs. 71164 in F.Y. 2019-20. Finance Cost inboth the years is almost same.

2) Debt equity ratio - Debt equity ratio has improved from 0.53 as on31st March 2019 to 0.38 as on 31st March 2020 due to repayment of long term loan andprofit during F.Y 2019-20

3) Operating Profit Margin (%) - Operating Profit Margin Ratios isincreased as revenue from operation as well as net profit both have increased as comparedto F.Y 2018-19. Revenue from operation has increased to Rs. 442544 lakhs in F.Y 2019-20from Rs. 387285 lakhs in F.Y. 2018-19 whereas operating profit has increased to Rs. 10456lakhs from Rs. (30708) lakhs in 2018-19.

4) Net Profit Margin (%) - Net Profit Margin Ratios is increased asrevenue from operation as well as net profit both have increased as compared to F.Y.2018-19. Revenue from operation has increased to Rs. 442544 lakhs in F.Y. 2019-20 from Rs.387285 lakhs in F.Y 2018-19 whereas net profit has increased to Rs. 30235 lakhs from Rs.(12199) lakhs in 2018-19.

5) Return on Networth (%) - Net profit has increased to Rs. 30235 lakhsin F.Y. 2019-20 from Rs (12199) lakhs in the F.Y 2018-19 for standalone and to Rs 33648lakhs for the F.Y. 2019-20 from Rs (6266) lakhs in the F.Y 2018-19 for consolidatedresults

.