The Directors are pleased to present the 69th Annual Report on the business operations and the Financial Statements of your Company for the financial year ended March 31, 2017.
The financial results of the Company (standalone) for the financial year ended March 31, 2017 are presented below:
(Rs. in crores)
Profit before tax
Less : Tax Expenses
Profit for the period
Balance at the beginning of the year
- Profit for the year
- Other Comprehensive Income
-Transfer to Tonnage tax reserve
-Transfer to Debenture redemption reserve
-Dividend on Equity Shares
-Dividend Distribution Tax
Balance at the end of the year
*recasted as per Ind AS
The net worth of the Company as on March 31, 2017 was Rs.5162.02 crores as compared to Rs.4620.08 crores for the previous year.
The financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015.
During the year, your Directors declared and paid an interim dividend of Rs.3.60 per share, resulting in an outflow of Rs.60.58 crores (inclusive of tax on dividend).
Your Directors recommend a final dividend of Rs.6.50 per share which will result in an outflow of Rs.117.96 crores (inclusive of tax on dividend). The dividend will be paid after your approval at the ensuing Annual General Meeting. The aggregate outflow on account of the equity dividend for the year will be Rs.178.54 crores (inclusive of tax on dividend). This represents a payout ratio of 29.69% (previous year 39.46%).
In Financial Year (FY) 17, the Company recorded a total income of Rs.2226.74 crores (Previous year Rs.2110.39 crores) and earned a PBIDT of Rs.1261.97 crores (previous year Rs.1,108.30 crores).
The crude oil tanker market in FY 17 saw lower earnings than FY 16 due to the following factors:
- Disruptions in oil supply from West Africa and Canada.
- Oil demand growth slowed down to below 1.4 mbpd coupled with a significant growth in fleet supply at 6.5%.
- Flattening oil price curve leading to less demand for ships for storage and release of a significant number of ships already held in floating storage.
- Weaker refining margins, compared to last year, as products inventory was drawn down, leading to lower crude demand by refineries. The table below captures the earnings of the Suezmax and the Aframax type of ships over the financial year (S/day).
Source: Baltic Exchange
These weak earnings led to healthy correction in asset prices for the crude ships and the Company was able to capitalize on the same by acquiring a few modern ships. The Company believes that these acquisitions will be value accretive to the shareholders in the long term.
In FY 17, crude tankers, inclusive of ''''spot'''' and ''''period'''', earned an average TCY of $ 21,853 /day (previous year $31,913/day).
The clean products trade in FY 17 was adversely affected due to the following factors:
- Due to high refinery runs in FY 16, inventory of products increased significantly, capping product prices and shutting many arbitrage plays.
- The West to East movement of naphtha almost came to a standstill, while the movement of cargo between the EU and US reduced as well.
- Crude prices also began to rise which further added strain to refinery margins.
- The lack of a contango led to a reduction in the number of vessels employed on storage and in slow steaming on certain vessels.
- Fleet supply was also quite strong at 5.5%.
The table below captures the earnings of the LR and MR type of ships over the financial year (S/day).
Source: Baltic Exchange
As a result of the lackluster earnings, the prices of the clean ships also corrected. The Company bought an MR tanker during FY 17 and also entered into a contract to buy another modern MR tanker just after the conclusion of the financial year. The Company believes that these acquisitions will also be value accretive in the long term.
Product carriers, inclusive of ''''spot'''' and ''''period'''', earned an average TCY of $ 15,707/day (previous year S20,155/day).
The rise of the gas market over the last few years had been characterized broadly by robust demand and the incremental LPG flowing from the US gulf Asia rather than middle east thus contributing tonne miles. To put it in perspective, the total LPG exports from the US, which was 1.42 Mn tons in 2006, grew to about 27-28 Mn tons in Cal 2016, with the majority destined for Asia.
However in FY 17, the fall in crude prices has led to a major slowdown in shale production which consequently has reduced the supply of LPG. Price increases in the US and depressed prices in Asia led to the elimination of arbitrage opportunities. While fundamental demand still remains strong, the cargoes have reduced on the margin. FY 17 also witnessed unprecedented fleet growth at 14.76% with minimal scrapping. As a result the freight markets remained under pressure in FY 17.
The graph below shows the VLGC earnings for FY 17 (S/day).
The Gas carriers, inclusive of ''''spot'''' and ''''period'''', earned an average TCY of $ 38,114/day (previous year $77,586/day).
DRY BULK MARKETS
The dry bulk markets began the financial year on a weak note, thus continuing the sentiment of the previous financial year. The defining characteristic of the Dry Bulk market over the last few years is that it is intrinsically dependent on what happens to Chinese cargo volumes.
The following events followed each other during the financial year:
- China closed some iron ore mines with a focus on reducing pollution and steel mills focused more on high quality imported ore. This resulted in a boost in imports.
- The Chinese government in a measure to combat air pollution shut around 290 Mn tons of domestic coal mining capacity, leading to a surge in high quality imported coal.
- The fleet supply remained subdued during the first three quarters due to a high level of scrapping.
The raft of measures by the Chinese government led to a steadily strengthening market through the year with the fourth quarter taking a major turn upwards. The Company purchased several dry bulk ships in the financial year in order to capitalize on the low asset values. These acquisitions are already proving to be value accretive.
The table below shows the earnings of the various Dry bulk ships over FY 17 (S/day).
Source: Baltic Exchange
In FY 17, the average TCY for dry bulk vessels, inclusive of ''''spot'''' and ''''period'''', was approximately $ 7,051 /day as compared to $ 6,638/day in the previous year.
FLEET SIZE AND CHANGE DURING THE FINANCIAL YEAR
As of 31st March 2017, the fleet of your Company stood at 44 ships aggregating 3.69 Mn dwt, with an average age of 9.41 years. During the financial year, your Company took delivery of 7 tankers, 1 Very Large Gas Carrier and 6 Dry bulk carriers aggregating 1.39 Mn dwt. The Company also sold an Aframax tanker in the financial year.
MOVEMENT OF ASSET VALUES
The weakness of the tanker freight markets translated into the weakening of vessel values over the year. The crude vessels lost about 35% - 40% of the value depending on size and age whereas the clean vessels lost about 20% - 30% of their value depending on size and age. The value of the dry bulk vessels moved up on the back of strengthening freight rates with gains of 40% - 80%. Currently, the Company believes that the values of crude tankers have a negative bias especially of the older vessels while the clean tankers have stabilized in values. The values of the dry bulk assets continue to exhibit positive bias on their current valuations.
ORDER BOOK AND OUTLOOK
The tanker order book stands at about 12.6% of the fleet. The majority of this order book is slated to be delivered over the next 12 -15 months. As this order book delivers, coupled with the expected extension of OPEC cuts and lower refinery throughputs, the tanker freight markets are expected to remain subdued over the next 6-9 months where after secular demand is expected to make its effect felt on the markets.
The Dry Bulk order book stands at about 8.1% of the fleet and the majority of it is slated to be delivered over the next 12-15 months. Whilst this order book does not seem large, the Company has already seen a large growth in fleet over the last few years and thus it is critical that the order book does not grow. The strength in the freight markets coupled with low asset values is however encouraging owners to order more new buildings which can postpone the return of robust earnings for these vessels. The Company expects the market to plateau around the current earnings level over the next 6 months and the trajectory thereafter shall be guided by additional demand for dry bulk commodities and the increase/decrease of order book in the interim.
RISKS AND CONCERNS
Your Company has carried out a detailed exercise to identify the various risks faced by the Company, and has put in place mitigation, control and monitoring plans for each of the risks. Risk owners have been identified for each risk, and these risk owners are responsible for controlling the respective risks. The efficacy of these processes is monitored on a regular basis by Risk Committees for the different areas in order to make continuous improvement and is further reviewed by the Risk Management Committee consisting of the three Whole-time Directors and the Compliance Officer.
The material risks and concerns faced by the Company are as follows:
Shipping is a global business whose performance is closely linked to the state of the global economy. Therefore, the earnings of your Company could be impacted negatively if the global economic situation does not improve over the longer term.
Over and above the economic risks, the shipping industry is impacted by numerous short term and regional factors, like political fallouts, weather changes, etc. This results in great amount of volatility in the freight market, which in turn impacts your Company''''s earnings.
Your Company has attempted to hedge some of the above risk by entering into time charters for part of its fleet. Your Company also believes that one of the main elements of risk management in shipping is the cost of the asset, and will endeavour to time acquisitions and sales in such a way as to reduce risk on the portfolio.
Indian officers continue to be in great demand all over the world. Given the unfavorable tax status conferred on a seafarer sailing on Indian-flagged vessels, it is becoming increasingly difficult for your Company to source officers capable of meeting the modern day challenges of worldwide trading. This is more relevant for tanker personnel and may become a hindrance to growth.
If the OPEC decides to prolong the cut in output, this drop in supply along with increased new building deliveries, could continue to negatively impact the demand for tankers.
As seen in the recent past, China has been the main driving factor of the shipping demand. The Chinese economy has over the last financial year increased its consumption of imported dry bulk commodities. Whilst this has impacted trade growth positively, this demand needs to continue going forward. If this demand were to falter, this along with increased new building deliveries may renew the negative impact on dry bulk freight markets.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Your Company has instituted internal financial control systems which are adequate for the nature of its business and the size of its operations. The policies and procedures adopted by the Company ensure the orderly and efficient conduct of its business, including adherence to Company''''s policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information.
The systems include a range of activities such as approvals, authorizations, verifications, reconciliations, review of operating and financial performance, security of assets, segregation of duties, preventive and detective controls.
The systems have been well documented and communicated. They are also tested from time to time through internal as well as external audits.
The internal audit is carried out by a firm of external Chartered Accountants and covers all departments. In the beginning of the year, the scope of the internal audit exercise including the key business processes and selected risk areas to be audited are finalized in consultation with the Audit Committee. All significant audit observations and follow up actions thereon are reported to the Audit Committee.
The Audit Committee comprises of Mr. Cyrus Guzder (Chairman), Mr. Berjis Desai, Mr. Farrokh Kavarana and Ms. Rita Bhagwati.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements have been prepared by your Company in accordance with Ind ASs notified under the Companies (Indian Accounting Standards) Rules, 2015. The audited Consolidated Financial Statements together with Auditors'''' Report thereon form part of the Annual Report.
The group recorded a consolidated net profit of Rs.754.96 crores for the year under review as compared to Rs.1096.98 crores for the previous year. The net worth of the group as on March 31, 2017 was Rs.7223.33 crores as compared to Rs.6563.48 crores for the previous year,
The statement containing the salient features of the financial statements of the Company''''s subsidiaries for the year ended March 31, 2017 has been attached along with the financial statements of the Company. The report on performance of the subsidiaries is as follows:
GREATSHIP (INDIA) LIMITED, INDIA
Greatship (India) Limited (GIL), wholly owned subsidiary of your Company and one of India''''s largest offshore oilfield services providers, has completed its one of the most challenging years in the midst of worst downturn in the offshore oil and gas industry. GIL has, after accounting for an impairment of Rs.184.33 crores in asset values, recorded a profit after tax of Rs.154.71 crores on a consolidated basis for the year ended March 31, 2017 as compared to Rs.523.77 crores for the year ended March 31, 2016, after accounting for impairment of Rs.163.09 crores in asset values. The consolidated net worth of GIL for financial year 2017 was Rs.3,219.65 crores as compared to Rs.3,098.39 crores for financial year 2016.
During the year under review, GIL sold one 1999 built Platform Supply Vessel (PSV), ''''Greatship Disha'''' and its subsidiary in Singapore sold one 2013 built ROV (Remotely Operated Vehicle) Support Vessel (ROVSV), ''''Greatship Ragini''''. There was no addition to the fleet during the year under review. GIL, along with its subsidiaries, currently owns and operates nineteen vessels and four jack up drilling rigs. The operating fleet of nineteen vessels comprises of four PSVs, eight Anchor Handling Tug cum Supply Vessels (AHTSVs), two Multipurpose Platform Supply & Support Vessels (MPSSVs) and five ROVSVs.
During the year under review, the company commenced group restructuring exercise whereby the company has acquired full ownership of its Singapore subsidiary, Greatship Global Energy Services Pte. Ltd. (GGES) and further has also decided to acquire the jack-up rigs owned by GGES.
GIL has the following wholly owned subsidiaries:
- Greatship Global Energy Services Pte. Ltd., Singapore (GGES)
Subsequent to acquisition of all shares of GGES from GGHL by GIL, GGES has become the direct 100% wholly owned subsidiary of GIL w.e.f March 28, 2017. GGES currently owns four Jack-up rigs and GGES has committed to sell all its four jack-up rigs to GIL. GGES after accounting for impairment of USD 223.7 Mn in the asset values on account of assets being held for sale, incurred a loss of USD 198.54 Mn for the current financial year as against the profit of USD 42.87 Mn in the previous year.
- Greatship Global holdings Ltd., Mauritius (GGHL)
During the year, GGHL sold all the shares held by it in GGES, representing 89.3% of share capital of GGES, to GIL and recognized a gain on disposal of its holding in GGES. 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 Handling Tug cum Supply Vessel (AHTSV) and two Multipurpose Platform Supply and Support Vessels (MPSSVs). GGOS after accounting for an impairment of USD 16.32 Mn in asset values, incurred a loss of USD 19.96 Mn for the current financial year as against the loss of USD 5.33 Mn in the previous year, after accounting for impairment of USD 8.93 Mn in asset value.
During the year, GGOS''''s wholly owned subsidiary, GGOS Labuan Ltd., Malaysia was struck off with effect from March 4, 2017.
- Greatship (uK) Limited, united Kingdom (GuK)
During the year under review, the term of the charter party for one of the ROV Support Vessels (ROVSVs) inchartered from GIL was completed and GUK continued to operate the other ROV Support Vessel (ROVSV) inchartered from GIL. GUK''''s profit after tax for the current financial year amounted to USD 0.41 Mn as against the profit of USD 1.55 Mn in the previous year.
- Greatship Oilfield Services Ltd., 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. The Greatship (Singapore) Pte. Ltd. does shipping agency business for the ships owned by your Company. During the year ended March 31, 2017 there were 87 ship calls at Singapore. The company''''s profit after tax for the current financial year amounted to S$ 0.13 Mn as against the profit of S$ 0.20 Mn in the previous year.
THE GREAT EASTERN SHIPPING CO. LONDON LTD., u.K.
The Great Eastern Shipping Co. London Ltd. was a wholly owned subsidiary of your Company. It did not carry out any operations during the year. The company had filed an application with the Companies House, UK for voluntarily striking off its name from Register of Companies, UK. The company has been dissolved w.e.f August 30, 2016.
THE GREAT EASTERN CHARTERING LLC (FzC), u.A.E.
The Great Eastern Chartering LLC (FZC) is a wholly owned subsidiary of your Company. Chartering of ships is the main activity of this company. The company had in-chartered one Suezmax tanker on 3 years charter which will end in June 2017. The vessel was chartered to The Great Eastern Shipping Co. Ltd. commencing 3rd April 2015 on back to back terms. During the financial year ended March 31, 2017, the company made a loss of USD 0.59 Mn as against the profit of USD 1.65 Mn in the previous year.
THE GREAT EASTERN CHARTERING (SINGAPORE) PTE. LTD., SINGAPORE
The Great Eastern Chartering (Singapore) Pte. Ltd. is a wholly owned subsidiary of The Great Eastern Chartering LLC (FZC), UAE. The company has done no trading activity during the year due to deteriorating market conditions. During the financial year ended March 31, 2017, the company made a loss of USD 0.05 Mn as against the loss of USD 0.10 Mn in the previous year.
GREAT EASTERN CSR FOUNDATION, INDIA
Great Eastern CSR Foundation (Foundation) is a wholly owned subsidiary of your Company which handles the CSR activities of your Company and its subsidiaries. The Foundation received a total contribution of Rs.8.28 crores from the Company and Great ship (India) Limited during the year ended March 31, 2017. The Foundation spent Rs.6.87 crores on CSR activities during the year.
Details of CSR activities carried out by Great Eastern CSR Foundation for your Company are set out in the annual report on CSR activities which forms part of this Board''''s Report.
DEBT FUND RAISING
During the year, fresh debt of Rs.1931.21 crores was raised. The gross debt : equity ratio as on March 31, 2017 was 0.86:1 and the debt : equity ratio net of cash and cash equivalents was 0.27:1.
During the year, the Company has bought back and extinguished 100 Secured and 550 Unsecured Debentures of Rs.10,00,000 each, aggregating to Rs.65 crore.
QUALITY, SAFETY, TRAINING, HEALTH & ENVIRONMENT
A high level of safety on board assets has been maintained during the year on the Company''''s vessels by continued efforts of the seafarers and the office staff. This requirement continues to be emphasised during the scheduled meetings with the management level floating staff and the Company''''s top management. Lost Time due to Injury (LTI) was 2.34 per million exposure hours and Total Recordable case Frequency (TRCF) was 5.23 per million exposure hours. This is slightly more than the Company''''s KPI of 2.0 and 4.8 respectively. The increase as compared to last year is due to the re-classification of data collected based on OCIMF guidelines.
The Company, to ensure that the assets are maintained in good condition, carried out additional inspections of vessels. The Company''''s assets continued to perform well during oil major inspections. The Company also ensured that new acquisitions into the fleet were taken into the Company''''s quality management system quickly during the rapid fleet expansion phase.
The need for continuous improvement in safety and operating standards is recognized by the Company and to achieve greater level of compliance a separate department dealing with training at all levels of seafarers has been established. This department identifies the seafarer''''s training needs on an individual basis and organizes shore-based training in established training institutes. The department is also involved in designing company specific training modules.
In this financial year, IT has focused on the following major initiatives:
TIGHTENING OF CYBER SECURITY
In this digitally connected world, cyber security is a matter of great concern for all organizations. The Company has appointed a major IT service provider and security expert to assess the vulnerability, both in the shore office and on board the ships, with respect to Cyber security.
The agency is guiding the Company to implement the required technologies in order to reduce vulnerability of the Company''''s systems.
UPGRADING PLANNED MAINTENANCE SYSTEM (PMS)
The PMS is one of the key functions on board to keep the ship''''s equipment technically fit to operate with minimum disruption. Your Company is upgrading the PMS software, and this will further help the technical maintenance teams to ensure maximum uptime for all equipment, and to maintain the ship itself to the highest possible standards.
The goal has been set for the organization to go for paperless environment and IT is enabling the organization towards that direction, by way of making more user friendly software applications to increase usage of software. Also, old paper records are being digitized to maximize accessibility and minimize storage requirements.
GST IMPLEMENTATION INITIATIVE
The Company''''s ERP system has been developed and built in-house over the past 10 years or more and all of the organization''''s functions are working through this system. In order to implement GST, a significant amount of modifications are required to be done in the ERP platform before July 2017 deadline. A dedicated team has been on the job to make it happen before deadline, so as to enable your Company to move on to the GST platform seamlessly.
Your Company recognizes the ability to attract and retain the best talent is vital for sustainability and competitive advantage for the organization. A set of initiatives were implemented for enabling talent acquisition and development during the year. A focused social media campaign improved applicant base for the pre-sea courses held at GEIMS. Introduction of structured scientific recruitment methods resulted in enhancement of quality of cadets at the Institute.
Learning & Development continued to get organizational attention. As in the past, the Company has initiated the 3600 feedback process for senior roles to aid in individual development and succession planning. Employees underwent training in shipping business simulation, emotional intelligence, critical thinking and career planning. Team relationship reviews facilitated cohesiveness among members. A special workshop was held for women employees based on career anchors and wheel of balance.
Social cafe approach was utilized to harness employee camaraderie which included Quiz, Marathon and cultural programs during festive occasions. The annual town hall held in December 2016 helped in employee alignment and building team spirit.
The overall employee engagement measured by Coffman Index stood at 77% compared to 74% in the previous year.
For the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
Total number of permanent shore staff and floating staff was 191 and 222 respectively.
GREAT EASTERN INSTITUTE OF MARITIME STUDIES (GEIMS)
The Great Eastern Institute of Maritime Studies, Lonavla (GEIMS) has since inception trained 3068 cadets. These cadets are serving on ships as Nautical, Engineering or Electro-Technical Officers. Almost 70% of the officers of Company''''s vessels have been trained at GEIMS. This percentage will increase in the next few years.
In August 2016, GEIMS set up a state of the art ''''Electrical High Voltage Safety and Switch Gear laboratory with simulator'''' and obtained approval of the Directorate General of Shipping. With this facility GEIMS has provided the mandatory training to 145 senior Engineers of the Company and to others on payment of fees.
GEIMS was inspected as per the Comprehensive Inspection Programme (CIP) enhanced guidelines of the Director General of Shipping in November 2016 by an Audit team from DNV GL Ship Classification Society. GEIMS was certified that it meets the training requirement criteria as per IMO STCW Convention and effectively complies with all applicable Merchant Shipping Rules, and other associated orders, circulars and guidelines issued by the Directorate General of Shipping. On basis of the successful inspection, GEIMS was once again assigned Grade A1 (outstanding) for three years.
In December 2016, GEIMS was granted approval by the Directorate General of Shipping to conduct the 6-months training course for General Purpose Ratings (GP Rating). The GP Rating training course successfully commenced at GEIMS with a first batch of 37 trainees in January 2017. After successful completion of their training, these trainees are expected to be placed on Company''''s vessels as trainee seamen.
CORPORATE SOCIAL RESPONSIBILITY
The Corporate Social Responsibility Committee comprises of Mr. Vineet Nayyar (Chairman), Mr. Cyrus Guzder and Mr. Bharat K. Sheth.
Copy of the Corporate Social Responsibility Policy of the Company as recommended by the CSR Committee and approved by the Board is enclosed as ''''Annexure A''''. The CSR Policy is also available on the website of the Company : www.greatship.com.
The Annual Report on CSR activities is enclosed herewith as "Annexure B”.
Mr. K. M. Sheth shall retire by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.
Necessary resolution for re-appointment of Mr. K. M. Sheth has been included in the Notice convening the ensuing Annual General Meeting.
The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013 and under Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements), 2015.
During the year, 5 meetings of the Board were held. The details of Board meetings as well as Committee meetings are provided in the Corporate Governance Report.
APPOINTMENT AND REMUNERATION POLICY FOR DIRECTORS AND SENIOR MANAGEMENT
The Nomination & Remuneration Committee has framed a policy for appointment of Directors. The Nomination & Remuneration Committee has also framed policies for remuneration of Directors, Key Managerial Personnel and other employees, which have been adopted by the Board.
The aforesaid policies are enclosed herewith as Annexure ''''C'''' and ''''D''''.
The details of remuneration as required to be disclosed pursuant the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are enclosed as Annexure ''''E''''.
Annual performance evaluation of Board, its committees (namely, Audit, Nomination & Remuneration, Corporate Social Responsibility and Stakeholders'''' Relationship Committees) and all the Directors individually has been done in accordance with the Performance Evaluation Framework adopted by the Nomination & Remuneration Committee of the Company.
The Performance Evaluation Framework sets out the performance parameters as well as the process for performance evaluation to be followed. Performance evaluation forms were circulated to all the Directors to record their evaluation of the Board, its Committees and Non-executive Directors of the Company. The performance evaluation of the Company and Executive Directors was done on the basis of presentation made by the management.
Pursuant to the provisions of the Companies Act, 2013, a separate meeting of Independent Directors reviewed performance of the Company, Board as a whole and Non-Independent Directors (including Chairman) of the Company.
The Board of Directors reviewed the performance of Independent Directors and Committees of the Board. Nomination & Remuneration Committee also reviewed performance of the Company and every Director.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirement of Section 134 (3) of the Companies Act, 2013 the Board of Directors hereby state that:
a) In the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;
b) The directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period;
c) The directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets 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 had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
f) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
Your Company has complied with all the mandatory provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, relating to Corporate Governance. A separate section on Corporate Governance forms part of the Board''''s Report and the certificate from practicing Company Secretary confirming the compliance of conditions on Corporate Governance is included in the Annual Report.
The Company has established a vigil mechanism (Whistle Blower Policy) for directors and employees to report genuine concerns. The Whistle Blower Policy provides for adequate safeguards against victimization of persons who use such mechanism and make provision for direct access to the Chairperson of the Audit Committee in appropriate or exceptional cases.
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 of which is available on the website of the Company: www. greatship.com
The particulars of contracts or arrangements with related parties in Form AOC 2 is annexed herewith as "Annexure F”.
All the related party transactions have been entered into by the Company in the ordinary course of business and on arm''''s length basis.
However, following transaction, though entered into in the ordinary course of business, may not strictly be treated on arm''''s length basis:
During the year, the Company has transferred a Hyundai i20 Asta car to Mr. Jayesh M. Trivedi, President (Secl. & Legal) & Company Secretary for no consideration (subject to applicable taxes) as per employment rules of the Company. Mr. Jayesh M. Trivedi had availed the car in 2010 based on his entitlement. The value of car has already been deducted from his salary.
EXTRACT OF ANNUAL RETURN
The extract of the Annual Return in Form MGT 9 is enclosed herewith as "Annexure G”.
PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
Particulars of Loans, Guarantees and Investments covered under the provisions of Section 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 or tribunals 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''''. Copy of the Dividend Distribution Policy is also available on the website of the Company : www.greatship.com.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION
CONSERVATION OF ENERGY
In order to contribute to and prepare for a low carbon future, your Company has been undertaking various initiatives with regard to enhancing energy efficiency in its business operations.
ENERGY SAVING DEVICES
During the year under consideration, following Energy Saving Devices were retrofitted for reducing fuel consumption of main propulsion system:
- Jag Rani and Jag Pankhi were retrofitted with Propeller Boss Cap Fins (PBCF), a device which improves propulsive efficiency. The propeller''''s rotational motion forms a strong vortex at the center, which causes overall loss of propulsive efficiency. The finned features of a PBCF break up this vortex, thereby reducing the loss of energy.
Total cost incurred on above two ships: USD 150,000.
- For a typical Bulk Carrier or Tanker, loss of energy through hull resistance is around 30% and this increases with growth of hull roughness due to bio-fouling. To minimize growth of bio-fouling, the Company has applied superior anti-fouling coatings on Jag Rishi, Jag Rani, Jag Roopa and Jag Vishnu during their respective dry dockings during the financial year.
The additional cost incurred for application of the superior anti-fouling coatings was USD 290,000.
During the year, saving of USD 1.06 million was achieved in fuel cost from energy saving retrofits and use of superior anti-fouling hull coatings alone. This fuel saving also resulted in reduction of CO2 emission by 13,973 MT.
INITIATIVES OF VESSEL PERFORMANCE MANAGEMENT CELL
VPM Cell in co-ordination with IT Department has developed a Main Engine Performance Monitoring tool and has been rolled out to fleet vessels. This will assist in closer monitoring and analysis of main engine performance over time i.e. trend analysis.
Your Company has identified and absorbed several technologies on fleet vessels. These are reflected in paragraphs above.
QUANTIFICATION AND REPORTING OF GREENHOUSE GASES (GHG) EMISSION
Since last year, your Company has started to capture and quantify GHG emission from its business operation in a transparent and standardized manner for the information of stakeholders of the Company on a voluntary basis. The GHG emission quantification and reporting has been done taking into account:
- ISO 14064-1 (2006) ''''Greenhouse gases - Part 1: Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals'''', and
- The Greenhouse Gas Protocol - A Corporate Accounting and Reporting Standard (Revised edition) published by World Business Council for Sustainable Development and World Resources Institute.
CONTRIBUTION IN THE WORK OF MARINE ENVIRONMENT PROTECTION COMMITTEE OF INTERNATIONAL MARITIME ORGANIZATION
Marine Environment Protection Committee of IMO is currently developing new regulations and reviewing existing regulations for reduction of CO2 emission from ships. Your Company, as a stake holder, has been providing feedback to this work through Government of India for development of pragmatic regulations for benefit of the environment and society.
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.
b) Foreign Exchange used including operating expenses, capital repayment, down payments for
acquisition of ships (net of loan), interest payment, etc.
Pursuant to provisions of Section 139 of Companies Act, 2013, Kalyaniwalla & Mistry LLP were appointed as the Statutory Auditors of the Company at the Annual General Meeting held on September 25, 2014, to hold office till the conclusion of the ensuing Annual General Meeting. Since Kalyaniwalla & Mistry LLP has completed its term as prescribed under Section 139(2) of the Companies Act, 2013, the Company is required to appoint another firm as the Statutory Auditor in their place.
Accordingly, the Audit Committee and the Board of Directors have recommended appointment of Deloitte Haskins & Sells LLP as Statutory Auditors to hold office from conclusion of the ensuing Annual General Meeting till the conclusion of the 74th Annual General Meeting to be held in calendar year 2022.
Necessary resolution for their appointment has been included in the Notice convening the ensuing Annual General Meeting.
Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Company appointed M/s. Mehta & Mehta, Company Secretaries to undertake the Secretarial Audit of the Company for the financial year ended March 31, 2017.
The Secretarial Audit Report is annexed herewith as "Annexure I”.
Your Directors express their sincere thanks to all customers, charterers, vendors, investors, shareholders, shipping agents, bankers, insurance companies, protection and indemnity clubs, consultants and advisors for their continued support throughout the year. Your Directors also sincerely acknowledge the significant contributions made by all the employees through their dedicated services to the Company. Your Directors look forward to their continued support.
For and on behalf of the Board of Directors
(DIN : 00022079)
Mumbai, May 05, 2017