(A) Sethusamudram Corporation Ltd. (SCL), a Special Purpose Vehicle was incorporated on 06.12.2004 for developing the Sethusamudram Channel Project with Tuticorin Port Trust, Ennore Port Ltd, Visakhapatnam Port trust, Chennai Port Trust, Dredging Corporation of India Ltd., Shipping Corporation of India Ltd. and Paradip Port Trust as the shareholders. SCI participated with an investment of' 5000 lakhs (previous year' 5000 lakhs). The dredging work is suspended from 17.09.2009 consequent upon the direction of the Hon'ble Supreme Court of India. As there is no progress in the project since then, the Management had provided for diminution towards the investment in FY 2012-13.
(B) India LNG Transport Companies No. 1 & 2 Ltd. are two joint venture companies promoted by the Corporation and three Japanese companies Viz. M/S Mitsui O.S.K.lines Ltd. (MOL), M/S Nippon Yusen Kabushiki Kaisha Ltd (NYK Lines) and M/S Kawasaki Kisen Kaisha Ltd (K Line) along with M/S Qatar Shipping Company (Q Ship), Qatar. SCI and MOL are the largest shareholders, each holding 29.08% shares while NYK Line 17.89%, K Line 8.95% & Q Ship holds 15% respectively. The Shares held by the Corporation and other partners in the two joint venture Companies have been pledged against loans provided by lender banks to these companies. India LNG Transport Company No.1 Ltd owns and operates one LNG Carrier Disha and India LNG Transport Company No. 2 Ltd owns and operates one LNG Carrier Raahi (Refer Note no - 34).
(C) India LNG Transport Company No. 3 Ltd. is the 3rd joint venture company which owns and operates one LNG Carrier Aseem. The company is promoted by the Corporation and three Japanese partners viz. MOL, NYK Lines, K Line along with M/S Qatar Gas Transport Company (QGTC), Qatar and M/s Petronet LNG Limited (PLL), India who are the other partners. SCI and MOL are the largest shareholders with 26% share each, while NYK, K Line, QGTC and PLL hold 16.67%, 8.33%, 20% and 3% respectively. The Shares held by the Corporation and other partners in the joint venture company have been pledged against loans provided by lender banks to this company (Refer Note no - 34).
(D) India LNG Transport Company (No. 4) Pvt. Ltd. is the 4th Joint Venture Company is promoted by the Corporation and three Japanese partners viz NYK, MOL and K Line along with PLL, India. SCI, NYK and PLL are the largest shareholders with 26% share each, while MOL and Kline hold 15.67% and 6.33% respectively. The Shares held by the Corporation and other partners in the joint venture company have been pledged against loans provided by lender banks to this company. India LNG Transport Company (No. 4) Pvt. Ltd owns and operates one LNG Carrier Prachi (Refer Note no - 34).
*As a prudent practice, the Company is taking Goods and Service Tax Credit in the Electronic Credit Ledger upon payment of the liabilities. Hence, there is a difference in the amount of credit appearing in books of accounts and the Electronic Credit Ledger of the respective states. Therefore, the balance in Input Tax Credit ledgers will be progressively reviewed and availed for discharge of Goods and Service Tax liability payable by the Corporation.
** This pertains to India Myanmmar Service started on 02.10.2014 on the directions of Ministry of Shipping. The service was completed on Nov 2016.
# On 10th August 2020, Ministry of Shipping had sanctioned a subsidy of ' 21.10 crores as assistance for running cargo shipping service between India and Maldives. The Male service was flagged off on 21st September 2020. The net expenditure incurred (Expenses less Income earned) pertaining to this service is booked against the Subsidy for Maldives Service. Further subsidy of ' 16.16 crores was received in March 2023, and ' 2 crores was received on 30.03.2024 to continue running cargo shipping service between India and Maldives. The balance amount is placed in Fixed Deposit and Interest earned against such deposit are remitted to the Consolidated Fund of India.
Nature and Purpose of other reserves
Capital Reserve: The amount of sales proceeds in excess of original cost of ships sold by the Company. This is not available for distribution of dividend but can be utilised for issuing bonus shares.
Securities Premium: The amount received in excess of face value of the equity shares is recognised in Share Premium Reserve. This is not available for distribution of dividend but can be utilised for issuing bonus shares.
General Reserve: General Reserve represents appropriation of retained earnings and are available for distribution to shareholders.
Tonnage Tax Reserve/Tonnage Tax Reserve (Utilised): This reserve is a statutory reserve as per requirement of section 115VT of the Income Tax Act, 1961 for the purpose of complying with the conditions for applicability of tonnage tax scheme.
Retained Earnings: Retained Earnings represents surplus/accumulated earnings of the Corporation and are available for distribution to shareholders.
Other comprehensive income (OCI): OCI comprises items of income and expenses (including reclassification adjustments) that are not recognised in profit or loss as required or permitted by Indian Accounting Standards. The components of OCI include: re-measurements of defined benefit plans.
(a) The Company’s pending litigations comprise claims against the Company and proceedings pending with Tax / Statutory/ Government Authorities. After review of all its pending litigations and proceedings, the Company has made adequate provisions, wherever required and disclosed the contingent liabilities, wherever applicable, in its financial statements. The Company does not expect the outcome of these proceedings to have a material impact on its financial position. Future cash outflows in respect of the above are determinable only on receipt of judgments/ decisions pending with various forums/ authorities.
(b) A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity. During the normal course of business, several unresolved claims are currently outstanding. The inflow of economic benefits, in respect of such claims cannot be measured due to uncertainties that surround the related events and circumstances.
(c) The company issued bonds of'64,927 lakhs to custom authorities [a(V)] is mainly for duty free movement of Import/Export containers.
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.
None of the financial assets of SCI have been considered in the fair value of plan assets.
The expected rate of return on plan assets has been estimated on the basis of actual returns of the trust in the past years. The securities of trust have an effect on the fair value of plan assets as the value of the securities vary with the changes in the market interest rates.
Actual Return on plan assets ' 1833 lakhs (Prev. period ' 1044 lakhs)
Through its defined benefit plans, SCI is exposed to a number of risks, the most significant of which are detailed below:
Asset volatility: The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Most of the plan asset investments is in fixed income securities with high grades and in government securities. The Company intends to maintain the above investment mix in the continuing years.
Changes in bond yields: A decrease in bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond holdings.
Life expectancy: The gratuity plan obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an increase in the plans’ liabilities.This is particularly significant where infiationary increases result in higher sensitivity to changes in life expectancy.
Contribution expected to be paid in the next year is ' 10 Lakhs.
The weighted average duration of the defined benefit obligation is 9.51 years (2023 - 9.82 years).
The weighted average duration of the defined benefit obligation is 9.51 years (2023-9.32 years).
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions the same method (present value of the defined benefit obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.
Note 31: Segment information
(a) BusinessSegments
The Company is managed by the Board which is the Chief Operating Decision-Maker (CODM). The Board has determined the operating segments based on the pattern of vessels deployed by the Company, forthe purposes of allocating resources and assessing performance.
(I) Liner
Liner segment includes break-bulk, container transport.
(II) Bulk
Bulk Carriers include dry bulk carriers.
(III) Tanker
Tankers segment includes both crude and product carriers, gas carriers.
(IV) T&OS
Technical & Offshore services segment includes company owned offshore vessels, offshore vessels managed on behalf of other organisations, income from technical consultancy and passenger vessels & research vessels managed on behalf of other organisations.
(V) Unallocated
Unallocable items and interest income/expenses are disclosed separately.
Expense and Revenue items are allocated vessel wise wherever possible. Expenses and revenue items that cannot be allocated vessel wise are allocated on the basis of age of the vessel i.e. (Current year - Built year) 1.
(b) Geographical Segments
Presently, the Company's operations are predominantly confined in India.
(c) Adjusted Earnings before Interest & Tax (EBIT)
Adjusted EBIT excludes discontinued operations and the effects of significant items of income and expenditure which may have an impact on the quality of earnings such as restructuring costs, impairments when the impairment is the result of an isolated, nonrecurring event. It also excludes the effects of gains or losses on financial instruments.
Interest income is not allocated to segments, as this type of activity is driven by the central treasury function, which manages the cash position of the Company.
The nature of services and its disclosure of timing of satisfaction of performance obligation is mentioned in para 1.8 of Note No. 1. Contract Assets in the balance sheet constitutes unbilled amounts to customers representing the Company’s right to consideration for the services transferred to date. Any amount previously recognised as Contract Assets is reclassified to trade receivables at the time it is invoiced to the customer.
Contract Liabilities in the balance sheet constitutes advance payments and billings in excess of revenue recognised. The Company expects to recognise such revenue in the subsequent financial years.
There were no significant changes in contract assets and contract liabilities during the reporting period except amount as mentioned in the table and explanation given above.
Trade receivables as disclosed in note no 7(d) includes contract balances. Impairment losses as disclosed in Note 37 includes receivables arising from contracts with customers.
Under the payment terms generally applicable to the Company’s revenue generating activities, prepayments are received only to a limited extent. Typically, payment is due upon or after completion of the services.
The Company generates revenuefrom shipping activities.Revenuefrom avoyage charteris recognised overtime, which is determined on a percentage of voyage completion method. The Company has recognised revenue over a period of time basis following output method. Since, the Company can track the progress toward completion of the contract by measuring days to date relative to total estimated days needed to satisfy the performance obligation, the percentage of voyage completion method/ straight-line basis over the period of the charter i.e. output method provide a faithful depiction of transfer of goods or services.
Note 33: LEASE
The Company as lessee has agreements/contracts relating to charter in of vessel on time basis, land, building, Cars, Photocopier machine etc. The Company as lessor has entered into agreements/contracts of out charter of vessel on time, etc. The right-of-use and lease liability are disclosed in the financial statements at note no 5 & 14 (b) respectively. The Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss.
The fair value of financial instruments referred above have been classified into three categories depending on the inputs used in the valuation technique. The hierarchy gives the highest priority to quoted prices in active market for identical assets or liabilities (level 1 measurements) and lowest priority to unobservable inputs (level 3 measurements). The categories used are as follows:
Level 1: Level 1 hierarchy includes financial instruments measured using quoted prices. This includes mutual funds that have a quoted price. The mutual funds are valued using the closing NAV.
Level 2: The fair value of financial instruments that are not traded in an active market is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
Level 3: If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities which are included in the level.
There were no transfers between any levels during the year.
(ii) Valuation technique used to determine fair value
Specific valuation techniques used to value financial instruments include:
• the use of closing NAV for investment in mutual funds
• the use of book values for investment in unlisted equity securities
• the fair value of the remaining financial instruments is determined using discounted cash how analysis.
All of the resulting fair value estimates are included in level 1 and 2 except for unlisted equity securities, where the fair values have been determined based on present values and the discount rates used were adjusted for counterparty or own credit risk.
(iii) Fair value measurements using significant unobservable inputs (level 3)
The following table presents the changes in level 3 items for the periods ended 31 March 2024 and 31 March 2023:
The carrying amounts of trade receivables, trade payables, short term security deposits, bank deposits with more than 12 months maturity, cash and cash equivalents including other bank balances and other current financial assets and liabilities are considered to be the same as their fair values. Hence the current financial assets & liabilities have not been considered for Fair value hierarchy above.
The fair values of non-current borrowings (with floating rate of interest) is not impacted due to interest rate changes and will not be significantly different from their carrying amount as there is no significant change in the underlying credit risk of the Company's borrowings. The fair values of non-current borrowings (with fixed rate of interest) are based on discounted cash flows using a current borrowing rate. They are classified as level 2 fair values in the fair value hierarchy due to the use of observable inputs.
For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.
Note 37: Financial risk management
The Company has exposure to the Credit risk, Liquidity risk and Market risk.
The Company's Board of Directors has overall responsibility for the establishment and supervision of the Company's risk management framework. The Board of Directors has established the Risk Management Committee (RMC), which is responsible for developing and monitoring the Company's risk management policies. The Audit Committee oversees how management monitors compliance with the Company's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Company.
(A) Credit Risk:
(i) Credit risk is the risk of financial loss to the Company if a customer to a financial instrument fails to meet its contractual obligations. Company's exposure to credit risk primarily arises on account of its Trade receivables. Trade receivables consist of a large number of customers spread across diverse geographical areas. A default on a trade receivable is considered when the customer fails to make contractual payments within the credit period. This credit period has been determined by considering the business environment in which the Company operates.
The Company considers dealing with creditworthy customers and obtaining sufficient collateral, where appropriate, as a means of mitigating the risk of financial loss from defaults. The credit risk due to above is periodically monitored. Based on the periodical analyses, the credit risk is managed by continuous review and follow-up.
(ii) Provision for expected credit losses (ECL):
The Company provides for expected credit loss on trade receivables based on a provision matrix. This matrix is a simplified basis of recognition of expected credit losses in case of trade receivables. The model uses historical credit loss experience for trade receivables i.e. this model uses aging analysis of trade receivables as at the reporting date and is based on the number of days that a trade receivables is past due. The aging has been done for bracket of 90 days over a period of last 3 years. Receivables that are more than 3 years old are considered uncollectible. Further, customers declaring bankruptcy or failing to engage in repayment plan with the Company, provisioning is made on caseto case basis i.e. such customers do notform partof this impairmentexercise and provided for separately.
(B) Liquidity risk
(i) Prudent liquidity risk management refers to the management of the Company's short term and long term funding and liquidity management requirements. The Company's treasury maintains flexibility in funding by maintaining availability of funds under committed credit lines.
Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
(ii) Maturities of financial liabilities
The tables below analyse the Company’s non-derivative financial liabilities into relevant maturity groupings based on their contractual maturities.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. In the table below, borrowings include both interest and principal cash flows. To the extent that interest rates are floating rate, the undiscounted amount is derived from interest rate curves atthe end of the reporting period.
(C) Market risk
Market risk is the risk that changes in market indicators such foreign exchange rates, interest rates and commodity prices will affect the Company's income or the value of its financial instruments. The Company's activities mainly expose it to risks arising from changes in foreign exchange rate and interest rate and freight/charter hire rates.
(i) Foreign currency risk
The Company operates vessels in foreign waters, earns revenues and incurs expenditure in foreign currencies, primarily with respect to USD, EURO and certain other foreign currencies. Foreign currency risk arises from future commercial transactions and recognised assets and liabilities denominated in a currency that is not the Company's functional currency (INR).
Considering the business environment in which Company operates, exposure to foreign exchange rate risk is largely managed by collection of income in foreign currencies in bank accounts abroad.
Interest rate riskistheriskthatthefuture cash flows of floating interest bearing borrowings willfluctuate because of f luctuations in the interest rates. The Company’s main interest rate risk arises from long term borrowings with variable rates, which expose the Company to cash flow interest rate risk. The Company's fixed rate borrowings are carried at amortised cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neitherthe carrying amount northefuture cash flows will fluctuate because of achangeinmarketinterest rates. The Company manages its interest rate risk by regularly monitoring the interest rate movement and deciding on type of interest rate i.e. fixed or fluctuating.
(b) Sensitivity
The sensitivity analysis has been determined based on the exposure to interest rate risk on the borrowings outstanding as at the end of the reporting period. The analysis is prepared assuming the amount of the liability outstanding at the end of the reporting period was outstanding for the whole year with a 100 basis point increase or decrease.
Shipping industry is governed by various national and international economic and geopolitical developments. Local and international demand and supply determine freight and charter hire rates. Since Company's vessels ply in international waters, it is affected by such developments. Also, bunker cost is major component of Company's cost structure and bunker prices are highly volatile. Informatively, as per GST return filed during FY 2023-24, Export Revenue of the SCI is ' 1,54,472 lakhs (previous year' 1,71,809 lakhs).
Note 38: Capital management (a) Risk management
The Company’s objectives when managing capital are to safeguard the company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
(b) Loan covenants
The Company has ECB loan agreements with two Banks and these banks have covenants of DSCR, total liabilities to shareholders equity and Total Fixed assets to long term secure debt. The Corporation is comfortably meeting all the financial loan covenants for both the banks for FY 2023-24.
Note 39
As per the guidelines dated 27.05.2016 issued by Department of Investment and Public Asset Management (DIPAM), MOF, GOI in respect of dividend, bonus shares, etc. the Company has an obligation to comply with these guidelines. However, the company shall take into consideration and be guided by the provisions of the Companies Act 2013, Companies (Declaration and Payment of Dividend) Rules, 2014, Guidance Note on Dividend & Secretarial Standard 3 (SS3) and company's future plans and cash position for taking necessary action appropriate and deemed fit in the circumstances.
Note 40
The matter of payment of Performance Related Pay (PRP) of '1,103 lakhs vis-a-vis DPE guidelines w.r.t. computation of profits from core activities and non-observance of "Bell Curve” is continued since the FY 2014-15. The Action Taken Notes (ATNs) furnished by the Ministry of Ports, Shipping and Waterways (MoPSW) are yet to be examined by Committee of Public Undertakings. The Company is pursuing the matter with the aforesaid Ministry and awaiting theirfurther instructions for resolution and final decision in the matter.
Note 41
Pursuant to the order of Hon’ble ITAT Mumbai in favor of the Company for A.Y 2008-09, the Income Tax department has filed an appeal with the Hon’ble Bombay High Court during the financial year 2023-24. Consequently, the Company has disclosed the amount under dispute in the Contingent Liability in the financial statements for the year ended 31.03.2024. Notably, the Company has received the Order Giving Effect (OGE) dated 30th April 2024 from the Income Tax department to the ITAT order dated 14.03.2023.
On 28.02.2024, The Hon’ble ITAT Mumbai in the Company’s own case of A.Y 2010-11 has passed an order in favor of the Company in the matter of Interest income by ruling that the said income would be in the nature of business income i.e. core business activity and not in the nature of ‘Income from Other Sources’.
Based on the legal and expert opinions, past favorable judgments, and the receipt of the Order Giving Effect (OGE) concerning the ITAT order for AY 2008-09 dated 14.03.2023 in identical matter, the Company has reversed the provision for income tax for the for assessment year 2010-11 to the tune of ' 74 crore, consequent to the aforesaid ruling. This adjustment is reflected under "Tax pertaining to earlier Years" in the financial statements for the year ended 31.03.2024. However, the Company has disclosed the same under Contingent liability in the financial statements for the year ended 31.03.2024.
The proposed strategic disinvestment of SCI is being handled by Department of Investment and Public Asset Management (DIPAM) with the engagement of Transaction Advisor. In this regard, Preliminary Information Memorandum (PIM) for inviting expression of interest was released on 22.12.2020. The Virtual Data Room is open and is being managed by the Transaction Advisor for the process of due diligence by the Qualified Interested Parties.
Note 43
Pursuant to approval of demerger scheme by MCA vide its order dated 22.02.2023,192 non-core assets were transferred from the Company (Demerged Company) to Shipping Corporation of India Land and Assets Limited (Resulting Company) (hereinafter referred to as SCILAL) w.e.f. 01 April 2021 and lease back of the same to the company has been treated as short term lease, pending execution of final agreement and disinvestment process as detailed in note no. 42.
Note 44
a) The Company has the practice of seeking confirmations of balances from all the parties in respect of the Trade Receivables, Trade Payables and Deposits. While the reconciliation is an on-going process, the management does not expect any material difference affecting the financial results due to the same.
b) Reconciliation of agent/vendor/customer balances is an ongoing process. Management is of the view that effect of changes in the balances on account of above reconciliation and subsequent impact of foreign exchange gain / loss will not be material.
Note 45
The Board of Directors recommended a dividend of ' 0.50/- per equity share of face value of' 10/- each. The outgo on this account will be approximately ' 2,329 Lakhs, subject to the approval of members atthe ensuing Annual General Meeting.
Note 46
The Company is undertaking a review of all open charges as per MCA records and taking necessary action for fling of satisfaction of charges for which liability has already been discharged.
Note 47
During the Financial Year 2023-24, the company has sold its vessels M.T. Sampurna Swarajya, DWT 32950 and M.T. Suvarna Swarajya, DWT 32902 due to completion of useful life.
Note 48
Following assets has been transferred to SCILAL w.e.f 01.04.2021 as per MCA order dated 22.02.2023 and has been removed from SCI financial statements. Title deeds of these assets are in the name of SCI as on 31.03.2024 and is in the process of transfer. There are few assets for which SCI does not have title deeds also.
The figures of previous year have been regrouped or rearranged wherever necessary to conform to current year's presentation as per Schedule III (Division II) to the Companies Act 2013.
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