To the Members of Essar Shipping Limited
Your Directors are pleased to present the Twelfth Annual Report and Audited Financial Statements of the Company for the financial year ended March 31, 2022.
The Companys financial performance, for the year ended March 31, 2022 is summarized below:
Rs. in Crore
|For the year ended 31-03-2022||For the Year ended 31-03-2021||For the year ended 31-03-2022||For the Year ended 31-03-2021|
|Less: Interest & Finance charges||356.47||488.69||180.22||212.16|
|Less: Provision for Depreciation||105.92||173.76||45.26||112.53|
|Profit / (Loss) before Tax||(174.58)||(596.53)||(24.57)||(298.06)|
|Less: Provision for Tax||0.26||0.62||0.26||0.62|
|Profit / (Loss) for the year before share of profit of associate||(174.84)||(597.15)||(24.83)||(298.68)|
|Add: Exceptional item||93.81||(23.41)||(225.15)||0.79|
|Add: Share of profit of associate||3.00||0.00||-||-|
|Add: Other Comprehensive Income/loss||0.23||(0.10)||0.23||0.20|
|Profit / (Loss) for the year||(77.80)||(620.66)||(249.75)||(297.69)|
In view of absence of profit, the Board of Directors has not recommended any dividend for the year ended 31st March, 2022.
MANAGEMENT DISCUSSION AND ANALYSIS
Overview of the World Economy & Shipping Industry
Every crisis brings with it an opportunity. As the world economy recovers from the economic paralysis of the pandemic, there appears to be the chance to rethink the model of global governance that has guided the world economy for the past forty years but has largely failed to deliver on the promise of prosperity and stability. Most advanced economies are rebounding in 2021 from the recession conditions, induced to stem the pandemic. Their key challenge is the medium and longer-term direction and nature of economic growth, both in terms of avoiding the policy reversals that marred the decade following the global financial crisis and making a definitive shift to a zero-carbon energy system, in line with the aims of the Paris Agreement.
The IMF has downgraded its forecast for world economic growth in 2022, with global GDP now projected to rise by 3.6% this year following the 6.1% ‘post-Covid rebound in 2021. This comes against the backdrop of the Russia-Ukraine conflict, with the impacts of the war intensifying global inflationary pressures. The IMF expects inflation to average 5.7% in advanced economies in 2022 and 8.7% in emerging market and developing economies (+2.8pp), with impacts, including tighter monetary policies, set to check economic improvements.
Notable downward revisions were made to Russian GDP (now expected to fall 8.5% in 2022), but also to economic growth in the Euro Area , GDP growth projections were also downgraded for China and the US. UK GDP rebounded by 7.5% y-o-y in 2021, the fastest growth since 1941 and the firmest in the G7.
Against the backdrop of the Russia-Ukraine conflict and consequent concerns surrounding Western energy security, the US has agreed to attempt to deliver an additional c.10mt of LNG to Europe in 2022 (equivalent to c.14% of total US LNG exports last year). In the longer term, the US has agreed
to supply a further c.35mt of LNG to Europe p.a. out to 2030, should the additional LNG consumption remain consistent with existing European decarbonisation plans. Meanwhile, concerns surrounding inflation and its potential impacts on the global economy developed further this week.
The COVID-19 pandemic disrupted maritime transport, though the outcome was less damaging than initially feared. The shock in the first half of 2020 caused maritime trade to contract by 3.8 per cent in the year 2020. But in the second half of the year there was a nascent, if asymmetric, recovery, and by the third quarter, volumes had returned, for both containerized trade and dry bulk commodities. However, there has yet to be a full recovery for tanker shipping. Maritime trade has performed better than expected partly because the COVID-19 pandemic unfolded in phases and at different speeds, with diverging paths across regions and markets. The rebound in trade flows was also the result of large stimulus packages, and increased consumer spending on goods, with a growth in e-commerce, especially in the United States. Later, there was more general optimism in advanced regions from the rollout of vaccines. But it was also partly due to unlocking pent-up demand, restocking and inventory-building. The rebound was fairly swift because, unlike the global financial crisis of 2009, the downturn was not synchronized across the world.
The International Monetary Fund estimates that $50 billion are required to end the pandemic and roll out vaccines across developing countries. This would bring not just health but also economic benefits since it would be tantamount to a large scale economic stimulus package that could accelerate economic recovery and by 2025 generate some $9 trillion in additional global output.
The pandemic has accelerated pre-existing digitalisation and environmental sustainability trends. Technological advances have enabled shipping and ports to continue operations while minimizing interaction and physical contact. The growth in online trade has increased the demand for distribution facilities and warehousing that are digitally enabled and offer value- added services. All these developments are expected to generate new business opportunities for shipping and ports as well as for other players in the maritime supply chain. Technology will also be critical for advancing environmental sustainability. While designing their stimulus packages and post-pandemic plans, many governments aim to harness the synergies between technology, environmental protection, efficiency, and resilience. Businesses and governments recognize that adapting to the post-pandemic world and building back better requires adding economic, social and environmental value and creating new business opportunities, not least for maritime transport.
In 2020, global economic output fell by 3.5 per cent and merchandise trade by 5.4 per cent, while international maritime shipments fell by 3.8 per cent, to 10.65 billion tons. However, UNCTAD expects world maritime trade to recover by 4.3 per cent in 2021, and growth is projected to continue over the 20222026 period.
Throughout 2021, much of the global economic revival will be driven by government spending in major economies, so the patterns and geography of the recovery will be shaped by the ways in which their governments wind up these support measures.
In 2020, the global commercial shipping fleet grew by 3 per cent, reaching 99,800 ships of 100 gross tons and above. By January 2021, capacity was equivalent to 2,13 billion dead weight tons (dwt). During 2020, delivery of ships declined by 12 per cent, partly due to lockdown-induced labour shortages that disrupted marine-industrial activity. The ships delivered were mostly bulk carriers, followed by oil tankers and container ships. As owners and operators tried to cope with tight vessel supply, they were also buying more second-hand ships with a resulting increase in prices. Recycling rates also increased in 2020, although compared to previous years, the levels remain low. During 2020, orders for new ships had declined by 16 per cent, continuing a downward trend observed in previous years. In early 2021, however, shipping companies reacted to the capacity constraints with a surge of new orders, especially for container ships for which orders were the highest for the last two decades. There were also more orders for LNG carriers.
BUSINESS PERFORMANCE, OPPORTUNITIES AND OUTLOOK
Freight rates and Maritime trade by Cargo type
Structural factors keep maritime transport costs higher in developing regions. The current historical highs in freight rates are largely driven by pandemic-induced shocks and unexpected upward swings in shipping demand. But in the longer term, shipping and port prices are driven by structural factors such as port infrastructure, economies of scale, trade imbalances, trade facilitation, and shipping connectivity - all of which have lasting impacts on maritime transport costs and trade competitiveness. An analysis based on a new UNCTAD-World Bank transport costs dataset, shows that significant structural improvements could reduce maritime transport costs by around four per cent. Interventions and policies that address the structural determinants of maritime transport costs can thus help mitigate the impacts from cyclical factors and disruptions. Other structural issues that will increase prices include the new regulations on decarbonizing shipping. The recently adopted IMO short-term measure on greenhouse gas reduction is expected to reduce average shipping speeds and increase maritime transport costs, especially for developing countries.
In the first half of 2020, freight rates were higher compared with 2019 for most routes, with first half of 2021 reporting extreme volatility with freight rates nearly doubling for all the segments.
(a) Tanker trade:
In the first half of 2020, there was a surge in tanker freight rates, boosting profits for tanker shipping companies. In the second half of the year the COVID-19 impacts weakened demand and rates started to drop in an oversupplied market. By January 2021, oil tanker spot earnings were $5,237/day, and by July had fallen to $2,753/day, the lowest levels ever.
EU members met to consider placing a ban on Russian oil imports in response to the conflict in Ukraine The EU accounted for the largest share of seaborne Russian oil exports in 2021; the EU imported an estimated 1.5m bpd of crude (c.46% of Russian crude exports) and an estimated 0.8m bpd of oil products (c.34% of Russian products exports) by sea from Russia. Meanwhile, Indian buyers continued purchasing Russian oil, with one private refiner reported to have bought 1.8m bbls of Urals crude. The VLCC markets saw pressures to trade in the range of $5,000/day on spot. Crude traded at $ 119.03/bbl at the end of March22. Germany announced that it plans to halt Russian oil imports by the end of the year. Given current low global demand and future uncertainties, tanker freight rates will probably remain in the range of $12,000 - 15,000/ day for the rest of the year.
the figs on right axis are missing
Source: Clarksons Shipping Intelligence, 25th Mar22
(b) Dry cargo trade:
Iron ore trade remained unperturbed as shipments increased by 3.2 per cent to 1.5 billion tons in 2021. In 2021, seaborne dry bulk trade is projected to expand by 3.7 per cent, with iron ore and grain trade growing steadily, a rebound in minor bulk volumes and more coal trade. Coal trade plunged 9.3 per cent in 2020, partly as a result of the pandemic, with reduced electricity demand across regions overlaid on the ongoing structural shift towards cleaner energy sources.
Freight rates were high through the first half of 2021 as a result of continuing higher demand, combined with fewer new vessel deliveries and increased scrapping activity. Looking ahead, dry bulk demand should continue to grow and the capacity should be manageable so rates are likely to remain high. The orderbook is only around 6 per cent of the existing fleet capacity, the
lowest level in three decades. Future freight rates will be largely determined by demand growth, particularly from China, but the market will also be affected by the ongoing energy transition and shifts in fuel mix choices. However, high freight rates could stimulate new build orders so that in the medium term, supply capacity could exceed demand.
Global sentiments picked up in early 2021 given the ease of sanctions on Qatar by the Middle East council of member nations. The continued surge in the market was against the backdrop of ten year high iron ore prices, improved coal volumes and stability in global steel prices.
However, in March2022, Russian seaborne coal exports were down c.35% y-o-y, the sharpest decline so far this year view impact of EU ban, which is reportedly to take effect from August. The EU imported 41mt of coal from Russia by sea in 2021, 49% of total EU seaborne coal imports and 24% of total Russian seaborne coal exports, and accounting for c.3%. of global seaborne coal trade. European buyers are searching for alternative supplies in the US, Colombia and as far afield as Australia, while Russian exporters are expected to try to redirect exports to markets in Asia, all of which is expected to boost coal tonne-mile trade. Japan also announced a ban on Russian coal imports (c.19mt in 2021), highlighting the challenges now facing Russian exports, and the scale of changes to trade patterns that appear likely to evolve. Russian grain exports were down 15% y-o-y, albeit outside of ‘peak export season, while Ukrainian exports remain suspended.
Developments in Indonesia also helped sentiment in the Supra/ Ultramax sectors in the Pacific, Indonesias coal export ban was lifted on 14th Jan, though only miners that have fulfilled their domestic sales obligations reportedly most major export players, will be allowed to resume exports at this stage. There remains a backlog of tonnage to clear in the region.
Overall, the war and the slower growth in the active fleet pushed up freight rates. This was reflected in the Baltic Exchange Dry Index, which measures the cost of shipping various raw materials, such as coal, iron ore, cement, grain and fertiliser. In February 2020 this stood at only 461 points but by July 2021 had reached 3,257 points. Capesize spot earnings witnessed a high of $70,000/day in August21 averaging across all segments of bulk carriers at $20,000/day by March22
S&P (Sale & Purchase), Shipbuilding, New Orders & Recycling Market
There have been significant increases in the prices for secondhand bulk carriers. During the first half of 2021 prices of various vessel sizes aged between 5 and 10 years rose by between 25 and 50 per cent. Higher prices reflect strong short-term market confidence, based on rising commodity prices, high earnings for bulk carriers and projections for increasing global seaborne bulk trade.
Since the beginning of 2021, sales have been at their highest for the past five years. Two-thirds of world ship building was of dry bulk carriers and tankers. As world trade gradually recovered during the second half of 2020 and the first half of
2021, demand for ships increased - responding to severe fleet capacity constraints and the uptick in freight rates.
In the first half of 2021, newbuild investment was at its highest since the first half of 2014. with record-breaking orders for container ships - almost eight times those in the first half of 2020. New building orders were spearheaded by those for Panamax container ships (ShipInsights, 2021). There has also been an increase for LNG carriers. New orders between January 2020 and January 2021, the global order book declined by 16 per cent. The sharpest reductions were for bulk carriers, down 36 per cent, followed by ferries and passenger ships, down 32 per cent. By contrast, other segments grew: liquefied gas carriers, up 10 per cent, and general cargo ships, up 6 per cent.
Recycling volumes stood at historically low levels in 2021, with 24.3m dwt reported sold for scrap in the full year. Although this represented steady volumes year-on-year, this was still 32% below the 10-year average. Amid a challenging earnings environment, the tanker sector accounted for the greatest proportion (64%) of tonnage sold for recycling in full year 2021, with 15.7m dwt reported sold for demolition. Meanwhile, the bulkcarrier sector accounted for 21% of tonnage reported sold for scrap, with 5.2m sold for recycling. As tanker earnings remain weak going into
2022, the supply of tonnage to the recycling market is likely to originate from this sector for the time being. Conversely, the volume of bulkcarrier and containership tonnage sold for recycling looks set to be limited for the foreseeable future, amid continued firm earnings in these sectors.
Outlook - Diverging Impacts and Recoveries for key shipping markets
The shipping market hardest hit by the pandemic has been the oil trade. Between 2019 and 2020 UNCTAD estimates that tanker trade, including crude oil, refined petroleum products, and gas, slipped by 7.7 per cent, with volumes down from 3.2 billion to 2.9 billion tons. The steepest drop was for seaborne crude oil at 7.8 per cent, as total volumes fell to 1.7 billion tons. Crude oil imports declined in most key importing markets including the
United States, Europe, India, Japan, and the Republic of Korea. The only increase was in China, by 8 per cent.
The tanker trade has suffered from weak oil demand, high inventories, and cuts in oil supply by OPEC+ members. That said, 2021 should see an improvement as demand gradually recovers and supply increases. Starting in August 2021, as oil prices hit their highest levels in more than two years, OPEC+ members agreed to phase out 5.8 million barrels per day of production cuts (OPEC, 2021). Meanwhile, a lifting of the United States sanctions would increase exports from the Islamic Republic of Iran, which could displace production from other locations but nevertheless increase the demand for tankers. With an increase in OPEC production and the expansion of Asian refineries, there is likely to be more demand for very large crude carriers. In the longer term, tanker demand will be affected by the current global energy transition, which implies a change in the energy mix
The pandemic has also weighed, if to a lesser extent, on the global demand for gas. In 2020, global gas trade increased only marginally, by 0.4 per cent, while volumes of LNG exports are estimated to have expanded by 1.1 per cent and of LPG to have declined by 1.0 per cent. Gas projects have been delayed by weak energy prices, including work on LNG export terminals in the United States and LNG feedstock projects in Australia (Clarksons Research, 2020). That said, exports from the United States rebounded in 2020, thanks to a boost in consumer demand supported by a cold winter in Asia. The United States also increased its LPG trade, by 15 per cent. Natural gas offers a lower-carbon source of energy, so with more demands for sustainability and a transition to lower-carbon energy, the global gas trade is set to increase. Much of the growth will be driven by Asia, with an important role for Chinas new propane dehydrogenation plants. Indias trade will also expand as a result of subsidized domestic LPG prices.
Natural gas is set to contribute a larger share to the global energy mix in the coming years, with much of the growth driven by shale-gas production in the United States, as well as by production in Western Asia and in other regions including the Mediterranean and East Africa.
Broad-based global recovery will depend on smart, resilient and sustainable maritime transport The COVID-19 pandemic triggered a succession of shocks and waves, each setting off their own spinoff events. The recovery is similarly proving uneven, with differences in the levels and scale of policy support and unequal access to vaccines. The timescale for a lasting recovery will depend on the progress of the pandemic, the extent and timing of world vaccination plans, and the duration of policy support measures. At present the nascent recovery is being
threatened by supply-chain breaks and logistical bottlenecks that are disrupting shipping markets and pushing cost levels to historic highs. The COVID-19 disruption has also accelerated pre-existing megatrends - geopolitical, technological, and environmental. These trends have been unfolding slowly over the past decade but have accelerated during the pandemic and continue to transform maritime transport and trade:
a. Geopolitics - In the face of heightened geopolitical risks and rising trade tensions, many countries and enterprises are shifting their mindsets and now perceive global interdependency partly as a vulnerability. To mitigate risks and build resilience - they are therefore aiming to reduce their reliance on distant foreign suppliers.
b. Resilience - Enterprises and governments are aiming to make supply chains more robust and resilient, including by looking to diversify their business partners and suppliers. This will involve a new balance between local, regional and global production. They are also reconsidering inventory and stock management strategies and the trade-offs between just-in-time and just-incase supply chain models.
c. Technology - Customs officials, port workers, and transport operators increasingly recognize the value of new technologies and digitalization, not just as a way of boosting efficiency but also for maintaining business continuity at times of disruption. Technological innovations include advanced analytics, on-board sensors, communications technology, port-call optimization, blockchains, big data, and autonomous ships and vehicles. Technological advances have stimulated consumer spending online and a growth in e-commerce. These trends will continue to redefine production and consumption patterns and the ways in which ships, ports and their hinterland connections deliver cargo and services.
d. Shipping market dynamics - In anticipation of future disruptions, carriers, shippers, ports, and inland transport operators will be rethinking their business and operating models to respond more flexibly to changing market conditions. They can also anticipate potential greater regulation of shipping markets as national competition authorities step up their monitoring of freight rates and market behaviour and scrutinize rapid movements in shipping prices.
e. Decarbonisation and the energy transition - Maritime transport is facing growing pressure to decarbonize and operate in a more sustainable way - issues that have also come to the fore as part of the post-pandemic recovery. With ongoing IMO work on greenhouse gas emission reduction in shipping providing further momentum, shipping is expected to change its fuel mix and use new technology and ship designs, alternative fuels and operational adjustments to cut its carbon and environmental
footprint. For energy, shipping is not just a large-scale user but also a major carrier, so the industry will have to respond to lower demand for oil tankers and coal carriers and more for ships transporting hydrogen, ammonia and other alternative fuels.
f. Climate adaptation and resilience - Over recent years extreme weather events, including floods, hurricanes and cyclones, have been causing frequent and intense disruptions for both coastal infrastructure and hinterland connections. With current climate projections pointing to a global warming trajectory exceeding the agreed targets under the Paris Agreement, the maritime industry and governments need to invest in adaptation and in climate-proofing maritime transport infrastructure and services, as well as accelerate the development of related legal, policy and technical measures, and capacity-building.
Due to sharp decline in asset prices of vessels and poor shipping freight market persisting over last few years including covid pandemic period , The company had been incurring losses and regularly defaulting on servicing of debts and Interest of financial institutions and banks. The financial Institutions and Banks have been pressing for settlement of their dues in order to avoid taking legal courses . The Board after long deliberation took a decision to monetize all the Vessels which were under charge in favour of the lenders in order to settle dues.
For this purpose the Company had obtained shareholders approval for disposal of the Companys fleet in AGM held in September 2020. Sale was to be done at an appropriate opportunity to maximize valuation.
In line with the approval granted by the Shareholders, ESL monetized its fleet of vessels at appropriate time. The proceeds of the vessels were utilized to reduce the debt to its secured lenders. As the Baltic Dry Index hit a 10 year high in 2021, making it the most appropriate time to monetize vessels in order to reduce its debt. Accordingly, it was felt that this was an appropriate time for Essar Shipping to monetize its vessels and fetch the best price in order to maximise valuation and reduce debt accordingly.
Last vessel was monetized in January 2022 when freight market was at peak and asset prices high. The company has plans to start with in-chartering of vessels once freight market and charter hires soften which are currently quite high and not conducive for chartering business.
With ESL achieving its task of monetisation of assets to reduce its liabilities, the company is now looking at appropriate
opportunities for a future business built up. ESLs experience of 40+ years in marine transportation and logistics will be a pillar of strength to chalk out future business strategy.
For the duration until the hand-over of the vessels, the Company catered to various clients such as Arcelor Mittal Nippon Steel, JSW Steel, Jindal steel and Power, Power International, Team bulk Carriers, Delta Corporation, Seatrek Singapore, Zeel Shipping, Victory Shipping , PK Agri leading to vessels being fully employed even during the pandemic time.
MT Smiti, our VLCC has been always engaged with major refinery/ traders like Vitol, Formosa, Shell IOCL, BPCL and many more in the past.
With this monetization and upon satisfaction of other conditions, Essar Shipping Ltd.s obligation reduced by approx. Rs 1,100 cr.
GREEN INITIATIVES IN SHIPPING
An alternative fuel already widely in use is liquefied natural gas. This is the greenest fossil energy source, which compared to heavy fuel oil (HFO), could reduce sulphur emissions by 99 per cent, nitrogen oxides by 80 per cent, and CO2 emissions by up to 20 per cent, along with most particulate matters. The 2020 Sphera report demonstrated that LNG/dual-fuel engines emit fewer grams of CO2 equivalent per kw than diesel engines. Dual-fuel engines can use existing technology, enabling ships to be operated on different types of fuel and comply with regulations while remaining competitive. In January 2021 the IMO sulphur cap entered into force, prompting greater investment in bunkering port infrastructure and in LNG- fuelled ships. Currently, these represent a small share of the fleet and of the orderbook. But their numbers are expected to grow significantly in the 2021-2022 period. The major disadvantage of LNG is that it consists primarily of methane which is a far more potent greenhouse gas than CO2. Even small escapes during production or use could result in a net increase in GHG emissions. In April 2021, the World Bank published a report that considered holistic lifecycle emissions and highlighted the impact of LNG on climate change. It recommended countries to avoid supporting LNG as a bunker fuel and advocated for regulation of methane emissions. Shipping industry voices, such as Maersk and Euronav, have also questioned the suitability of LNG as a transition fuel and point to the high costs of investing in new ships and infrastructure while not reducing lifecycle greenhouse gas emissions - with the danger of technological lock-in since new infrastructure with be in operation for 20 years. They also perceive such investment as extending the use of carbon in the maritime energy supply chain and delaying the energy transition.
Halving shipping emissions by 2050 is estimated to require an annual average investment of between $40 to $60 billion between 2030 and 2050. Most of this is for producing alternative fuels such as ammonia, hydrogen, and methanol among others, while also developing new land-based infrastructure for storage and bunkering.
Against the backdrop of the Russia-Ukraine conflict and consequent concerns surrounding Western energy security, the US has agreed to attempt to deliver an additional c.10mt of LNG to Europe in 2022 (equivalent to c.14% of total US LNG exports last year). In the longer term, the US has agreed to supply a further c.35mt of LNG to Europe p.a. out to 2030, should the additional LNG consumption remain consistent with existing European decarbonisation plans.
The Green Transition is dominating ‘Post- Covid planning, with an intensifying focus on decarbonisation ahead of incoming IMO and EU regulation .An increasing proportion of vessels on order (35% in GT) are set to use alternative fuels, primarily LNG. LPG fuel is dominant for new LPG carriers, while there have been notable orders for methanol fuelled boxships, alongside ‘alt. fuel ready and battery-powered vessels. Although uncertainty remains over timing and technology choices, the ‘Fuelling Transition is expected to be a key driver of fleet renewal and newbuilding interest at shipyards across the coming years.
Industry outlook GLOBAL PERSPECTIVE
GOI in a bid to expedite oil and gas exploration and raise domestic production, in 2018 launched the first bid round under the Open Acreage Licensing Policy (OALP) that allowed explorers to carve out desired areas for exploration and offered liberal terms. Having committed USD 2.3 billion investment, energy firms such as Cairn Oil & Gas (Vedanta) spent USD 75 million (about Rs 550 crore) in oil and gas hunt in the first two years of Indias maiden open acreage licensing policy, according to the Directorate General of Hydrocarbons (DGH). 105 blocks awarded in 5 OALP rounds, totalling 1,56,579 sq. km of acreage. (Onland 100605 sq km & Offshore 55974 sq km). DGH had on October 22 announced the winners of the OALP-V round, with ONGC walking away with 7 out of the 11 blocks on offer. OIL won the remaining 4 blocks. All of them are envisaged to be opportunities in the coming quarters.
With the successful roll out of the HELP/OALP regime, based on the world-class National Data Repository (NDR), the Government has achieved massive enhancement of exploration acreage in India. The exploration acreage which stood at approximately 80,000 sq. km. in 2019 from earlier regimes has
now been enhanced to approx. 2,15,000 sq. km. after 4 rounds of OALP. The cumulative exploratory work commitment after the 4 rounds of OALP comprise 29,270 LKM of 2D Seismic Survey, 43,272 sq. km of 3D Seismic Survey, 369 Exploratory Wells and 290 Core Analysis to establish Shale Resources. This will generate an investment of approx. US$ 2.35 billion over next 3 to 4 years in exploratory work alone.
Availability of Natural Gas
The availability of natural gas has steadily increased from a mere 40.91 BCM during 2008-09 to 52.52 BCMs during 2017-18, registering a CAGR of 2.53%.
India had produced 31.83 bcm of gas in FY18 which is expected to rise and reach 40 bcm by 2023.
Availability of Crude Oil
Oil demand in India is projected to register a 2x growth to reach 11 million barrels per day by 2045. Diesel demand in India is expected to double to 163 MT by 2029-30, with diesel and gasoline covering 58% of Indias oil demand by 2045
Market Overview & Trends
• State-owned ONGC dominate the upstream segment.
Through Energy Strategy 2040, ONGC has set a target to double its Oil and Gas production from its domestic, as well as overseas fields by the year 2040.
ONGC produced 5.551 MMT of crude oil in the fiscal year ending March 31 (2021-22) and 21.1 million tonnes in 2018-19. It produced 5.583 billion cubic metres of gas in 2021-22.
ONGC accounted for around 61.25 per cent of total crude oil production in India in FY19*.
• During FY21, 438 wells were drilled in the country.
• State-owned oil companies undertake most of the upstream drilling and exploration work.
• In September 2018, investments worth Rs 5,900 crore (US$ 840.70 million) were committed in 55 Oil and Gas exploration areas awarded under Open Acreage Licensing Policy - 1. The Government of India undertook auction of 14 more blocks in the second round, which shall be under exploration by 2023.
• The government is planning to invest US$ 4 billion in the upstream Oil and Gas production to double the natural gas production to 60 bcm and drill more than 120 exploration wells by 2024.
• The land drilling rig market is expected to register a CAGR of more than 4% during the forecast period of 2022 - 2027. The COVID-19 outbreak had led to the slowdown of drilling rig contraction activities across the globe. Factors such as the increasing use of high horsepower and hi-tech rigs, and the increasing demand for heavy rigs, the land rig market has evolved significantly in recent years. Moreover, exploitation of unconventional reserves to meet the increasing demand for crude oil and natural gas is expected to create significant demand for land drilling rig market during the forecast period.
• The day rates are expected to increase due to the upward trend in the Crude Oil prices.
OGDSL Business Strategy & Initiatives
1. Undertaking IPM projects through joint venture/ consortium model with Oilfield Service companies for Blocks awarded through OALP, CBM, DSF & Shale Gas bidding rounds.
2. Acquisition of Brand new rigs or Leasing of rigs to meet higher requirement of Operators.
3. Targeting Marginal Field Operators for the blocks offered under DSF rounds.
4. To keep in constant touch with existing and previous clients and give them priority in business.
5. To re-define the benchmarks in the industry by operating the rigs with lowest cost of operations.
6. Focus on Middle East, Far East & African markets for deployment of rigs.
1. Discussions in progress with OEMs in China & USA for acquiring newly built but stacked rigs through long term finance, lease and buyback option.
2. Checking possible options/alternatives with various rig owners/suppliers for leasing the rigs.
3. Critically evaluating the scope of work for drilling and work-over jobs & offering the most suitable rig for cost optimization.
4. Submission of Pre-qualifying documents to Middle Eastern operators & partnering with local agents to receive tender/ RFQ documents.
SUBSIDIARIES & ASSOCIATES
Your Company has three direct subsidiaries and two step- down subsidiaries. OGD Services Holdings Limited, Mauritius, Energy II Limited, Bermuda and Essar Shipping DMCC, Dubai are direct subsidiaries of the Company. OGD Services Limited, India and Starbit Oilfields Services India Limited, India, are step down subsidiary of the Company.
A report on the performance and financial position of each of the subsidiaries and associates companies as per the Companies Act, 2013 is provided as Annexure G to this report and hence not repeated here for the sake of brevity. The Policy for determining material subsidiaries as approved by the Board is available on Companys website www.essar.com.
CONSOLIDATED FINANCIAL STATEMENTS
In accordance with the Companies Act, 2013 and Indian Accounting Standard (IND-AS) - 110 on Consolidated Financial Statements read with IND-AS-28 on Accounting for Investments in Associates, the audited Consolidated Financial Statements are provided in the Annual Report. The audited Consolidated Financial Statements together with Auditors Report thereon form part of the Annual Report.
Your Company believes that employee competence and motivation are necessary to achieve its business objectives. ESL has undertaken many training initiatives to enhance technical and managerial competence of the employees. ESL has taken a series of initiatives to enhance emotional and intellectual engagement of employees. During the year under review, COVID-19 has accelerated the adoption of fully digitized approaches to re-create the best of in-person learning and employee engagement.
1. Times of Essar : A monthly newsletter that not only gave business and workforce updates but also received contributions from ESL employees, hosted engagement activities ranged from fun quizzes around Independence Day, IPL, Holi, etc, to featuring each and every achievement of our employees. The medium is used to showcase the creative side of our employees and their families.
2. Essar Radio: Used as a key medium to communicate important updates about the different projects that were going on at different sites. Leaders from every location including founders took the opportunity to connect with employees, discussing the strategies about how they aim to overcome the pandemic without hampering or jeopardising anyones health, shared their daily routine to motivate the employees to stay healthy and stress-free.
In addition to the above mentioned initiatives, engagement programs like Health webinars, Yoga classes, and online counselling programme were also conducted. This transformation made it possible to scale learning efforts in a more cost-effective way and permits greater engagement during the locked in scenarios. Hence, initiatives like these taken during the pandemic times helped employees and their families to stay motivated and healthy.
The Company has policies on conduct, sexual harassment of women at workplace, whistle blower, corporate governance, insider trading etc. guiding the human assets of the Company. For the year under review, there was no instance of the sexual harassment reported pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.
During the year under review, Mr. Sumit Agarwal tendered his resignation from the post of Additional Director (NonExecutive Director) of Company w.e.f August 06, 2021 due to personal occupancy. In the Board meeting held on August 31, 2021, Mr. Jayakumar Rajaraman and Mr. Suresh Ramamirtham were appointed as Additional Director (Independent Director) on the Board of the Company and their appointment was regularized by the members of the Company in the 11th AGM held on September 29, 2021.
In the 11th Annual General Meeting, Ms. Sunita Kotian retired by Rotation from the post of Non - Executive Director (Women Director) and in place of her Ms. Saraswathy Subramanian was appointed as a Non - Executive Director (Women Director) by the members of the Company in AGM.
During the year under review Capt Subimal Mahato (DIN: 08867107) Whole Time Director had submitted his resignation letter dated November 11, 2021 due to personal occupancy which was accepted by the Board in its meeting held on November 12, 2021; however, his relieving was subject to hand over of all his responsibilities. He was relieved from Board w.e.f.
November 30, 2021 and there was Change in Designation of Mr. Rajesh Desai (DIN: 08848625) from Non- Executive Director to Executive Director with effect from November 01, 2021 duly approved by Board members in the Board Meeting held on November 12, 2021.
As per Regulation 17(1)(c) of SEBI (LODR) Regulations, 2015, Board of top 2000 listed entities w.e.f. April 01, 2020 shall comprises of at least six Directors, as such, on March 31, 2022, there were six directors on the Board of Company with Independent Director as Chairman of the Board.
Capt. Bhupinder singh Kumar and Mr. Natesan Srinivasan would retire at the ensuing Annual General Meeting on completion of their long tenure office. The Board records its deep appreciation of the valuable contribution made by them during their association with the Company.
Further, Board also records the appreciation of valuable contribution of Mr. Ranjit Singh as President & Chief Executive Officer of the Company during turbulent times.
The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed under sub-Section (6) of Section 149 of the Companies Act, 2013 and under Regulation 16 (b) (iv) of SEBI (LODR) Regulations, 2015.
Pursuant to Sections 134 and 178 of the Act and the Regulations 17 and 19 of the Listing Regulations, Nomination and Remuneration Committee (‘NRC) has set the policy for performance evaluation of Independent Directors, Board, Committees and other individual directors; separate meeting of Independent Directors; familiarization programme for Independent Directors, etc. is provided under Corporate Governance Report annexed with this Report and the relevant policies are also available on the website of the Company https:// www.essar.com/wp-content/uploads/2022/06/EShipL Policy Familirisation-Programme.pdf
Based on the criteria set by NRC, the Board has carried out the annual evaluation of its own performance, its committees and individual Directors for FY 2021-2022. The questionnaires on performance evaluation were prepared in line with the Guidance Note on Board Evaluation date January 5, 2017, issued by SEBI
The performance of the Board and Individual Directors were evaluated by the Board seeking inputs from all the Directors. The performance of the Committees was evaluated by the Board taking input from all the Committee members. NRC reviewed the performance of individual Directors, separate meetings of Independent Directors were also held to review the performance of Non-Independent Directors and performance of the Board as the whole. Thereafter, at the board meeting, performance of the Board, its committees and individual Directors was discussed and deliberated.
Further the evaluation of the Independent Directors was done by the entire board of directors of the Company. Their evaluation included performance of directors and fulfillment of the Independence criteria as specified in these regulations and their independence from the management.
KEY MANAGERIAL PERSONNEL
In terms of section 203 of the Companies Act, 2013, As on March 31, 2022 the Key Managerial Personnel of the Company are Mr. Ranjit Singh, Chief Executive officer, Mr. Ketan Shah, Chief Financial Officer and Ms. Nisha Barnwal, Company Secretary & Compliance Officer.
During the under review, Ms. Jyotsna Gupta tendered her resignation letter to the Board on August 02, 2021 due to relocation and personal occupancies. The resignation letter was accepted in the Board Meeting held on August 31, 2021 however her relieving was subject to hand over of all her responsibilities and completion of the annual general meeting held on September 29, 2021. Ms. Nisha Barnwal was appointed w.e.f September 23, 2021 as Company Secretary & Compliance Officer of the Company duly approved by the Board in Board Meeting held on August 31, 2021. There was gap in approval by the board and in appointment of Ms. Nisha Barnwal as her ICSI membership number was awaited. Her appointment became effective once the membership number was received.
During the year ended on March 31, 2022, eight (8) meetings of the Board were held June 08, 2021, June 24, 2021, August 11, 2021, August 31, 2021, October 19, 2021, November 12, 2021, February 09, 2022, March 28, 2022.
COMMITTEES OF THE BOARD
Currently the Board has 5 Committees viz. Audit Committee, Nomination & Remuneration Committee, Stakeholders Relationship Committee, Share Transfer Committee and Corporate Social Responsibility Committee.
A detailed note on the composition of the Board and its Committees and other related particulars are provided in the Report of Directors on Corporate Governance forming part of this Annual Report.
CHANGES IN SHARE CAPITAL
There was no change in the Share Capital during the year under review.
DIRECTORS RESPONSIBILITY STATEMENT
Your Directors state that:
(a) in the preparation of the annual accounts for the year ended
March 31, 2022, the applicable accounting standards had been followed and there are no material departures from the same;
(b) the Directors have 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 as at March 31, 2022 and of the loss of the Company for the year ended on that date;
(c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 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. The auditors have expressed an emphasis of matter on Going Concern in their Consolidated Audit Report relating to a step down subsidiary.
(e) the Directors, had laid down internal financial controls followed by the Company and that such internal financial controls are adequate and were operating effectively as endorsed by Statutory Auditor in their separate report annexed to the Annual Report
(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 a Risk Management Policy that outlines the framework and procedures to assess and mitigate the impact of risks, and to update the Board and the senior management on a periodical basis on the risk assessed, actions taken for mitigation and efficacy of mitigation measures. With efficient Risk Management Framework, your Company managed:
(a) Economic Risks by entering into long term contracts with reputed global majors in each of its divisions thereby ensuring long term profitability of the Company and assured cash flows;
(b) Interest Rate Risk by undertaking suitable hedging strategies to overcome any adverse interest rate risks. It has formulated internal target rates at which any open interest rate risk can be hedged;
(c) Control over the operational matrix of various vessels to reduce cost and reduce downtime of vessels; and
(d) Control over various OPEX cost of the organization.
As per LODR, Regulation 2015, Risk Management Committee is required to be constituted by top 500 Companies based on
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market capitalisation, since your Company does not fall in that category, However, Company do believe and had put best efforts to minimise/mitigate the risk.
INTERNAL CONTROL SYSTEMS AND ITS ADEQUACY
Your Company has a well-established framework of internal operational and financial controls, including suitable monitoring procedures systems which are adequate for the nature of its business and the size of its operations. The detailed report is given in Corporate Governance Report. Based on the performance of the internal financial control, work performed by internal, statutory and external consultants and reviews of Management and the Audit Committee, the board is of the opinion that the Companys internal financial controls were effective and adequate during the FY 2021-2022 for ensuring the orderly efficient conduct of its business including adherence to the Companys policies, safeguarding of its assets, the prevention and detection of fraud and errors, the accuracy and completeness of accounting records an timely preparations of reliable financial disclosures.
The Company has complied with all mandatory provisions of SEBI (LODR) Regulations 2015, relating to Corporate Governance. A separate report on Corporate Governance as stipulated under the SEBI (LODR) Regulations, 2015 forms part of this Report. The requisite certificate from the Auditors of the Company regarding compliance with the conditions of corporate governance is attached to the report on Corporate Governance.
The Company is in compliance with Section 177 of the Companies Act, 2013 and Regulation 18 and Regulation 22 of the Listing Regulations established Vigil Mechanism by adopting the ‘Whistle Blower Policy, for Directors and Employees. The Whistle Blower Policy provides for adequate safeguards against victimization of persons who use such mechanism and have provision for direct access to the Chairperson of the Audit Committee in appropriate cases. A copy of the Whistle Blower Policy is available on the website of the Company https://www. essar.com/wp-content/uploads/2018/03/ESL Whistle Blower Policy.pdf
CORPORATE SOCIAL RESPONSIBILITY
The Corporate Social Responsibility Committee comprises Captain B. S. Kumar - Chairman; Mr. Rajesh Desai; and Mr. Saraswathy Subramanian as Member of said Committee.
Since the Company has incurred losses in proceeding three financial years, it was not required to spend on CSR Activities Further, in terms of provisions of Section 135 read with The Companies (Corporate Social Responsibility Policy) Rules, 2014 CSR Report is annexed to this Report as Annexure-A
EMPLOYEE STOCK OPTION SCHEME
The Company has implemented the “Essar Shipping Employees Stock Option Scheme-2011” (“Scheme”) in accordance with the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 (“the SEBI Guidelines”). The Nomination and Remuneration Committee of the Board of Directors of the Company administers and monitors the Scheme. The applicable disclosures as stipulated under the SEBI Guidelines as at March 31, 2022 are provided in the Annexure - B to this Report.
The term of scheme of Employee Stock Option was for a period of seven years which got completed in the year 2018. As the objective of the trust is attained, process of winding up of the ESOS trust is in process. All shares of the ESOS trust has been sold.
M/s. C N K & Associates LLP, Chartered Accountants - Statutory Auditors (Registration No. 101961 W/W - 100036) were reappointed at 10th AGM of the Company held on September 30, 2020 to hold the office up to the conclusion of 15th AGM of the Company to be held on year 2025.
Further with regard to the observations made in Annexure A to the Auditors Report, the management explanation is as under:
1. There has been delays in payment of interest and instalments of loans availed from Financial Institution, banks, etc.
During the year, the Company has settled many lenders by monetizing the assets of the Company. The Company is negotiating with balance lenders to repay the debts through monetization of securities offered to respective lenders.
2. Disputed dues w.r.t. Income tax, excise& Customs and GST
All these demands are under dispute and pending at the tribunals / courts.
3. The Companys current liabilities substantially exceed its current assets as on 31st March 2022. This indicates that a material uncertainty exists that may cast doubt on the Companys ability to continue as a going concern.
With the company achieving its task of monetisation of assets to reduce its liabilities, the company is now looking at appropriate opportunities for a future business built up. ESLs experience of 40+ years in marine transportation and logistics will be a pillar of strength to chalk out future business strategy.
4. As per note no. 30 of Standalone Financial Statements, relating to admission to Corporate Insolvency Resolution Process due to invocation of corporate guarantee on account of default by a Subsidiary Company. The said Subsidiary Company is yet to fulfil the settlement terms and subject to final settlement, the impact of Corporate Insolvency Resolution Process remains uncertain
The subsidiary co and the company had entered into a revised settlement agreement with the lender. There has been some delays in making payments are per the revised agreement. The subsidiary company and the company is in constant dialogue with the lender to clear the dues.
5. As per Note No. 6(E) of the Standalone Financial Statements relating to recognition of revenue amounting to Rs. 369.81 crore (including accrued interest up to 31st March 2018) in the financial year 2017-18 based on compensation granted to the Company in the arbitration proceedings for breach of contract terms by a charterer of which Rs. 305.81 crore remains outstanding receivable as on 31st March 2022. The Company is confident of full recovery of its claims. However, pending conclusion of the said proceedings, no interest is accrued on the same for the period 1st April 2018 till 31st March 2022.
The company had entered into a long term Contract of Affreightment (COA) with a PSU for transportation of bulk raw material products from International ports to India in the year 2007. However, the PSU terminated the COA mid way. The company initiated arbitration proceedings as per the COA and won award which was challenged by the counter party in the High Court. The courter party was directed by the High Court to deposit 50% of the award amount with the court in 2018. The matter is now in the High Court and the company is confident of recovery of the award amount.
6. Note No. 9(A) of the Standalone Financial Statements which states that the Company had issued Standby Letter of Credit (SBLC) with three banks for Rs. 687.37 crore to secure a loan availed by a subsidiary, which were invoked in an earlier year. The Company has taken up matter with respective banks to settle the loans through monetization of assets. Out of dues to three banks, dues to two banks have been paid/ settled and dues to one bank amounting to Rs. 340.80 crore (including interest of Rs.162.89 crore) is outstanding as at 31st March 2022.
The company paid the amount due to the lender as per agreed settlement terms. The No dues certificate will be issued by the lender based on agreed milestones.
7. We draw attention to Note No. 9(A) of the Standalone Financial Statements, relating to netting off of amount payable to a wholly owned overseas subsidiary with the amount receivable from the said subsidiary. This is subject to pending application and approval from the regulatory authorities
Necessary application has been made to the Authorised Dealer for seeking requisite statutory approval.
8. The Company has availed loans from banks and financial institutions which are secured by charge over various movable and immovable assets of the Company as well as subsidiary/ associate/ group companies and corporate guarantee of the ultimate Parent Company. The value of the security as at 31st March 2022 is substantially lower than the amount outstanding as at that date
The decline in the value of security available to the lender has taken place over the last 5 to 7 years due to recession in the Shipping sector and the Oilfields sector. The company is in dialogue with the lenders to settle the dues and hopeful of an early resolution.
9. The Company has issued Non-Convertible Debentures which are inter alia secured by a charge over six rigs owned by one of its subsidiary. Out of the six rigs, three rigs owned by the said subsidiary stacked at Dubai in a yard of a vendor have been disposed off / sold by the said vendor with a view to recover the dues from the Company to the said vendor. The said transaction has been intimated by the subsidiary to the debenture holder.
The company is in dialogue with the lenders to settle the dues and hopeful of an early resolution.
10. The Company has certain significant open legal proceedings including under arbitration for various matters with the Lenders & Customers, continuing from earlier years (Refer Note No. 22 of Standalone Financial Statements)
The company is defending the litigations in the respective jurisdiction.
11. The Company has not revalued its Property, Plant and Equipment (including right-of-use assets) and intangible assets or both during the year
The assets have been impaired as per accounting standards based on valuation reports / monetized.
12. The Company has incurred cash losses of Rs. 204.49 Crore during the financial year after considering exceptional
items. The Company has also incurred cash losses of Rs. 185.16 Crore during immediately preceding financial year.
The company earned operational EBIDTA of Rs 35 cr during FY 2022.
With the company achieving its task of monetisation of assets to reduce its liabilities, the company is now looking at appropriate opportunities for a future business built up. ESLs experience of 40+ years in marine transportation and logistics will be a pillar of strength to chalk out future business strategy.
13. The auditor is of the opinion that the material uncertainty exists as on the date of the audit report that company is not capable of meeting its liabilities existing at the date of balance sheet as and when they fall due within a period of one year from the balance sheet date;
With the company achieving its task of monetisation of assets to reduce its liabilities, the company is now looking at appropriate opportunities for a future business built up. ESLs experience of 40+ years in marine transportation and logistics will be a pillar of strength to chalk out future business strategy.
14. Material uncertainty related to Going Concern as Group
15. In case of one subsidiary, during the year Bare Boat Charter Demise with the Holding Company has been cancelled resulting in loss of USD 39.59 mio on foreclosure of lease. Further, the vessels repossessed have since been sold resulting in a loss of USD 39.02 mio.
The said transaction was done basis necessary regulatory / lender / shareholder approval
16. In case of holding and a subsidiary, the Company has availed loans from banks and financial institutions which are secured by charge over various rigs, other movable assets and corporate guarantee of the intermediate Holding Company. Majority of the rigs have either been held for sale or have been sold. The value of the security as at 31st March 2022 is lower than the amount outstanding as at that date due to downturn in shipping and oilfield markets from last several years
The subsidiary company is attempting to settle the dues to the lenders amicably.
INTERNAL AUDITOR AND THEIR REPORT
During the year under review the Mr. Rajesh Gupta Internal Auditors of the Company tendered his resignation w.e.f November 12, 2021 due to pre-occupation. In view of the same, Audit Committee recommended appointment of M/s. DMKH & Co, Chartered Accountants as Internal Auditors of the Company for financial year 2021-2022 and same were approved by members in the Board Meeting held on November 12, 2021. They conducted audit for quarter 3 onward of FY 2021-2022. During the year under review Internal Auditor has submitted their Report for the said quarters/period to the Audit Committee for its review and necessary action. In the Audit Committee meeting held on May 30, 2022, M/s. DMKH & Co, Chartered Accountants were further recommended for FY 2022-2023 and the same was approved by the Board.
The Board has appointed M/s. Martinho Ferrao & Associates, Practising Company Secretaries, to conduct Secretarial Audit for the financial year 2021-2022. The Secretarial Audit Report for the financial year ended March 31, 2022 is annexed herewith marked as Annexure - C to this Report.
SECRETARIAL STANDARDS OF ICSI
The Company has complied with the applicable mandatory Secretarial Standards issued by the Institute of Company Secretaries of India.
SECRETARIAL AUDITORS REPORT:
Further with regard to the observations made in Secretarial Auditors Report, the management explanation is as under:
The Board had 06 Directors including Executive, Non-Executive and Independent Directors throughout the year. However due to resignation of Mr. Sumit Agarwal on August 06, 2021 the composition of board as required by the LODR was below six for period. But in the immediate Board meeting held on August 31, 2021; Mr. Jayakumar Rajaram and Suresh Ramamirtham were appointed as Directors.
APPOINTMENT AND REMUNERATION POLICY FOR DIRECTORS AND SENIOR MANAGEMENT
The Board of Directors on recommendation of the Nomination & Remuneration Committee has adopted a policy for appointment of Directors, remuneration of Directors, Key Managerial Personnel and other employees. The brief details on the above are provided in Corporate Governance Report and
the policy is available on the website of the Company https:// www.essar.com/wp-content/uploads/2017/10/ESL Directors appointment policy.pdf. The details of remuneration as required to be disclosed pursuant to the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as Annexure - D to this Report.
PARTICULARS OF EMPLOYEES
In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules together with disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annexure - E to this Report.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arms length basis.
The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Companys website www.essar.com. The information on each of the transactions with the related party as per the Companies Act, 2013 is provided in note 27 of notes forming part of the financial statement and hence not repeated. The disclosure required pursuant to clause (h) of sub-Section (3) of Section 134 of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014 in Form AOC-2 is annexed herewith as Annexure - F to this Report.
WEBLINK OF ANNUAL RETURN
The Annual Return of the Company as on 31st March, 2022 in Form MGT - 7 in accordance with Section 92(3) of the Act read with the Companies (Management and Administration) Rules, 2014, is available on the website of the Company at www.essar. com
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
The Honble Bombay High Court, while deciding the petition in favour of the Petitioner i.e. ESL, vide order dated 08.02.2022, has discharged the Petitioner from the undertaking given by it on 14.09.2010 (vide order dated 14.09.2010, this Honble Court had granted ad-interim relief to DGFT subject to ESL furnishing of a bank guarantee of INR 30 Crores). Accordingly, by virtue of the Order dated 08.02.2022 there is no obligation on ESL to keep the bank guarantee alive, and further, there is no right of the DGFT with regard to the bank guarantee which bank guarantee has been returned by DGFT.
Vide order dated 23.02.2022 parties have entered into consent terms and pursuant to the Consent terms the Registrar has released the amount of Rs. 68,15,00,000.00 deposited in Court plus accrued interest thereon to LIC entirely without prejudice to ESL rights and contentions raised in Commercial Notice of Motion No. 1871 of 2019 and without this action being construed as any sort of waiver as regards jurisdiction and without any admission of liability.
On 22.05.2018 Justice Vibhu Bakhru (Delhi High Court) directed SAIL to deposit a sum of Rs. 25 crores with the Registry of Delhi High Court. However, Justice Bakhru failed to assign any reasons basis which only 25 Crore was directed to deposit, whereas as per the directives issued by Niti Aayog at least 75% amount should have been directed for deposit. Aggrieved by this order ESL filed a SLP in Supreme Court for enhancement of deposit amount. SLP has been filed in Supreme Court and numbered as 23144 of 2018. On 26-11-2018 the Supreme Court directed SAIL to deposit 50% of Rs380 crores before the Registrar, High court of Delhi and the Registrar is directed to deposit the amount so received in a short-term fixed deposit. SAIL has deposited Rs 190 Crore with the High Court of Delhi which can be withdrawn by furnishing a Bank Guarantee. ESL has withdrawn 64 crores by giving a bank guarantee of State Bank of India and the sum of 64 crores has been paid to Yes bank in terms of the OTS with Yes Bank.
ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO
Conservation of energy and Technology absorption
Your Company is committed for continual environmental improvement. The Company has taken several initiatives towards conservation of energy. The Company initiated the process of monitoring carbon emissions as per IMO GHG Guidelines and also explored opportunities to improve energy efficiency onboard the ships. Due to the nature of the business
(transportation), fuel and lubricants are necessary to deliver the services.
Following are few steps taken towards conservation of energy and use of alternate source of energy:
Ship Energy Efficient Management Plan (SEEMP): In line with current guidelines that have been established by IMO, this plan has been implemented all across fleet vessels. The capturing and monitoring of the data on regular basis prompts to take appropriate corrective measures on a timely basis. Onboard performance monitoring systems will give a holistic approach to ship operations with the aim of reducing fuel consumption and emissions while achieving optimum vessel performance. The Company have already completed energy efficiency evaluation on our assets and are now in the process of implementing fuel efficiency measures. These include trim, speed reduction and weather routing. These fuel efficiency measures will not only reduce energy consumption but also benefit customers through lower fuel cost, where applicable.
Alternate source ofenergy: In order to reduce fuel consumption, the Companys vessels utilize shore power during repair layup period and thereby reduce carbon foot print. Periodical cleaning of ships hull and propellers apart from routine drydocking of floating assets is another step which has been taken towards conservation of energy with insignificant investment or expenses.
The Company has successfully implemented SAP in its financial and budget management systems. The Company has also now implemented various methods of automation so as to have greater visibility and control over its assets and further improve the turnaround time thereby increasing asset utilisation and profitability. Planned maintenance and purchase management system of all the vessels are now being integrated with SAP in order to have uniform platform. The Company has implemented a robust Document Management System thus improving the availability of critical information in e-mode thereby reducing the use of paper. Ship-staff payroll system has been developed and implemented successfully.
In-house developed software EIS system has now been upgraded to monitor all the above energy conservation measures and is now available online. Various energy and cargo related data are available in e-mode and helps in close monitoring and control of energy conservation related matters. Due to inhouse developed software, your Company has not only saved on investment towards purchase of third party software but also reduced dependency on third party service provide.
The Company is upgrading its ships to meet future requirements of IMO 2021 towards compliance of burning of 0.5% of sulphur, this upgrade will not only aid to compliance but will also add to revenue of your Company.
Foreign Exchange Earnings and Outgo
The details of Foreign Exchange Earnings and Outgo during the year are as follows:
Foreign Exchanged Earned (including loan receipts, sale of ships, freight, charter hire earnings, interest income, etc.): Rs. 709.53 cr
Foreign Exchanged Used (including cost of acquisition of ships, loan repayments, interest, operating expenses, etc.): Rs. 889.42 cr
During the year under review, your Company neither accepted any deposits nor there were any amounts outstanding at the beginning of the year which were classified as ‘Deposits in terms of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposit) Rules, 2014 and hence the requirement for furnishing of details of deposits which are not in compliance with the Chapter V of the Companies Act, 2013 is not applicable.
PREVENTION OF SEXUAL HARASSMENT
Disclosures in relation to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 have been provided in the Report on Corporate Governance.
The listing fees payable for the financial year 2022-2023 is paid to BSE Limited and National Stock Exchange of India Limited within due date.
APPRECIATION AND ACKNOWLEDGEMENTS
Your Directors express their appreciation of commendable teamwork of all employees. Your Directors express their thanks to all the offices of the Ministry of Shipping, Directorate General of Shipping, Ministry of Petroleum and Natural Gas, Indian Navy, Indian Coast Guard, Mercantile Marine Department, State Government and Central Government, Classification societies, Oil Companies and Charterers, creditors, Banks and Financial Institutions for the valuable support, help and cooperation extended by them to the Company.
Your Directors also thanks its other business associates, including the Members of the Company for their continued cooperation and support extended towards the Company.
For and on behalf of the Board
|Ranjit Singh||N. S. Srinivasan|
|President & CEO||Chairman|
|Mumbai, May 30, 2022||DIN: 00004195|