tolani shipping company ltd Directors report

Directors Report

To

The Members of Tolani Shipping Company Limited

Your Directors present their Forty-First Annual Report on the operations and performance of the Company as well as the Audited Statement of Accounts for the Financial Year ended 31^st March, 2014.

1. FINANCIAL RESULTS

		(Rs. in million)
	2013-14	2012-13
Profit before Interest, Depreciation & Taxes	1,053.06	348.52
Less: Interest	193.44	199.82
Profit before Depreciation & Taxes	859.62	148.70
Less : Depreciation	1,198.97	1,212.18
Profit/(Loss) before Tax	(339.35)	(1,063.48)
Less: Provision for Current Tax	6.04	23.80
Add: Income Tax of earlier years	2.07	-
Profit/(Loss) after Tax	(343.32)	(1,087.28)
Add/(Less): Balance brought forward from previous year	9,449.08	9,915.87
Add/(Less): Transfer from Tonnage Tax Reserve (utilised)	-	647.00
Amount available for appropriation	9,105.76	9,475.59
APPROPRIATIONS
Proposed Dividend on Preference Shares	-	10.83
Tax on Proposed Preference Dividend	-	1.84
Proposed Dividend on Equity Shares	11.83	11.83
Tax on Proposed Equity Dividend	2.01	2.01
Balance carried to Balance Sheet	9,091.92	9,449.08
	9,105.76	9,475.59

2. AMALGAMATION

During the year under review, your Company made an application to the Honorable High Court of Judicature at Bombay for approval to a Scheme of Amalgamation whereby all the assets and liabilities of Tolani Private Ltd. and Tolani Bulk Carriers Ltd. (Transferor Companies) as of 1^st April, 2013 (Appointed Date) will be transferred to the Company (Transferee Company). The Scheme of Amalgamation was approved by the High Court on 27^th June, 2014. The amalgamation will be effective from the date a copy of the Order will be filed with the Registrar of Companies by the Transferor Companies and the Transferee Company.

The amalgamation will enable consolidation of the Tolani Groups operations into one entity and provide impetus for the growth of the Company. The amalgamation will result in economy of scale and reduction in administrative, managerial and other expenditure, operational rationalization and optimal utilization of various resources.

In consideration for the amalgamation, the Company will upon the Scheme becoming effective, issue and allot on a proportionate basis 14 (fourteen) 7.5% Cumulative Redeemable Preference Shares of Rs.10 each for every 1 (one) Equity Share of Rs.10 each held in Tolani Bulk Carriers Ltd.

In consideration for the Amalgamation, the Company will upon the Scheme becoming effective, issue and allot on a proportionate basis 2 (two) 7.5% Cumulative Redeemable Preference Shares of Rs.10 each for every 1 (one) Equity Share of Rs.10 each held in Tolani Private Ltd.

With the approval of the Scheme by the Honorable High Court as of 27^th June, 2014, the effect of the Scheme has been recognized in the financial statements for the year under review.

3. DIVIDEND FOR FINANCIAL YEAR

Your Directors are pleased to recommend for declaration at the Forty-First Annual General Meeting a dividend of 5% on 23,652,000 Equity Shares of Rs.10 each aggregating to Rs. 11,826,000.

4. OPERATIONS AND FUTURE OUTLOOK

During the year under review, your Companys income from operations stood at Rs.2,545.10 million compared to Rs.1,972.49 million of the previous year. Net Loss after tax was Rs.343.32 million against Net Loss of Rs.1,087.28 million of the previous year.

The dry bulk market continued to operate with historically low freight rates in the first half of 2013. However, the sentiments in the second half of 2013 improved, mainly driven by increasing Chinese steel production and restocking of iron ore inventories as well as grain exports from the US Gulf and the Black Sea. The upturn in the trade growth and the resultant commodity shipments contributed to the improved freight rates. The first quarter of 2014 also began on a better note than the first quarter of 2013. The pick up, on the back drop of recovery in global trade and economy have contributed to improved revenues of shipping companies, including yours.

Your Company also disposed off some of its non core assets during the year, which also contributed to prop up the revenues.

Your Company, incorporated in 1974 completed its 40 years of operations in 2014. Since the beginning, your Company has successfully navigated through changing environment, inherent to the cyclical nature of shipping industry. The Company has made remarkable progress over the years and is rated amongst one of the leading bulk cargo ship operator with strong fundamentals.

Your Companys focus has been in:

(i) achieving optimum utilization of its vessels;

(ii) quality maintenance of all its vessels and equipments;

(iii) ensuring operational safety of all its crew and officers;

(iv) achieving low operational costs;

(v) strict compliance of environmental regulations and rules;

(vi) professional management of its technical operations and crewing;

(vii) obtaining competitive rates for financing;

(viii) develop and maintain good relationship with charterers, brokers and agents.

Your Directors believe that the Companys efforts to constantly bring in improvements in operations, technology upgradation, improving the skills and talent of its employees will further consolidate the Companys operations and performance in the years to come.

5. MARKET TREND AND ANALYSIS

The Shipping Industry continues to face challenging times on the backdrop of uncertain freight rates and increasing operating costs. Ship values and freight rates have started to rebound, marked by economic recoveries in several nations. After years of turmoil, it appears that the dry bulk shipping is in the path of recovery. However, this could be under cloud from the rising new ship orders and the high level of new building deliveries from past orders.

A chronic oversupply of ships has been one of the major reasons for the depressed condition in shipping over the years. Hundreds of ships were ordered, when the Industry was booming. However, it now appears that the order books have started to dry up and the pace of new deliveries have shown marked reduction. During the year 2013, the bulk carrier fleet grew at 4.3% compared to 8.4%, 10.7%, 10.4% and 7.3% during the years 2009, 2010, 2011 and 2012.

The importance of China to the shipping is second to none. However, the growth of Chinese economy has been showing signs of weakness over the years. A stable and improved Chinese economy is vital for a sound shipping market. The strengthening of the US and improved conditions in Eurozone and Asian Countries augurs well for Global trade and International Shipping. Looking ahead, the global merchant fleet growth in 2015 is expected to remain below the tonnage demand growth of 5-6%, indicating improved freight market conditions.

On the domestic front, the people of India have elected a new Government at the Center with a massive mandate. The new Government has promised greater focus on infrastructural development and intents to bring in policy initiatives in this regard. The positive steps will encourage new investments in power and coal sector. The roads and ports sectors are also expected to see increased activity with new projects being given a fillip. Infrastructure development is critical for improving the economic potential of the country and the Indian Shipping Industry will extend all support to the Government in its efforts.

6. CHANGES IN SHARE CAPITAL

During the year:-

(i) the Company issued and allotted 120,000 0% Non Cumulative Redeemable Preference Shares of Rs.500 each. The shares are redeemable at the end of 36 months from the date of allotment at a premium.

(ii) revised the cupon rate of 500,000 Cumulative Redeemable Preference Shares from 7.25% to 0% w.e.f. 1.4.2013. The shares are redeemable at a premium over and above its face value of Rs.500 each and such premium will be payable from 1.4.2013 till the date of redemption.

7. THE COMPANIES ACT, 2013

The Ministry of Corporate Affairs (MCA) has notified majority of the Sections as well as Rules under Companies Act, 2013. The provisions of Companies Act, 1956 continues to be in force to the extent of the corresponding provisions of the Companies Act, 2013, which are yet to be notified. The Ministry of Corporate Affairs have vide its circular dated 4^th April, 2014 clarified that the financial statements and documents, Auditors Report and Boards Report in respect of Financial Years that have ended prior to 1^st April, 2014 shall be governed by the provisions of the Companies Act, 1956 and in line with the same, your Companys financial statements for the Financial Year ended 31^st March, 2014, Auditors Report and Boards Report and attachments thereto have been prepared in accordance with the provisions of the Companies Act, 1956.

8. SUBSIDIARY COMPANY

During the Financial Year 2013-2014, your Companys Subsidiary Top Investments and Finance Pvt. Ltd. reported Net Profit of Rs.4.06 million compared to Net Profit of Rs.3.96 million of the previous year.

9. CONSOLIDATED FINANCIAL STATEMENT

Consolidated Financial Statements of the Company and its subsidiary have been prepared by your Company in accordance with the Accounting Standards issued by the Institute of Chartered Accountants of India. The Audited Consolidated Statements together with Auditors Report thereon form part of this Annual Report.

Pursuant to the provision of Section 212(8) of the Companies Act, 1956, the Ministry of Corporate Affairs vide its circular dated 8^th February, 2011 has granted general exemption from attaching the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies with the Balance Sheet of the holding Company. A statement containing brief financial details of the Companys subsidiary for the Financial Year ended 31^st March, 2014 is included in the Annual Report. The Annual Accounts of the subsidiary and the related detailed information will be made available to any member of the Company/its subsidiary seeking such information at any point of time and are also available for inspection by any member of the Company/its subsidiary at the Registered Office of the Company. The Annual Accounts of the subsidiary will also be available for inspection, as above, at the Registered Offices of the subsidiary company. The Company shall furnish a copy of the details of Annual Accounts of subsidiary to any member on demand.

10. FOREIGN EXCHANGE EARNINGS AND OUTGO

The details of the foreign exchange earnings and outgoings are as follows:

		(Rs. in million)
Particulars	2013-14	2012-13
a) Foreign exchange earnings/savings [including Rs.Nil
(previous year Rs.767.40) on account of sale of ship.]	2,567.13	2,733.68
b) Foreign exchange used [including Rs. 1,003.98 million
(previous year Rs.1,500.23 million) towards loan repayment and interest]	1,233.35	2,942.60

The other particulars as per Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are not applicable to the Company.

11. CORPORATE GOVERNANCE REPORT

The Company has voluntarily fulfilled the corporate governance norms prescribed by the Ministry of Corporate Affairs. A separate report on corporate governance is furnished as part of this report.

12. DIRECTORATE

Mr.V.S.Gharat (DIN : 01815581) and Mr. C.V.V.Rao (DIN : 01815475), Directors of the Company are due to retire by rotation at the Forty-First Annual General Meeting and being eligible offer themselves for reappointment.

Pursuant to Sections 149,150 and 152 of the Companies Act, 2013, read with Companies (Appointment and Qualification of Directors) Rules, 2014 along with Schedule IV of the Companies Act, 2013 (including any statutory modification(s) or re-enactment thereof for the time being in force), the Independent Directors can hold office for a term of five consecutive years on the Board of Directors of your Company. Accordingly, it is proposed to appoint the following existing Independent Directors as Non-executive Independent Directors for five (5) consecutive years with effect from

Forty-First Annual General Meeting of the Company, subject to approval of Members at the ensuing Forty-First Annual General Meeting of the Company.

(i) Mr. N.C.Singhal (DIN : 00004916)

(ii) Mr. Michael P. Pinto (DIN : 00021565)

(iii) Lt. Col. (Retd.) T.J.Reejhsinghani (DIN : 00006426)

(iv) Vice Adm. (Retd.) M.P.Awati (DIN : 00007383)

These Independent Directors shall not be liable to retire by rotation. All the above mentioned Independent Directors have given the declaration of Independence as per Section 149 (6) of the Companies Act, 2013.

13. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 217 (2AA) of the Companies Act, 1956, the Directors state that:

(i) in the preparation of the annual accounts for the year ended 31^st March, 2014, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;

(ii) 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 31^st March, 2014 and of the losses of the Company for the period 1^stApril, 2013 to31^st March, 2014;

(iii) the Directors have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the Directors have prepared the annual accounts on a going concern basis.

14. PARTICULARS OF EMPLOYEES

Information in accordance with the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 forms part of this Report.

15. AUDITORS

M/s. Chandabhoy & Jassoobhoy, Chartered Accountants, the auditors of the Company hold office until the conclusion of the Forty-First Annual General Meeting and are eligible for reappointment.

16. APPRECIATION

Your Directors express their sincere thanks to the Ministry of Shipping, Mercantile Marine Department, Directorate General of Shipping, Corporation Bank, DBS Bank Ltd., DNB Asia Ltd., HDFC Bank Ltd., HSH Nord Bank AG, The Bank of Nova Scotia Asia Limited, The Royal Bank of Scotland Pic, and other institutions for their consistent support to your Company. The confidence of all these associates, agencies and institutions in your Companys management has been a great source of strength to your Directors. Your Directors have appreciated their advice, which has always been constructively received and utilized to the fullest. They look forward to the same support in the future. Your Directors also place on record their appreciation of the services rendered by our agents, brokers, and last but not the least by our floating staff and those placed ashore.

l	For and on behalf of the Board
	Sujata A. Naik
Mumbai, Dated :25th July, 2014.	Chairperson