Varun Shipping Company Ltd Directors Report

COMPANY AND MANAGEMENT

History of the Company

Incorporated in 1971, Company commenced operations with acquisition of one product tanker in the year 1973.

It slowly expanded its operations and later diversified into support services for oil exploration with the acquisition of Anchor Handling and Towing Supply Vessels (AHTS) in 1983-84. As part of diversification programme in 1993, Company acquired two bulk carriers for dry cargo movement. The Company was the first private sector Company to commercially operate LPG carriers. It now has the distinction of having the largest LPG fleet in the country i.e. 70 per cent of the total LPG tonnage operating under Indian Flag.

It has emerged as one of the countrys major private sector shipping company. It has a track record of profitability and uninterrupted payment of dividend for the past 21 years.

There have been no defaults/reschedulements of loans with financial institutions/banks, in the history of the Company. There have been no lock-out, strikes in the history of the Company. There has been no revaluation of assets by the Company in the past and Promoters have not been issued shares for consideration other than cash except as specified in the Letter of Offer. There have been no changes in the activities of the issuer which may have had a material effect on the profit/loss during the last five years.

The Company formed a wholly owned subsidiary in Singapore in 1995 to own and operate ships under the Singapore flag. Significant events in the Companys history are as follows :

Year	Event
1971	Incorporation of Company as private limited
1972	Conversion to public limited company
1973	Commencement of operations with acquisition of one product tanker
1983-84	Diversification into support services for oil exploration by acquiring AHTS Vessels
1986	Initial Public Offering
1988	Second Public Offering
1991	Rights Cum Public Offering of Fully Convertible Debentures
1993	Diversification into dry cargo movement by acquiring two bulk carriers
1995	ISO 9001:2000 certification from DNV for Shore Based Ship Management Services
1995	Setting-up of a wholly owned subsidiary in Singapore
1996	First private sector Company to acquire and commercially operate LPG carrier
1998	Obtained Document of Compliance for all applicable ships from Director General of Shipping
2001	Rights offer of Fully Convertible Debentures
2004	Market leader in the Indian LPG sector with the acquisition of 6th LPG carrier (around 70 per cent market share)

Main Objects of the Company

Main and other significant objects of the Company as set out in its Memorandum and Articles of Association inter-alia are:

1) To purchase, charter, hire or otherwise acquire, sell, exchange, let or charter or otherwise deal with steam and other ships or vessels, build steam and other ships and vessels, and to employ the same in the conveyance of passengers, mails, crude oils, petrols, live stock, meat, corn and other produce and of treasure and merchandise and food articles, and things of all kinds, between such ports and places in any part of the world as the Company may from time to time decide and to establish and maintain lines of steam and other ships between any ports, countries or places which may seem to the Company expedient and to acquire any postal subsidies.

2) To enter into any partnership or any arrangement for sharing profits, union of interests, joint venture, reciprocal concession, amalgamation or otherwise, with any person or persons or corporation carrying on or engaged in or about to carry on or engage in, any business or enterprise which the Company is authorised to carry on or engage in or any business or transaction capable of being conducted so as directly or indirectly to benefit this Company and to take or otherwise acquire and hold shares or stock in or securities of and to subsidize or otherwise assist any such Company and to sell, hold, reissue with or without guarantee or otherwise deal with such shares, stock or securities.

3) To carry on the business of merchants, carriers by land, water or air, shipowners, aircraft owners, dock owners, hanger owners, air-field owners, sea-plane base owners, warehousemen, wharfingers, barge owners, lightermen, forwarding agents, stevedores, bunkerers and ice merchants and refrigerating store keepers and of hotel owners and bus owners in furtherance of or in connection with their business of carriers by land, sea and air.

4) To purchase, take on lease or acquire in exchange or in amalgamation, license or otherwise solely or jointly with others, equip and fit up with all plant, machinery equipment, appliances and accessories, yards, factories or works for building, repairing, equipping, stationing steamers, ships, vessels, launches, boats and aircrafts.

5) To promote any company or companies for the purpose of acquiring all or any of the properties, rights and liabilities of this Company or for any other purpose which may seem directly or indirectly calculated to benefit this Company.

6) To acquire and take over the whole or any part of the business property and liabilities of any person or persons, firm or corporation carrying on any business which this Company is authorised to carry on or possessed of any property or rights suitable for the purposes of the Company.

7) To purchase, take on lease or in exchange, hire or otherwise acquire any estate or estates, land or lands in India or elsewhere, and any right of way, water and other rights, privileges and easements and concessions and any factories, machinery, apparatus, equipments, implements, tools, live and dead stock, stores, effects and other property, real or personal, immoveable or moveable of any kind.

8) To carry on the business of shipbuilders and repairers and refitters of ships, vessels and aircraft and manufacturers and/or repairers of engines, boilers, machinery and any parts required for ships, vessels or aircraft.

9) To do all or any of the above things in any part of the world and either as principals, agents, trustees or otherwise and either alone or in conjunction with others and by or through agents, sub-contractors, trustees or otherwise.

10) To do all such other things as are incidental or ancillary or the Company may think conducive to the attainment of the above Objects or any of them.

The main object clause of the Memorandum of Association enables the Company to undertake the present activity as also the activities for which the funds are being raised in the present Issue.

Changes in the MOA of the Company since incorporation

Sr. No.	Details of changes in MOA	Date of Resolution
1.	Conversion from private limited into public limited Company and change in name from Varun Shipping Company Private Limited to Varun Shipping Company Limited	10.01.1972
2.	Alteration of authorised share capital	28.02.1973
3.	Increase in authorised share capital	27.08.1973
4.	Increase in authorised share capital	30.09.1985
5.	Alteration of authorised share capital	05.03.1986
6.	Increase in authorised share capital	03.09.1990
7.	Increase in authorised share capital	25.08.1993
8.	Alteration of authorised share capital	19.09.1995
9.	Increase in authorised share capital	03.09.2003

Past capital issues by the Company

The Company has raised capital in the past as follows :

Year	Type of Capital Raised (Debt/Equity)	Nature of Issue (Public/Rights)	Issue Size Rs in Lakhs	Date of Prospectus/Letter of Offer
1986	Equity cum debt	Public	385.00	13th May, 1986
1988	Equity	Public	552.18	31st May, 1988
1991	Debt	Public	2,151.38	26th March, 1991
1991	Debt	Rights	3,060.77	26th April, 1991
2001	Debt	Rights	3,626.16	22nd February, 2001

Board of Directors

The Board comprises of eminent professionals in the field of legal, finance and shipping.

Mr. Arun Mehta, Vice Chairman and Managing Director and Mr. Yudhishthir D. Khatau, Managing Director are vested with substantial powers of overall management of the Company subject to the supervision and control of the Board.

Mr. Arun Mehta and Mr. Yudhishthir D. Khatau are ably supported by professional and qualified team of executives in the areas of fleet and commercial operations, finance, secretarial and legal, information technology and human resources.

Board meets with requirements of corporate governance as it consists of 6 non-executive Directors out of total 8 Directors as on date, who account for about 75 per cent of the total strength of the Board. Moreover, 4 out of 6 non-executive Directors are independent Directors.

The following table sets forth details regarding Companys Board and nature of family relationship, if any:

Name of Directors, Age in years	List of other Directorships
Designation, Occupation and Address
Mr. Dilip D. Khatau (62)	Adventure Lodges India Private Limited
Chairman	R V Media World Pte Ltd.
Promoter-Non Executive Director	Tarun Shipping and Industries Limited
Industrialist	VSC International Pte Ltd (Executive Chairman)
(Father of Mr Yudhishthir D. Khatau and husband of Mrs Rina D. Khatau)
6, Manav Mandir Road,
Malabar Hill, Mumbai 400 006.
Mr. Arun Mehta (70)	Tarun Shipping and Industries Limited
Vice Chairman and Managing Director	VSC International Pte Ltd
Non Independent Executive Director
Company Executive
Orion, Flat No.17, Oomer Park,
B. Desai Road, Mumbai 400 036.
Mr. Yudhishthir D. Khatau (36)	Indian National Shipowners Association
Managing Director	Khatau Makanji & Co. Private Limited
Promoter - Executive Director	Mulraj Khatau & Sons Limited
Industrialist	Tarun Shipping and Industries Limited
(Son of Mr Dilip D. Khatau)	VSC International Pte Ltd
82, Casa Grande, Little Gibbs Road,	Yuka Plantations Private Limited
Malabar Hill, Mumbai 400 006.

 

Name of Directors, Age in years	List of other Directorships
Designation, Occupation and Address
Mrs. Rina D. Khatau (45)	Adventure Lodges India Private Limited
Promoter-Non Executive Director	VSC International Pte Ltd.
Industrialist
(Wife of Mr Dilip D. Khatau)
6, Manav Mandir Road,
Malabar Hill, Mumbai 400 006
Mr. C.M. Maniar (68)	Agfa India Private Limited
Independent Non Executive Director	Akzo Nobel Coatings India Pvt. Limited
Solicitor	Amsar Pvt. Limited
Garden House, Chowpatty Band Stand,	Foods & Inns Limited
Dadyseth Second Cross Lane, Mumbai 400 007.	Godfrey Phillips India Limited
	Gujarat Ambuja Exports Limited
	HGC Foundation Pvt. Limited
	Hindalco Industries Limited
	Indian Card Clothing Co. Limited
	Indo-Euro Investment Co. Limited
	Lintas India Pvt. Limited
	Machine Tools (India) Limited
	MAS Consulting Group Pvt. Limited
	Multi Commodity Exchange of India Limited
	Pennzoil-Quaker State India Limited
	Pioneer Investcorp Limited
	Sudal Industries Limited
	Twenty-First Century Printers Limited
	Alternate Director in :
	Chemtex Engineering of India Limited
	Indian Match Financial Services Pvt. Limited
	Vadilal Industries Limited
Mr. Praveen Singh (70)	Pandi Correspondents Pvt. Limited
Independent Non Executive Director
Consultant
23, Harinagar Society, Gotri Road,
Race Course, Vadodara 390 007.
Dr. A.K. Bhattacharya (70)	English Indian Clays Limited (Nominee Director,
Independent Non Executive Director	ICICI Bank Limited)
Financial & Management Consultant	NCS Gayatri Sugars Limited
Flat 9, Devdoot Tower,	Sumedha Fiscal Services Limited
43, Southern Avenue, Kolkata 700 029.
Mr. Bansi S. Mehta (69)	Atul Limited
Independent Non Executive Director	Bharat Bijlee Limited
Chartered Accountant	CEAT Limited
Maheshwari Mansion,	Century Enka Limited
34, L. Jagmohandas Marg,	Housing Development Finance Corporation Limited
Mumbai 400 036.	IL&FS Investment Managers Limited
	JB Chemicals and Pharmaceuticals Limited
	Jumbo World Holdings Limited (BVI).
	Pidilite Industries Limited
	Procter and Gamble Hygiene and Health Care Limited
	SBI Capital Markets Limited
	Sudarshan Chemical Industries Limited
	The Dawn Mills Co. Limited
	Vinyl Chemicals (India) Limited
	Alternate Director in:
	Chemetall Rai India Limited
	Sasken Communication Technologies Limited
	Shaw Wallace Breweries Limited
	Shaw Wallace Distilleries Limited
	Uhde India Limited

Mr. Dilip D. Khatau

Mr.Dilip D. Khatau was appointed as a Director on the Board of the Company on 5^th January, 1979 and was appointed as the Chairman of the Board with effect from 31^st January, 1986. Mr. Dilip D. Khatau, graduated with a Bachelors degree in Commerce. He is an industrialist with vast and varied experience and his global business experience gained over the past 44 years now guides the Company as it aspires to expand its international operations. He has 25 years of experience in the shipping industry.

Mr. Arun Mehta

Mr.Arun Mehta was appointed as Managing Director on the Board of the Company on 3^rd October, 1978. He was elevated to the position of Vice Chairman while continuing as the Managing Director by the Board of Directors of the Company with effect from 25^th May, 1999 having regard to the long and meritorious services rendered by him. Mr. Arun Mehta is a Chartered Accountant and also a Company Secretary with vast and varied experience of over 46 years in business and industrial management and 31 years of experience in the shipping industry. He is the past president of Indian National Shipowners Association (INSA). In recognition of his invaluable contribution to the shipping industry, he was conferred with the Dadabhai Naoroji New Millennium Award, 2000. In the year 2000, he received the All India Feroze Gandhi Memorial Society Award for lifetime achievement. As the Managing Director of the Company for the last several years, he is responsible for overall management of the Company and has guided the Company successfully through various stages of expansion and enabled it to reach its present position in the shipping industry.

Mr. Yudhishthir D. Khatau

Mr.Yudhishthir D. Khatau is a Bachelor of Science and Economics - Wharton Business School, University of Pennsylvania, USA, having majored in corporate finance and marketing. He is an industrialist with wide business experience. He joined the Company as an additional director on 12^th July, 1994 and was appointed as its executive director on 25^th January, 1995. He was thereafter appointed as the Managing Director of the Company effective 25^th August, 1999. Mr.Yudhishthir D. Khatau possesses 10 years of experience in shipping industry and has made significant contribution to the growth of the Company. He is a Director on the Board of Indian National Shipowners Association.

Mrs. Rina D. Khatau

Mrs.Rina D. Khatau was appointed as a Director on the Board of the Company with effect from 12^th January, 1995. She holds a diploma from Associate Financial Consultant and she is an industrialist with 25 years of business experience.

Mr. C.M. Maniar

Mr. C.M. Maniar was appointed as a Director on the Board of the Company with effect from 22^nd September, 1983. Mr.Maniar is a M.A. (Economics & Politics), B.Com and LL.B. He is a Solicitor and Advocate and is a senior partner of Crawford Bayley & Co., a leading firm of solicitors and advocates. He possesses vast and rich experience of over 40 years in the field of legal profession. He is a Director on the Board of several reputed companies.

Mr. Praveen Singh

Mr.Praveen Singh was appointed as a director on the Board of the Company with effect from 15^th September, 1994. He is a B.A. (Hons.), M.A (History). He is the former Director General of Shipping, Government of India and possesses vast and rich experience of over 25 years in the field of shipping. He was also a joint secretary in the Union Cabinet Secretariat, New Delhi for five years co-ordinating and monitoring the performance of the infrastructure sector.

Dr. A.K. Bhattacharya

Dr.A.K. Bhattacharya, was appointed as a Director on the Board of the Company with effect from 12^th January, 1995. He is M.Sc (Chemistry), Ph.D (Chemistry). He is the former Chairman and Managing Director of United Bank of India and former Managing Director of State Bank of Hyderabad. He is the recipient of several awards for excellence in banking development and customer service, including the National Citizens Award presented by the late Prime Minister, Rajiv Gandhi, and honoured with gold medals by the former Vice President of India, late Shankar Dayal Sharma and former President of India, late Gyani Zail Singh. He possesses vast and rich experience of over 48 years in the area of banking and finance.

Mr. Bansi S. Mehta

Mr.Bansi S. Mehta was appointed as a Director on the Board of the Company with effect from 28^th August, 1997. Mr.Mehta is a graduate in commerce and a Fellow Member of the Institute of Chartered Accountants of India. He is an eminent chartered accountant and partner of Bansi S. Mehta & Co., a leading firm of Chartered Accountants. He is an expert on taxation, accounting matters and mergers and acquisitions and valuations. He is the former President of the Institute of Chartered Accountants of India. He is a Director on the Board of several reputed companies. He possesses vast and rich experience of 46 years.

COMPENSATION OF MANAGING DIRECTORS

Arun Mehta (Vice Chairman and Managing Director)

In accordance with the resolution passed at the annual general meeting of shareholders held on 3^rd September 2003, Mr. Arun Mehta is entitled to the following:

• basic salary of Rs. 36.00 lakhs per annum for the period 3^rd October 2003 to 2^nd October 2005 and Rs.42.00 lakhs per annum for the period 3^rd October 2005 to 2^nd October 2008

• commission at the rate of 3 per cent of the net profits for the year but not exceeding one years salary in each year, perquisites/allowances comprising of housing, medical expenses, leave on full pay and allowances, encashment of leave, leave travel concession, fees of clubs, personal accident insurance, gratuity, contribution to provident fund and superannuation fund, telephone and car subject to the provisions of Sections 198 and 309 of the Act.

Pursuant to the employment agreement dated 3^rd September, 2003 entered into by the company with Mr.Arun Mehta, the company or Mr.Arun Mehta shall be entitled to terminate the said agreement by giving to the other party three months notice in writing or by the company paying three months remuneration in lieu thereof.

Yudhishthir D. Khatau (Managing Director)

In accordance with a resolution passed at the annual general meeting of shareholders held on 22^nd August 2002, Mr. Yudhishthir D. Khatau is entitled to the following:

• basic salary of Rs.16.8 lakhs per annum for the period 25^th August 2002 to 30^th September 2003, Rs.30.00 lakhs per annum for the period from 1^st October 2003 to 30^th September 2005 and Rs.36.00 lakhs per annum for the period from 1^st October 2005 to 24^th August 2007

• commission at the rate of 3 per cent of the net profits for the year but not exceeding one years salary in each year, perquisites/allowances comprising of housing, medical expenses, leave on full pay and allowances, encashment of leave, leave travel concession, fees of clubs, personal accident insurance, gratuity, contribution to provident fund and superannuation fund, telephone and car subject to the provisions of Sections 198 and 309 of the Act.

Pursuant to the employment agreement dated 23^rd August, 2002 entered into by the company with Mr. Yudhishthir D. Khatau, the company or Mr. Yudhishthir D. Khatau shall be entitled to terminate the said agreement by giving to the other party three months notice in writing or by the company paying three months remuneration in lieu thereof.