| Dear Members,
The Directors have pleasure in presenting the Forty-second Annual
Report together with the audited statements of account of the Company
for the 18 months period ended 31st March, 2014.
(Figures in millions of Rupees)
18 months 18 months
period ended period ended
31.03.2014 30.09.2012
PROFIT/LOSS BEFORE TAX (4,890.77) 377.27
Less: Provision for Taxation
Current Tax - 17.50
Short/(Excess) provision of
Income-Tax for
prior years written back 8.59 (23.88)
PROFIT/LOSS AFTER TAX (4,899.96) 383.65
Add: Surplus brought forward from 1,239.40 942.92
previous year
Amount available for appropriation (3,659.96) 1326.57
In view of losses incurred by the Company, your Directors are unable to
recommend any Dividend for Financial year under review
Freight and charter hire income for the 18 months period ended 31st
March, 2014 was Rs.1753.15 million compared to Rs. 4655.02 million for
the 18 months period ended 30th September, 2012. Profit before tax was
Rs.(4890.77) million for the 18 months period ended 31st March, 2014 as
against Rs. 377.27 million during the 18 months period ended 30th
September, 2012. Net profit after tax was Rs. 4899.36 million for the
18 months period ended 31st March, 2014 as against Rs.383.65 million
during the 18 months period ended 30th September, 2012.
With a view to realign businesses and increase focus on individual
growth strategies of each business, the Company together with other
companies has proposed to rearrange its businesses by segregating its
traditional Shipping Business, Ship Management (technical and
commercial management) & Shipping Investment Business (presently
confined to holding investment in group companies) into separate
entities through a Composite Scheme of Arrangement and Amalgamation
("the Scheme") under the provisions of the Companies Act, 1956 to
primarily pursue their individual growth strategies, thereby resulting
in enhancement of business prospects and shareholder's value. The
company has received approval of Hon'ble Bombay High Court for the said
Scheme.
During the period under review, the company invested in the following
wholly owned subsidiary companies:
Varun Global Private Limited and acquired 400,000 equity shares of Re.1
each. The existing subsidiary companies namely Varun Resources Pvt Ltd
and Varun Global Pvt Ltd, were converted into public limited companies
during the period under review.
Further, during the period under review your Company had invested in
redeemable preference shares of Varun Asia Pte. Ltd., Singapore and
Varun Cyprus Ltd, Cyprus. The details of investment made are mentioned
in the attached financial statements.
Effect of 'Global Crisis' to Shipping industry
Due to the global recession in shipping industry there was a downturn
in the shipping business of your Company. This has led to lower
capacity utilization and has adversely affected the operations of the
Company. A combination of these factors has affected the liquidity of
the Company and thereby facing problems in servicing the debt in timely
manner. Further to this, the vessels are due for drydocking as it is
mandatory requirement to drydock the vessels every two and half years.
And hence are non operational till past more than a year resulting to a
steep fall in the total operating income. Despite the loss of revenues,
the Company was incurring fixed operating costs, including settlement
of unpaid crew wages and seafarers repatriation. These fixed operating
expenses in the form of employee cost, bunker cost and other fixed
costs resulted to severe liquidity crisis to the Company and increase
in the outstaying debts. Therefore in order for the Company to survive
it was imperative to find the solution to service these huge debts.
Further, the survival of the Company and resulting companies as result
of the proposed demerger and merger, is very crucial as the
shareholders of the Company will be receiving the shares of the
resulting companies in exchange of their existing shareholding in the
Company. If the Company is not revived then the shareholding value of
the current shareholders of the Company will be completely eroded.
Therefore, with a view to revive the shipping business of the Company
and the resulting Company namely Varun Resources Limited (VRL) and to
enable VRL to survive, the Promoters (being the Yudhishthir D Khatau
group) and the management together with our bankers (led by the State
Bank of India) have decided to restructure the debts under the
"Framework for Revitalising Distressed Assets in the Economy -
Guidelines on Joint Lenders' Forum (JLF) and Corrective Action Plan
(CAP)" issued by the Reserve Bank of India is vide its circular dated
February 26, 2014, bearing number RBI/2013-14/503DBOD.BP.BC.No.97/
21.04.132/2013-14, (hereinafter referred to as the "JLF Mechanism").
The various Joint Lenders Meetings held since 11.04.2014 based on the
guidelines and RBI circulars on "Early Recognition of Financial
Distress, Prompt, steps for Resolution and Fair Recovery for Lenders"
under which the Reserve Bank of India has formulated the JLF Mechanism.
The Joint Lenders Forum had decided to restructure the existing loan
facilities and to provide incremental funding to the Company for
revival of the business. The Bankers had appointed PwC, an independent
agency to do Technical Evaluation Study to examine the viability of the
business. Based on their viability report, forensic report and the
subsequent clearance from Independent Evaluation Committee, it will be
agreed by the joint lenders to restructure the account under JLF
mechanism.
(i) Social Responsibility:
As a socially responsible corporate citizen, the company continues to
support a wide spectrum of community initiatives through NGOs as well
as programmes for health, education and environment.
As required under Section 217(2AA) of the Companies Act, 1956, your
Directors confirm to the best of their knowledge and belief that:
i) in the preparation of the annual accounts, the applicable accounting
standards have been followed;
ii) the Directors have selected such accounting policies and applied
them consistently and made judgements and estimates that are reasonable
and prudent so as to give a true and fair view of the state of affairs
of the company at the end of the financial year and of the profit or
loss of the company for that period;
iii) the Directors have taken proper and sufficient care for the
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;
and
iv) the Directors have prepared the annual accounts on a going concern
basis.
As required by the Listing Agreement with Stock Exchanges on which
shares of the company are listed, a Report on Corporate Governance of
the Company regarding compliance with Corporate Governance is attached
to this report.
During the period Dr. A.K.Bhattacharya, Mr. C.M. Maniar and Mr.
Khurshed M Thanawalla resigned from the directorship of the Company.
After the last Annual General Meeting, Ms. Armin Pardiwala was
appointed as additional director. In terms of the provisions of the
Companies Act she holds office until the date of the ensuing Annual
General Meeting. Her appointment as ordinary Director of the Company is
placed before the Members for consideration. The Board recommends the
resolution for adoption by the members
Mr.Praveen Singh retires by rotation and being eligible, offer himself
for re- appointment. Separate resolution is being proposed for his
re-appointments.
You are requested to appoint Auditors of the company and fix their
remuneration. The retiring Auditors Messrs. Sorab S. Engineer & Co.
being eligible, offer themselves for re-appointment.
As required by Section 217(2A) of the Companies Act, 1956, read with
Companies (Particulars of Employees) Rules, 1975, as amended, the names
and other particulars of the employees are set out in the Annexure to
the Directors' Report. However, as per the provisions of Section
219(1)(b)(iv) of the Companies Act, 1956, the Report and the Accounts
are being sent to all shareholders of the company excluding the
aforesaid information. Any shareholder interested in obtaining such
particulars may write to the Secretarial Department at the registered
office of the Company.
Your Directors express their thanks to all the officers of the Ministry
of Shipping, Directorate General of Shipping, Ministry of Petroleum and
Natural Gas, Indian Navy, Indian Coast Guard, Mercantile Marine
Department, Class, oil companies and charterers for the valuable help
and co-operation extended by them to the Company. Your Directors also
thank the banks for their continued support to the Company. Your
Directors also thank the shareholders of the Company for their
sustained confidence reposed in the Company and its management. Last
but not the least, your Directors express their deep appreciation for
the sincere and hard work put in by the floating as well as the shore
based officers and staff of the Company.
On behalf of the Board of Directors
YUDHISHTHIR D. KHATAU
Chairman and Managing Director
Mumbai, 30th May 2014
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