Shipping corporation of india financial analysis


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Shipping corporation of india financial analysis

  1. 1. SHIPPING CORPORATION OF INDIA (SCI) FINANCIAL ANALYSIS Submitted by “Group V1” Anindya Ganguly 13406 Anurag Bothra 13411 Harish B 13419 Pragati Chauhan 13435 Renjit Thomas 13440
  2. 2. 1. COMPANY BACKGROUND: The Shipping Corporation of India Limited provides shipping services in India and internationally. Starting out as a Marginal Liner Shipping Company with just 19 vessels of 0.19 million dead weight tonnage (DWT), the SCI has today emerged as the undisputed leader in India’s shipping industry with 80 vessels of 5.9 million (DWT). The SCI operates in Bulk carrier and Transport services, Liner and Passenger services, and Technical and offshore services. The SCI continues to be the only Indian mainline carrier providing liner services from India to the major global destinations. SCI’s fleet includes bulk carriers, very large crude carrier tankers (VLCC), crude oil tankers, product tankers, container vessels, passenger-cum-cargo vessels, chemical carriers, LPG / Ammonia carriers, and Offshore Supply Vessels. The SCI embarked on a $4 billion fleet expansion program aimed at doubling its overall capacity to 10 million deadweight tons from the current 5.9 million dwt. The SCI will stand to benefit from increased import of coal for power plants. But at the same time the Company’s operational performance was severely impacted by the depressed world economic conditions coupled with the oversupply of tonnage.Slowing down of infrastructure growth, real estate growth and automobile industries negatively hamper demand for bulk steel and cement trade thereby reducing tonnage demand. Indian iron ore exports to China, a trade in which SCI has been an active participant has been practically dead since the mining ban on iron ore in Goa / Karnataka. The market share of SCI is 35% in Indian tonnage operations. Some of the major competitors are GE Shipping co, Essar Shipping co, Pipavav Defence, Gujarat Pipavav etc.Customers are primarily comprised of Government agencies, large industrial concerns, international oil companies and public sector undertakings.Some of the major clients are Indian Oil, ONGC, SAIL, BHEL, Reliance Industries, HP, BP, Shell and Petronas etc. The major part of revenue comes from Bulk Segment in Segment revenue. It contributes 59.70% of total revenue of SCI. i.e. (279900 of 468785lakhs) 2. COMPANY BACKGROUND: 1) Chairman & Managing Director / Director (Finance): B. K. Mundal Position:B. K. Mandal has been entrusted with the additional charge of CMD of SCI w.e.f 1.1.2013. B. K. Mandal is Director (Finance) since November 2005.
  3. 3. Education: B.K. Mandal is a post graduate in Management from the Indian Institute of Management, Ahmedabad, and also a Fellow member of the Institute of Cost & Works Accountants of India. Experience: Mandal was working in NTPC Ltd., Delhi, as General Manager (Finance) and has also worked with BHEL in the initial years of his career 2) Government Director: Dr. (Ms) T. Kumar Position:Dr. (Ms) T. Kumar, Additional Secretary and Financial Advisor, Ministry of Shipping, and ex-officio part-time Director of the Company was appointed on the Board of Directors in November, 2012. Education:Dr. (Ms) T. Kumar, an I.A.S. Officer of the West Bengal Cadre, holds a Ph.D in Ancient Indian History from the Delhi University. Experience: Before joining the I.A.S., she served Delhi University as a Lecturer for a brief stint. She has worked in the State Government of West Bengal in various senior positions in the Districts and the State Capital, including that of Labour Commissioner and Advisor, Industry. Dr. Kumar has also been on deputation with Government of India in Constitutional Organisations and Ministries such as the Union Public Service Commission, Ministry of Human Resource Development, and Ministry for Development of the North East Region and Ministry of Culture. She was the Principal Secretary to the Speaker, LokSabha (Parliament of India) in the 14th LokSabha, between 2004-2009. Before her present posting with Government of India in November, 2012, Dr. Kumar was Additional Chief Secretary with the Government of West Bengal. 3) Government Director: M. C. Jauhari Position: M. C. Jauhari, Joint Secretary (Shipping), Ministry of Shipping, an ex-officio part-time Director of the Company, was appointed on the Board of Directors in January 2012. Education:Jauhari, an IAS Officer, is a post graduate in Physics from Allahabad University. Experience: He has worked in the State Government of Assam in various capacities and also as Joint DG / Director in DGFT in Commerce & Industry Ministry, Govt. of India, and New Delhi. He has also worked as Advisor in Indian Mission to European Union. He has vast knowledge in different areas like land revenue administration, Labour & Employment, Town and Country Planning, Science & Technology, Foreign Trade, Agriculture & Cooperation, Personnel & General Administration, Planning & Programme Implementation, etc. He is also a Government Director on the Boards of Cochin Shipyard Ltd. and Chennai Port Trust.
  4. 4. 4) Director: J. N. Das Position: J. N. Das is Director (Liner & Passenger Services) since December 2007. Education:He is a Marine Engineer from Marine Engineering Training College (DMET), Kolkata and possesses First Class Engineer (MOTOR). Certificate of Competency from MOT. He is a member of the Institute of Engineers (MIE India) and a fellow of Institute of Marine Engineers (FIME) India. Experience: He has vast experience in shipping management,bulk carriers, tankers, chemicals, LPG & LNG operations, new building and offshore services. J.N. Das is also on board of other Joint Venture companies. 5) Director: Arun Kumar Gupta PositionArun Kumar Gupta is the Director of Technical & Offshore Services Division since October 25, 2010. Age: 58 Education: He holds a bachelor’s degree in Marine Engineering from Marine Engineering Training College, Kolkata and possesses First Class Engineer (MOTOR) Certificate of Competency from Ministry of Transport. Experience: He is a member of the Institute of Engineers, a Fellow Member of Institute of Marine Engineers &NarottamMorarjee Institute of Shipping. He has also served Irano-Hind Shipping Co., Tehran as Director Administration for a period of over three years. He has been a Trustee of Kandla Port and also the Vice President of Institute of Marine Engineers (India). He has been on the Governing Council of both, Institute of Marine Engineers as well as NarottamMorarjee Institute of Shipping. In this context he has chaired sessions and also presented papers in several technical meets. He has almost 34 years of experience in all aspects of shipping management. 6) Director: Sushil Kumar Roongta Position:Sushil Kumar Roongta is a non-official part-time (Independent) Director inducted on the Board in October, 2010. He is a member of the Strategy Committee of our Company. Education:He holds a Bachelor of Engineering (Honours) degree in Electrical Engineering from the Birla Institute of Technology & Sciences and has a Post Graduate Diploma in Business Management-International Trade from the Indian Institute of Foreign Trade. He is also a fellow member of the All India Management Association.
  5. 5. Experience: He has expertise in marketing, strategy and turnaround management. He was the executive Chairman of the Steel Authority of India Limited (“SAIL”) from August 2006 to May 2010. He was also the first chairman of the International Coal Ventures Limited, a joint venture of five leading Public Sector units. He is presently the Chairman of the Panel of Experts on PSU reforms, constituted by the Planning Commission, Government of India. Presently, he is on the Board of Axis Bank Limited since July 2010 and Neyveli Lignite Corporation Limited since September 2010. He has also been appointed as Managing Director of Vedanta Aluminium from June 2011. 7) Director: Capt. B.B. Sinha Position: Capt. B.B. Sinha is the Director of Personnel and Administration since 1st January, 2013. Age: 55 Education:Capt. Sinha is a Master Mariner (Foreign Going) and holds a diploma in Shipping Management. Experience: Capt. Sinha has served over 33 years at responsible executive level in Shipping Industry consisting of 16 years of sea service and 17 years of shore service at SCI in shipping management, bulk carriers, tankers, chemicals, LPG & LNG operations.He has also served as Member of THC Committee (India, Pakistan, Bangladesh) Ceylon Conference, as member of BIS Technical Committee on Cordage (Ministry of Textiles) and as memberof 11th Plan SubCommittee on Multi-modal Transport and has represented SCI & Indian national Shipowners on TAMP (Tariff Authority for major ports). He has also served as SCI’s representative in New Jersey (USA). 8) Director: Capt. Sunil Thapar Position: Capt. Sunil Thapar is the Director of Bulk Carriers and Tanker Division since January, 2011. Age: 58 Education:He holds a Masters’ degree in Shipping Management from the World Maritime University. He also holds Master (FG) Certificate of Competency. Experience: He has sailed on many ships including Bulk Carriers, Passenger vessels and Breakbulk ships in various capacities. He has served in various capacities in the Offshore, Liner & Passenger and Bulk Carrier & Tanker Divisions. In April 2005, he was posted to Shanghai as the
  6. 6. Company’s Chief Representative in China to look after the container services and other interests in the region including China and other Far East regions. Since December 2007, he has been in charge of the Bulk Carrier & Tanker Division of the Company. Capt. Sunil Thapar is also on board of other Joint Venture companies Diversity: i) Gender:The ratio of male to female in SCI is 7:1. Though the gender diversity is less, generally women representation at the executive and board level in India is low. So the gender diversity in SCI is acceptable, but there is scope of improvement for women representation in board. ii) Education: Two out of eight board members have master degree in shipping management. Two out of the rest six members are marine engineers. One of the board member holds MBA from IIFT. One is a ph.d in history and another in physics. The CMD of SCI, B. K. Mundal, holds MBA from prestigious IIM-A. He also qualified in ICWA. SCI has board members from various educational backgrounds from Marine Engineering to Finance to Management. It has right diversity in terms of education. iii) Work Experience: Four out of eight board members (i.e. 50%) have many years of work experience in shipping industry. They are all worked in the shipping industry for many years and gained expertise. One of the board member is IAS cadre who served in various capacities in Government sectors. Rest of the members are worked in PSU such as ONGC, SAIL, and BHEL etc. All of them carry plenty of years of work experience and expertise under the belt which is required to manage and operate SCI. iv) Age: It is obvious that most of the board members are above 58 years of age. Though all of them are highly qualified and have great deal of work experience, it is necessary to have at least some board members who are less than 50 years of age to have different perspective. There is no diversity among board members as far as age is concerned in SCI. Board of Directors: SCI has not expanded its board size in the last few years. It has just reappointed/appointed the board members for the vacant positions. The board of directors comprises 14 members with 9 non-executive directors and 5 executives. Out of 9 non-executive directors, 2 are from GOI and 7 are Independent directors.In fact the number of directorshas reduced from eleven tonine during
  7. 7. the current year.During the current year, the Ministry of Shipping appointed Sunil Kohlias NonExecutive Director (ex-officio) on the Board of SCI w.e.f. 21.09.2012 in place of Vijay. Subsequently, on relinquishment of the additional charge of JS&FA (Shipping) by Sunil Kohli on 25.11.2012, the Ministry of Shipping appointed Dr. (Ms.) T. Kumar as Additional Secretary & Financial Advisor (Shipping) as Non-Executive Director (ex-officio) and her appointment on the SCI Board took effect on 26.11.2012. Kailash Gupta, Director (P&A) and S. Hajara, Chairman & Managing Director (CMD) ceased to be directors on the Board of SCI due to superannuation w.e.f. 31.12.2012. Capt. B. B. Sinha was appointed Director (P&A) w.e.f. 1.1.2013. B.K. Mandal, Director (Finance), Shipping Corporation of India (SCI) Ltd., holds additional charge of the post of Chairman & Managing Director (CMD), SCI w.e.f. 01.01.2013 to 31.3.2013 or until further orders of the Ministry, whichever is earlier. Name Designation No. of Directorships and committee memberships / chairmanships Directorships 1 Committee memberships 0 Committee chairmanships 0 Director (Liner) 1 0 0 Director 1 0 0 0 0 0 0 0 0 Joint Secty 2 0 0 AddtnlSectry 0 0 0 T.S. Ganeshan Director 0 0 0 ArunRamanathan Director 4 4 2 Arun K. Verma Director 0 0 0 S.K. Roongta Director 8 4 1 Sundararajan Director 0 0 0 Nasser Director 15 4 5 S.C. Tripathi Director 8 7 0 B.K. Mandal CMD & Director (Finance) J.N. Das A.K. Gupta (Offshore) S. Thapar Director (Bulk carrier) B.B. Sinha Director (Personal & Admin) Jauhari T. Kumar Board Meetings:
  8. 8. During the financial year 2012-2013, 10 Board Meetings were held. Name Designation Meetings Held B.K. Mandal CMD & Director Attended 10 10 (Finance) J.N. Das Director (Liner) 10 9 A.K. Gupta Director 10 10 10 10 3 2 (Offshore) S. Thapar Director (Bulk carrier) B.B. Sinha Director (Personal & Admin) Jauhari Joint Secty 10 8 T. Kumar AddtnlSectry 4 3 T.S. Ganeshan Director 10 6 ArunRamanathan Director 10 8 Arun K. Verma Director 10 10 S.K. Roongta Director 10 3 Sundararajan Director 10 0 Nasser Director 10 3 S.C. Tripathi Director 10 9 Directors’ Remuneration: The total directors’ remuneration which includes salary, perquisites and allowances, and performance incentives are Rs.250 lakhs. The directors’ remuneration is 0.056% of total revenue for 2012-2013 and 0.56% of total employee benefit expenses. Name Designation Total B.K. Mandal CMD & Director 4,263,638 (Finance) J.N. Das Director (Liner) 3,624,782 A.K. Gupta Director (Offshore) 3,120,675 S. Thapar Director (Bulk 3,182,485
  9. 9. carrier) B.B. Sinha Director (Personal & 669,424 Admin) Jauhari Joint Secty 0 T. Kumar AddnlSectry 0 T.S. Ganeshan Director 480,000 ArunRamanatha Director 420,000 Arun K. Verma Director 740,000 S.K. Roongta Director 60,000 Sundararajan Director 60,000 Nasser Director 180,000 S.C. Tripathi Director 400,000 n 3. SHAREHOLDERS: The company is authorised to issue 1,00,00,00,000 shares of which the number of shares issued/subscribed and paid up is46,57,99,010. The Par value of share is Rs. 10/The total value of equity shares issued subscribed and paid up by SCI is Rs. 46580 Lakhs The company has neither issued nor bought back any shares during the financial year 2012-2013. The company has pledged 30 Shares of SCI Directors and are with Irano Hind Shipping Co. Ltd., Tehran. The SCI shares are listed in both Bombay Stock Exchange (BSE) and National Stock Exchange (NSE). In BSE, the share traded at the highest price of Rs. 65.85 and the lowest price of Rs. 49.25. In NSE, the share traded at the highest price of Rs. 65.70 and the lowest price of Rs. 46.55. The book value per share is the amount of shareholders’ equity divided by the number of share, which comes to Rs. 142.04. The par value of share is the value of share at the time of IPO, which is Rs. 10. The market price indicates the value at which the shares are trading in stock exchange such as BSE and NSE. The market price of SCI shares at 31.3.2013 was Rs. 40. The price-to-book ratio is 0.28 times. This indicates that the shares are under-priced in stock market. The SCI share price movement trend is irregular with BSE Sensex movement. BSE Sensex index value has increased by 8.76% during 2012-2013. Whereas the share value of SCI has decreased by 34%. Though the overall BSE Sensex value increase, the share value of SCI is coming down heavily. This indicates that share value of SCI is losing sheen among investors.
  10. 10. The 63rd Annual General Meeting of The Shipping Corporation of India Ltd. will be held at theRegistered Office of the Company at “Shipping House” , 245, Madame Cama Road, Nariman Point, Mumbai - 400 021 at 1530 hrs. on Tuesday, the 24th day of September 2013. The Agenda of the meeting is as follows: ORDINARY BUSINESS 1. To receive, consider and adopt the Balance Sheet as at 31st March, 2013, Profit & Loss Account for the year ended on that date and Reports of Auditors and Directors thereon. 2. To appoint a Director in place of Shri Arun Kumar Gupta who retires at this meeting and being eligible, offers himself for re-appointment. 3. To appoint a Director in place of Capt. Sunil Thapar who retires at this meeting and being eligible, offers himself for re-appointment. 4. To fix remuneration of auditors. SPECIAL BUSINESS BY ORDINARY RESOLUTION 5. To appoint a Director in place of Capt. B. B. Sinha who holds office only up to the date of this Annual General Meeting and being eligible for appointment, the Company has received a notice in writing from a shareholder signifying his intention to propose appointment of Capt. B. B. Sinha as Director of the Company. Shareholding pattern for shareholders holding more than 5% shares: The shareholding pattern for the current year remains same as that of the previous year. No shares were issued or bought back in the current year. The share holding pattern for shareholders holding more than 5% is as given below: S.No. Name of Shareholder No of shares held Percentage of Holding 1 President of India 296939920 63.75 2 LIC 65801520 14.13 Dividend of 10 Lakhs is paid to shareholders for the current financial year. 4. AUDITORS Two Auditing firms that have audited the financial reports of Shipping Corporation of India for financial year 2012-2013: a) Gaurav Sarda Partner
  11. 11. Membership No.110208 SARDA & PAREEK Chartered Accountants FRN 109262W b) Durga DuttDadhich Partner Membership No.071909 PSD & ASSOCIATES Chartered Accountants FRN 004501C There is no change in the auditing firms. The same firms have done the auditing for previous year financial reports i.e. 2011-2012 of SCI Concerns raised by auditing firms which are mentioned below: The company has not complied with the requirements of AS 28 - Impairment of Assets, issued by ICAI the effect of which is unascertainable. The Accuracy of Exchange Gain / Loss in respect of Customer reconciliation / Advance received from Customers / Trade Payable recognized on revaluation as per AS 11 - The Effects of Changes in Foreign Exchange Rates remains unverifiable and unascertainable. The Company is unable to provide confirmation for accounts receivable, accounts of agents. In absence of thereasonable audit evidence, the effect of the same remains unascertainable / unverifiable on the Statement of Profitand Loss and Balance Sheet. We draw attention toward the direct access of the Accounting Software provided to the Agents for accounting of the expenses relating to the port and 83% of the same are yet to be verified by the Company, the consequential effect of the same on the Statement of Profit and Loss remains unascertainable. Auditors’ Remuneration: The total remuneration to auditing firms for 2012-2013 are 71 Lakhs. It was 83 Lakhs for the previous year of 2011-2012. The auditing cost was reduced by 14.5% for the current year. The auditing expense of 71 Lakhs for the current year is just 0.32% of the other expenses
  12. 12. 22417 Lakhs. The auditing expense of 83 Lakhs for the previous year is 0.82% of the other expenses 10161 Lakhs. The auditing firms have not provided any non-audit services as far as the Annual Report Information is concerned. 5. FIXED ASSETS:(Based on Balance Sheet as at 31.03.2013) The company has a Total Asset Value of Rs.1609620Lakhs, out of which Fixed Assets is Rs.1172923Lakhs. The total investment in Fixed Assets constitutes72.87 % of the Total assets. The item wise composition of Fixed Assets as a percentage of Total Assets is summarised in the below table: Asset Value As a percentage As a percentage of (in Lakhs) of Fixed Asset Total Asset Tangible Assets 1150651 98.10 % 71.49 % Intangible Assets 3327 0.28 % 0.21 % Capital Work-In- 18945 1.62 % 1.17 % Progress The composition of Tangible Assets and Intangible Assetsin Fixed Assets are 98.10 % and 0.28% respectively. The break-up of tangible and intangible assets are given in below tables: Current Year - 2013 Tangible Assets (in Lakhs) Fleet 1148179 Ownership Containers 417 Freehold Land 271 Buildings 469 Ownership Flats and Residential Buildings 69 Furniture, Fittings and Equipments etc. 1235 Motor Vehicles 11 Current Intangible Assets Year - 2013
  13. 13. (in Lakhs) Computer Software 3327 Additional Investment in Fixed Assets: Net increase in fixed assets for the current year – Rs. 245449 lakhs % of previous year revenue – 54.94% % of current year revenue – 55.35% Decrease in revenue – 0.73% Decrease in loss–73.30% Return on increase in fixed assets – 0.12% Return on operating cash flow due to increase in fixed assets – 50% There has been a net increase of Rs.245449Lakhs in fixed assets.The company had reinvested54.94% of previous year’s Total Revenue (Rs. 446691Lakhs). The company has lost 44917 lakhs in operating activities and reported net loss of 42821 lakhs for previous year. So increase in fixed assets investment for the current year is financed majorly through long term and short term borrowings. Even though there has been a net increase in fixed assets, the revenue has decreased by 0.73%. This means that humongous increase of fixed assets doesn’t result in proportionate revenue. But the loss is reduced by 73.30%. Each rupee invested in fixed assets results in Rs. 0.12 increase in profits. The net increase in fixed assets results in significant increase in net cash from operating activities. Each rupee invested in fixed assets results in Rs. 0.5 increase in Cash Flow from Operating Activities.The cash flow has increased by 125,786 lakhs i.e. from Rs. -44917Lakhs to Rs.80869Lakhs. Policy for Depreciation: Depreciation on ships is charged on “Straight Line Method” (SLM).Assets other than ships and Intangible assets, depreciation is charged on the “Written Down Value Method” (WDV). Intangible assets including software is amortised over the useful life not exceeding five years. Assets costing individually Rs. 5,000/- and below are fully depreciated in the year of addition. The carrying amounts of assets are reviewed at each Balance Sheet date for
  14. 14. impairment so as to determine the provision for impairment loss, if any, required, or the reversal, if any, required of impairment loss recognised in previous periods. Depreciation Expense: The Total Depreciation and Amortization expenses is Rs. 76052 Lakhs. The Total Revenue is Rs. 443426lakhs. Depreciation and Amortization expense is 17.15% of the Total Revenue. The company has not revalued any of its fixed assets during the year. Return on Assets: The Return on Total Assets is around - 0.71% and the Return on Fixed Assets is 0.97%. It indicates that for every rupee of investment in Total Assets, the company has lost 0.0071 and for every rupee of investment in Fixed Assets, the company has lost Rs. 0.0097. The calculation is derived below: I Net Loss 11431 II Fixed Assets 1172923 III Total Assets 1609620 IV Return on Fixed Assets -0.97% (I/II) V Return on Total Assets -0.71% (I/III) Effective tax rate: The PBT for SCI is Rs. -6845 i.e. loss of 6845 crore. Since Effective tax rate is Tax Expense divided by PBT. Effective tax rate cannot be calculated for loss making company. The net loss has decreased from Rs. 42821 lakhs for the previous year (i.e. 2011-2012) to Rs. 11431 lakhs for the current year (i.e. 2012-2013). The decrease in net loss is due to exchange differences amounting to Rs. 29974 lakhs arising on settlement / translation of foreign currency loans to the extent regarded as an adjustment to interest costs and earlier charged to statement of Profit and Loss, have now been adjusted in the cost of related assets. As a result, profit for the year ended March 31, 2013 and fixed assets as on March 31, 2013, is higher by Rs. 27879 lakhs and depreciation is higher by Rs. 2095 lakhs.
  15. 15. The net cash flow from operating activities is Rs 80869 Lakhs. The net loss is 11431 lakhs. Operating cash flow is a better metric for investors to assess a company's financial health than net profit. 6. Inventories: What type of inventories does the company hold? Type of inventories: Capital Work in Progress, Other items (Fuel Oil, Stores and spares). What is the total investment in inventories? How does it compare with the previous year? Total investment in inventories as of 31-mar-2013 = 18346 Total investment in inventories as of 31-mar-2012 = 17745 Percentage increase w.r.t previous year = 3.4% 7. Long Term Borrowings: Particulars Total (Rs in Lakhs) Total (Rs in Lakhs) Indian Banks (INR) 51929 38617 Indian Bank (Foreign 148950 39596 5569911 554078 770,740 632,293 Currency) Foreign Bank (Foreign Currency) Total Yes the composition of long term borrowings has changed in 2012-2013. The long term borrowings has increased by 21.89%from 2011-2012 to 2012-2013. SCI borrows money from Indian Bank in INR and in foreign banks as well. Total assets = 1609620. Long term debt = 682264. Percentage of total assets in funded by long term debt =57.6%. The company has raised additional long term debt of 138,447 lakhs during the year from Indian Bank and foreign bank. SCI has borrowed long term loans in order to buy new vessels. What is the average cost of these borrowings? Average cost of borrowing =Interest payment (cost) + other borrowing cost =15887 + 295 =Rs. 16182 lakhs
  16. 16. What is the interest coverage ratio? ICR = EBIT/Interest Expense Here EBIT is negative i.e. the company has suffered loss; therefore interest coverage ratio cannot be calculated. Are operating cash flows sufficient to meet interest & principal obligations? Net cash generated from operating activities after interest deductions and taking into principal obligations is positive. So operating cash flows are sufficient to meet interest and principal obligation. 8. Other: What kind of investments has the company made? How much is trading purposes? The company has made 2 types of investments: 1) Non-current investments – Trading investments A. Investments in equity instruments – Joint Ventures B. Investments in preference shares – Joint Ventures. A. The Company holds 49% interest in Irano Hind Shipping Co. Ltd. a joint venture company incorporated in Iran on which sanction has been imposed by United Nations Organisation (UN). The exposure of the Company in the Joint Venture is limited to ` 39 lakhs towards investment. It has been decided by the JV partners to dissolve this company. Consequently, the investment has been transfered from “Non current investments” to “Current investments” during Fy 2012-13. B. Sethusamudram Corporation Ltd. (SCL), a Special Purpose Vehicle was incorporated on 06.12.2004 for developing the Sethusamudram Channel Project with Tuticorin Port Trust, Ennore Port Ltd., Visakhapatnam Port trust, Chennai Port Trust, Dredging Corporation of India Ltd., Shipping Corporation of India Ltd. and Paradip Port Trust as the shareholders. SCI participated with an investment of ` 5000 lakhs (previous year ` 5000 lakhs). The dredging work is temporarily suspended from 17.09.2009 consequent upon the direction of the Hon’ble Supreme Court of India. As there is no progress in the project since then, the Management has provided for dimunition towards the investment and the same is shown at “Nil” Value.
  17. 17. C. SCI Forbes Ltd. is a joint venture between SCI, Forbes & Co. & Sterling Investment Pvt. Ltd. where SCI has a 50% shareholding. The company has a positive networth as on 31st March, 2013. The Management has provided ` 4460 lakhs towards dimunition in the value of the investment in SCI Forbes Ltd. on the basis of pro rata reduction in the networth of the company. 2) Current investments – A. Investments in mutual funds B. Investments in Equity Instruments C. Investments in preference shares Total Trade Investments – Rs. 17 lakhs. How much income did the company get during the year from its investments? Income from investments – Rs. 3249 lakhs. What kind of contingent liabilities does the firm have? How much are these as % of current revenues/operating cash flows? Contingent Liabilities 1) Claim against the company not acknowledged as debts. 2) Guarantees given by the Banks. 3) Undertaking cum Indemnity given by Company. 4) Cargo Claims not covered by P&I Club. 5) Bonds / Undertakings given by the Company to Customs Authorities. 6) Corporate Guarantees / Undertakings. Total Contingent Liabilities – Rs. 75420 lakhs Net cash flow from operating activities – Rs. 80869 lakhs Percentage – 93.26% What is the nature of the extraordinary gains/losses? The Company had extraordinary income of 300 crores being the reversal of borrowing cost (arising on account of exchange loss arising out of revaluation of the foreign currency loans) of
  18. 18. earlier years. However, the same has been offset primarily by increase in depreciation, creation of provision for diminution in value of investments and higher interest cost due to the new vessels inducted. 9. Ratio Analysis Profitability ratio : Profit Margin: Profit Margin ratio of the company over the years: Mar '13 Mar '12 -12.01 % -15.13 % It is also known as return on sales. Profit Margin of the company has sharply declined over the years. It had turned negative in 2012 and 2013 indicating losses for the company for the last two years. It also tell us there is no cushion available to company in case of an increase in costs, drop in selling prices in face of recession or competition. Profit Margin in comparison to competitors Companies Mar’13 Mar’12 Mar’11 Shipping Corporation -12.01 % -15.13 % 18.35 % G E Shipping 3.90 % 6.87 % 19.34 % Essar Shipping 13.40 % 24.47 % 24.63 % Of India In comparison to other key competitors performance of shipping Corporation of India is very bad in terms of Profit margin. While, other companies are enjoying profit Shipping Corporation of India is facing huge losses. This can be due to various categories of expenses such as materials, salaries,wages and advertising. Asset Turnover Ratio: It is calculated by total sales divided by average total assets. It is equal to 0.27. It indicates company was not unable to efficiently utilise its assets. This number indicates how many times assets were turned over in a period to generate sales. It also implies
  19. 19. presence of more assets than company needs for its operations. In case of Shipping Corporation of India Return on Equity: It isamount of net income returned as a percentage of shareholders equity. Return on Equity is 1.7%. The negative value denotes company is unable to generate revenue based on investments. Liquidity Ratio: Current Ratio: Current ratio of the company over the years: Mar '13 Mar '12 1.05 1.69 The extent of the claims of short-term creditors covered by assets that are expected to be converted to cash in a period roughly corresponding to the maturity of the liabilities has decreased. Current Ratio in comparison to competitors: Companies Mar’13 Mar’12 Mar’11 Shipping Corporation 1.05 1.69 3.19 G E Shipping 0.98 2.51 2.05 Essar Shipping 1 1.22 1.80 Of India Quick Ratio: Quick ratio of the company over the years: Mar '13 Mar '12 0.98 1.587
  20. 20. Firm's ability to pay off short-term obligations without relying on the sale of its inventories has decreased. As a rule of thumb quick ratio must be 1:1 as in case for the firm in the year ended 2013. Quick ratio in comparison to competitors: Companies Mar’13 Mar’12 Shipping Corporation 0.98 1.587 G E Shipping 0.93 2.46 Essar Shipping 1.39 2.04 Of India Inventory turn-over ratio: For the year ended 2013, inventory turnover ratio is 2.014. Since, turnover ratio is low it implies low sales and excess inventory. It is a bad sign because inventory will deteriorate and inventory cost will also increase. Solvency Ratio : Debt To Equity Ratio : Debt equity ratio of the company over the years. Mar '13 Mar '12 1.10 0.82 In compared to previous years debt to equity ratio has increased indicating that they have borrowed more funds from creditors than invested by owners. This ratio indicates extensive use of financial leverage. A high debt to equity ratio indicates aggressive use of leverage, and a high leveraged company is more risky for creditors. Companies Mar’13 Mar’12 Shipping Corporation 1.10 0.82 G E Shipping 0.63 0.68 Essar Shipping 0.65 0.66 Of India
  21. 21. In compared to competitors debt to equity ratio has increased significantly in last two years indicating that borrowing is done more by SCI than its competitors. Liabilities to Equity Ratio: It is the ratio of all liabilities to shareholder’s equity. It is especially useful in the case of firms that kept rolling over short term obligations. In 2013, it is 2.44 while in 2012 it was 2.0846. This indicates company increasing dependence on liabilities.