1. Corporate information
Shreyas Shipping and Logistics Limited (the “Company” or “SSLL”) is a public limited company incorporated in India on 16th August, 1988 under the Companies Act, 1956. The registered office of the Company is 4th Floor, Himalayas, Geetmala Complex, Shah Industrial Estate, Govandi - East Mumbai, Maharashtra, India - 400 088.
SSLL is India’s first container feeder owning and operating company. The Company started its operations in 1993 primarily to fill the gap for feedering of containers between Indian ports and internationally renowned Asian transshipment ports. SSLL’s shares are listed on both Bombay Stock Exchange and National Stock Exchange. At present, it is a leading player in coastal shipping sector.
2. Applicability of new and revised Ind AS
2.1 Amendments to Ind AS that are notified and adopted by the Company
a. The Company has adopted Ind AS 115, with the date of initial application of April 1, 2018 following the cumulative effective method - i.e. by recognising the cumulative effect of initially applying Ind AS 115 as an adjustment to the opening balance of equity as at April 1, 2018. Therefore, the comparative information has not been restated and continues to be reported under erstwhile ind AS 18 ‘Revenue’ and Ind AS 11 ‘Construction contracts’.
Ind AS 115 modifies the determination of how much revenue to recognise, and when, and introduces a single principle based five-step model to be applied to all the contracts with the customers. Ind AS 115 replaces the separate models for goods, services and construction contracts currently included in Ind AS 18 and Ind AS 11.
In case of the Company, the timing for recognition of revenue under Ind AS 115 coincides with the revenue recognised as per Ind AS 18 and accordingly, the adoption of Ind AS 115 has no material impact on the opening balance of equity as at April 1, 2018.
b. The application of Appendix B, (Foreign Currency Transactions and Advance Considerations) to Ind AS 21, “The Effects of Changes in Foreign Exchange Rates” with effect from April 1, 2018 does not have any impact, as the Company used to determine the exchange rate of the date on which advance consideration in foreign currency been received or paid for the purpose of initial recognition of related asset, expense or income.
2.2 New Standards issued but not yet effective:
a. Ind AS 116 - Leases:
On March 30, 2019, the Ministry of Corporate Affairs has notified Ind AS 116, Leases. Ind AS 116 will replace the existing leases standard, Ind AS 17, Leases, and related interpretations. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract i.e., the lessee and the lessor. Ind AS 116 introduces a single lessee accounting model and requires the lessee to recognize assets and liabilities for all leases with a term of more than twelve months, unless the underlying asset is of low value. Currently, operating lease expenses are charged to the Statement of Profit and Loss. The standard also contains enhanced disclosure requirements for lessees. Ind AS 116 substantially carries forward the lessor accounting requirements in Ind AS 17. The effective date for the adoption of Ind AS 116 is annual periods beginning on or after April 1, 2019. The standard permits two possible methods of transition:
i. Full retrospective - Retrospectively to each prior period presented applying Ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors
ii. Modified retrospective - Retrospectively, with the cumulative effect of initially applying the standard recognized at the date of initial application.
Under modified retrospective approach, the lessee records the lease liability as the present value of the remaining lease payments, discounted at the incremental borrowing rate and the right of use asset either as :
i. Its carrying amount as if the standard had been applied since the commencement date, but discounted at the lessee’s incremental borrowing rate at the date of initial application, or
ii. An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments related to that lease recognized under Ind AS 17 immediately before the date of initial application. Certain practical expedients are available under both the methods.
The management is assessing the impact of the aforesaid standard issued and amendments on the Company’s financial information.
b. Appendix C to Ind AS 12 - Uncertainty over Income Tax treatments
On March 30, 2019, the Ministry of Corporate Affairs has notified Ind AS 12, Appendix C, Uncertainty over Income Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. According to the appendix, companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.
The standard permits two possible methods of transition :
- Full, retrospective approach - Under this approach, Appendix C will be applied retrospectively to each prior reporting period presented in accordance with ind AS 8, Accounting Policies, Changes in Accounting Estimates and Errors, without using hindsight, and
- Retrospectively with cumulative effect of initially applying Appendix C recognized by adjusting equity on initial application, without adjusting comparatives
The effective date for adoption of Ind AS 12 Appendix C is annual periods beginning on or after April 1, 2019. The Company will adopt the standard on April 1, 2019 and has decided to adjust the cumulative effect in equity on the date of initial application i.e. April 1, 2019 without adjusting comparatives.
The management is assessing the impact of the aforesaid standard issued and amendments on the Company’s financial information.
c. Amendment to Ind AS 19 - Plan Amendment, Curtailment or Settlement
On March 30, 2019, the Ministry of Corporate Affairs issued amendments to Ind AS 19, Employee Benefits, in connection with accounting for plan amendments, curtailments and settlements.
The amendments require an entity :
- To use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and
- To recognize in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognized because of the impact of the asset ceiling.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Company does not expect to have any material impact on account of this amendment. The Company is currently evaluating the effect of this amendment on the standalone financial statements.
d. Amendment to Ind AS 12 - Income Taxes
On March 30, 2019, the Ministry of Corporate Affairs issued amendments to the guidance in Ind AS 12, Income Taxes, in connection with accounting for dividend distribution taxes.
The amendment clarifies that an entity shall recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Company is currently evaluating the effect of this amendment on the standalone financial statements.
3. Key sources of estimation uncertainty and critical accounting judgements:
The preparation of the financial statements requires management to make judgements, estimates and assumptions about the reported amounts of assets and liabilities, and, income and expenses that are not readily apparent from other sources. Such judgments, estimates and associated assumptions are evaluated based on historical experience and various other factors, including estimation of the effects of uncertain future events, which are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
The following are the critical judgements and estimations that have been made by the management in the process of applying the company’s accounting policies and that have the most significant effect on the amount recognised in the financial statements and/or key sources of estimation uncertainty that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
i. Revenue recognition:
The Company recognises unfinished voyage income and related expenses based management’s estimates on the average number of days required to complete the voyage from the port of origin for the voyage to the port of destination given its operational performance during the year. The actual travel time per voyage may differ leading to differences in unfinished voyage income and expenses to be recognised for voyages in-transit at the end of the period.
ii. Useful lives and residual values of property, plant and equipment:
As described in 3(d) above, the management reviews the useful lives of property, plant and equipment at least once a year. Such lives for fleet are dependent upon an assessment of both the technical lives of the assets and also their likely economic lives based on various internal and external factors including relative efficiency and operating costs, historical planned and scheduled maintenance, the operating condition of the vessel etc. Accordingly, depreciable lives are reviewed annually using the best information available with the Management. Residual values is estimated based on the steel scrap rate applied to the light weight of each vessel at the end of each financial year.
It is possible that the estimates made based on existing experience are different to the actual outcomes within the following financial periods and could cause a material adjustment to the carrying amount or depreciation charge on property, plant and equipment.
iii. Contingencies:
In the normal course of business, contingent liabilities may arise from litigation and other claims against the Company. Potential liabilities that are possible but not probable of crystalising or are very difficult to quantify reliably are treated as contingent liabilities. Such liabilities are disclosed in Note 34 but are not recognized. Company’s assessment of exposure to contingencies could change as new developments occur or more information becomes available. The outcome of the contingencies could vary significantly and could materially impact the Company’s results and financial position.
iv. Expected credit losses:
The Company assesses its expected credit losses at each reporting date. Allowances are applied to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. Key assumptions applied are experience (including comparisons of the relative age of accounts and consideration of actual write-off history), customer creditworthiness, changes in customer payment terms, the estimated debt recovery rates and future market conditions that could affect recovery. The actual level of debt collected may differ from the estimated levels of recovery.
v. Defined benefit plans:
The cost of defined benefit plan and other post-employment benefits and the present value of such obligations are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual development in the future. These include the determination of the discount rate, future salary escalations and mortality rates etc. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each financial year end.
vi. Fair value measurements
When the fair values of financial assets or financial liabilities recorded or disclosed in the financial statements cannot be measured based on quoted prices in active markets, their fair value is measured using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Judgements include consideration of inputs such as liquidity risk, credit risk and volatility.
4.1 Terms of/rights attached to equity shares
(a) The Company has only one class of equity shares having a par value of Rs. 10 each. Each shareholder of equity shares is entitled to one vote per share. Dividend proposed by the Board of Directors, if any, is subject to the approval of the Shareholders in the ensuing Annual General Meeting, except in the case of interim dividend.
(b) In the event of liquidation,the equity share holders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their share holding.
Footnotes:
(a) Capital redemption reserve: The Companies Act provides that companies redeeming preference shares at face value or nominal value is required to transfer an equivalent amount into capital redemption reserve. This reserve can be used to issue fully paid-up bonus shares to the shareholders of the Company.
(b) Securities premium reserve: The amount received in excess of face value of equity shares is recognised in securities premium reserve. This is not available for distribution of dividend but can be utilised for issuing bonus shares.
(c) Tonnage tax reserve: The reserve is a statutory reserve as per requirements of section 115VT of the Income Tax Act, 1961 for the purpose of complying with the conditions of tonnage tax scheme.
(d) Tonnage tax utilisation reserve: The tonnage tax utilised reserve represents the utilisation of tonnage tax reserve created as per requirements of section 115VT of the Income Tax Act, 1961 for the purpose of purchase of vessel.
(e) General reserve: The Company created a general reserve in earlier years pursuant to the provisions of the Companies Act wherein certain percentage of profits were required to be transferred to general reserve before declaring dividends.
The provision of the Companies Act 2013, do not mandate transfer of profits to general reserve. General reserve is a free reserve available for distribution subject to compliance with the Companies.(Declaration and Payment of Dividend ) Rules, 2014.
(f) Retained earnings: Retained earnings comprise balances of accumulated (undistrubuted ) profit and loss at each year end.
(g) Cash flow hedging reserve: Cash flow hedging reserve represents the cumulative effective portion of gains or losses arising on changes in fair value of designated hedging instruments entered into for cash flow hedges, which shall be reclassified to Statement of Profit and Loss only when the hedged transaction affects the profit or loss.
5.1. Defined benefit plans a) Gratuity (funded)
The Company provides for gratuity for employees as per the Payment of Gratuity Act, 1972. The amount of gratuity shall be payable to an employee on the termination of his employment after he has rendered continued services for not less than 5 years, or on the superannuation or resignation. However, in case of death of the employee, the minimum period of 5 years shall, not be required. The amount of gratuity payable on termination/retirement is the employee last drawn basic salary per month computed proportionately for 15 days salary multiplied by the number of years’ service completed.
The current service cost and the net interest expense for the year are included in the “Employee benefits expense” line item in the Statement of Profit and Loss.
The remeasurement of the net defined liability is included in other comprehensive income.
In assessing the Company’s post retirement liabilities, the Company monitors mortality assumptions and uses up-to date mortality tables, the base being the Indian assured lives mortality (2006-08) estimate.
The Company expects to contribute Rs. 10 lac (for the year ended March 31, 2018: ‘ Nil ) to its gratuity plan for the next year.
Expected return on plan assets is based on expectation of the average long term rate of return expected on investments of the fund during the estimated term of the obligations after considering several applicable factors such as the composition of plan assets, investment strategy, market scenario, etc.
The estimates of future salary increase, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.
The discount rate is based on the prevailing market yields of Government of India securities as at the balance sheet date for the estimated term of the obligations.
Significant actuarial assumptions for the determination of the defined obligation are discount rate and expected salary increase. The sensitivity analysis below have been determined based on reasonably possible changes of the respective assumptions occurring at the end of the reporting period, while holding all other assumptions constant.
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
In presenting the above sensitivity analysis, the present value of the defined benefit obligations has been calculated using the projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation liability recognised in the balance sheet.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from prior years.
(b) Compensated absences (unfunded)
As per the Company’s policy accumulated leave may be availed by an employee during the period of his service and may be encashed on separation (i.e. due to death, retirement, separation or resignation). Compensated absences which are not expected to be encashed or availed within twelve months of the end of the period in which the employee renders the related services are recognised as an actuarially determined liability at the present value of the defined benefit obligation at the Balance Sheet date.
In respect of the plans, the most recent actuarial valuation of the plan assets and the present value of the defined benefit obligation were carried out as at March 31, 2019 by Mr. Arpan N. Thanawala, Fellow of the Institute of Actuaries of India. The present value of the defined benefit obligation and the related current service costs and past service cost, are measured using the projected unit credit method.
6. Lease
Operating lease arrangements
The Company has entered into cancellable operating lease arrangements for its office premises and the lease rental mentioned in below table is charged to the Statement of Profit and Loss.
7. Segment information
The Company has determined ‘Sea logistics’ as its single reportable segment based on the information reviewed by the Company’s Chief Operating Decision Makers (CODM).
The information relating to revenue from customers and location of its non-current assets of its single reportable segment is as under:
a) Revenue from operations:
b) Non-current assets:
All non-current assets other than financial instruments and deferred tax assets of the Company are located in India.
c) Information about major customers
Revenue from operations include revenues of Rs. 28,331 Lac (previous year: Rs. 27,052 lacs) from the single largest customer of the Company. No other single customer contributed 10% or more to the Company’s revenue for the current and previous year.
8. Financial instruments
8.1 Capital management
The Company’s objective for capital management is to maximize shareholder value, safeguard business continuity and maintain an optimal capital structure to reduce the cost of capital. The Company maintains its financial framework to support the pursuit of value growth for shareholders, while ensuring a secure financial base. In order to maintain or adjust the capital structure, the Company may return capital to shareholders, issue new shares or sell assets to reduce debt.
The capital structure of the Company consists of total equity. The Company is not subject to any externally imposed capital requirements.
Footnotes
(a) Discounted cash flow: Future cash flows are estimated based on forward interest rates (from observable yield curves at the end of the reporting period) and contract interest rates, discounted at a rate that reflects the credit risk on various counter parties.
(b) Generally accepted pricing model based on discounted cash flow analysis with most significant input being the discounting rate that reflects the credit risk of counterparties.
(c) The management considers that the carrying amounts of financial assets and financial liabilities recognised in the financial statements, other than as detailed in table above, approximate their fair values.
8.2 Details of financial assets pledged as collateral
Carrying amount of financial assets provided as a collateral for obtaining borrowing and other facilities from the bankers are as follows:
8.3 Financial risk management objectives
While ensuring liquidity is sufficient to meet Company’s operational requirements, the Company’s financial management committee also monitors and manages key financial risks relating to the operations of the Company by analyzing exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk.
8.4 Market risk
Market risk is the risk or uncertainty arising from possible market price movements and their impact on the future performance of a business. The major components of market risk are freight rate movements, commodity price risk (fuel), foreign currency exchange risk and interest rate risk.
The Company has entered into an INR - USD cross currency swap for its borrowing during the year and accounted Rs. 4 lac as mark to market as on March 31, 2019 in Other Comprehensive Income.
8.5 Foreign currency risk management
The Company undertakes transactions denominated in different foreign currencies and consequently exposed to exchange rate fluctuations. Exchange rate exposures are managed within approved policy parameters. The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows:
8.6 Foreign currency sensitivity analysis
The Company is principally exposed to foreign currency risk against USD. Sensitivity of profit or loss arises mainly from USD denominated receivables and payables. As per management’s assessment of reasonable possible changes in the exchange rate of /- 5% between INR and following currencies, sensitivity of profit or loss only on outstanding foreign currency denominated monetary items at the period end is presented below. A positive number below indicates an increase in profits or equity where INR strengthens 5% against the relavant currency. For a 5% weakening of INR against the relavant currency , there would be a comparable impact on profit or equity, and the balances below would be negative.
* Amount represent less than Rs. 0.5 lac
In the management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the exposure at the end of the reporting period does not reflect the exposure during the year.
The Company undertakes transactions denominated in different foreign currencies and consequently exposed to exchange rate fluctuations. Exchange rate exposures are managed within approved policy parameters. The Company resorts to cash flow hedge to manage its foreign exchange risk.
i) Foreign currency borrowings are designated as hedging instruments in cash flow hedges of forecast sales in US Dollar. These forecast transactions are highly probable. The balance of foreign currency borrowings varies with changes in foreign exchange rates.
Carrying amount of foreign currency borrowings designated as hedging instruments is Rs. 12,896 Lac as at March 31, 2019 (as at March 31, 2018: Rs. 12,620 lac) with maturity upto March 2025. Net unrealised gain of Rs. 732 Lac (Negative) (as at March 31, 2018 : Rs. 112 lac (negative)) relating to effectiveness of cash flow hedges of expected future sales is included in OCI and the hedge ineffectiveness of Rs. 66 iac (for the year ended March 31, 2018 : Rs. 99 lac) is recognised in the Consolidated Statement of Profit and Loss.
ii) Out of the cumulative loss accumulated in Other comprehensive income relating to cash flow hedges, which have been discontinued upon termination of the underlying FCNR faciiity/principLe only swap contract designated as hedging instruments, the loss of Rs. 250 iac (for the year ended March 31, 2018- Rs. 58 iac) corresponding to the cash flows expected for the year has been reclassified to the Statement of Profit and Loss.
8.7 Interest rate risk management
The Company is exposed to interest rate risk because of borrowing of funds at floating interest rates.
The following table provides a break-up of the Company’s fixed and floating rate borrowings:
Interest rate swap contract entered into by the company in respect of its floating rate borrowing with carrying amount of Rs. 1,603 Lac as on March 31, 2018 for for conversion into fixed rate borrowing has been terminated during the year.
Interest rate sensitivity analysis
if interest rates had been 50 basis points higher/iower and all. other variables were held constant, the Company’s profit for the year ended March 31,2019 would decrease/increase by Rs. 149 lac (for the year ended March 31, 2018 : Rs. 123 lac).
8.8 Other price risks
The Company is exposed to price risk arising from investments in mutual funds. Company’s equity investments are held for strategic rather than trading purpose.
The sensitivity analysis below have been determined based on the exposure to mutual fund price risk at the end of the reporting period.
if the Net Asset Value of mutual fund scheme has been 5% higher / lower, profit for the year ended March 31, 2019 would increase / decrease by Rs. 77 lac (for the year ended March 31, 2018 : increase / decrease by Rs. 142 lac ) as a result of the changes in the fair values of mutual fund investments.
8.9 Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company has adopted a policy of dealing only with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults.
Credit risk arises from cash and cash equivalents, deposits with banks as well as customers including receivables. Credit risk management considers available reasonable and supportive forward-looking information including indicators like external credit rating (as far as available), macro-economic information (such as regulatory changes, government directives, market interest rate).
Credit exposure is managed by counterparty limits for investment of surplus funds which is reviewed by the Management. investments in liquid plan/schemes are with reputed fund houses having high rating. For banks, only high rated banks are considered for placement of deposits.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Ongoing credit evaluation is performed on the financial condition of accounts receivable.
Of the trade receivables balance as at March 31, 2019 : Rs. 9,303 lac (as at March 31, 2018: Rs. 8,317 lac is due from Avana Logistek Limited (formerly known as Shreyas Relay Systems Limited). There are no other customers who represent more than 10% of total balance of trade receivables.
8.10 Liquidity risk management
The Company manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities.
8.11 Liquidity and interest rate tables
The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods. The information included in the tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The tables include both interest and principal cash flows.
The following table details the Company’s expected maturity for its non-derivative financial assets. The information included in the table has been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets. The inclusion of information on non-derivative financial assets is necessary in order to understand the Company’s liquidity risk management as the liquidity is managed on a net asset and liability basis.
Management is generally unable to reasonably estimate a range of possible loss for proceedings or disputes other than those included in the estimate above, including where:
(i) parties are yet to raise claims on account of damages to the cargo, and
(ii) there is uncertainty as to the outcome of pending appeals or motions or settlement proceedings;
The Company’s management does not believe, based on currently available information, that the outcomes of the above matters will have a material adverse effect on the Company’s financial position, though the outcomes could be material to the Company’s operating results for any particular period, depending, in part, upon the operating results for such year. It is not practicable for the Company to estimate the timings of cash flows, if any, in respect of the above.
9. Disclosure made in terms of schedule V of SEBI (Listing obligation and Disclosure Requirement ) 2015
The Company has not given any loan or advance in the nature of loan to subsidiary, associates or firm/companies in which directors are interested in view of Regulation 34(3) of SEBI (Listing obligations and disclosure requirement) Regulation, 2015.
10 i) The amount due to Micro and Small Enterprises as defined in the “The Micro, Small and Medium Enterprises Development Act, 2006” has been determined to the extent such parties have been identified on the basis of information collected by the Management.
ii) Disclosure under Micro, Small and Medium Enterprise Development Act, 2006:
NOTE:
1) Figures have been adjusted for exchange rate variations
2) Reimbursement of expenses/income incurred/earned by/to Group Companies is not included in the table above.
3) Managerial remuneration excludes provision for gratuity and compensated absences since these are provided on the basis of actuarial valuation for the company as a whole.
4) Figures in Italics represent amount for the previous year
11. Disclosure in connection with revenue from contract with customers
The Company has adopted Ind AS 115 - ‘Revenue from Contracts with Customers’, and also appropriately evaluated its revenue recognition policies, w.e.f. April 1, 2018.
11.1. Revenue of Rs. 381 Lac recognised during the year ended March 31, 2019 out of Advance from customer and unfinished voyage income as on March 31, 2018.
12. The Board, in its meeting on May 28, 2019 proposed a dividend of Rs. 1.20 per equity share. The proposal is subject to the approval of shareholders at the ensuing Annual General meeting.
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