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You can view the entire text of Notes to accounts of the company for the latest year

BSE: 533248ISIN: INE517F01014INDUSTRY: Ship - Docks/Breaking/Repairs

BSE   ` 114.65   Open: 114.80   Today's Range 112.75
115.10
+0.15 (+ 0.13 %) Prev Close: 114.50 52 Week Range 102.20
168.40
Year End :2017-03 

1. Land and site development includes

- Freehold land of INR 50.55 million

- Land aggregating INR 1.47 million purchased during prior years for getting the rail connectivity from nearest station upto the port boundary is registered in the name of our Associate Company, Pipavav Railway Corporation Limited, pursuant to Government notification.

- Land aggregating INR 24.99 million was purchased during prior years for handing it over to Government of Gujarat, pursuant to the order issued by Hon’ble Supreme Court. This land will be exchanged with the land located inside the port premises which does not form part of the current Concession with Gujarat Maritime Board (GMB).

- Expenditure of INR 244.85 million incurred towards Land Filling and Site development.

2. Refer to note 31 for disclosure of capital commitments for the acquisition of property, plant and equipment.

1. Land and site development includes

- Freehold land of INR 50.55 million

- Land aggregating INR 1.47 million purchased during prior years for getting the rail connectivity from nearest station upto the port boundary is registered in the name of our Associate company, Pipavav Railway Corporation Limited, pursuant to Government notification.

- Land aggregating INR 24.99 million was purchased during prior years for handing it over to Government of Gujarat, pursuant to the order issued by Hon’ble Supreme Court. This land will be exchanged with the land located inside the port premises which does not form part of the current Concession with Gujarat Maritime Board (GMB).

- Expenditure of INR 244.85 million incurred towards Land Filling and Site development.

2. Pursuant to Schedule II of the Act being effective from April 1, 2015 the Company has revised useful life of its assets on certain fixed assets as per the useful life specified in Part ‘C’ of Schedule II of the Act or as per the management’s estimate based on internal evaluation. As a result of this change, the depreciation charge for the year ended 31 March 2016 is higher by INR 247.17 million (of which INR 20.64 million pertains to assets whose life is already exhausted as on 1 April 2015).

* As per the provisions of Indian Tax laws, the Company is eligible for a tax holiday under section 80IA of the Income Tax Act, 1961 for a block of 10 consecutive Assessment years out of the 15 years beginning of port operations. Accordingly, the Company is entitled to tax holiday commencing from 1 April 2007 until 31 March 2017. Minimum Alternative Tax will apply after lower of unabsorbed book loss or depreciation is adjusted against book profits during the years of tax holiday.

Amounts recognized in statement of profit and loss

Write-downs of inventories including provision for inventory amounts to INR 24.96 million (31 March 2016 : INR 20.46 million). These were recognised as an expense (Refer note - 25) during the year and included in other expenses in Statement of Profit and Loss.

b) Rights, preferences and restrictions attached to equity shares

The Company has a single class of equity shares. Accordingly, all equity rank equally with regard to dividends and share in the Company's residual assets. The equity shares are entitled to receive dividend as declared from time to time. The voting rights of an equity shareholder on a poll (not on show of hands) are in proportion to its share of the paid-up equity capital of the Company. Voting rights cannot be exercised in respect of shares on which any call or other sums presently payable have not been paid.

On winding up of the Company, the holders of equity shares will be entitled to receive the residual assets of the Company, remaining after distribution of all preferential amounts in proportion to the number of equity shares held.

Note: There are no amounts due for payment to the Investor Education and Protection Fund under Section 125 of The Companies Act 2013 as at the year end.

- Includes INR 32.72 million (31 March 2016: INR 64.52 million) payable to related parties

(i) Compensated absences

The leave salary is payable to all eligible employees for each day of accumulated leave on death or on resignation or upon superannuation. Amount charged to the Statement of Profit and Loss on account of compensated absences during the year amounts to INR 7.43 million (31 March 2016: INR 3.68 million) and is included in Note 22 - ‘Employee benefits expenses'. Accumulated current provision for compensated absences aggregates to INR 17.68 million (31 March 2016: INR 14.33 million; 1 April 2015: 12.00 million) (Refer note 14).

(ii) Post-employment obligations - Gratuity

The Company makes annual contribution to the Employee's Group Gratuity-cum-Life Assurance Scheme of the Life Insurance Corporation of India, a funded defined benefit plan for employees. The scheme provides for lump sum payment to vested employees at retirement, death while in employment or on termination of employment of an amount equivalent to 15 days salary payable for each completed year of service or part thereof in excess of six months. Vesting occurs upon completion of five years of service. Gratuity payments due to employees are processed disregarding the upper limits specified by Income Tax Act, 1961 and The Payment of Gratuity Act, 1972.

(iii) Risk exposure:

Though its defined benefits plan, the Company is exposed to a number of risks, the most significant of which are detailed below

Changes in bond yields

A decrease in bond yield will increase plan liabilities, although this will be partially offset by increase in the plan's bond holding

Asset volatility

The plan liabilities are calculated using a discount rate set with reference to bond yields; if plan assets underperform this yield, this will create a deficit. Plan assets are invested with the Life Insurance Corporation of India Limited. It is subject to interest rate risk. The Company intends to maintain the above investments in the continuing years.

Maturity Analysis of Projected Benefit Obligation: From the Fund

Projected Benefits Payable in Future Years From the Date of Reporting

1. Transfer Pricing

The Company's international transactions with related parties are at arm's length as per the independent accountants' report for the year ended 31 March 2016. Management believes that the Company's international transactions with related parties post 31 March 2016 continue to be at arm's length and that the transfer pricing legislation will not have any impact on these financial statements, particularly on amount of tax expenses and that of provision of taxation.

2. Fair Value of financial assets and liabilities carried at amortized cost

There are no financial assets and liabilities designated at fair value through profit or loss or other comprehensive income. All the Financial instruments carried at amortized cost.

Financial instruments carried at amortized cost

Fair value of the current financial assets and current financial liabilities carried at amortized cost is not materially different from the carrying amount. In general, fair value is determined primarily based on the present value of expected future cash flows.

28. Financial risk management

The Company's activities expose it to a variety of financial risks:

(a) Credit risk

(b) Liquidity risk

(c) Market risk

The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize the potential adverse effects on the Company's financial performance. Risk management is carried out by finance department under policies approved by the Board of Directors.

(a) Credit risk

The Company has exposure to financial and commercial counterparties but has no particular concentration of customers or suppliers. To minimize the credit risk, security deposits and advance payments are taken from all major customers. Our historical experience of collecting receivables, supported by the level of default, is that credit risk is low and so trade receivables are considered to be a single class of financial assets.

Expected credit loss for trade receivables under simplified approach:

Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Management monitors Company's liquidity position and cash and cash equivalents through Quarterly rolling forecasts and on the basis of expected cash flows. Company treasury maintains flexibility in funding through committed credit lines with Financial Institution.

Maturities of financial liabilities

The following table shows the maturity analysis of the Company's financial liabilities based on contractually agreed undiscounted cash flows as at the Balance Sheet date. Balances due within 12 months and more than 12 months equal their carrying balances as the impact of discounting is not significant.

As there is no committed credit facilities to meet obligations when due and to close out market positions, the Company is not exposed to liquidity risk.

(c) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, will affect the Company's profit or the value of its holdings of financial instruments. Below sensitivity analyses relate to the position of financial instruments at 31 March 2017 and 31 March 2016. It is assumed that the exchange rate sensitivities have a symmetric impact, i.e. an increase in rates results in the same absolute movement as a decrease in rates.

The sensitivity analyses show the effect on profit or loss and equity of a reasonably possible change in exchange rates and interest rates.

Foreign Currency risk

The Company is exposed to foreign exchange risk arising from foreign currency transactions, primary with respect to USD and EURO. The Company's business model incorporates assumptions on currency risk and ensures any exposure is covered through the normal business operations. As the functional reporting currency is in INR, the foreign currency risk exists for the Company.

Foreign currency exposure not covered by Forward Contracts as at 31 March 2017:

3. Capital Management

The Company's objective in managing its capital is to safeguard its ability to continue as a going concern and to optimize returns to our shareholders. The Company considers the following components of its Balance Sheet to be managed capital:

1) Share Capital, 2) Share Premium; and 3) Retained Earnings

The Company's capital structure is based on the Managements assessment of the balances of key elements to ensure strategic decisions and day to day activities. The capital structure of the Company is managed with a view of the overall macro-economic conditions and the risk characteristics of the underlying assets.

The Company's policy is to maintain a strong capital structure with a focus to mitigate all existing and potential risks to the Company, maintain shareholder, vendor and market confidence and sustain continuous growth and development of the Company.

The Company's focus is on keeping a strong total equity base to ensure independence, security, as well as high financial flexibility without impacting the risk profile of the Company. In order, to maintain or adjust the capital structure, the Company will take appropriate steps as may be necessary. The Company does not have any debt or financial covenants.

The Management monitors the return on capital as well as the level of dividend to shareholders. The Company goal is to continue to be able to provide return to shareholders by continuing to distribute dividends in future period. Refer the following table for the final and interim dividend declared and paid.

4. Traffic guarantee commitment

The Company has entered into tripartite Transportation and Traffic Guarantee Agreement with Pipavav Railway Corporation Limited (PRCL) and Indian Railways, to provide minimum volumes of 3 million metric tonnes for every Financial Year. The Company has consistently met its volume commitment from Financial Year 2010-11 till date and there is no shortfall on account of minimum traffic guarantees to be paid.

5. Capital and other commitments

(a) Capital commitments on account of Capital expenditure contracted and obligation under Export Promotion Capital Goods ('EPCG') at the end of the reporting period but not recognized as liabilities is as follows

(b) During the year 2005 and prior to AP Moller Maersk group acquiring the complete shareholdings held by the original promoters, SKIL group, the Company had provided commitment of INR 350 million (31 March 2016: INR 350 million;

1 April 2015: INR 350 million) towards consortium lending to a SKIL Group Company, Pipavav Shipyard Limited conditional to fulfillment of certain obligations by Pipavav Shipyard Limited and other parties. This arrangement has been closed and the Company is in the process of seeking discharge from this commitment. IL&FS (lead manager in the consortium) would be releasing the Company of its commitment once it receives a “No Dues certificate” from the Government of Gujarat.

6. Lease

(i) The Company has taken operating leases for office premises, concession agreement with GMB (including lease rental payable as per High Court order. These lease arrangements include both cancellable and non-cancellable leases. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.

(ii) Lease payments of INR 22.04 million (31 March 2016 INR 19.22 million) recognized in Statement of Profit and Loss are shown as “Rent” under Other Expenses in Note 25.

(iii) The future minimum lease payments payable under the said non-cancellable operating lease for rented premises are as follows:

(iv) The Company has given a Total area of 1,111,813 Square Mtr. (31 March 2016: 1,111,813 Square Mtr.; 1 April 2015: 1,111,813 Square Mtr.) of Land on Lease to various customers. The lease is upto 2028 which is the end of the Concession Period.

(v) Operating lease rental income of INR 225.98 million (31 March 2016 INR 198.46 million) recognized in Statement of Profit and Loss is included in Other Operating Revenue in Note 19.

(vi) The future minimum lease payments receivable under the said non-cancellable operating lease for rented premises are as follows:

33. Provisions and Contingent liabilities

Claims against Company not acknowledged as debt aggregates to INR 1,869.30 million (31 March 2016: INR 1,838.07 million; 1 April 2015: INR 1,823.14 million). Provisions made in respect of the same aggregates to INR 365.04 million (31 March 2016: INR 355.04 million; 1 April 2015: INR 355.04 million).

Above claim includes disputed claim with the associate Company, Pipavav Railway Corporation Limited of INR 699.33 million (31 March 2016: INR 699.33 million; 1 April 2015: INR 699.33 million).

Other contingent liabilities in respect of taxation matter not acknowledged as debt aggregates to INR 1.57 million (31 March 2016: INR 14.17 million; 1 April 2015: INR 38.27 million). Provisions made in respect of the same is INR 1.12 million (31 March 2016: NIL; 1 April 2015: INR 8.00 million).

Movement in provisions

Future cash outflows in respect of above are determinable only on receipt of judgments/decisions pending with various authorities/forums and/or final outcome of the matters.

7. Concession Agreement with Government of Gujarat

Pursuant to the Concession agreement with the Government of Gujarat and Gujarat Maritime Board (GMB) dated 30 September 1998, the Company is entitled towards government assistance and accordingly have discharged its liability towards waterfront royalty subject to the conditions led down in the aforesaid agreement.

8. Earnings per share

8.1. Interest in Associate company

Set out below is the associate of the Company as at 31 March 2017 which, in the opinion of the directors, is material to the Company. The entity listed below have share capital consisting solely of equity shares, which is held directly by the Company. The country of incorporation or registration is also their principal place of business, and the proportion of ownership interest is the same as the proportion of voting rights held.

9. Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (“CODM”) of the Company. Managing Director and Chief Financial Officer of the Company are the chief operating decision makers. The Company operates only in one Business Segment i.e. 'Port Services' which primarily includes services such as Marine services, Berth hire, Wharfage, Container Handling, Yard Operations, Stevedorage and the activities incidental thereto within India, hence does not have any reportable Segments as per Indian Accounting Standard 108 “Operating Segments”.

The Company having combined revenue of more than 10% of the total revenue from related parties of amounts to INR 1,185.11 million.

10. Other notes

Dues to Micro and Small suppliers

Under the Micro, Small and Medium Enterprises Development Act, 2006 (‘MSMED Act') which came into force from 2 October 2006, certain disclosures are required to be made relating to Micro, Small and Medium enterprises. On the basis of the information and records available with the Company, the details of outstanding dues to the Micro and Small enterprises as defined in the MSMED Act, 2006 as set out in the following disclosures:

Note : Permitted receipt and permitted payments are not specifically defined in the notification. However, these would include transactions of receipt and payment of Specified Banking Notes as permitted by Reserve Bank of India from time to time. These would include payment for the medical treatment (hospitalization in Government hospitals, medicine etc.), purchase at consumer cooperative stores operated under authorization of Central or State Government, purchase of bus tickets at government bus stands, train tickets at railway station, air tickets at airport, toll charges at National Highway, utility bills, purchase of LPG/gas cylinders, school fees, payment towards any fees, charges, taxes or penalties, payable to the Central or State Government including Municipal and local bodies and fuel purchase etc.

11. First-time adoption of Ind AS

Transition to Ind AS

These are the Company's first financial statements prepared in accordance with Ind AS.

The accounting policies set out in note 2 have been applied in preparing the financial statements for the year ended 31 March 2017, the comparative information presented in these financial statements for the year ended 31 March 2016 and in the preparation of an opening Ind AS balance sheet at 1 April 2015 (the Company's date of transition). In preparing its opening Ind AS balance sheet, the Company has adjusted the amounts reported previously in financial statements prepared in accordance with the accounting standards notified under Companies (Accounting Standards) Rules, 2006 (as amended) and other relevant provisions of the Act (previous GAAP or Indian GAAP). An explanation of how the transition from previous GAAP to Ind AS has affected the Company's financial position, financial performance and cash flows is set out in the following tables and notes.

A. Exemptions and exceptions availed

Set out below are the applicable Ind AS 101 optional exemptions and mandatory exceptions applied in the transition from previous GAAP to Ind AS.

A.1 Ind AS optional exemption

a) Deemed Cost

Ind AS 101 permits a first-time adopter to elect to continue with the carrying value for all of its property, plant and equipment as recognized in the financial statements as at the date of transition to Ind AS, measured as per the previous GAAP and use that as its deemed cost as at the date of transition after making necessary adjustments for de-commissioning liabilities. This exemption can also be used for intangible assets covered by Ind AS 38 Intangible Assets.

Accordingly, the Company has elected to measure all of its property, plant and equipment and intangible assets at their previous GAAP carrying value.

b) Designation of previously recognized financial instruments

Ind AS 101 allows an entity to use the deemed cost in its opening balance sheet for investment in associate company. Accordingly, the Company has elected to apply this exemption for its investment in equity investment.

c) Leases

Appendix C to Ind AS 17 requires an entity to assess whether a contract or arrangement contains a lease. In accordance with Ind AS 17, this assessment should be carried out at the inception of the contract or arrangement. Ind AS 101 provides an option to make this assessment on the basis of facts and circumstances existing at the date of transition to Ind AS, except where the effect is expected to be not material.

The Company has elected to apply this exemption for such contracts/arrangements.

A.2 Ind AS mandatory exceptions

a) Estimates

An entity's estimates in accordance with Ind ASs at the date of transition to Ind AS shall be consistent with estimates made for the same date in accordance with previous GAAP (after adjustments to reflect any difference in accounting policies), unless there is objective evidence that those estimates were in error.

Ind AS estimates as at 1 April 2015 are consistent with the estimates as at the same date made in conformity with previous GAAP. The Company made estimates for Impairment of financial assets based on expected credit loss model in accordance with Ind AS at the date of transition as these were not required under previous GAAP

b) Classifications and measurement of financial assets

Ind AS 101 requires an entity to assess classification and measurement of financial assets on the basis of the facts and circumstances that exist at the date of transition to Ind AS. Consequently, the Company has applied the above assessment based on facts and circumstances exist at the transition date.

B. Reconciliations between previous GAAP and Ind AS (1 April 2015)

Ind AS 101 requires an entity to reconcile equity, total comprehensive income and cash flows for prior periods. The following tables represent the reconciliations from previous GAAP to Ind AS.

(i) Reconciliation of equity as at date of transition (1 April 2015)

C. Notes to first-time adoption :

12. Government Grant

As stated in the Note 2, on transition to Ind AS, the Company has elected to continue with the carrying value of all of its property , plant and equipment recognized as at 1 April 2015 measured as per the previous GAAP and use that carrying value as the deemed cost of the property, plant and equipment. However, in view of the Ind AS Transition Facilitation Group (ITFG) clarification bulletin dated 17 April 2017 the deemed cost of property, plant and equipment as at the transition date has been increased by INR 644.28 million being the unamortized Capital Subsidy/EPCG as on the date of the transition (Refer note 15 and 18). Consequent to the aforesaid adjustment, the Company has provided for incremental depreciation and also recognized deferred income (Refer note 20 and 24) to the extent of INR 55.65 million for the year ended 31 March 2016 on the Government grant.

13. Plant, Property and Equipment

The Company has elected to apply the optional exemption as per Ind AS 101 to measure all of its property, plant and equipment, intangible assets as per previous GAAP at carrying value. In the year 2015-16, the Company based on physical assessment and business performance and financial projections for foreseeable future had reversed impairment provision on its fixed assets. However in the view of Accounting Standard Board (ASB) clarification on 30 June 2016, when an entity elects the deemed cost on the transition date (i.e. carrying values of PPE as per the previous GAAP) as the cost of its PPE, then any accumulated depreciation and provision for impairment under previous GAAP will have no relevance. Consequently, the reversal of impairment provision of INR 604.09 million in the year 2015-16 disclosed as exceptional item under previous GAAP will have no relevance. As a result:

- Gross carrying value of PPE as at 31 March 2016 has decreased by INR 604.09 million. This has also resulted into decrease in depreciation by INR 45.85 million, and thus net impact on PPE as at 31 March 2016 is of INR 558.24 million; and

- Profit and total equity for the year ended 31 March 2016 has decreased by INR 558.24 million (exceptional item: reversal of impairment provision of INR 604.09 million less decrease in depreciation by INR 45.85 million)

14. In case of depreciation expense for the year ended 31 March 2016, the net impact of Ind AS adjustment mentioned in note 41 (C)(1) (increase in depreciation charge on Government Grant by INR 55.65 million) and 41 (C)(2) (decrease in depreciation charge by INR 45.85) is of increase in depreciation expense by INR 9.80 million.

15. Proposed dividend

Under the Indian GAAP, dividends proposed by the board of directors after the balance sheet date but before the approval of the consolidated financial statements were considered as adjusting events. Accordingly, provision for proposed dividend was recognized as a liability. Under Ind AS, such dividends are recognized when the same is approved by the shareholders in the general meeting. Accordingly, the liability for Proposed Dividend including Dividend Distribution Tax of INR 1,110.75 million as at 31 March 2016 (1 April 2015 - NIL) included under provisions has been reversed with corresponding adjustment to retained earnings. Consequently, the total equity increased by an INR 1,110.75 million

16. Remeasurements of post-employment benefit obligations

Under Ind AS, remeasurements i.e. actuarial gains and losses and the return on plan assets, excluding amounts included in the net interest expense on the net defined benefit liability are recognized in other comprehensive income instead of Consolidated Statement of Profit and Loss. Under the previous GAAP, these remeasurements were forming part of the Consolidated Statement of Profit or Loss for the year. As a result of this change, the profit for the year ended 31 March 2016 decreased by INR 4.49 million. There is no impact on the total equity as at 31 March 2016.

17. Deferred Tax

In accordance with the Indian GAAP the 'deferred tax asset' as of 31 March 2015 was not recognized, as they were not considered to be virtually certain of realization as of that date. With the adoption of Ind AS 12 effective 1 April 2016, the accounting standard requires the recognition of 'deferred tax asset' based on reasonable certainty, resulting in a transitional adjustment to the Opening Balance Sheet as of 1 April 2015. Consequently, the deferred tax asset amounting to INR 150.57 million so recognized as at 1 April 2015 has been adjusted against the deferred tax liability during the financial year 2015-16.

Under previous GAAP, MAT is presented as separate line item in financial statement. Whereas under Ind AS same is required to be disclosed under deferred tax. There is no impact on the total equity and profit.

18. Other Comprehensive Income

Under Ind AS, all items of income and expense recognized in a period should be included in Statement of Profit and Loss for the period, unless a standard requires or permits otherwise. Items of income and expense that are not recognized in Statement of Profit or Loss but are shown in the Statement of Profit and Loss as 'other comprehensive income' includes remeasurement of defined benefit plans. The concept of other comprehensive income did not exist under previous GAAP

19. Retained Earnings

Retained earnings as at 1 April 2015 has been adjusted consequent to the above Ind AS transition adjustments.

20 Interest Income

The Company calculates the interest revenue by applying the effective interest method to the amortized cost of the financial asset in accordance with paragraph 5.4.1 (b) of Ind AS 109. Accordingly the Company has calculated the interest revenue by applying the effective interest rate to the gross carrying amount. In previous GAAP there was no concept of effective interest rate.

21. As required under paragraph (10C) of Ind AS 101 the Company has reclassified items that it recognized in accordance with previous GAAP as one type of asset, liability or component of equity, but are a different type of asset, liability or component of equity in accordance with Ind AS.