Great Eastern Shipping Company

1.  Contingent Liabilities :                             RS. IN LAKHS
 
 SR.  PARTICULARS                               CURRENT       PREVIOUS
 NO                                             YEAR          YEAR
 
 (a)  Guarantees given by banks counter 
      guaranteed by the Company.                 26712          43250
 (b)  Guarantees by bank given on behalf of 
      a subsidiary company/joint venture.          409            775
 (c)  Guarantees given to banks/shipyard on 
      behalf of subsidiaries.                   128192         132416
 (d)  Sales Tax demands under BST Act for 
      the years 1995-96,1996-97,1997-98,1998-99
      ,2001-02,                                    746            646
      against which the Company has 
      preferred appeals.
 (e)  Lease Tax liability in respect of a 
      matter decided against the Company, 
      against which the                           1740           1740
      Company has filed a revision petition in 
      the Madras High Court.
 f)   Possible obligation in respect of matters 
      under arbitration/appeal.                     59             59
 (g)  Demand from the Office of the Collector & 
      District Magistrate, Mumbai City and from    434            434
      Brihanmumbai Mahanagarpalika towards 
      transfer charges for transfer of 
      premises not acknowledged by the Company.
 
 2.  Share Capital:
 
 Under orders from the Special Court (Trial of Offences relating to
 Transactions in Securities) Act, 1992, - the allotment of 2,85,922
 (Previous Year 2,91,682) right equity shares of the Company have been
 kept in abeyance in accordance with section 206A of the Companies Act,
 1956, till such time as the title of the bonafide owner is certified by
 the concerned Stock Exchanges. An additional 40,608 (Previous Year
 40,608) shares have also been kept in abeyance for disputed cases in
 consultation with the Bombay Stock Exchange. During the year 5760
 (Previous Year Nil) equity shares have been allotted out of the
 shares kept in abeyance.
 
 3.  Warrants against Share Capital:
 
 The Company had on August 09,2007, allotted 50,05,000 convertible
 warrants to certain Promoters and Non Executive Directors, pursuant to
 the resolution passed by the shareholders at their meeting held on July
 26,2007, at a price of Rs. 312.75 per share. Each warrant was
 convertible into one Equity Share of the face value of Rs. 10/-, at the
 option of the warrant holders, at any time prior to expiry of 18 months
 from the date of allotment of the warrants.
 
 Out of the 50,05,000 warrants, 10,000 warrants were converted into
 Equity Shares. Due to the unfavourable market conditions, which did not
 justify conversion of warrants, the balance 49,95,000 warrants were not
 converted. Accordingly the said warrants stood cancelled and the amount
 of Rs. 1598 lakhs being the amount received upfront from the warrant
 holders @ Rs. 32/- has been forfeited and credited to capital reserve.
 
 4.  Secured Loans:
 
 Term loans from banks includes a syndicated loan of USD 53 million from
 a consortium of banks against security by way of assignment of bank
 deposit of USD 2.5 million and a financial covenant inter-alia, to
 maintain unencumbered assets of value not less than 1.25 times the said
 borrowing.
 
 5.  Fixed Assets:
 
 (a) Estimated amount of contracts, net of advances paid thereon,
 remaining to be executed on capital account and not provided for - Rs.
 236883 lakhs (Previous Year Rs.211838 lakhs).
 
 (b) The amount of exchange loss on account of fluctuation of the rupee
 against foreign currencies and gains/(losses) on hedging contracts
 (including on cancellation of forward covers), relating to long term
 monetary items for acquisition of depreciable capital assets and
 gains/(losses) on forward contracts for hedging capital commitments for
 acquisition of depreciable assets, added to the carrying amount of
 fixed assets during the year is Rs. 54023 lakhs. Corresponding gain
 relating to the previous year deducted from the carrying amount of
 fixed assets during the year pursuant to the option exercised by the
 Company vide Ministry of Corporate Affairs notification dated March
 31,2009 is Rs.13265 lakhs.
 
 (c) The deed of assignment in respect of the Companys Leasehold
 property at Worli is yet to be transferred in the name of the Company.
 
 (d) The Company has recognised an impairment of Rs. 70 crores in
 respect of one dry bulk carrier during the year under review in
 accordance with Accounting Standard (AS) 28 consequent to a sharp fall
 in the recoverable value of the said asset. In the opinion of the
 management, the book value of this asset, after correcting for the
 impairment recognised, is aligned closer to the current market price
 and also broadly reflected the earnings expectations from it.
 
 6.  Cash & Bank Balance:
 
 Balances with scheduled banks on deposit account include margin
 deposits of Rs. 201 lakhs (Previous Year Rs.l lakh) placed with the
 bank, under a lien against the guarantees issued by the said bank.
 Balance with other banks include a deposit of Rs. 1268 lakhs (Previous
 Year Rs. 1003 lakhs) which is under a lien as security against a
 syndicated loan.
 
 7.  Investments:
 
 The company has vide Memorandum of Undertaking dated March 31,2009
 agreed to disinvest its entire shareholding in CGU Logistics Ltd., a
 joint venture company. The anticipated loss on sale of the investments
 of Rs. 444 lakhs has been provided for in the profit & loss account for
 the year.
 
 8.  The balances of debtors and creditors are subject to confirmation.
 
 9.  Current Liabilities:
 
 According to the information available with the Company regarding the
 status of the suppliers as defined under the Micro, Small and Medium
 Enterprises Development Act, 2006, amount overdue as on March 31,2008
 to Micro, Medium and Small Enterprises on account of principal amount
 together with interest, aggregate to Rs. Nil. (Previous Year Rs.
 Nil).
 
 10.  Deferred tax:
 
 Pursuant to the introduction of Section 115VA under the Income Tax Act,
 1961, the Company has opted for computation of its income from
 shipping activities under the Tonnage Tax Scheme. Thus income from the
 business of operating ships is assessed on the basis of the deemed
 Tonnage Income of the Company and no deferred tax is applicable to such
 income as there are no timing differences. The timing difference in
 respect of the non-tonnage activities of the Company are not material,
 in view of which provision for deferred taxation is not considered
 necessary.
 
 11.  Provisions:
 
 The Company has recognised the following provisions in its accounts in
 respect of obligations arising from past events, the settlement of
 which is expected to result in an outflow embodying economic benefits.
 
 12.  The Company has provided a performance guarantee in favour of a
 party which has awarded a contract to the Companys wholly owned
 subsidiary which would require it to assume the benefits and costs of
 this contract in the event the subsidiary is not able to fulfill the
 same, in which event, the Company does not expect any net liability or
 outflow of resources.
 
 13.  Change in Accounting Policy:
 
 The Ministry of Corporate Affairs vide notification dated March 31,2009
 issued the Companies (Accounting Standards) Amendment Rules, 2009,
 inserting paragraph 46 in Accounting Standard (AS) 11 The Effect of
 Changes in Foreign Exchange Rates. Pursuant thereto, the Company has
 exercised the option available under the said paragraph 46
 retrospectively with effect from April 1, 2007 in respect of all long
 term foreign currency monetary items covered under the notification.
 Accordingly, losses arising from the effect of changes in the foreign
 exchange rates on repayment of loans and revaluation of the outstanding
 foreign currency loans including currency swaps relating to acquisition
 of depreciable capital assets amounting to Rs. 54023 lakhs for the year
 ended March 31,2009 are added to the cost of such assets. The
 corresponding foreign exchange gains of Rs. 12260 lakhs (net of
 depreciation of Rs.1005 lakhs) for the year ended March 31,2008 on
 monetary items relating to acquisition of depreciable capital assets
 have been reversed from the General Reserve and deducted from the cost
 of such assets. The Company did not have any other long term monetary
 assets and liabilities.
 
 In the previous year, the effects of changes in foreign exchange rates
 on repayment of loans and revaluation of the outstanding foreign
 currency loans including currency swaps relating to acquisition of
 depreciable capital assets were accounted in the Profit and Loss
 account.
 
 During the year, the Company has with effect from April 1,2008 adopted
 the principles enunciated in Accounting Standard (AS) 30, Financial
 Instruments: Recognition and Measurement in respect of hedge
 accounting and recognition and measurement of derivatives, in
 accordance with the recommendation of the Institute of Chartered
 Accountants of India.  Accordingly, forward exchange contracts entered
 into to hedge foreign currency risk of firm commitments or highly
 probable forecast transactions, forward rate options, interest rate
 swaps and commodity future contracts which have been designated as part
 of the hedging relationship and which qualify as effective hedges have
 been accounted in accordance with the principles of hedge accounting
 and the (gains) or losses on such designated hedging instruments
 amounting to Rs. 36002 lakhs is recorded in the Hedging Reserve
 Account. In the previous year, exchange differences in respect of
 foreign currency derivative contracts including forward exchange
 contracts entered into to hedge foreign currency risk of firm
 commitments or highly probable forecast transactions, forward rate
 options, interest rate swaps were accounted for on settlement alongwith
 the cash flow from the hedged transaction/commitment. There is no
 impact on the profit and loss account for the year consequent to the
 change.
 
 Further, in accordance with the principles of hedge accounting,
 cancellation loss of Rs. 511 lakhs has been debited to Hedging Reserve
 Account until maturity of the underlying. In the previous year such
 gain and losses were accounted in the statement of profit and loss on
 cancellation. Consequently the profit for the year is higher to that
 extent.
 
 The Hedging Reserve account as at March 31, 2009 has a net debit
 balance of Rs. 36513 lakhs.
 
 Consequent to the change in the aforesaid accounting policies, fixed
 assets as at March 31,2009 are higher by Rs. 40427 lakhs, current
 liabilities are higher by Rs. 36312 lakhs, depreciation for the year is
 higher by Rs. 2253 lakhs, the profit for the year is higher by Rs.
 53197 lakhs and the Reserves as at March 31, 2009 are higher by Rs.
 4423 lakhs.
 
 (vi) Basis used to determine expected rate of return on assets:
 
 Expected rate of return on investments is determined based on the
 assessment made by the Company at the beginning of the year on the
 return expected on its existing portfolio since these are generally
 held to maturity, along with the estimated incremental investments to
 be made during the year.
 
 (vii) General description of significant defined plans:
 
 Gratuity Plan:
 
 Gratuity is payable to all eligible employees of the Company on
 superannuation, death, permanent disablement and resignation in terms
 of the provisions of the Payment of Gratuity Act or as per the
 Companys Scheme whichever is more beneficial. Benefit would be paid at
 the time of separation based on the last drawn base salary.
 
 Pension Plan:
 
 Under the Companys Pension Scheme for the whole-time Directors as
 approved by the Shareholders, all the wholetime Directors are entitled
 to the benefits of the scheme only after attaining the age of 62 years,
 except for retirement due to Physical disability, in which case, the
 benefits shall start on his retirement. The benefits are in the form of
 monthly pension @ 50% of his last drawn monthly salary subject to
 maximum of Rs.75 lakhs p.a. during his lifetime. If he predeceases the
 spouse, she will be paid monthly pension @ 50% of his last drawn
 pension during her lifetime. Benefit also include reimbursement of
 medical expense for self and spouse, overseas medical treatment upto
 Rs. 50 lakhs per illness, office space including telephone in the
 Companys office premises and use of Companys car including
 reimbursement of drivers salary and other related expenses during his
 lifetime.
 
 Leave Eancashment:
 
 Eligible employees can carry forward and encash leave upto
 superannuation, death, permanent disablement and resignation subject to
 maximum accumulation allowed at 15 days for employees on CTC basis and
 at 300 days for other employees. The Leave over and above 15 days for
 CTC employees and over 300 days for others is encashed and paid to
 employees as per the balance as on June 30 every year. Benefit would be
 paid at the time of separation based on the last drawn basic salary.
 
 14.  Hedging Contracts:
 
 The Company uses foreign exchange forward contracts, currency &
 interest rate swaps and options to hedge its exposure to movements in
 foreign exchange rates. The use of these foreign exchange forward
 contracts, currency & interest rate swaps and options reduces the risk
 or cost to the Company and the Company does not use the foreign
 exchange forward contracts, currency & interest rate swaps-and options
 for trading or speculation purposes.
 
 The Company also uses commodity futures contracts for hedging the
 exposure to bunker price risk.
 
 15.  The above mentioned derivative contracts having been entered into
 to hedge foreign currency risk of firm commitments and highly probable
 forecast transactions and the interest rate risk, have been designated
 as hedge instruments that qualify as effective cash flow hedges. The
 mark-to-market loss/(gain) on the foreign exchange derivative contracts
 outstanding as on March 31,2009 amounting to Loss of Rs. 36513 lakhs
 has been recorded in the Hedging Reserve Account as on March 31,2009.
 The corresponding mark-to-market loss of Rs.5503 lakhs in the previous
 year was recognised only on settlement.
 
 16.  Segment Reporting:
 
 The Company is only engaged in shipping business and there are no
 separate reportable segments as per Accounting Standard AS -17 Segment
 Reporting.
 
 17.  Information pursuant to para 4D of Part II of Schedule VI to the
 Companies Act, 1956 has not been given in view of exemption granted by
 the Department of Company Affairs, vide Order No. 46/34/2009-CL-lll
 dated March 26, 2009.
 
 18.  Previous Years figures have been regrouped wherever necessary to
 conform to current years classification.