To the Members of Essar Ports Limited
Your Directors take pleasure in presenting the Thirty-Seventh Annual Report of your
Company together with Audited Accounts for the year ended March 31, 2013.
1. FINANCIAL RESULTS
The summary of consolidated and standalone financial results of your Company for the
year ended March 31, 2013 are furnished below:
||(Rs. in crore)
||For the year ended March 31, 2013
||For the year ended March 31, 2012
||For the year ended March 31, 2013
||For the year ended March 31, 2012
|Profit before exceptional items, finance costs, tax, depreciation and amortisation
|Less: Finance Costs
|Less: Depreciation and amortisation
|Profit / (Loss) before exceptional item and tax
|Less: Exceptional item
|Profit / (Loss) after exceptional item and before tax
|Less: Provision for tax
|Profit / (Loss) before Share of minority interest
|Less: Share of minority interest
|Profit / (Loss) for the year
Your Company proposes a dividend of 5% on the equity shares of the Company.
3. MANAGEMENT DISCUSSION & ANALYSIS
Indian Economy and Infrastructure Sector
The Indian Economys growth is estimated to have moderated to a decadal low of 5%
in FY13 from 6.5% in FY12. The revival of private investment is a key to raise
Indias GDP growth in the coming years. In order to improve the investment climate,
the government during budget for FY14 has announced an investment allowance of upto 15% of
the total investments over Rs. 100 crore in plant and machinery during the two years
ending March 2015. But a substantial and sustainable boost to investment sentiment will
come only when major issues such as mining rights, land acquisition, environmental
clearances, are satisfactorily resolved.
In spite of this slowdown, India has the potential to continue to be one of the fastest
growing economies in the world. Fundamentals of the economy remain strong, backed by
promising growth in external trade. Government expects the GDP growth to revive during
FY14 to about 6% for which there seems to be promise on continued efforts to improve
Indian Economy witnessed moderation in inflation during FY13 and the budget for FY14
expects inflation to further moderate to average 6.5% which will also give enough control
to Reserve Bank of India (RBI) to lower repo rate. If this happens as per plan, it will
further fuel the investment and contribute towards growth of the economy.
The focus of the Government has to be on growth of the infrastructure sector to ensure
that earlier growth targets set in the ports, roads, steel and power sectors are achieved
and the economy gets back to 8% plus growth rate trajectory.
Indian ports have handled a total of 898 million metric tonnes (MMT) of cargo during
FY12 registering a moderate growth of 5% compared to 884 MMT of cargo handled during FY11.
The ports sector in India has grown at a CAGR of 10% in the last 10 years.
However, in the last 2 years, growth in the ports sector has been below its potential
due to imposition of higher export duty on iron ore and higher railway charges for
transportation of iron ore. Growth of the port sector has also been affected by rise in
prices of imported coal. However, these issues are expected to be temporary in nature and
the port sector growth story is expected to remain intact in the long run.
A sharp fall in iron ore exports has reduced the cargo at most of the major ports, even
while the so-called non-major ports, mainly in Gujarat, have bucked the trend. The fiscal
year ending March 2013 saw cargo handled by the 12 major ports shrunk by 2.5 per cent, to
545 million tonnes (mt), from 561 mt in 2011-12. This makes it the lowest in last four
As per Maritime Agenda 2010-20 published by the Ministry of Shipping, port traffic is
expected to reach to 2,495 MMT by 2020 from 850 MMT in 2010. As the economy grows, port
traffic will increase and more investment opportunities will be created in this sector.
Considering high capacity utilisation of existing port assets and expected higher traffic
growth in future, new capacity addition in ports will have good utilisation and the port
sector will remain an attractive investment destination.
In contrast, the total traffic at Gujarat Maritime Board ports reached 293 MMT (million
metric tonne) for year ending March 31, 2013, from 259 MMT in 2011-12, registering a
growth of 13% over the previous year. The privately-operated ports in Gujarat alone
handled over 53 per cent cargo handled by all ports.
Out of the 42 projects targeted for award in 2012-13, 27 port projects involving an
investment of Rs. 6,303.19 crore were bid out to private firms by March 31, 2013. Some of
the bidders have backed out subsequently, which will see those particular projects being
An interesting development in the ports sector is the draft tariff guidelines for
ports. Recently, the Shipping Ministry has released a draft guideline linking tariff to
market forces, which would be applicable to all future projects. The new guidelines will
not strictly ensure market related rates but the Tariff Authority for Major Ports (TAMP)
will still continue to play a major role in determining the rates. As per the new draft
tariff guidelines, upcoming terminals will be exempted from getting their prices regulated
by TAMP and pass over the price setting function to market dynamics.
The Government has announced that it would work towards removing bottlenecks to kick
start over 215 infrastructure projects worth Rs. 7 lakh crore. It is a very positive
announcement and this initiative should help the infrastructure sector overall.
Projects like the Dedicated Freight Corridor are eagerly awaited and would help greatly
in speedier connectivity of the ports to the north Indian hinterland.
To sum up the macro view, we can expect some positive moves and improvement in the
Challenges faced by the port sector
Several port projects have been affected due to procedural delays linked to approvals
and clearances required for the projects. Connectivity of ports is another major challenge
as it is critical for the ports to operate at their optimum capacity. Government
initiatives for development of port connectivity as linkages to the hinterland would
provide necessary boost to the sector.
Essar Ports performance
Your Company is one of the largest private sector port and terminal companies in India
and the year under review has been a good year for the Company.
Essar Ports Board recommends a dividend of 5% of face value of the share (Rs.
0.50 per share) for FY2013, amounting to Rs. 21,39,43,999/-.
Highest ever cargo handled in a year for Essar Ports at 54.52 MMT, up from 43.23
MMT in FY2012, an increase of 26%. For Q4FY13, cargo handled increased by 20% to 14.82 MMT
as against 12.36 MMT in Q4FY12.
Net Profit for FY13 increased 5 times to Rs. 331.9 crore from Rs. 64.0 crore in
FY12. For Q4FY13, the Net Profit was Rs. 92.5 crore up from a loss of Rs. 61.5 crore
Earnings Per Share for FY13 were at Rs. 7.76 as against Rs. 1.56 for FY12.
Revenue for FY13 increased by 27% to Rs. 1437.9 crore from Rs. 1131.1 crore in
FY12. For Q4FY13, the Revenue increased by 32% to Rs. 390.3 crore from Rs. 296.6 crore in
EBITDA for FY13 increased by 27% to Rs. 1159.0 crore from Rs. 913.2 crore in
FY12. For Q4FY13, the EBITDA increased by 26% to Rs. 305.8 crore from Rs. 243.2 crore in
Continued focus on Quality, Health, Safety and Environment resulted in ISO 9001
certification for quality; ISO 14001 certification for Environment and OHSAS 18001
certificates for occupational health and safety for the Companys Vadinar and Hazira
Your Company commissioned the state of the art 16 MMTPA Dry Bulk Terminal at
Paradip, with a fully mechanised ship loading system with a capacity of 5,000 tons per
hour. It is one of the most modern terminals of its type in India, connected to the
stockyard by a 9 km long covered conveyor system.
Your Company also completed the construction of 3 HSD tanks of capacity 180,000
KL during the year at Vadinar.
Operations on track:
Essar Oil completed expansion of 20 MMTPA refinery in June 2012 and accordingly,
the Vadinar terminal is now operating at an enhanced run-rate of 10.5 MMT per quarter
During FY13, your companys terminals handled a record 683 ships, as
against 514 ships handled for the corresponding previous year.
Your Companys commitment towards Quality, Health, Safety & Environment
was highlighted with your Company winning the following awards during the year:
Vadinar terminal continued to be an award winning asset for its world class HSE
practices. Awards won during the year include India Shipping Summit, Gujarat Star Awards
Hazira terminal won the HSE award from Greentech foundation and Best coal port
performer award in the Indian Coal Markets conference.
Progress of the project under implementation:
Progress of the construction of a 20 MMTPA coal berth at Salaya is as per plan.
The project is 59% complete. Piling and Decking works of the Jetty and Approach trestle to
Jetty have been completed. Bund Work has started. Ship loader erection is completed and
Unloaders erection is under progress. Stackyard is operational with two stacker cum
reclaimers and Conveyor fabrication is under progress.
Construction of a deep draft coal terminal at Paradip is expected to commence
during FY14. Environment clearance and forest clearance have been received and the project
is expected to start once the land for construction is handed over by Paradip Port Trust.
Risk and Concerns
Implementation and operation of port and terminal facilities are dependent on various
regulatory approvals and government policies. Changes in macro economic factors like
inflation, interest rate, world trade and natural catastrophes also play an important role
in the trade of goods and cargo.
Any adverse change in the above may affect the performance of your Company. Your
Company periodically reviews the risks associated with the business and takes steps to
mitigate and minimise the impact of risks.
4. QUALITY, SAFETY AND ENVIRONMENT
Your Company, in order to ensure highest standard of safety, has implemented and
initiated various measures with respect to Quality, Safety and Environment Management
Systems. The initiatives by your Company have been rewarded with several recognitions.
Some of the key recognitions are as follows:
Vadinar Oil Terminal Limited (VOTL) has been certified by British Standard for
Occupational Health & Safety Advisory Services (OHSAS) for, Zero Gas
Release, Zero Fire Incident and Zero Loss Time Accident or No Loss
VOTL completed 2,380 Lost Time Injury Free days during the year under review.
In line with Environment Management initiatives, VOTL successfully achieved the
Zero Spill / No Spill, target and Reduction of Emission.
An Annual Audit was also successfully carried out for the following ISO
|- ISO 9001:2008
||Quality Management System by ABS;
|- ISO/TS 29001:2007 for Quality Management
||Petroleum Sector by ABS
|- ISO 28000:2007
||for Security Management Systems by ABS
|- ISO 14001:2004
||Environment Management System by Det Norske Veritas(DNV);
|- ISO 9001:2008
||Quality Management System by DNV;
|- ISO 18001:2007
||OHSAS by DNV;
Essar Bulk Terminal Limited (EBTL) also achieved Zero Loss Time Injury during
EBTL has been certified for the following :
|- ISO 18001:2007
||OHSAS by IRQS for health & Safety
|- ISO 14001:2004
||Environment Management System by IRQS
|- ISO 9001:2008
||Quality Management System by IRQS
The terminal of EBTL also has the Navigation Safety at Ports Committee (NSPC) approval
from the Director General of Shipping, Mumbai.
5. INTERNAL CONTROL FRAMEWORK
Your Company conducts its business with integrity and high standards of ethical
behaviour and in compliance with the laws and regulations that govern its business. Your
Company has a well-established framework of internal controls in its operations, including
suitable monitoring procedures. In addition to an external audit, the financial and
operating controls of your Company at various locations are reviewed by Internal Auditors,
who report their observations to the Audit Committee of the Board.
6. HUMAN RESOURCE
Human resources have always been the key to success of your Companys business. A
balance of internal and external talent was maintained to ensure right skills are
available to initiate project activities. A large number of fresh talent comprising
engineers and management graduates were deployed to nurture future Essar Ports facilities.
At the existing ports, special emphasis was laid on the training of employees with a
combination of "On the job and Off the job" training. Your Company has
introduced technology-enabled HR practices in Performance Management and Training to
streamline and strengthen these practices.
7. INFORMATION TECHNOLOGY
Your Company successfully implemented SAP in its financial and related systems. For dry
bulk as well as oil terminals, systems have been implemented to capture end-to-end
workflow covering all activities from pre-arrival intimations to actual departure of
vessels. Expected berth occupancy is being plotted thereby optimising the berth
utilisation and increasing berth efficiency. Various dashboard reports have been
implemented in the system for berth performance and resource monitoring.
As on March 31, 2013, the following were the subsidiaries of your Company:
1. Vadinar Oil Terminal Limited (VOTL)
2. Vadinar Ports & Terminals Limited (a subsidiary of VOTL)
3. Essar Bulk Terminal Limited (EBTL)
4. Essar Bulk Terminal Paradip Limited (a subsidiary of EBTL)
5. Essar Bulk Terminal (Salaya) Limited
6. Essar Paradip Terminals Limited
7. Essar Dredging Limited
In accordance with the general circular issued by the Ministry of Corporate Affairs,
Government of India, the Balance Sheet, Profit & Loss Account and other documents of
the subsidiary companies are not attached with the Balance Sheet of the Company. The
Company will make available the Annual Accounts of the subsidiary companies and the
related information to any member of the Company who may be interested in obtaining the
same. The annual accounts of the subsidiary companies will also be kept for inspection at
the Registered Office of the Company and that of the respective subsidiary companies. The
Consolidated Financial Statements presented by the Company include the financial results
of the subsidiary companies.
In accordance with the provisions of the Companies Act,1956 and the Articles of
Association of the Company, Shri. Dilip J. Thakkar, and Shri. T. S. Narayanasami retire at
the ensuing Annual General Meeting of the Company and being eligible, offer themselves for
Shri. P. K. Srivastava has been appointed as an Additional Director on October 16,
2012. The Company has received a notice from a member proposing the appointment of Shri.
Srivastava as a Director of your Company.
Shri. N. C. Singhal, Dr. Jose Paul and Shri. Michael Pinto have been appointed as an
Additional Directors on July 18, 2013. The Company has received notice from members
proposing the appointment of Shri. N. C. Singhal, Dr. Jose Paul and Shri. Michael Pinto as
Directors of your Company.
Your Board would like to inform the members about the sad demise of Shri. K. V.
Krishnamurthy who left for heavenly abode on January 16, 2013 after being associated with
your Company as Director for about 4 years. Your Board places on record its appreciation
for the invaluable contributions made by Shri. Krishnamurthy during his tenure as
Shri. Anshuman Ruia resigned from the directorship of your Company on October 16, 2012.
Your Board also place on record their appreciation for the invaluable contribution made by
Shri. Ruia in the growth and progress of the Company during his tenure as Director.
Your Companys Auditors, Messrs. Deloitte Haskins & Sells, Chartered
Accountants, Ahmedabad, the Statutory Auditors of the Company hold office until the
conclusion of the ensuing Annual General Meeting and are eligible for re-appointment.
The Company has received a letter from them to the effect that their appointment, if
made, would be within the prescribed limits under Section 224(1B) of the Companies Act,
1956 (the Act) and that they are not disqualified for re-appointment within the meaning of
Section 226 of the said Act.
11. CORPORATE GOVERNANCE
The Company has complied with the requirements under the Corporate Governance reporting
system. The disclosures as required therein have been furnished in the Annexure to the
Directors Report under the head "Corporate Governance".
12. PARTICULARS REQUIRED UNDER THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT
OF THE BOARD OF DIRECTORS) RULES, 1988
This does not apply to your Company as the Ports & Terminals industry is not
included in the Schedule to the relevant rules.
|(1) Earned (including freight, charter, hire earnings, interest income, etc.)
||: Rs. 603.35 lacs.
|(2) Used (including loan repayments, interest, operating expenses, etc.)
||: Rs. 1,526.91 lacs.
13. PARTICULARS OF EMPLOYEES
Information as per Section 217(2A) of the Companies Act, 1956 read with the Companies
(Particulars of Employees) Rules, 1975, as amended, is given in the Annexure forming part
of this Report. However, as per the provisions of Section 219(1)(b)(iv) of the said Act,
the Report and Accounts are being sent to all the shareholders of the Company excluding
the statement of particulars of employees under u/s 217(2A) of the said Act. Any
shareholder interested in obtaining a copy of this statement may write to the Company
Secretary for the same at the Registered Office of the Company.
14. STATEMENT OF DIRECTORS RESPONSIBILITIES
Pursuant to the requirement of Section 217(2AA) of the Companies Act, 1956, the Board
of Directors hereby state that:
a) in the preparation of the annual accounts, the applicable accounting standards have
been followed and there have been no material departures;
b) the Directors have selected such accounting policies and applied them consistently
and made judgments and estimates that are reasonable and prudent so as to give a true and
fair view of the state of affairs of the Company at the end of the financial year and of
the profit or loss of the Company for that period;
c) the Directors have taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of this Act for safeguarding the
assets of the Company and for preventing and detecting fraud and other irregularities; and
d) the Directors have prepared the annual accounts on a going concern basis.
15. APPRECIATION AND ACKNOWLEDGEMENTS
Your Directors express their sincere thanks and appreciation to all the employees for
their commendable teamwork and contribution to the growth of the Company. Your Directors
also thank its bankers and other business associates for their continued support and
co-operation during the year.
||For and on behalf of the Board
|July 18, 2013