Companies & Industry »Directors' Report
Sical Logistics Ltd - Directors' Report

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Code: SICAL
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Your directors are pleased to present this sixtieth annual report of your company and the audited financial statements for the year ended 31 March 2015.

FINANCIAL REVIEW

The financial results for the year ended 31 March 2015 are summarized below:-

Year ended 31 March 2015 2014
Sales and other income 63954 60174
Profit before interest, depreciation and tax 11248 8527
Interest 6442 5808
Cash profit 4806 2719
Depreciation 2250 1669
Profit before tax 2556 1050
Provision for tax -163 (55)
Exceptional Items
Prior period items (38)
Net profit 2719 1067
Earnings per share (EPS) in Rs. (after exceptional items) 4.89 1.92

DIVIDEND

The directors have decided to conserve the resources for the company`s capital expenditure to be incurred for the ongoing surface mining and overburden removal contracts and for any new business that are on the anvil.

RESERVES

Debenture redemption reserve of Rs.5 crores has been created in accordance with the provisions of Rule 18(7) of the Companies (Share Capital and Debenture) Rules, 2014.

FRESH ISSUE OF SHARES / DEBENTURES

During the year under review, the Company has not issued any shares / securities which are convertible into equity shares.

FIXED DEPOSITS

The Company has not invited any deposits from public. There are no matured and unclaimed deposits as on 31 March 2015.

UNCLAIMED DIVIDENDS

Pursuant to the provisions of Section 205A of the Companies Act, 1956, any dividend amount which remains unpaid or unclaimed for a period of 7 years will be transferred to the Investor Education and Protection Fund of the Central Government. Unclaimed dividends pertaining to the financial year 2001-02 which was distributed in 2007 and remaining unclaimed in the account had to be transferred upon expiry of 7 years period. Accordingly an amount of Rs.11,28,707/= was paid to the Investor Education and Protection Fund Account of the Central Government on 28th May, 2014.

PERFORMANCE

The company`s revenues for 2014-15 stood at Rs. 63954 lakhs as against Rs.60175 lakhs in the previous year while profit after tax was Rs.2719 lakhs as against Rs.1067 lakhs in the previous fiscal. Profit before interest, depreciation and tax for the fiscal 2014-15 was Rs.11248 lakhs as against Rs.8528 lakhs in the previous year.

The performance of various divisions of the company during the year under review is summarized below.

Port Handling

This division operates in ports like Chennai, Ennore, Tuticorin, Visakhapatnam and Mangalore. An entry has been made in the port of Kandla during the financial year 2014-15. Mainly this division performs stevedoring operations for movement of coal for TNEB and for various other private sector customers. Cargoes handled at the various ports vary from Coal, Dolomite, Limestone and Steel products. The total volume handled at the various ports during FY2014-15 was 26.33 million MT as against 26.01 million MT in FY 2013-14.

Customs House Agency

This division acts as an agency for clearing and forwarding goods through customs for imports and exports. This division handled 18.95 million MTs (16.34 million MTs in the previous year) of bulk cargo and 3258 TEUs (4025 TEUs in the previous year) of containerized cargo during the year under review. The cargoes handled vary from Coal, Project Cargo, Capital Goods, Cement, Pulses, Non Ferrous Alloys and Steel in various forms.

Ship Agency

This division facilitates and ensures quick turnaround of the ships at berth at all major ports. During the year under review, the division handled 109 vessels (121 vessels in the previous year) at various ports in the country handling both dry and liquid bulk.

Road Logistics and Cold Chain

This division improved its performance during the fiscal under review by adding new clientele to its fleet catering to the construction, steel, fertiliser and chemical industries. The division has selected high profile customers with consistent operation yielding a reasonable margin for its operation as the sector is highly unorganised. This division handled a cargo of 4.31 million MT of cargo during the year. This division also provides support in the integrated logistics sector for movement of coal and surface mining projects. Apart from this, the Company operates cold chain refrigerated vehicles for the movement of food items currently in Chennai, Bangalore and Hyderabad. Propose to increase the operation on pan-India basis.

Goodwill Travels Division

This division carries out rail and airline ticketing for domestic as well as international and booking of worldwide hotels and tour packages, car rentals, online visas, and travel insurances apart from operating as an authorized dealer for full fledged money changing business. This division is also engaged in organized full fledged packaged tours. During the year under review the division has operated full fledged packaged tours to Thailand, Sri Lanka and USA.

New Initiatives

Surface mining and Overburden Removal contracts

The Company has commenced surface mining and transportation contracts at Bharatpur and Lajukura Coal mines of Mahanadhi Coal Fields during the year. Bharatpur contract is for 3 years and Lajukura contract is for 2 years.

The Company along with Saumya Mining Limited had also participated and successful in the tenders floated by Mahanadhi Coalfields for overburden removal and subsequent transportation at Samleshwari and Lajkura mines for a period of 3 years and 5 years respectively. A joint venture company viz. Sical Saumya Mining Limited with a participation of 65:35 has been incorporated to carryout the above said contract. These projects are in initial stages and execution is expected to commence in the coming months.

Project Cargo and Car movement

The company is contemplating to venture into carrying project cargoes and cars through coastal movement.

SUBSIDIARIES AND JOINT VENTURES

As on 31st March, 2015, the Company has the following subsidiaries and joint venture companies

Subsidiaries

1. Sical Infra Assets Limited

2. Sical Multimodal and Rail Transport Limited

3. Sical Iron Ore Terminals Limited

4. Sical Iron Ore Terminal [Mangalore] Limited

5. Sical Adams Offshore Limited

6. Norsea Offshore India Limited

7. Bergen Offshore Logistics Pte Ltd [Overseas subsidiary]

Joint Ventures

1. PSA Sical Terminals Limited

The company had divested its entire stake effective September, 2014 in the joint venture company Ennore Automotive Logistics Limited.

PERFORMANCE / DETAILS OF SUBSIDIARIES / JOINT VENTURES

The performance on the Company`s key subsidiaries and joint ventures are furnished in the succeeding paragraphs.

1. Sical Infra Assets Limited

Sical Infra Assets Limited is the infrastructure holding company currently having Sical Multimodal and Rail Transport Limited comprising of container rail and container freight station divisions.

Sical Multimodal and Rail Transport Limited

This Company operates container rail as well as CFS. CFS business is continuing its operations at Chennai and Tuticorin. The total volume handled during 2014-15 was 107973TEUs as against 123705 TEUs in the previous year.

Container Rail business operates own rakes pan India under category 1 licence. The Company handled 16,836 TEUs during the year on multiple sectors. The company also handled export cargo during the year in its pursuit to engage in the EXIM business. The project activities relating to development of its own rail terminals ICD/CFS at Chennai and Bangalore are in progress. The Company has a JV with 50% stake in Sical Sattva Rail Terminals Private Limited which operates the Melpakkam terminal.

The overall revenue for the company during the financial year was Rs.20352 lakhs and Profit was at Rs.789 lakhs, as against the profit of Rs.1464 lakhs in the previous year. Since the Strategic Alliance Management Contract with CWC at Vizag was completed in November 2013 for the CFS division, the performance of this division was affected. Efforts are on to establish a CFS facility at Vizag on leased land and is expected to be functional during the current financial year. Further the real turnaround for this business will start once the own rail terminals at Chennai and Bengaluru become operational.

2. Sical Iron Ore Terminals Ltd

Sical Iron Ore Terminals Limited is non operational due to ban on iron ore exports and an investment of Rs. 594 crores as at 30 Jun 15 is lying idle. Our efforts with Kamarajar Port to convert the terminal into productive one is progressing and we expect to resolve the issue during the course of the current financial year

3. Sical Iron Ore Terminal [Mangalore] Limited

Sical Logistics Limited has entered into a Concession Agreement with the New Mangalore Port Trust for the setting up of mechanized Iron Ore handling facilities at the deep draft multipurpose berth of New Mangalore Port on BOT basis. This project is also impacted for the same reasons that affect SIOT, Ennore project, explained above.

4. Norsea Offshore India Limited

Norsea Offshore India Limited, a wholly owned subsidiary of the Company now owns and operates a Cutter Suction Dredger “SICAL Portofino”. The dredger is currently deployed in Gopalpur port for dredging activities.

5. Sical Adams Offshore Limited

This company was incorporated in the year 2012 and is exploring the possibility of entering into the offshore segment.

6. PSA Sical Terminals Ltd

PSA SICAL Terminals Limited, a joint venture with Port of Singapore Authority operates a container terminal at Tuticorin. In 2014-15, the company handled container volumes of 502913 TEUs as against 507294 TEUs in the previous year. The operation of this joint venture company was affected on account of the mismatch in the royalty being paid to the Port authorities and the tariff charged to customers as per the rules of Tariff Authority for Major Ports. The Company is in the process of resolving the tariff issue.

SUBSIDIARY COMPANIES FINANCIAL STATEMENTS

As per Section 129[3] of the Companies Act, 2013 read with Rule 5 of Companies [Accounts] Rules, 2014, the Company has prepared consolidated financial statement and the same is being laid before the members for their approval. Also a separate statement containing the salient features of the financial statement of the subsidiaries and joint ventures in Form AOC-1 is attached along with the financial statements.

AWARDS AND ACCREDITATIONS

During the year under review,

• 2nd Runner up in Haulier League Prize for 2013-14 by Shell India Markets

• Transporter of the year 2014-15 award from Tata Chemicals Limited

• Best Performance Award for the year 2013-14 from Chennai Port Trust for highest tonnage handled by a Stevedore during the year 2013-14 and for record loading of cargos on to vessels on a single day on two occasions during the year 2013-14.

• Certificate of appreciation from New Mangalore Port Trust for highest discharge of coal cargo in 24 hours in a day.

DIRECTORS

The Company has 08 [Eight] Directors consisting of 04 [four] independent directors 03 [three] non-executive directors and 01 [one] executive director as on 31st March, 2015.

INDEPENDENT DIRECTOR

In terms of the definition of Independence of Directors as prescribed under Clause 49 of the Listing Agreement entered with Stock Exchanges and Section 149[6] of the Companies Act, 2013 and based on the confirmation / disclosures received from the Directors, the following Non-Executive Directors are Independent Directors

1. Mr. H.R. Srinivasan

2. Mr. Harady Rathnakar Hegde

3. Mr. S. Ravinarayanan

4. Mr. Sudhir V Kamath

APPOINTMENT OF WOMAN DIRECTOR

In terms of the provisions of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a Company shall have at least one Woman Director on the Board of the Company. Ms. Shweta Shetty was appointed as an additional director on 30th March, 2015 and appointed Director effective 08th July, 2015 pursuant to the approval of the shareholders through postal ballot.

MANAGING / WHOLE-TIME DIRECTOR

Mr. R. Ram Mohan has been serving as the Managing Director since 26th September, 2011 with the approval of the shareholders. Mr. R. Ram Mohan was elevated to the position of Chairman of the Board effective from 04th May, 2015.

Mr. Kush S Desai was appointed as whole-time director with the designation as Joint Managing Director w.e.f. 04th May, 2015 by the Board and his appointment has been duly approved by the members by way of postal ballot.

Except Mr. Kush S. Desai all other directors are either independent or non-executive.

APPOINTMENT / RESIGNATION OF DIRECTORS

Mr. A.S. Sundaresha resigned from the directorship effective 26th September, 2014.

Mr. S. Ravinarayanan was appointed as an additional director effective 26th September, 2014 and was appointed Director effective 31st March, 2015 pursuant to the approval of the members by way of postal ballot.

Ms. Shweta Shetty was appointed as an additional director on 30th March, 2015 and appointed Director effective 08th July, 2015 pursuant to the approval of the shareholders through postal ballot.

Mr. Sudhir Kamath was appointed as additional director on 30th March, 2015 and appointed Director effective 08th July, 2015 pursuant to the approval of the shareholders through postal ballot.

APPOINTMENT OF CHAIRMAN

Mr. R. Ram Mohan was elevated to the position of Chairman of the Board by the Directors effective 04th May, 2015.

APPOINTMENT / RESIGNATIONS OF THE KEY MANAGERIAL PERSONNEL

Mr. R. Ram Mohan, Managing Director [until 04th May, 2015], Mr. Kush S Desai [w.e.f. 04th May, 2015], Mr. Sumith R Kamath, Group CFO and Mr. V. Radhakrishnan, Company Secretary are the Key Managerial Personnel as per the provisions of the Companies Act, 2013.

DIRECTOR RETIRING BY ROTATION

In terms of Section 152 of the Companies Act, 2013, Mr. Sunil Deshmukh being longest in the office shall retire at the ensuing AGM and being eligible for re-appointment offers himself for the re-appointment.

NUMBER OF MEETINGS OF THE BOARD

The Board met 08 times during the FY 2014-15 viz. 27th May, 2014, 11th August, 2014, 25th August, 2014, 26th September, 2014, 29th October, 2014, 13th February, 2015, 24th March, 2015 and 30th March, 2015. Detailed information on the meetings of the Board are included in the report on Corporate Governance which forms part of this Directors Report.

Additionally several committee meetings were held including Audit Committee which met 04 [four] times during the year.

Committees of the Board

The Company has several committees which have been established as a part of the best corporate governance practices and are in compliance with the requirements of the relevant provisions of applicable laws and statutes.

The company has the following Committees of the Board.

• Audit Committee

• Stakeholders Relationship Committee

• Corporate Social Responsibility Committee

• Nomination and Remuneration Committee

• Risk Mitigation Committee

The details with respect to the composition, powers, roles, terms of reference of relevant committees are given in detail in the Report on Corporate Governance which forms part of this Directors Report.

Corporate Social Responsibility Committee

In compliance with Section 135 of the Companies Act, 2013 read with the Companies [Corporate Social Responsibility Policy] Rules, 2014, the Company has established Corporate Social Responsibility [CSR] Committee and statutory disclosures with respect to the CSR Committee and an Annual Report on CSR Activities forms part of this Report as Annexure 1.

Performance Evaluation of the Board

In accordance with Section 178 of the Companies Act, 2013 and Clause 49 [IV] of the Listing Agreement the Company has laid down a Nomination and Remuneration Policy. Further to this, a policy for the manner in which formal annual evaluation of the Directors, the Board and Board level Committees were devised by the committee.

The performances of the members of the Board, the Board level committees and the Board as a whole were evaluated at the meeting of the Independent Directors and the Board of the Directors held on 10th August, 2015.

CORPORATE GOVERNANCE

The Company is committed to achieve the highest standards of Corporate Governance and strives to comply with the requirements as set by the Regulators / applicable laws.

A separate section providing a Report on the Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges is attached as an Annexure to this report. The said report on Corporate Governance also contains certain disclosures required under the Companies Act, 2013.

A certificate from the statutory auditors M/s. CNGSN & Associates LLP, Chartered Accountants conforming compliance to the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is annexed to the Report.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis Report is furnished as an annexure to this report.

VIGIL MECHANISM

The Company has implemented a Vigil Mechanism / Whistle Blower Policy pursuant to which Whistle Blowers can raise concerns relating to Reportable Matters [as defined in the Policy]. Further the policy encourages whistle blowers to bring the genuine concerns or grievances and provides for adequate safeguards against victimization of Whistle Blower who avail of such mechanism and also provides for direct access to the Chairman of the Audit Committee, in exceptional cases. The functioning of the vigil mechanism is reviewed by the Audit Committee from time to time. None of the whistle blowers were denied access to the Audit Committee of the Board of Directors. The details of Vigil Mechanism / Whistle Blower Policy are available on the website of the Company [www.sical.in]

RISK MANAGEMENT POLICY

The Board has implemented the risk management policy for effective management of risks that are envisaged on the conduct of business wherein all material risks faced by the company are identified and assessed and evolves assessment of controls and policies and put in place procedure for monitoring, mitigating and reporting risk on a periodic basis.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions that were entered during the financial year were in the ordinary course of the business of the Company and were on arm`s length basis. There were no materially significant related party transactions entered into by the Company with the Promoters, Directors, Key Managerial Personnel or other persons which may have a potential conflict with the interest of the Company. The details of such related party transactions in Form AOC-2 is furnished as Annexure - 2 to this Report.

Considering the nature of the industry in which the company operates, related party transactions are in the ordinary course of business on an arms length basis. All such related party transactions are placed before the Audit Committee for approval, wherever applicable. Prior omnibus approval for normal transactions is also obtained from the Audit Committee for the related party transactions which are of repetitive in nature as well for the normal transactions which can not be foreseen and accordingly the required disclosures are made to the Committee on quarterly basis in terms of the approval of the Committee.

The policy on materiality of Related Party Transactions and also on dealing with Related Party Transactions as approved by the Board of Directors is uploaded on the website of the Company and the link for the same is http://www.sical.in/Policy

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

No new guarantees were provided during the year under review.

The Company subscribed for 40,00,000 equity shares of Rs.10/= each in its wholly-owned subsidiary M/s. Sical Iron Ore Terminal [Mangalore] Limited during the year.

The following are the amounts extended as Loans / Advances to subsidiaries as per Section 186 of the Companies Act, 2013 during the year 2014-15.

Name of the Body Corporate Amount in Rs. Lakhs Nature of the Body corporate
Sical Multimodal and Rail Transport Limited 2535 Subsidiary
Sical Iron Ore Terminals Limited 4886 Subsidiary
Norsea Offshore India Limited 2817 Subsidiary
Sical Iron Ore Terminal [Mangalore] Limited 349 Subsidiary
Bergen Offshore Logistics Pte Ltd 263 Overseas subsidiary
Norsea Global Offshore Pte Ltd 266 Overseas subsidiary
TOTAL 11,117

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has laid down set of standards, processes and structure which enables to implement internal financial control across the organization and ensure that the same are adequate and operating effectively.

[a] Statutory Auditors

M/s CNGSN & Associates LLP, Chartered Accountants, retire at the conclusion of the ensuing annual general meeting and are eligible for reappointment as the statutory auditors of the Company for the current financial year viz. 2015-16. The Company has received the consent from the Auditors and confirmation to the effect that they are not disqualified to be appointed as the Auditors of the Company in terms of the provisions of the Companies Act, 2013 and the rules made thereunder. Accordingly, the Board of Directors has recommended the reappointment of M/s. CNGSN & Associates LLP, Chartered Accountants as the Statutory Auditors of the Company to hold office from the ensuing AGM till the conclusion of the next AGM on a remuneration to be decided by the Board or Committee thereof to the shareholders for their approval.

[b] Secretarial Auditors and Secretarial Audit Report

Pursuant to Section 204 of the Companies Act, 2013, your Company appointed Mr. R. Kannan, Practicing Company Secretary, Chennai as its Secretarial Auditor for the Financial Year 2014-15. The report of the Secretarial Auditor for the FY 2014-15 is annexed to this report as Annexure 3.

There are no audit qualifications in the Statutory Auditors Report and in the Secretarial Audit Report as annexed elsewhere in this Annual Report.

MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY

There are no material changes and commitments affecting the financial position of the Company which has occurred between the end of the financial year of the Company i.e. 31st March, 2015 and the date of the Director`s report i.e. 10th August, 2015.

EMPLOYEE REMUNERATON

1. The statement containing particulars of employees as required under Section 197[12] of the Companies Act, 2013 read with Rule 5[2] of the Companies [Appointment and Remuneration of Managerial Personnel] Rules, 2014 are not applicable since none of the employees are in receipt of remuneration exceeding Rs.5 lacs in a month or Rs.60 lacs in a year during the financial year under review.

2. The ratio of the remuneration of each director to the median employee`s remuneration and other details in terms of sub-section 12 of section 197 of the Companies Act, 2013 read with Rule 5 [1] of the Companies [Appointment and Remuneration of Managerial Personnel] Rules, 2014 are forming part of this report as Annexure 4.

Statutory Disclosures

[1] The disclosures to be made under sub-section [3][m] of Section 134 of the Companies Act, 2013 read with Rule 8[3] of the Companies [Accounts] Rules, 2014 are furnished below.

Since the Company is engaged in providing logistics services, the details as to conservation of energy and technology absorption are not applicable.

A. CONSERVATION OF ENERGY : NA
B. TECHNOLOGY ABSORPTION : NA
C. FOREIGN EXCHANGE EARNINGS AND OUTGO
Total Foreign Exchange Earned : Rs.892 lacs
Used : Rs.1069 lacs

2. No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and company`s operations in future.

3. There were no complaints received / cases filed under Section 22 of the Sexual Harassment of Women at Workplace [Prevention, Prohibition and Redressal] Act, 2013.

4. No stock options were issued to the Directors of the Company.

Extracts of Annual Return

Pursuant to sub-section 3[a] of Section 134 and sub-section [3] of Section 92 of the Companies Act, 2013, read with Rule 12 of the Companies [Management and Administration] Rules, 2014, the extracts of the Annual Return as at March 31, 2015 forms part of this report as Annexure 5.

Directors Responsibility Statement

Pursuant to the requirement of Section 134[5] of the Companies Act, 2013, it is hereby confirmed that:

[a] in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any;

[b] the directors had 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 of the Company for that period;

[c] the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

[d] the directors had prepared the annual accounts on a going concern basis;

[e] the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate for the operation of the Company; and

[f] the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGEMENT

The directors wish to thank the Port Authorities, Governmental Agencies, company`s bankers, financial institutions, customs authorities, foreign collaborators, suppliers, statutory regulators, investors, customers and all stakeholders for their support.

For and on behalf of the Board
R. Ram Mohan Kush S Desai
Place Bengaluru Chairman Joint Managing Director
Date 10 August 2015 [DIN 02506342] [DIN: 00693663]

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