e announce with immense pleasure the

2

We announce with immense pleasure the

achievement of the much coveted “Navratna” status

by the Shipping Corporation of India Ltd.

SCI is the seventeenth PSE which has been able to

achieve this feat. The Navratna status confers upon the

company enhanced autonomy in operations and

financial investment decisions. This is in line with

Government of India’s philosophy of making SCI

a dominant player in the shipping industry.

With continuous patronage and support from all the

stakeholders, the Management is committed to make

SCI a leading name in the World Maritime Sector.

2

www.global-reports.com

3

CONTENTS

Board of Directors .......................................................................................... 5

Brief Profile of the Directors of the Company .............................................. 6

Notice of Meeting .......................................................................................... 9

Salient Statistics ........................................................................................... 19

Decade at a Glance ...................................................................................... 21

Directors’ Report .......................................................................................... 25

Management Discussion and Analysis ....................................................... 27

Report of Directors on Corporate Governance .......................................... 51

Auditors’ Certificate on Corporate Governance ......................................... 64

Auditors Report ............................................................................................ 65

Annexure to the Auditors' Report ............................................................... 67

Comments of the Comptroller and Auditor General of India .................... 70

Annual Accounts.......................................................................................... 72

Cash Flow Statement ................................................................................. 103

Glossary...................................................................................................... 104

The Shipping Corporation of India - Swift, efficient and customer friendly.

SCI has come a long way from where it started and is today one of the most admired, dependable

and progressive shipping companies in the world.

SCI has been consistently creating value for its stakeholders and customers through technology

upgradation, strategic tie-ups, fleet expansion and manpower development, while maintaining

high standards of safety and reliability.

With a highly diversified fleet and a network that covers almost every major sea route, SCI now

renews its commitment to continue as the touchstone for outstanding performance, and to remain

highly responsive and efficient in terms of service, thus making a mark for itself in the Indian

maritime industry.

3

44


5

BOARD OF DIRECTORS

Photographs of Directors (other than S/Shri S. Hajara, C. Balakrishnan and Rajeev Gupta) appear in alphabetical order of Surnames.

Registered Office: Shipping House, 245, Madam Cama Road, Mumbai 400 021

Registrar & Transfer Agents : M/s. Sharepro Services (India) Pvt. Ltd. Satam Estate, 3rd Floor,

Above Bank of Baroda, Cardinal Gracious Road, Chakala, Andheri (E), Mumbai - 400 099.

(Investor Relation Centre) 912, Raheja Centre, Free Press Journal Road, Nariman Point, Mumbai - 400 021.

Messrs. KHANDELWAL JAIN & CO.

Messrs. S. BHANDARI & CO.

Auditors

Messrs. MULLA & MULLA &

CRAIGIE BLUNT & CAROE

Solicitors

Shri Dipankar Haldar

SVP (Legal Affairs) &

Company Secretary

Shri S. Hajara

Chairman & Managing Director

Shri C. Balakrishnan

Government Director

Shri Rajeev Gupta

Government Director

Shri J.N. Das Dr. Bakul H. Dholakia Shri A. D. Fernando

Shri U. C. Grover Shri Kailash Gupta Shri A. K. Mago Shri B. K. Mandal Shri Nasser Munjee

Shri Keshav Saran Shri J. N. L. Srivastava Shri U. Sundararajan Shri S.C. Tripathi

6

BRIEF PROFILE OF THE DIRECTORS OF THE COMPANY

Shri S. Hajara is Chairman & Managing Director since September 2005 before which he held the post

of Director (Personnel & Administration). He holds a Bachelor’s degree in Science - Chemistry and a Post

Graduate Diploma in Management from IIM, Kolkata. He also holds a degree in Law, diploma in

Professional Ship Management, Norwegian Shipping Academy, Oslo. He is also experienced in marketing,

chartering, import operations, liner conference / bilateral matters, commercial operations in liner, bulk

and tanker.

Shri C. Balakrishnan, Additional Secretary and Financial Advisor, Ministry of Shipping, Road Transport

& Highways, an ex-officio part-time Director of the Company was appointed on Board of Directors in

September 2005. Shri Balakrishnan, an I.A.S. Officer of the Himachal Pradesh cadre, holds a Masters

degree in Business Administration (MBA) from the University of Florida, is an M.P.A. from the Harvard

University and an M.Phil. of the Punjab University from the Indian Institute of Public Administration. He

held several posts in both the State and Central Governments and was the Joint Secretary (Planning &

UNESCO) in the Ministry of Human Resource Development. He was also a District Magistrate of Sirmur

District and Divisional Commissioner of Kangra Division.

Shri Rajeev Gupta, Joint Secretary (Shipping), Ministry of Shipping Road Transport & Highways, an

ex-officio part-time Director of the Company, was appointed on the Board of Directors in June 2007.

Shri Rajeev Gupta, an I.R.S.M.E. Officer, is a graduate in both Mechanical and Electrical Engineering.

He has had experience in shipping, inland waterways, chartering, enterprise planning, vigilance, human

resource management among other subjects. He has held several posts in Central Governments and

was in the Railway Board and was involved in formulating the Tenth Five Year Plan for Railways.

Shri J.N. Das is Director (Liner & Passenger Services) since December 2007. He is a Marine Engineer

from Marine Engineering Training College (DMET), Kolkata and possesses First Class Engineer (MOTOR)

Certificate of Competency from MOT. He is a member of the Institute of Engineers (MIE India) and a

fellow of Institute of Marine Engineers (FIME) India. He has vast experience in shipping management,

bulk carriers, tankers, chemicals, LPG & LNG operations, new building & offshore services.

Dr. Bakul H. Dholakia is a part-time non-official Director inducted on the Board in July 2007. He is also

a member of the Audit Committee of the Board. He was the former the Director of Indian Institute of

Management (IIM), Ahmedabad and holds Master's Degree in Economics and is also a Ph.D. in Economics.

He has 38 years of professional experience including 32 years in IIMA and in recognition of his contribution

to Management Education in India, Dr. Dholakia was awarded Padma Shree in 2007. He is presently the

Chairman of National Board of Accreditation for Technical Education in India and has also served as part

time External Director on the Board of several companies. His areas of specialization include Business

Economics, Economic Policy, Corporate Strategy and Public Enterprise Management.

Shri A.D. Fernando is a part-time non-official Director inducted on the Board in July 2007. He is the

Chairman & Managing Director of Victoria Marine & Agro Export Ltd. He is a BE in Mechanical Engineering

from Madras University and has a diploma in Global Trade from the City University of New York, USA.

He has vast knowledge in global trade, export and import of Marine & Agro products, Marine Biotech,

Shipping & Port Management, Thermal Plant operations and Governmental Aquarian policy planning

(State planning commission).

Shri U.C. Grover is Director (Technical & Offshore Services) since April 2006. He is a Marine Engineer from

Marine Engineering College (DMET), Kolkata and possesses First Class Engineer (MOTOR) Certificate of

Competency from MOT. He has vast experience and knowledge in ship acquisitions, project management,


7

new business development, commercial operations in Liner & Container Services, Marketing, Liner

Conferences / Bilateral Matters, Stevedoring Operations, Bulk Carrier & Tanker Operations, Fleet Management,

etc. He also has the experience in Maritime Training, Safety and Marine Environment Protection, development

and implementation of the requirements of ISM Code in the Company and fleet.

Shri Kailash Gupta is Director (Personnel & Administration) since July 2006. He is a post graduate in

Personnel Management from XLRI, Jamshedpur, and also has degree in law from the University of

Delhi. Shri Gupta has also worked with NALCO Ltd. as General Manager (HRD & Administration) for over

six years prior to joining SCI.

Shri A.K. Mago is a part-time non-official Director inducted on the Board in July 2007 and is the Chairman

of the Shareholders’/Investors’ Grievance Committee of the Board. He is also a member of the Audit

Committee. He joined the IAS in 1967 and retired in 2004 as Chief Secretary, Govt. of Maharashtra.

He was also the former Chairman of Maharashtra State Electricity Board and Mumbai Port Trust.

He is M.Sc.(Physics), M.Phil.(Social Sciences) and holds diplomas in management, public administration

(Paris and Delhi), public finance (Paris) and possesses knowledge of French language. He also holds a

certificate in International Law & Diplomacy. He has valuable administrative and management expertise/

skills and is also well conversant with matters relating to policy/planning and implementation in power,

port and urban infrastructure sectors. He has worked, for over 37 years, in different capacities in the

State and Central Government in several sectors which include energy, port, urban infrastructure,

environment & forest and industries sectors.

Shri B.K. Mandal is Director (Finance) since November 2005 and is a post graduate in Management

from the Indian Institute of Management, Ahmedabad and also a Fellow member of the Institute of Cost

& Works Accountants of India. Shri Mandal was working in NTPC Ltd., Delhi, as General Manager

(Finance) and has also worked with BHEL in the initial years of his career.

Shri Nasser Munjee is a part-time non-official Director inducted on the Board in August 2007.

He is presently the Chairman of Development Credit Bank (DCB) and was the former Managing Director

& CEO of the IDFC. He holds a Bachelor’s degree from the University of Chicago and Master’s degree

from the London School of Economics, U.K. His journey in creating financial institutions began with the

HDFC (which he has been assisting since its inception in 1978) and he joined the Board as an Executive

Director in 1993 with primary responsibility for resource mobilization, research, publications, training,

communication and managing the Centre for Housing Finance. He has deep interest for rural development,

housing finance, urban issues, specially the development of modern cities and humanitarian causes.

Shri Munjee is also a Technical Advisor on the various Funds of the World Bank and the memberships

held by him include that of the Goa Planning Board, Managing Committee of the Bombay Chamber of

Commerce & Industry and CII, Western Region. He is also on the Board of Governors of the NMIMS and

a Member and Honorary Distinguished Professor at IIT, Kanpur. He continues to be on the Board of

HDFC and the Board of other companies and several other institutions as Chairman, Member of the

Board or as a Trustee.

Shri Keshav Saran is a part-time non-official Director inducted on the Board in July 2007. He is also a

member of both, the Audit and Shareholders’/Investors’ Grievance Committees of the Board. He was

the former Chairman & Managing Director of Engineers India Ltd. and has also been Director (Projects)

in the National Thermal Power Corporation (NTPC). He is an electrical engineering graduate with a

post-graduate diploma in Industrial Management and holds an MBA and LL.B. degrees. He has vast

experience and knowledge in PSU (public sector undertakings) management, project management and

commercial management. He has around 44 years’ experience mainly in Public Sector Undertakings in

Petroleum and Power Sector. He has presented number of papers in international and national seminars

8

and has been associated with various professional organizations. He started his career at IIT Kharagpur

and has worked for about 15 years with Bharat Heavy Electricals Ltd. in various capacities.

Shri J.N.L. Srivastava is a part-time non-official Director inducted on the Board in July 2007. He is an

IAS and presently the Managing Trustee of IFFCO Foundation. He has held the posts of Secretary in

the Agriculture & Co-operation Dept. of Government of India, the Department of Animal Husbandry

& Dairying & Fisheries and the Ministry of Non-conventional Energy Sources. He has vast experience

in public administration and management of public enterprises and a long association with Agriculture,

Industry, Commerce and Trade. He was the former Chairman of Indian Potash Ltd and the Managing

Director of the Punjab State Industrial Development Corporation (PSIDC) and has held directorships

in various Companies which include NABARD, IFFCO, KRIBHCO, NAFED, Max India Ltd. He has

represented India in the Food & Agricultural Organisation (FAO) of the United Nations and the World

Trade Organisation (WTO).

Shri U. Sundararajan is a part-time non-official Director of the Company inducted on the Board in July

2007 and is also the Chairman of the Audit Committee of the Board. He was the former Chairman and

Managing Director of BPCL. He is a Cost Accountant and has vast experience and knowledge in financial

management and general management. He has also served as part time External Director on the Board

of several companies which include Gujarat State Petronet Ltd. and Larsen & Toubro Ltd.

Shri S.C. Tripathi is a part-time non-official Director of the Company inducted on the Board in

December 2007. He is an IAS and was the former Secretary to Government of India and had

rich experience in finance, economics and in petroleum sector. Shri Tripathi, an M.Sc.

(Physics-Specialisation in Electronics), LL. B., PG Diploma in Development Studies (Cantab.),

AIMA Diploma in Management, started his career as Lecturer in Physics in 1964 and joined the Indian

Administrative Service in 1968 (Second Rank in the country). He spent nearly 20 years in Finance and

Industry sectors at Chief Executive / Secretary levels at the State and Central Government and in

representative capacity at international levels. Shri Tripathi retired as Secretary, Ministry of

Petroleum and Natural Gas in the Government of India, in December 2005.


9

NOTICE OF MEETING

NOTICE is hereby given that the 58th Annual General Meeting of The Shipping Corporation of India Ltd.

will be held at the Registered Office of the Company at "Shipping House", 245, Madam Cama Road,

ORDINARY BUSINESS

1. To receive, consider and adopt the Balance Sheet as at 31st March 2008, Profit & Loss Account for

the year ended on that date and Reports of Auditors and Directors thereon.

2. To declare dividend.

3. To appoint a Director in place of Shri A.K. Mago who retires at this meeting and being eligible, offers

himself for re-appointment.

4. To appoint a Director in place of Shri A.D. Fernando who retires at this meeting and being eligible,

offers himself for re-appointment.

5. To appoint a Director in place of Shri U. Sundararajan who retires at this meeting and being eligible,


6. To appoint a Director in place of Shri J.N.L. Srivastava who retires at this meeting and being eligible,


7. To fix remuneration of auditors.

SPECIAL BUSINESS

BY ORDINARY RESOLUTION

8. To appoint a Director in place of Shri S.C. Tripathi who under Article 125 of the Articles of Association

of the Company and Section 260 of the Companies Act, 1956 holds office only upto the date of this

Annual General Meeting and being eligible for appointment, the Company has received a notice in

writing, from a shareholder signifying his intention to propose appointment of Shri S.C. Tripathi as

a Director of the Company.

9. To appoint a Director in place of Shri J.N. Das who under Article 125 of the Articles of Association

of the Company and Section 260 of the Companies Act, 1956 holds office only upto the date of this

Annual General Meeting and from whom the Company has received a notice in writing signifying

his candidature to the office of Director and who is eligible for appointment.

BY SPECIAL RESOLUTION

10. To consider and if thought fit, to pass with or without modification, the following resolution as a

Special Resolution.

RESOLVED that approval of the Shareholders be and is hereby accorded to the :

1) deletion of Article 150(1)(d) of Articles of Association and consequent renumbering of the

remaining sub-clauses of Article 150 (1),

2) deletion/modification of Article 150(2)(a),(e),(h) of Articles of Association, insertion of new clauses

to Article 150(2)(a) and (d) and consequent renumbering of the remaining sub-clauses of the

said Article,

3) substitution of Article 151 of Articles of Association by insertion of a new Article 151,

4) insertion of new clause (25) in Article 166 of Articles of Association,

as proposed hereafter,

Mumbai - 400 021 at 11.30 hrs. on Monday, the 29th September 2008 to transact the following as:-

10

Article 150 (1) (d)

Existing Proposed Amendment

Acquisition and construction of vessels Deletion of Article 150 (1) (d)

subject to Article 151.

Article 150 (2)


Notwithstanding anything contained in any other

articles, prior approval of the President of India should

be obtained in respect of :

(a) Appointment to posts where the pay (including

pension and pensionary equivalent of retirement

benefits) exceeds Rs. 5700/- per month or where

the minimum of pay scale is Rs. 5700/- or more

of persons who have already attained the age

of 58 years.

(b) appointment of any foreign national to any post

in the company.

(c) Schemes, purchases and contracts involving

capital outlay which is in excess of the powers

vested in the Board under Article 151.

(d) disposal of property (other than ships which are

economically not viable) having an original book

value of Rs. 1 crore (Rupees one crore) and

above.

(e) formation of a subsidiary company or companies

of the Company, setting up Joint Venture

Companies in India and abroad, acquiring other

companies or merging the acquired entities

amongst themselves.

PROVIDED THAT :

Notwithstanding anything contained elsewhere

in the Articles, no such prior approval of the

President shall be required, subject to provision

of the Act, to form wholly or partly owned

companies or subsidiaries in India or acquiring

other companies or merging the acquired entities

amongst themselves or joint venture in India in

cases where powers have been delegated to the

Board by the Government.

(f) any proposal for action relating to the reduction

of capital.

(g) any proposal for action relating to the amount

of capital to be raised and the terms and

conditions thereof.

(h) Agreements involving foreign collaboration

proposed to be entered into by the company

other than those provided in sub clause (e)

above.

Notwithstanding anything contained in any other

article, prior approval of the President of India should

be obtained in respect of :

(a) appointment of any foreign national to any post

in the company.

PROVIDED THAT :

Notwithstanding anything contained in this article

or any other article, no such prior approval of

the President of India shall be required for

creation and winding up of all posts including

and up to those of non-Board level Directors i.e.

Functional Directors who may have the same

pay scales as that of Board level Directors, but

who would not be members of the Board. All

appointments up to this level would also be in

the powers of the Boards and would include the

power to effect internal transfers and

redesignation of posts. All powers in this respect

shall be exercised in accordance with the

guidelines prevailing from time to time;

(b) Schemes, purchases and contracts involving

capital outlay which is in excess of the powers

vested in the Board under Article 151;

(c) disposal of property (other than ships which are

economically not viable) having an original book

value of Rs. 1 crore (Rupees one crore) and

above.

(d) formation of a subsidiary company or

companies of the Company, setting up Joint

Venture Companies in India and abroad,

acquiring other companies or merging the

acquired entities amongst themselves which are

exceeding the limits or conditions or are

otherwise not covered under the provisions of

Article 151 of the Articles of Association of the

Company;

(e) any proposal for action relating to the reduction

of capital;

(f) any proposal for action relating to the amount

of capital to be raised and the terms and

conditions thereof;


11

Article 151


Without prejudice to the provisions contained in these

Articles, and subject to the provisions of the Act, the

Directors shall have the following powers with regard

to the works of capital nature :

(i) To authorize, without reference to the President

of India, the undertaking of works of a capital

nature including the incurrence of capital

expenditure, where Detailed Project Reports

have been prepared with estimate of different

component parts of relevant Project and where

such Project Reports have been approved by

President and to invite and accept tenders

relating to the works included in the approved

Detailed Project Report, including variations, if

any, in the approved estimates, provided such

variations are not more than 10% for any

particular component part and do not

substantially change the scope of the project :

(ii) To authorize the undertaking of works of a capital

nature, not covered by Clause (i) above, if

required to be taken up in advance of the

preparation of a Detailed Project Report or

otherwise as individual works including the

incurrence of capital expenditure not exceeding

Rs.20 crores provided that :-

(a) The above will cover expenditure on capital

items, including project and scheme, the

individual cost of which does not exceed

Rs.20 crores provided the item/scheme/

project has either figured individually or

provided for collectively in lump under the

sub-head "miscellaneous Capital

Expenditure" or "Other Capital Items" etc. in

the approved annual Plan of the Company

and its Capital Budget approved by the

President of India after consideration in the

Board of the Company , in terms of Article

150 provided the funds required will be

found out of budget allocation for the

Company for that financial year; and

(b) The spill-over of expenditure on such works

in subsequent years will be the first call on

the respective budget allocation. Provided

further that as and when Memorandum of

Understanding (MOU) is signed by the

Company with the Government of India

for any particular year, then the provisions

with regard to powers of the Board

contained in the said MOU would be

deemed to be applicable for that year to

Without prejudice to the provisions contained

in these Articles, and subject to the provisions

of the Act, the directors shall have the following

powers:

(i) (a) to incur capital expenditure on purchase of

new items or for replacement, without any

monetary ceiling;

(b) to establish financial Joint ventures and

wholly owned subsidiaries in India or abroad

with the stipulation that the equity investment

of the Company should be limited to the

following :-

15% of the net worth of the Company in one

project limited to Rs.1000 crores. The overall

ceiling of such investment in all projects put

together shall be 30% of the net worth of the

Company.

(c) relating to mergers and acquisitions, subject

to the conditions that (i) it should be as per the

growth plan and in the core area of functioning

of the Company, (ii) conditions/limits would be

as in the case of establishing joint ventures/

subsidiaries, (iii) the Cabinet Committee on

Economic Affairs (CCEA) is kept informed in case

of investments abroad and (iv) powers for

mergers and acquisitions is delegated to the

Company with a condition that the same should

be exercised in a manner that it should not lead

to any change in the public sector character of

the Company.

(d)To enter into technology Joint Ventures or

strategic alliance or to obtain by purchase or

other arrangements, technology and know-how.

FURTHER PROVIDED THAT the above stated

powers shall be exercised by the Board in

accordance with the Guidelines issued by the

Government from time to time.

(ii) All proposals where they pertain to capital

expenditure, investment or other matters

involving substantial financial or managerial

commitments or where they would have a long

term impact on the structure and functioning of

the Company, should be appraised, in suitable

cases, by financial institutions or reputed

professional organizations with expertise in the

areas. The financial appraisal should also

preferably be backed by an involvement of the

appraising institutions through loans or equity

participation.

12

11. To consider and, if thought fit, to pass, with or without modification, the following resolution as a

Special Resolution:

RESOLVED :

a) That upon the recommendation of the Board of Directors of the Company ('the Board', which

term shall be deemed to include any Committee thereof) and in accordance with applicable

provisions of the Companies Act, 1956, or any amendment or re-enactment thereof and the

provisions of the Articles of Association of the Company and subject to the approval of Competent

Authority and subject to the Guidelines issued by the Securities and Exchange Board of India

(SEBI) in this behalf and subject to such further approvals, consents, permissions and sanctions,

as may be necessary from appropriate authorities, consent of members, be and is hereby

accorded to the Board for capitalization of sum of Rs.1,41,15,12,150/- (Rs. One hundred and

forty one crores fifteen lakhs twelve thousand one hundred and fifty only) standing to the credit

of the General Reserves of the Company, as may be considered necessary by the Board, for the

purpose of issue of Bonus Shares of Rs.10/-(Rupees Ten) each, credited as fully paid-up Equity

Shares to the holders of the Equity Shares of the Company, whose names shall appear in the

Register of Members or in the respective beneficiary account with their respective Depository

Participants, on the 'Record Date' to be determined by the Board for the purpose, in the proportion

of 1(One) bonus share of Rs.10/- (Rupees Ten) each for every 2 (Two) fully paid-up Equity

Shares of Rs.10/- each held by them and that the Bonus shares so distributed shall, for all

purposes, be treated as an increase in the nominal amount in the Capital of the Company held

by each such member, and not as income;


Article 166


(25) To effect organizational restructuring including

establishment of profit centres, opening of offices in

India and abroad, creating new activity centres, etc.

(iii) The exercise of authority to enter into technology

joint ventures and strategic alliances as referred

to in Article 151(i)(d) above shall be in

accordance with the Government guidelines as

may be issued from time to time.

(iv) The delegated power should be exercised by

the Board only subject to prior approval of

President of India in items involving policy

matters where specific Government approval is

needed.

the Company and the provisions of the

Article 151 would be read in conjunction with

the said MOU and the said Article 151 would

stand modified to that extent. However, if

the company is not covered by MOU for a

particular year, then the powers of the Board

as prescribed in Article 151 would revert

back to the position existing then, provided

further that no specific or general exemption,

approval, order or direction is issued or given

by the Government of India (President of

India) to the contrary.

Notes:

1. The power to incur capital expenditure on town-

ship, residential quarters etc. will be within the

ceiling of Rs. 50 lakhs subject to the condition

that total annual expenditure sanctioned under

this delegation of powers on township/residential

quarters should not exceed twice this amount.

2. The delegated powers should be exercised by

the Board only subject to the prior approval of

President of India in items involving policy matters

where specific Government approval is needed.


13

b) That the Bonus Equity Shares so allotted shall rank pari passu with the existing equity shares

of the Company, from the date of creation;

c) That the Bonus Shares so allotted shall always be subject to the terms and conditions contained

in the Memorandum and Articles of Association of the Company;

d) that no letter of allotment shall be issued in respect of the Bonus Shares but in the case of

Members who hold Equity Shares (or opt to receive the Bonus Shares) in dematerialized form,

the Bonus Shares shall be credited to the respective beneficiary accounts of the Members with

their respective Depository Participants and in the case of Members who hold Equity Shares

in physical form, the share certificates in respect of the Bonus Shares shall be dispatched,

within three months from the date of allotment;

e) that no fractions, if any, arising out of the issue and allotment of the Bonus Shares shall be

allotted by the Company and the Company shall not issue any certificate or coupon in respect

thereof but all such fractional entitlements, if any, shall be consolidated and the Bonus Shares,

in lieu thereof, shall be allotted by the Board to a trust to be formed by the Board, who shall

hold the same as trustee(s) for the members entitled thereto, and sell the said shares so arising

on such date and at such rate, as deemed fit by them and pay to the Company the net sale

proceeds thereof, after adjusting therefrom the cost and expenses in respect of such sale, for

distribution to Members in proportion to their fractional entitlements;

f) that the issue and allotment of the Bonus Shares to non-Resident Members, Foreign Institutional

Investors (FIIs) and other foreign investors and/ on distribution of net sale proceeds in respect

of fractions to which such Members may be entitled, be subject to the approval of the Reserve

Bank of India under the Foreign Exchange Management Act, 1999, as may be necessary;

g) that for the purpose of giving effect to this Resolution, the Board be and is hereby authorized

to do all such acts/ deeds, matters and things and give such directions as may be necessary

or expedient and to settle any question, difficulty or doubt that may arise in this regard as the

Board in its absolute discretion may deem necessary or desirable."

By Order of the Board of Directors

for The Shipping Corporation of India Ltd.

Dipankar Haldar

Senior Vice President (Legal Affairs) & Company Secretary

Registered Office:

Shipping House,

245, Madame Cama Road,

Mumbai - 400 021.

Dated :18th August, 2008

Notes:

a) A MEMBER ENTITLED TO ATTEND AND VOTE IS ENTITLED TO APPOINT A PROXY TO ATTEND AND

VOTE INSTEAD OF HIMSELF AND A PROXY NEED NOT BE A MEMBER OF THE COMPANY. THE

PROXY FORM DULY COMPLETED AND SIGNED MUST BE DEPOSITED AT THE REGISTERED OFFICE

OF THE COMPANY NOT LESS THAN 48 HOURS BEFORE THE MEETING.

b) The Register of Members and the Share Transfer Books of the Company will remain closed from

23.09.2008 to 30.09.2008 (both days inclusive).

14

c) Members are requested to notify any change in their address to the Share Transfer Agents of the

Company at the following address:

M/s. Sharepro Services (India) Pvt. Ltd.

Satam Estate, 3rd Floor, Above Bank of Baroda,

Cardinal Gracious Road,

Chakala, Andheri (E), Mumbai - 400 099.

d) Pursuant to the provisions of Section 205A of the Companies Act, 1956, the amount of dividend

which remains unpaid/unclaimed for a period of 7 years is required to be transferred to the "Investor

Education and Protection Fund (IEPF)", constituted by the Central Government and after such transfer

the member(s) would not be able to claim any dividend so transferred to the Fund. Therefore,

member(s) who have not yet encashed his/their dividend warrant(s) is/are requested in his/their own

interest to write to the Company Secretary/Share transfer agent, immediately for claiming outstanding

final dividend declared by the Company for the year 2000-2001 and onward.

The dividend declared for the year 1997-98, 1998-99, 1999-2000 and 2000-01(Interim) and remaining

unclaimed/unpaid has already been transferred to the IEPF.


15

ANNEXURE TO THE NOTICE

EXPLANATORY STATEMENT PURSUANT TO SECTION 173(2) OF THE

THE COMPANIES ACT, 1956.

The following explanatory statement sets out all the material facts relating to special business mentioned

at Item Nos. 8 and 9 of the accompanying Notice dated 18th August, 2008, convening the 58th Annual

General Meeting of the Company.

Item No. 8 of the Notice

The Company has received a notice in writing dated 28th November, 2007 from the Govt. of India,

Ministry of Shipping, Road Transport & Highways, conveying the nomination of Shri S.C. Tripathi for

appointment as Director, for a period of three years or until further orders, whichever is earlier.

Accordingly, Shri S.C. Tripathi was appointed as Additional Director by the Board of Directors pursuant

to the powers vested in it. In accordance with Section 260 of the Companies Act, 1956, he holds office

upto the date of this Annual General Meeting.

Shri S.C. Tripathi, former Secretary to the Government of India, has valuable administrative and

management expertise / skills for working at top levels in organizations and held important positions in

Governments of Uttar Pradesh and India. He had spent nearly 20 years in Finance and Industry sector

at various levels in State and Central Government and in representative capacity at International levels.

It is, therefore, recommended that in the interest of the Company, he may be appointed as Director.

Shri S.C. Tripathi is interested in the resolution as it concerns him. No other Director is interested in the

resolution.


The Company has received a notice in writing dated 24th December, 2007 from the Govt. of India,

Ministry of Shipping, Road Transport & Highways, conveying the nomination of Shri J.N. Das for

appointment as Director, for a period of five years with effect from the date of assumption of charge of

the post i.e. 24th December, 2007 or till the date of his superannuation or until further orders, whichever

is earlier. Accordingly, Shri J.N. Das was appointed as Additional Director by the Board of Directors

pursuant to the powers vested in it. In accordance with Section 260 of the Companies Act, 1956, he

holds office upto the date of this Annual General Meeting.

Shri J.N. Das had graduated as Marine Engineer from DMET, Kolkata and possesses First Class Engineer

(MOTOR) Certificate of Competency from MOT. He has vast experience in shipping management, bulk

carrier and tanker operations and technical and offshore services. It is, therefore, recommended that in

the interest of the Company, he may be appointed as Director.

Shri J.N. Das is interested in the resolution as it concerns him. No other Director is interested in the

resolution.


The Central Government in pursuance of its policy objective to make Public Sector more efficient and

competitive, has decided to grant enhanced autonomy and delegation of powers to Navratna PSEs by

means of the Guidelines-DPE O.M. No. DPE/11(2)/97-Fin. dated 22nd July, 1997, DPE O.M. No. DPE/

11(2)/97-Fin. dated 26th September, 1997, issued by the Department of Public Sector Enterprises. This

delegation of powers has been further enhanced vide Guidelines DPE O.M. No. 18(24)/2003-GM-GL.64

dated 05th August 2005.

The Department of Public Enterprises - Ministry of Heavy Industries & Public Enterprises, vide letter

dated August 01, 2008, has conferred "Navratna" status on the Shipping Corporation of India Ltd. The

Company being eligible to avail the enhanced delegation of powers available to Navratna PSEs, your

Board has hence decided to exercise these powers in the best possible manner to gain competitive

advantage for the Company.

By the proposed amendments, the Company will be in a position to incur capital expenditure on purchase

of new items without any monetary ceiling, to form Joint Ventures in India and abroad, to entering into

foreign collaborations, mergers and acquisitions. The articles which have become redundant due to the

16

conferment of Navratna status are required to be deleted from the Articles of Association.

The members are requested to approve the amendments to the Articles of Association.

Your Directors recommend the Special Resolution for approval of the Shareholders.

None of the Directors of the Company is concerned or interested in this Special Resolution.

The copies of Memorandum and Articles of Associations and all relevant Government/DPE guidelines,

and other relevant documents are open for inspection during the business hours of the Company

at its Registered office.


As on 31.03.2008, the Reserves & Surplus of your Company is Rs.53,49,78,92,643/- (Rs. Five thousand

three hundred and forty nine crores seventy eight lakhs ninety two thousand six hundred and forty three

only) and the paid-up share capital is Rs.2,82,30,24,300/- (Rs. Two hundred and eighty two crores thirty

lakhs twenty four thousand and three hundred only). Considering the comfortable position of Reserves

and Surplus your Company has achieved, the Board of Directors of the Company at its meeting held on

May 20, 2008 considered the proposal to issue 1 bonus share for every 2 equity shares held and had

decided to recommend the proposal to the administrative ministry i.e. Ministry of Shipping, Road Transport

& Highways (MoSRTH) for their approval in terms of the Articles of Association of the Company.

Accordingly, the proposal was submitted to the MoSRTH which approved the proposal vide their letter

dated 16.07.2008.

The Board of Directors is pleased to recommend issue of equity shares by way of bonus to the existing

shareholders in the ratio of 1:2 [i.e issue of 1 equity share as bonus for every 2 equity shares held on

the record date].

Fully paid-up bonus equity shares shall be distributed to the Members of the Company, whose names

shall appear on its Register of Members or in the respective beneficiary account with their respective

Depository Participants, on the Record Date to be determined subsequently by the Board (which term

shall be deemed to include any Committee thereof) for the purpose of issue of Bonus Shares.

The Bonus shares so allotted shall rank pari passu in all respects with the existing equity shares of the

Company from the date of creation.

The Directors of your Company may be deemed to be interested in this resolution to the extent of their

respective shareholding in the Company.

The letters received in this regard from MoSRTH are kept open for inspection at the Registered Office

of the Company during office hours.

Dipankar Haldar

Senior Vice President (Legal Affairs) & Company Secretary

Registered Office:

Shipping House,

245, Madam Cama Road,

Mumbai - 400 021.

Dated : 18th August 2008.


17

DETAILS OF THE DIRECTORS RE-APPOINTMENT/ APPOINTMENT

AT THE FORTHCOMING ANNUAL GENERAL MEETING

Name of the Director Shri A.K. Mago Shri A.D. Fernando Shri U. Sundararajan

Date of Birth 27.09.1944 21.03.1955 14.06.1942

Date of Appointment 28.07.2007 28.07.2007 28.07.2007

Qualifications • M.Sc. (Physics) • BE (Mech.) • Cost Accountant

• M.Phil.(Social Sciences) • Diploma in Global Trade from

• Diploma in Management, the City University of

Public Administration, French & New York, USA

Certificate in International Law

& Diplomacy

Expertise in specific Possesses valuable administrative Wide knowledge about global Vast experience in financial &

functional areas and management expertise / skills trade, export and import of general management areas

for working at top levels in Marine & Agro products,

organizations and is well Marine Biotech, Shipping & Port

conversant with matters relating Management, Thermal Plant

to policy/planning and operations and Governmental

implementation in power, Aquarian policy planning

port and urban infrastructure (State planning commission)

sectors

DETAILS OF THE DIRECTORS RE-APPOINTMENT/ APPOINTMENT AT THE

FORTHCOMING ANNUAL GENERAL MEETING (Continued)

Name of the Director Shri J.N.L. Srivastava Shri S.C. Tripathi Shri J.N. Das

Date of Birth 01.01.1943 01.01.1946 24.04.1954

Date of Appointment 28.07.2007 13.12.2007 24.12.2007

Qualifications • Master of Arts • M.Sc. (Physics)

• L.L.B.

• Diploma in Development (Cantab.)

• AIMA Diploma in Management

• Fellow Energy Institute (UK)

• Fellow Institution of Electronic

& Telecom Engineers

• Professional Member All India

Management Association

• Member Computer

Society of India

• Life Member Indian Institute of

Public Administration

• Graduation from Directorate of

Marine Engineering Training

(DMET)

• 1ST Class MOT(MOTOR)

• Member of Institute of

Engineers(MIE, India)

• Fellow of Institute of Marine

Engineers (F.I.M.E) - India

Vast experience in Public

Administration and Public

Policy, Management of Public

Enterprises in Agro-processing

and other industrial sectors and

establishment of industrial

infrastructure.

Vast experience in Public

Administration and has held

important positions in

Governments of Uttar Pradesh

and India, nearly 20 years'

experience in Finance and

Industry sector.

Vast experience in shipping

management, bulk carrier and

tanker, chemicals, LPG & LNG

operations, New Building &

offshore services.

Expertise in specific

functional areas

18

EQUITY SHARES HELD BY THE NON-EXECUTIVE DIRECTORS SEEKING

RE-APPOINTMENT AT THE FORTHCOMING ANNUAL GENERAL MEETING

Sr.No. Name of non-executive Director No. of Shares held

1. Shri A.K. Mago 100

2. Shri A.D. Fernando Nil

3. Shri U. Sundararajan Nil

4. Shri J.N.L. Srivastava Nil

5. Shri S.C. Tripathi Nil

CHAIRMANSHIP / DIRECTORSHIP HELD IN OTHER PUBLIC COMPANIES

AND MEMBERSHIP HELD IN COMMITTEES OF SUCH BOARDS

IN TERMS OF CLAUSE 49 OF THE LISTING AGREEMENT

Name of the Director Chairmanship/Directorship held in other Chairmanship / Membership held in

public companies Committees of such Boards

Shri A.K. Mago Directorship

1. Yes Bank

2. Hindustan Copper Ltd. -

3. National Hydroelectric Power 3. Chairman - Audit Committee

Corporation Ltd.

Shri A.D. Fernando Chairmanship

1. Victoria Marine & Agro Exports Ltd. -

Shri U. Sundararajan Directorship

1. Gujarat State Petronet Ltd. 1. Member - Audit Committee

2. Bharat Oman Refinery Ltd. 2. Member - Audit Committee

3. IDFC Trustee Company Ltd

4. Ennore Port Ltd.

Shri J.N.L. Srivastava 1. Northern Coalfields Ltd. -

Shri S.C. Tripathi 1. Reliance Capital Asset

Management Co. Ltd.

2. Indusind Bank Ltd.

3. Orient Green Power Co. Ltd.

4. ILFS Energy Development Corporation

5. IL&FS Infrastructure Development

Corporation

6. Modi Rubber Ltd.

7. Gammon Infrastructure Projects Ltd.

8. Power Grid Corporation Ltd.

Shri J.N. Das Nil Nil


19

SALIENT STATISTICS 2007/2008

Authorised Capital Rs. 450.00 Crores

Subscribed and Paid-up Capital Rs. 282.30 Crores

Depreciation Provision Rs. 303.18 Crores

Gross Earnings Rs. 4084.36 Crores

Gross Investment on Fleet Rs. 8633.92 Crores

No. of Voyages made 614

No. of Passengers carried (including managed vessels) 2,25,511

No. of Employees (including crew) (As on 1st

July, 2008) 3677

Vessels Owned (As on 1st August, 2008)

— Number 79

— Tonnage 2.73 Million GRT

4.76 Million DWT

Vessels on Order

— Number 28

— Tonnage 1.32 Million GRT

2.30 Million DWT

20


21

OPERATIONAL STATISTICS

(FIGURES IN CRORES OF RUPEES)

1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08

Operating Earnings 2,520.8 2,542.8 2,994.8 2,784.7 2,376.5 3,100.3 3,396.1 3,531.0 3,703.4 3,726.9

Other Income 61.5 65.2 137.4 121.5 66.9 74.5 249.7 59.0 287.2 129.8

Total Earnings 2,582.3 2,608.0 3,132.2 2,906.2 2,443.4 3,174.8 3,645.8 3,590.0 3,990.6 3,856.7

Operating Expenses 1,799.4 1,908.1 2,049.0 1,982.3 1,826.1 2,019.8 2,033.7 2,119.3 2,567.7 2,594.4

Other Expenses 175.3 150.1 189.3 256.8 156.9 166.5 183.7 145.3 149.4 221.3

Interest* 100.4 72.4 65.7 22.6 13.8 (5.0) (16.0) (93.1) (139.6) (166.1)

Depreciation 258.9 274.8 273.6 265.2 257.8 280.0 297.2 303.5 303.1 303.2

Tax Liability 47.0 41.0 172.0 137.7 (86.0) 86.5 22.8 72.8 95.5 90.0

Deffered Tax Provision written back 0.0 0.0 0.0 0.0 0.0 0.0 (295.5) 0.0 0.0 0.0

Total Expenses 2,381.0 2,446.4 2,749.6 2,664.6 2,168.6 2,547.8 2,225.9 2,547.8 2,976.1 3,042.8

Profit after Tax 201.3 161.6 382.6 241.6 274.8 627.0 1,419.9 1,042.2 1,014.5 813.9

*Net

FINANCIAL HIGHLIGHTS :

31-03-99 31-03-00 31-03-01 31-3-02 31-3-03 31-3-04 31-03-05 31-03-06 31-03-07 31-03-08

WHAT THE COMPANY OWNED

Fixed Assets

Gross Block 5,098.3 5,303.0 5,254.3 5,142.0 5,243.2 6,073.8 6,506.1 6,818.9 6,705.4 6,737.1

Less:Depreciation(Cum) 2,223.1 2,477.6 2,559.1 2,679.4 2,871.4 3,092.0 3,270.3 3,559.4 3,744.2 4,047.2

Net Block 2,875.2 2,825.4 2,695.2 2,462.6 2,371.8 2,981.8 3,235.8 3,259.5 2,961.2 2,689.9

Assets under Construction 251.9 89.5 303.7 432.3 681.3 385.7 122.5 237.3 762.5 2,007.2

Assets Retired from Operation 9.8 0.0 0.0 4.9 0.0 0.0 0.0 0.0 0.0 0.0

Working Capital 415.1 434.2 442.8 402.0 561.3 667.6 1,618.6 2,224.1 2,596.7 2,347.7

Investments 0.4 9.3 21.9 51.0 0.5 0.5 1.5 8.9 24.0 41.5

3,552.4 3,358.4 3,463.6 3,352.8 3,614.9 4,035.6 4,978.4 5,729.8 6,344.4 7,086.3

WHAT THE COMPANY OWED

Long Term Funds :

SDFC/Govt. Loans 451.9 381.9 308.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Bank Loans 1,044.3 1,060.2 948.0 1,031.6 1,112.1 1,371.3 1,402.7 1,374.4 1,244.7 1,454.2

Mumbai Port Trust 119.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Deferred Credits 130.9 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Unsecured Loans 41.9 30.8 19.8 6.9 6.9 0.0 0.0 0.0 0.0 0.0

1,788.1 1,472.9 1,276.1 1,038.5 1,119.0 1,371.3 1,402.7 1,374.4 1,244.7 1,454.2

Deferred Tax Liability 0.0 0.0 0.0 218.7 233.0 295.5 0.0 0.0 0.0 0.0

NET WORTH OF THE COMPANY

Share Capital 282.3 282.3 282.3 282.3 282.3 282.3 282.3 282.3 282.3 282.3

Reserves & Surplus 1,529.7 1,636.0 1,924.8 1,852.1 2,029.6 2,114.7 3,309.8 4,077.8 4,817.4 5,349.8

Deferred Revenue Expenditure (47.7) (32.8) (19.6) (38.8) (49.0) (28.2) (16.4) (4.7) 0.0 0.0

1,764.3 1,885.5 2,187.5 2,095.6 2,262.9 2,368.8 3,575.7 4,355.4 5,099.7 5,632.1

Dividend paid 42.4 45.2 84.7 98.8 84.7 479.9 197.6 239.9 239.9 239.9

Dividend % 15.0 16.0 30.0 35.0 30.0 170.0 70.0 85.0 85.0 85.0

The Shipping Corporation of India Ltd.

DECADE AT A GLANCE

22

TTTTTOTOTOTOTOTAL INCOMEAL INCOMEAL INCOMEAL INCOMEAL INCOME

PRPRPRPRPROFIT BEFORE TOFIT BEFORE TOFIT BEFORE TOFIT BEFORE TOFIT BEFORE TAXAXAXAXAX


23

COMPOSITION OF SCI FLEET IN DWCOMPOSITION OF SCI FLEET IN DWCOMPOSITION OF SCI FLEET IN DWCOMPOSITION OF SCI FLEET IN DWCOMPOSITION OF SCI FLEET IN DWT (%) T (%) T (%) T (%) T (%) as on 3as on 3as on 3as on 3as on 311111.03.2008.03.2008.03.2008.03.2008.03.2008

GRGRGRGRGROSS BLOCKOSS BLOCKOSS BLOCKOSS BLOCKOSS BLOCK

24

BOOK VBOOK VBOOK VBOOK VBOOK VALUE OF SHARESALUE OF SHARESALUE OF SHARESALUE OF SHARESALUE OF SHARES

DEBT / EQUITY RATIODEBT / EQUITY RATIODEBT / EQUITY RATIODEBT / EQUITY RATIODEBT / EQUITY RATIO


25

DIRECTORS’ REPORT

To the Members,

Your Directors have pleasure in presenting the 58th Annual Report on the working of your Company for

the financial year ended 31st March 2008.

Accounting Year

The year under report covers a period of 12 months ended on 31st March 2008.

Financial Performance

The comparative position of the working results for the year under report vis-à-vis earlier year is as

under:

(Rs. Crores)

2007-2008 2006-2007

Gross Earnings 4,084 4,210

Gross Profit (before interest, depreciation,

tax and items relating to earlier years) 1,188 1,310

Less: Interest 62 80

Depreciation 303 303 303 383

Profit before tax & prior year adjustments 823 927

Prior year’s adjustments 23 25

Excess Provision/sundry credit balances

written back 58 158

Provision for Indian Taxation (90) (95)

Net Profit 814 1,015

Appropriations

The working results of your Company for the year 2007-2008 after considering prior period adjustments

show a profit of Rs.813.90 crores. An amount of Rs.170 crores has been transferred to Tonnage Tax

Reserve u/s 115VT of Income Tax Act. After adding a sum of Rs.580.80 crores (being balance profit and

loss account brought forward from the previous year) and after considering Rs.127.04 crores (being

interim dividend paid @ 45%) and Rs.21.59 crores (being the amount of tax on interim dividend), the

amount available for disposal works out to Rs.1076.07 crores. Your Directors propose to make the

following appropriations from this amount:

1. General Reserve …. Rs. 480.00 crores

2. Capital Reserve .... Rs. 2.82 crores

3. Staff Welfare Fund .... Rs. 0.75 crores

Total .... Rs. 483.57 crores

Dividend

The Board of Directors, in addition to the interim dividend @ 45% already paid for the year 2007-08, now

recommend payment of final dividend @ 40% for the said year absorbing a sum of Rs.112,92,09,720/-.

In addition dividend tax of Rs.19.19 crores will be payable by the Company. After the proposed

appropriations, the sum available is Rs.460.39 crores which is being carried forward to next year's accounts.

26

Fleet Position during the Year

During the year under report there was no addition or scrapping of tonnage. Thus, the overall fleet

position remained at 79 ships at the end of the year as shown in the following table:

FLEET PROFILE DURING THE YEAR

Particulars As on 01.04.2007 Additions Deletions As on 31.03.2008

No. DWT No. DWT No. DWT No. DWT

1 (a) Crude Oil Tankers 30 33,13,876 – – – – 30 33,11,723

(b) Product Tankers 9 3,67,240 – – – – 9 3,67,240

(c) Chemical Tankers 3 99,174 – – – – 3 99,174

(d) Gas Carriers 2 35,202 – – – – 2 35,202

2 Bulk Carriers 20 8,34,955 – – – – 20 8,34,955

3 Liner Ships 3 86,815 – – – – 3 86,815

4 Offshore Supply Vsls. 10 17,904 – – – – 10 17,904

5 Passenger-cum-Cargo 2 5,303 – – – – 2 5,303

Vessels

Total 79 47,60,469 – – – – 79 47,58,326*

VESSELS ON ORDER AT THE END OF THE YEAR

Type No. Shipyard Total DWT

Very Large Crude 2 Daewoo Shipbuilding and Marine

Oil Tankers (VLCCs) Engineering Co. Ltd., S. Korea 6,38,000

LR-I Product Tankers 6 STX Shipbuilding Co. Ltd., S. Korea 4,34,000

Cellular Container

vessels of 4,400 2 Hyundai Samho Heavy Industries, South Korea 116,000

TEUs each

MR Product Tankers 2 Jinling Shipyard, China 94,000

LR-II Product Tanker 2 Hyundai Heavy Industries Co. Ltd. S.Korea 210,000

Aframax Crude 4 Hyundai Heavy Industries Co. Ltd. S.Korea 460,000

Oil Carrier

Anchor Handling,

Towing & Supply 4 Bharati Shipyard Ltd. 8,000

Vessel (AHTSV)

Handymax Bulk Carrier 6 STX (Dalian) Shipbuilding Co. Ltd. 342,000

* Due to conversion of 2 Single Hull tankers to Double Hull, there is a minor change in DWT.


27

MANAGEMENT DISCUSSION AND ANALYSIS

The overall scenario under which the shipping industry operated and which had impacted the

various segments are discussed below.

A. INDUSTRY STRUCTURE AND DEVELOPMENT

World Scenario

The Shipping industry worldwide operated in a scenario of global economic growth of 4.6% in 2007

with a sizeable growth in world trade. This GDP growth, though marginally lower compared to 4.7% in

2006, was still healthy by historical standards, being higher than the previous four-year (2002-2006)

average of 4%. Main contributors were China (11.4% growth) and 'Developing Asia' (6.4% growth), in

which India was a leading contributor with nearly 9% growth. Europe, however, experienced a slight

slowdown with its growth easing to 3%, and the pace of US economy also declined to 2.3%. In the

fourth quarter of 2007 the global economic growth slowed down, with a drop-off in US manufacturing

activity and on-going housing slump in USA. This trend continues with further concerns of high oil

prices impacting global economy and business.

The global bulk trade in 'Oil & Dry Bulk' sector grew by 3.8% with the shipping industry carrying 2,034

Million tonnes of Crude oil imports (around 2% higher than the previous year); 739 Million tonnes of

Products imports (marginally lower than in 2006); and 2814 Million tonnes of Dry Bulk imports (increasing

by 6.5% over the previous year). Global Container trade was of the order of 124.98 Million TEUs,

representing a growth of 10.8%.

The share of 'Oil' trade in the global bulk trade was nearly 50%, with 'Crude Oil' accounting for 37% and

'Products' 13%, with 'Dry Bulk' trade accounting for the remaining 50%.

Indian Scenario

India continued to be amongst the leading economies with GDP growing at 8.8% in 2007-08, though

slower than the previous year's level. Its total Foreign Exchange reserves rose to nearly US$ 300 Billion

in March 2008. India's share of global trade was around 1% in value terms; with Exports in the 11 month

period (April 2007 to February 2008) being US$139.12 Billion and Imports US$211.95 Billion, together

aggregating to US$351.07 Billion EXIM trade.

The total Cargo traffic (excluding Containers) handled by the Major Indian ports during 2007-08 was

around 427.11 Million Tonnes, an increase of 9.4% compared to the previous year's traffic. This comprised

168.94 Million tonnes of POL (Petroleum and Other Liquids), showing a growth of 9.5% over 2006-07

and 258.17 Million tonnes of Dry Bulk (including 'Other' Cargoes), which increased by 9.4%. Container

traffic was 6.59 Million TEUs, registering a growth of 19% in TEU terms. Total Cargo traffic at Major ports

including Containerised cargoes in 2007-08 was 519.16 Million tonnes, witnessing a growth of 11.9%.

The share of 'POL' traffic in India's Major ports traffic (excluding Containers) was nearly 40% with the

'Dry Bulk / Other cargo' traffic accounting for the balance 60%.

B. OPPORTUNITIES & THREATS

Global Economy

Global GDP growth saw a rapid pace during the last 5 years, but experienced a marginal slow down in

2007, and is expected to dip further to 4.2% in 2008 with slower trade growth representing a challenging

scenario for the shipping industry.

Nevertheless, with the economic growth in 2008 projected to be higher than the 2002-2006 historical

average as mentioned earlier, the prospects for trade and shipping would still remain bright. The Chinese

and Indian economies are expected to continue to register strong performances, mainly due to domestic

demand. China's GDP is projected to grow by 10.5% in 2008, and thereafter to average a little higher

than 10% p.a. during the next three years with continuing rise in domestic demand and investments.

'Developing Asia' is also expected to register substantial growth of 6.2% in 2008, only marginally lower

than in 2007, with India and South Korea contributing significantly.

28

On the other hand, the unfavourable conditions arising out of the on-going US economic slowdown

combined with inflationary trends could restrict demand growth in Europe and in several Asian export-

oriented economies, including China, which may experience a significant setback affecting investment

and trade growth.

Global Trade

Growth in Dry Bulk imports is projected to be slower at 5.3%, while global 'Oil' imports (i.e. Crude oil

and Products) still indicate a higher growth of 4.1% in 2008 (comprising 3.4% growth for Crude Oil and

5.8% Products) as compared to previous year. Container trade growth is reckoned to be slightly lower

at 8.9% in 2008, which is still very encouraging, considering that it is after the sixth consecutive year

of double-digit growth.

Indian Economy & Trade

After witnessing a moderation in 2007-08, the Indian economy is, in any case, expected to continue to

expand at a rapid pace driven by investments and infrastructure development in key areas including the

maritime sector. Accordingly to Reserve Bank of India’s estimations, the GDP growth rate would hover

around 8 percent due to pressure of inflation, interest rates, upsurge in crude oil prices and relatively

weaker rupee.

The Foreign Trade Policy has laid down a target of 5% share of India's EXIM trade in terms of value in

World trade by 2020, which though ambitious, is considered to be achievable as per a recent survey by

the Confederation of Indian Industries (CII). For the next year i.e. 2008-09, the Government has set an

export target of US$200 Billion, up from US$160 Billion, representing an increase of 25% over the

previous year's target.

As per recent CMIE projections, Cargo traffic at Major Indian ports is expected to continue to show

substantial growth in 2008-09, with an increase of 9% over 2007-08.

C. OUTLOOK

The global economy is likely to emerge from the relative slowdown in 2009 and is expected to expand

at around 4.2% annual pace during 2010-2012. Indian maritime industry is thus looking at a scenario of

continuing global economic growth and trade, with China and India being significant contributors among

others. This coupled with the various projects and measures being taken up by the Government including

the National Maritime Development Programme (NMDP) for expansion of Indian ports & shipping capacity

do augur well for the shipping industry. Apart from participating in cross trades (worldwide), Indian

shipping companies would be aiming at capturing a greater share of India's expanding EXIM and domestic

trades. Your Company, as the leading Indian shipping company, has formulated its Ship Acquisition

Programme for the 11th Five Year Plan (2007-12) reflecting the strategy of focusing on value-adding

businesses by building on its core competencies so as to realize the objective of enhancing shareholder

value. Accordingly, SCI envisages acquisition of 62 vessels of about 47 lakhs dwt. comprising Bulk

Carriers, Crude Tankers, Product Tankers, Container Vessels, Chemical Carriers as well as Offshore Supply

Vessels.

D. RISKS AND CONCERNS

The slowing down of global economy and its consequential impact on developed economies, China and

other Developing Asian countries, including India, are issues of concern. In the event of a recession in

USA persisting throughout 2008, there could be worsening consequences for global economy & trade

well into 2009. The spiraling oil prices and fuel costs is another major concern, and the profitability of

shipping operations would be adversely affected if the trend continues.

A detailed analysis of how the above would impact or strengthen each segment of the Company is

discussed below. The segments have been divided into three parts viz. (1) Bulk Carrier & Tanker

(Bulk Segment), (2) Liner & Passenger Services (Liner Segment) and (3) Others.

(1) BULK CARRIER & TANKER

The Bulk Carrier & Tanker has been further sub-divided into two segments viz. (I) Tanker and

(II) Dry Bulk.


29

I) TANKER

A) INDUSTRY STRUCTURE AND DEVELOPMENTS

World Scenario

The world economy in the year 2007 registered a growth of about 5.2% in line with the forecast /

expectation made in 2006, despite the drop-off in US manufacturing activity and ongoing sub prime

crisis / housing slump in US coupled with negative impact of high oil prices. China and India witnessed

growth of about 11% and 9%, respectively, in 2007.

The global oil demand in 2007 was estimated at 85.58 mbpd, which was about 1.2% higher than the

demand in 2006, whereas the global oil supply was 85.54 mbpd in 2007 as compared to 85.41 mbpd

in 2006, registering a negligible growth over 2006 level.

During the year, the oil market witnessed various important developments that changed the course of

the market from time to time. The focus was on the perceived continued instability in the Middle East,

steadily falling crude and product stocks in US and Europe, the steady weakening of US Dollar and

continued insurgency in Nigeria. As a result, the crude oil prices rose steadily from US$ 64.06 per bbl

in May 2007 to US$ 79.03 per bbl in September and finally peaked at US$ 109.73 per bbl in end March

2008. With the oil prices rising significantly over the past couple of years, the Oil Companies are

focusing on 'deep-water' sub-sea projects and better means of recovery at oil fields to increase production.

With the availability of less expensive and less complicated technology, a number of exploration activities

have been undertaken in the recent years.

The year 2007 was marked by marginal increase in OPEC (Organization of Petroleum Exporting Countries)

output, which was counter balanced by decrease in Non-OPEC output, thereby keeping the total supply

almost at 2006 level. There was a shift in oil sourcing by China, which increased its long-haul imports

from West Africa and Latin America and reduced short-haul imports from other Asian countries. This

increased the tonne-mile demand to certain extent. The year also saw a moderate augmentation of

tanker fleet by 110 vessels aggregating about 17.13 m.dwt.

Though the market performed splendidly in December, the most part of the year the market was plagued

by the perils attached with a weak economic scenario and steeply rising oil prices and consequently, the

steep hike in bunker prices affected adversely the owners. As a whole, the year under review was not

as encouraging as the previous year.

Indian Scenario

The present refining capacity in India is about 140 mmt. There are various projects under implementation

to expand the capacity of the existing refineries and some projects are on the anvil to install new

refineries. If all these projects fructify, the total refining capacity of India would be about 220 mmt. by

the year 2012. Considering the expected refining capacity, India is going to emerge as a major refining

base and the main business hub for petroleum products for the whole world.

Since the domestic crude oil production has stagnated at previous year's level, to cater to the installed

refining capacity, in excess of 115 mmt. of crude oil was imported during the year 2007-08. As the

majority of the refining capacity that is being added is export oriented, the total export of Clean/Dirty

products during the year 2007-08 was to the tune of 36.16 mmt. However, to meet the increasing

domestic demand of products, which stood at about 116.711 mmt. in 2007-08, India imported about

20.19 mmt. of petroleum products during the year 2007-08.

Since there is a shift to higher parcel sizes of 2 million barrels, in order to obtain benefit from economies

of scale, the use of VLCCs have increased considerably for transportation of crude oil to Indian shores.

This is evident as more and more number of SBMs are set up / being set up to handle VLCCs.

B) OPPORTUNITIES & THREATS

Installation of new refining capacity in India would result in greater employment opportunities for tanker

fleet in general and Indian tankers in particular.

Increased oil imports in 2 million barrel parcels is resulting into enhanced usage of VLCCs and thus, an

opportunity for acquisition of more VLCC units. Coming on stream of Paradeep-Haldia pipeline would

result in greater usage of VLCCs for imports of crude on ECI (East Coast of India).

30

Emergence of India as a significant refining base and the expansion of Reliance Industries refinery and

coming on stream of Essar refinery would result in enhanced exports of products from India, which

would require Clean LR-I and LR-II tankers.

High Oil prices and the need to augment indigenous crude oil production are likely to lead to usage of

FPSOs(Floating Production Storage & Offloading) along the coast so as to start immediate production

from new oil fields and revive marginal fields. FPSOs present a cost effective means of starting production

from new/marginal oil fields with almost nil gestation period. This would provide another opportunity

for Indian ship-owners, including SCI, to diversify in a related but new field.

New MARPOL regulations along with the change in parcel size preferences of Indian oil companies has

led to reduced usage and marketability of SCI's eleven old single hull LR-I tankers.

Due to very stringent quality requirements in USA/Europe, world’s relatively older fleet is being deployed

in India and other developing areas. This impacts the freight rates for India centric business in general

and SCI in particular, which owns new building quality tonnage and is unable to compete with low-

quality and older tonnage.

The acute shortage of quality manpower and the inability to retain them to man our state of the art

tankers, which serve world's best quality charterers like Shell, BP, Total, Koch, Chevtex, Exxon Mobil,

Vitol, Trafigura, etc., who have stringent requirements regarding qualification and experience of floating

staff, poses a threat to acceptability of our tankers and also safe operation of vessels. The problem has

now been mitigated to some extent by increase in wages.

C) SEGMENTWISE PERFORMANCE

Crude Oil Tankers

Your Company has been competing with other players in the Global competitive market as a number

of tankers including two VLCCs are employed gainfully on cross trades. M/s. Hindustan Petroleum

Corporation Ltd. (HPCL) and M/s Bharat Petroleum Corporation Ltd. (BPCL) continues to have CoA

arrangements with SCI for their crude transportation.

During the year 2007-08, the total quantity of crude oil transported by your Company's tanker fleet was

about 35.08 mmt., which includes 10.49 mmt. in cross trades, 11.43 mmt. of imported crude for Indian

Oil Industry and 13.17 mmt. coastal movement. In addition, through in-chartered vessels, SCI transported

about 4.18 mmt. of imported crude for Indian Oil Industry. Hence, the total quantity transported by SCI

(both owned vessels and in-chartered vessels) during the year under review was 39.26 mmt.

Of the total of 15.61 mmt. of crude oil transported by SCI for Indian PSU refineries, 73% was carried by

owned vessels and 27% carried by in-chartered vessels.

SCI, as an integrated service provider, has also handled lighterage operations during the year 2007-08

at various locations along the Indian coast and lightened liquid and dry bulk cargo of 15.375 mmt.

Ship-to-Ship (STS) Lighterage operations

During this period, 448 lighterage operations were carried out for STS transfer of 12.018 mmt. of crude

oil (both imported and indigenous) and 56 lighterage operations for STS transfer of 3.357 mmt. of bulk

iron ore.

During the year 2007-08, your Company performed six complete tanker handling operations of product

tankers at SBM facility at Dabhol on account of IOC.

Contract of Affreightment (CoA)

During the year 2007-08, your Company successfully performed CoA with HPCL and BPCL for 10.94

mmt. of imported crude plus 1.3 mmt. of indigenous crude and for 6 mmt. of imported crude plus 2.35

mmt. indigenous crude, respectively.

Employment pattern

MR Tankers

The tanker, Homi Bhaba performed lighterage operation at Vadinar, Mumbai High and at PY3. Another


31

tanker, m.t. C.V.Raman was on time charter with IOC for lighterage operation at Sandheads and at Panna

fields.

LR-1 Tankers

As a result of revision of regulation 13G and addition of new regulation 13H of MARPOL Annex.1,

SCI's LR -1 tankers were unable to load HGO (Heavy Grade Oils) i.e crude oil and fuel oil cargoes having

density greater than 900 kg/m3 @ 15°C. Hence, these vessels were not workable for cross-trade shipments.

However, your Company managed to employ all these LR-1 tankers mainly for carriage of BH/ Ravva

crude along the coast and lighterage operations under the CoA. Besides, LR-1 tankers were also operated

for transportation of crude oil from Iraq from time to time for the Indian Oil Industry.

CSL tankers

These tankers performed mix of CoA and open market cross-trade voyages. The tanker, A.K. Azad, was

on time charter with BPCL.

Aframax tankers

These tankers performed mix of CoA and open market cross-trade voyages both in time charter and

voyage basis. The tanker, Desh Prem, was on cross-trade voyages for some time and thereafter, employed

on time-charter basis a/c. Norden. The tanker, Desh Bhakt, has been employed on time charter basis a/

c. Norden during the period under review.

Suezmax tankers

Suezmax tankers performed a mix of CoA and open market cross-trade voyages. The tanker, Desh

Shakti, was successfully employed on voyage charter basis in cross trade for some time and thereafter

employed on time charter basis.

VLCCs

Two VLCCs viz. m.t. Desh Ujaala and m.t. Desh Vaibhav were successfully employed in the open market

on time charter basis as also cross-trade voyages. Your Company took advantage of the premium

charter rates for its double hull tankers in the tanker freight market and earned additional revenue by

deploying them on cross trade from time to time.

Storage Duty

During the year under review, your Company regularly deployed LR -I tankers and m.t. Maharshi Karve

for storage of crude oil for Oil & Natural Gas Corporation (ONGC) under the time charter agreement.

Your company is transporting Mumbai high crude to various coastal refineries viz MRPL, HPCL, BPCL,

IOC and CPCL.

Product Carriers

During the year, 7 vessels viz. m.t. Bhartidasan, Suvarna Swarajya, Sampurna Swarajya, Lance Naik

Albert Ekka PVC, Flying Officer Nirmaljit Sekhon PVC, Arun Khetrapal and Major Hoshiar Singh PVC

were gainfully employed with the Indian Oil Industry on time charter basis ending on 31st March 2008.

Vessel m.t. Rabindranath Tagore has been employed with Dorado Tanker Pool. Vessel, m.t. B.C.Chatterjee

was on time charter for the whole year.

Specialized Vessels

Your Company's LPG / Ammonia carriers were operated for carriage of both LPG and Ammonia. While

one tanker serviced HPCL on time-charter for transportation of LPG from WAG, Malaysia to India as well

as coastal movement of LPG from Indian refineries up to mid January 2008 and thereafter with IOCL,

the second tanker was deployed on time-charter with Malaysia International Shipping Corporation (MISC),

Malaysia for transportation of Ammonia on cross-trade in the international market at attractive rates.

Three chemical tankers continue to be deployed under a long-term CoA with Maroc Phosphor / IMACID.

During the year, 3 tankers carried about 0.50 mmt. of phosphoric acid which included two parcels of

32

20000 mt. to Bin Qasim, Pakistan. Your Company also carried two backhaul cargoes from India for the

first time.

D) OUTLOOK

The "World Economic Forum" has outlined four issues viz. financial risks, food security, supply chains

and the role of energy, which may influence future growth of the world. Out of these risks, financial

risks is the most immediate and it entails a sharp decline in asset values and economic activity. This

risk is expected to result in slower growth during 2008 leading to fall in real GDP growth rate to 4.3%

from 5.2% in 2007. Even China and India which witnessed a robust growth are expected to grow at a

slower pace in 2008.

After growing by about 2.9% in 2007, tanker demand is projected to increase by 4.1% in 2008 in terms

of deadweight. However, with the increase in supply, the supply-demand gap is expected to increase to

9.2% in 2008 against 8.1% in 2007. Asia is likely to dominate the crude oil story, with imports into China

and developing Asia region is expected to continue rising rapidly. In addition, it is expected that the

trend towards longer-haul imports into these regions would continue in 2008.

With recent surge in ordering activity, tanker deliveries will remain strong. Though, the IMO regulations

begin to persuade owners to send the ships to the scrapyards, most single-hull vessels under the age

of 20 years will continue to trade as the regulation would come into effect in 2010. As a result, the

tanker fleet is expected to expand by 6.8% in 2008 and 11.6% in 2009.

As a consequence of the above, it is expected that freight rates are expected to be under

pressure in 2008.

Taking into account the current levels of vessels on order and the further tonnage aquisition planned,

SCI is likely to retain its numero uno position among Indian Shipowners in terms of tonnage and

actually widening the gap from other Indian Shipowners in the tanker segment.

SCI's CoA with HPCL and BPCL/KRL combine for transportation of crude oil has been extended by both

the companies till September 2008. Prior to expiry of this period, SCI would initiate dialogue with the

respective companies to sign new CoA.

The tanker Maharshi Karve was dry-docked for conversion to a double-hull tanker and after conversion,

the vessel has been delivered to ONGC on time charter basis in March 2007 for a period of five years.

Further, a contract has been signed with ONGC for LR- I tankers on time charter basis for a period of

three years up to June 2010 for deployment in D-1 field.

The reduced marketability and usage of LR-I tankers due to change in MARPOL regulations and their

single hull status poses a major challenge for SCI to gainfully deploy these vessels. These tankers would

continue to be deployed for coastal movement of indigenous crude and import of crude oil from Arabian

Gulf under CoA.

Contract with MRPL for transportation of BH crude will be continued.

The movement of clean petroleum products along the coast would remain steady and our product

tankers would continue to remain deployed on time charter basis to Indian oil companies.

E) RISKS & CONCERNS

The acute shortage of quality manpower and the inability to retain them to man our tankers is posing

threat to acceptability of our tankers by world's best/quality charterers. However, SCI has suitably

upgraded the compensation of fleet personnel to match the levels of other Indian Shipping companies

and this problem has been effectively brought under control.

Proactive Measures

During this fiscal your Company converted an OBO and an MR tanker into double hull tankers to enable

them to extend their life. They continue to service the Oil Industry in a profitable manner. SCI received

the "Innovator of the Year Award" at India Shipping Summit for being the first Indian Shipowner to have

successfully carried out such conversions.


33

Integrated Management System (IMS)

In order that our tankers maintain the highest standards and remain competitive and marketable, SCI

has ventured to implement the IMS (Integrated Management System) that encompasses provisions of

Quality Management System, Environmental Management System of the ISO and Occupational Health

& Safety Management System. The IMS also covers within its ambit; Risk Assessment, Hazard

Identification & Analysis and TMSA (Tanker Management and Self Assessment). TMSA is the

requirement of Oil Majors without which the tankers may face rejection by the Oil Majors and the Oil

Terminals around the world. TMSA offers a standard framework for assessment of ship-operators

management system. Ship-operators are expected to conduct and regularly review their TMSA

assessment on line against the highest practices recommended in their programme. Implementation

of IMS has been taken up as a time-bound programme to maintain profitability of SCI vessels at the

internationally highest levels.

Informatively, the IMS implementation on board 44 tankers have been completed and the certifying

authority IRQS (Indian Register Quality System) have recommended ISO 14001 and OHSAS 18001

(Occupation Health & Safety Assessment Series) certification after successful completion of Stage-I and

Stage-II audits for tanker fleet (44 tankers and shore offices at Mumbai, Chennai and Haldia), which were

duly completed and the Certificate of Conformance has been issued to SCI by IRQS.

Outstanding Payment from the oil industry

As on 31.03.2008, payment under various heads outstanding from the Oil Industry was approximately

Rs.216 crores. A substantial portion of the outstandings was in connection with the payment in respect

of tankers oil transportation including freight, demurrage and charter hire. Your Company has been

continuously following up with the oil industry for realization of overdue demurrage claims.

II) DRY BULK

World Scenario

The average BDI (Baltic Dry Index) during the year 2007-08 was 7771 (as compared to 3746 during 2006-

07). The upward movement, in fact, was steady from the start of the fiscal with a leap in September and

October 2007 and it ultimately peaked in November 2007.

The BSMI (Baltic Supramax Index) also witnessed a steady increase from April 2007 where the average

stood at 3691 and ended March 2008 with an average of 5160.

Strong global GDP (Gross Domestic Product) growth and the resulting strong commodity demand

underpinned rates in all sectors. The global tonne-mile demand in the dry bulk sector registered

an estimated growth of 7.7% at 14,746 billion tonne miles in the year 2007 compared to 13,694

billion tonne miles in 2006. Sea-borne trade in 2007 is estimated at 2975.5 mmt. in 2007 from 2796.6

mmt. in 2006.

Indian Scenario

Indian Iron Ore shipments and Coal imports are the driving forces for dry bulk demand in India. During

2007-08, India exported 88 mmt. of iron ore down from 93 mmt. in the last fiscal. Despite this reduction,

your Company's Handymax fleet performed well in this segment bolstered by the strong global dry bulk

market. Indian steam coal imports in 2007 was 26.1mmt. up from 22.6 mmt. in 2006. Growing domestic

demand for Steel and the augmentation of power generation capacities are driving the Iron Ore and

Coal demand and in both these trades, India is a major participant as an exporter and importer,

respectively.

Shipments of Iron Ore from India declined during end of last fiscal (2006-07) due to Government's

imposition of export duty of Rs.300 per tonne. Further to this, at the end of this fiscal ( 2007-08), there

is growing pressure due to high Steel prices for increase in this export duty / conversion of the duty

to an ad valorem basis. This could impact Iron Ore export trade from India.

34


With increasing demand from Steel makers and Power producers, Coal import requirements of India are

set to grow significantly. Though, at present the import requirements are met through Panamax and

Handymax vessels, the trend is changing towards Capesize vessels due to the setting up of UMPP (Ultra

Mega Power Projects) in the coastal areas and the commissioning of new deepwater ports in

Krishnapatnam and Gangavaram.

Currently, 85% of SCI's dry bulk fleet is more than 15 years old, of which 80% is of Handymax size. Out

of the total 15 Handymax vessels, 12 are of 20 years or above. The marketability of these Handymax

vessels has come down due to their age, as most of the reputed charterers prefer to take vessels of 15

years or younger. Moreover, for movement of Iron Ore from ECI to China, the charterers prefer to use

vessels equipped with grabs. None of the SCI vessels are installed with the grabs suitable for loading/

unloading of Iron Ore. However, cargo security for these vessels has been ensured through a long term

COA, for coal from Australia/N.Zealand to India with SAIL.

Due to ageing of SCI dry bulk fleet, the cost of maintenance has gone up considerably and the vessels

are becoming more and more expensive to operate.

As all new acquisitions of Handymax size vessels are mainly in the range of 50000+DWT

(Super Handymax) with greater capacity cranes and grabs and also more economic in fuel consumption,

the existing SCI's Handymax fleet of 47000 DWT range is facing tough competition especially due to

very high bunker costs. However, SCI's new buildings of 6 Handymax bulk carriers due for delivery in

2011-12 shall be at par with the Super Handymax vessels


Your Company owns 20 bulk carriers (average age 19 yrs) as on 31st March 2008 comprising of 15

Handymax and 5 Handysize vessels.

The 11 units of Handymax vessels were primarily deployed on a triangular voyage for transportation of

Coking Coal from Australia to ECI both on CoA and spot basis for Steel Authority of India Ltd. (SAIL),

Kolkata and then deployed for carrying Iron Ore from ECI to China on spot basis. These vessels were

some times deployed for carriage of Metcoke from China to India on spot as well as on CoA. SCI

tonnages had lifted from Australia about 11,21,339 mt., on account of SAIL, during the year 2007-08. In

end January 2008 force majeure conditions prevailed in Queensland on account of heavy rains and

consequently, there were heavy delays in the loading of some of SCI's bulk carriers nominated during

this period.

In addition to the above, a few Handymax vessels, primarily younger tonnages of 45000 DWT, were

deployed on short period charter in order to take advantage of the buoyant period charter market.

The 5 units of Handysize vessels were mainly employed on cross-trades for short-term/ long-term

period charters or spot basis to carry overseas cargoes like Urea, Steel, Grain, Fertilizers, Agri-

products etc.

D) OUTLOOK

The average BDI was 5754 in April 2007 and has climbed upwards to a phenomenal 8039 in March 2008

touching a peak level of 11039 in November 2007 and in overall representing an increase of 2,285

points. In the dry-bulk market, there was no stopping the rise in freight rates. Strong commodity demand

and a high level of congestion drove the market throughout 2007. Since November, however the

downward revision triggered by reduced activity prior Christmas holidays, has been continuing due to

various factors such as cancellation of nearly 50 Iron Ore shipments from Brazil, Richards Bay rail link

disruption, falling grain exports from US especially compared to record exports of last year, significant

fall in China's Steel exports and diversion of China's Coal output for domestic demand. Despite the

downward revision being witnessed the fundamentals governing the market are strong. After remaining

flat in the quarter January-March 2008 dry bulk demand is expected to increase in the second quarter

with a seasonal jump in Latin American grain exports. China's return to prominence as an exporter and

importer of Coal and the returning of Australian Coal supplies are expected to give a boost to Steam

Coal trade by about 6%. The Iron Ore trade, the main driver of dry bulk demand, is expected to be

weaker in US and Europe and continue to be strong in China, India and the Middle East. The growth


35

in this trade is expected to decelerate from current levels of 10% to about 8% in 2008. Iron Ore and

Coal export capacity increases in 2008 will also play a key role in increasing demand. However the key

factor could well be soaring commodity prices which are at record levels at present.

In the year 2007 the Handymax fleet had a 6% net growth of 123 units of 5.96 m.dwt . while the

Handysize fleet grew by a modest 1.6% with additions of 42 units totaling 0.84 m.dwt. End of 2008 will

find a further 7% growth in the Handymax segment and a small reduction in the Handysize segment.

The recent trend of conversions from tankers to bulk carriers is also expected to add to the supply in

the Capesize segment. However, the combination of various factors like improved fleet productivity, a

mild slow down in trade demand and pick up in deliveries is expected to put a downward pressure on

freight rates during 2008.

E) RISKS & CONCERNS

Ageing fleet demands high level of maintenance and repairs which is adversely affecting Company's

profitability.

Due to shortage of shipbuilding Steel globally, the cost of Steel renewal in ship repair yard is rising.

The high bunker prices is making the charterers look towards more fuel efficient ships.

Nevertheless in the current market conditions, there is a niche for SCI’s bulk carriers, which is being

catered to. Further, the delivery of the bulk carrier new buildings in the coming years will help in

augmenting the fleet and cater to global trade.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

(BULK CARRIER AND TANKER)

The overall financial performance of bulk carriers and tankers has been impressive. The contribution of

bulk carrier sector has shown considerable improvement in tune with the global firmness in this sector.

Crude sector was affected by the softness of the market but the vessels on period charter served as a

hedge both for revenues and against steep rise in bunker prices. The product tankers have performed

reasonably satisfactorily and the performance of LPG vessels has also been very impressive. Acid

Carriers were affected due to the downturn in the phosphoric acid trade.

The Bulk Carrier & Tanker segment (Tanker and Dry Bulk together) recorded a revenue of Rs.2889.86

crores in 2007-08 as compared to Rs.3111.55 crores in 2006-07. The segment recorded a Profit before

Tax of Rs.822.30 crores in 2007-08 as against Rs.893.23 crores in 2006-07.

(2) LINER & PASSENGER SERVICES

A) INDUSTRY STRUCTURE AND DEVELOPMENTS

World Scenario:

As mentioned earlier, containerised trade registered an unprecedented sixth straight year of double-

digit growth, expanding by 10.8% in 2007 due to rising demand in emerging economies and soaring

exports from Asia to Europe and the Mediterranean. The end of 2007 marked the first time that

containerised shipments in the Asia-Europe westbound lane surpassed Transpacific eastbound volumes,

thus becoming the world's largest liner trade. Trade growth from Asia to Europe rose sharply by 19%

in 2007 driven by economic expansion in South Europe, Turkey, Black Sea region, Baltic States and

Russia, as also increasing demand in leading European industrial countries. Chinese exports recording

24% growth mainly contributed to these developments. However, growth in the Transpacific eastbound

trade was severely restricted by an ailing US economy and slumping retailer demand, registering a

mere 2% rise, far below the average of 14% annual growth during the previous five years, and marking

an 11-year low. The regional intra-Asia trade surged by a remarkable 16%. The North-South shipments

also saw a strong 8.5% expansion with the trades in 'Asia to Middle East', 'Asia to Latin America' and

'Asia to Africa' sectors gaining momentum.

Major container lines, namely MSK, NORASIA, CMA-CGM, MSC restructured their services and increased

tonnage to northern and eastern China, as potential growth areas for 2008. The size and extent of

coverage give major carriers the advantage of economies of scale and, coupled with distinct customer

focus, enables a swift response to the emerging market dynamics as a commercial organisation.

36

On the Fleet side, the total Container capable fleet growth moderated from 15.4% at end of 2006 to 12%

at end of 2007. The massive contracting activity particularly for mega-size ships in excess of 10,000 TEU

surpassed historical records, rising to 3.2 Million TEU, nearly twice the contracting recorded in each of

the last 3 years. By end-2007, as many as 101 new building orders were placed for vessels of over

12,500 TEU capacity. More than two thirds of these contracts were placed for accounts of Chartered

Vessel owners, with German interests alone accounting for just over half of this tonnage.

In the 'under-3000 TEU' segment, the fleet growth declined correspondingly from 7.3% to 6.4% in 2007,

and the slippage in deliveries of medium sized vessels is attributed to delays in Polish and Chinese

yards, contributing to increase in charter rates in this segment.

During 2007, the Charter rates averaged 5% higher overall, compared to the previous year due to strong

trade demand, and after peaking in third quarter of 2007, they ended the year 25% above end-2006

rates. Liner Freight rates also rose during 2007, averaging 4% higher than 2006 box freights.

While there were substantial gains in freights during the fourth quarter of 2007, it is also to be noted that

the slowdown in the US trades did finally occur in second half of 2007. This rise in freight rates would

not indicate improving market conditions, but reflect heavy fuel surcharges. Fuel costs’ escalation are

estimated to be 17%, and the operating costs of most liner companies were on average 8% higher than

in 2006.

Indian Scenario:

India's container trade has also been growing at a rapid pace over the last decade; and the container

traffic handled by the Major Indian ports in 2007-08 which was 6.59 Million TEUs, registered a

growth of 19% over the previous year. With the extent of containerisation in India being around 50%

compared to 85% in developed countries, there is considerable scope for further expansion of container

trade in India.

The SCI is the only Indian mainline carrier providing services from India to many of the major global

destinations; and in view of the rapid growth in this business, many international major carriers have

been setting up / consolidating their operations in India either offering direct services from India or

calling Indian ports on their East & West services.


The impact of US economic slowdown combined with inflationary trends is expected to bring down

demand in several Asian export-oriented economies and Europe resulting in slower pace in European

imports and intra-Asian trades in 2008. Thus, global containerised trade growth is expected to ease

back to 8.9% in 2008, before bouncing back to 10.2% in 2009, as the global economy emerges from the

downturn. Meanwhile, significant slowdown in Asia-Europe westbound trade is expected with growth

falling from 19% in 2007 to 13% in 2008. Similarly intra-Asia trade growth is expected to ease to 11%,

around 5% lower than previous year. With a 10.5% GDP growth projected for China, its exports growth

is also expected to moderate from 23% in 2007 to 16% in 2008, falling below the 20% mark for the first

time since 2001. Nevertheless, growth projections for these trades are still above the 10% mark, which

would still signify reasonably favourable conditions for liner shipping. Also, the Transpacific eastbound

volumes are expected to expand faster in 2008, notching a 6% gain, as the US demand bounces back

in the second half of 2008.

Although newbuilding contracting activity is likely to moderate during the next two years, the ratio of

the Cellular orderbook to the existing fleet has already reached a record 60% mark and newbuilding

deliveries are scheduled to stretch upto 2011/2012. The accelerating fleet growth in second half of 2008

is expected to exert downward pressure on freight rates which may average 3% below 2007 levels,

weakening further in 2009 as new mega-ships are delivered. However, the rates are expected to level

off by 2010.

As regards the Breakbulk sector, there is a good potential in respect of import of general cargo / project

cargo / heavy lift cargo from Far Eastern ports on account of government / PSU requirements. Your

company is continuing to explore the possibility of catering to the shipment of these cargoes by venturing

into a viable Joint Service with internationally well-reputed partners.


37


Liner Vessels

The table below shows the profile of SCI's owned liner fleet having total capacity of 5,607 TEUs.

Type of Ships As on 31.03.2007 Addition Scrapping As on 31.03.2008

No. DWT No. DWT No. DWT No. DWT

Fully Cellular 3 86,815 - - - - 3 86,815

Total 3 86,815 - - - - 3 86,815

Average age of Container vessels : 15 years

The In-chartered container vessel tonnage presently operated by SCI comprises 5 vessels of a total DWT

of 1,94,461 tonnes and 13,556 TEU total capacity.

Your Company continued to deploy its owned / operated Container vessels in the various sectors as

indicated below.

Container Services

Indian Subcontinent Europe Service (ISES)

The UK-Continent cellular container service was started in 1994, with a single operator viz. SCI deploying

its 3 owned vessels of 1,800 TEU capacity. The service was subsequently upgraded in stages and is

currently operated in consortium by five Partners viz. SCI, Yang Ming Lines (YML) of Taiwan, ZIM lines of

Israel, K-Line of Japan and MISC of Malaysia with 7 vessels of 2,650 - 3,000 TEU capacity on a 49 day

round voyage schedule. SCI and ZIM line are operating two vessels each and the other three partners one

vessel each. The ISE service is a well reputed performer in the segment with a significant market share.

SCI's average weekly allocation stands at 742 TEUs per vessel. The ports of call for this service are:

Colombo / Nhava Sheva (JNP) / Port Said / Barcelona / Felixstowe / Rotterdam / Hamburg / Port Said /

Colombo.

Far Eastern Sector:

India / Far East Cellular (INDFEX 1) Service

This service commenced in June, 2001 with 5 vessels of 1,600 to 1,800 TEU capacity, offering a direct

service from India's West Coast (JNP - NSICT) to South China, Korea, Hong Kong, Singapore and Malaysia.

SCI's average weekly allocation was 600 TEUs. The service was upgraded in March 2008, and is now

operated with 5 vessels of 1,800 to 2,200 TEUs capacity, having a round voyage of 35 days. The main

ports of call are NSICT / Colombo / Singapore / Busan / Shanghai / Hong Kong / Singapore / Port Kelang /

Colombo / NSICT. There are three Vessel Operating Partners viz. SCI, PIL and K-Line. One vessel each is

operated by the respective Vessel Operating Partners and the other two ships are shared by all three

partners. With the upgrading of the service, SCI's average weekly allocation increased to about 700 TEUs.

Further, considering owner's merit of about 200 TEUs on m.v. SCI Vijay, the effective average allocation for

SCI enhanced to 740 TEUs.

India / Far East Cellular (INDFEX 2) Service

This service commenced in June 2002, with a fixed day, weekly, direct service connecting East coast of

India to North China. SCI had earlier deployed 1,600 TEU vessel and its average weekly allocation was

about 300 TEUs. The service is now operating with 5 vessels of 1,200 to 1,700 TEUS capacity each, and

has round voyage duration of 35 days. The main ports of call are Chennai / Vizag / Singapore / Hong Kong/

Dalian / Xingang / Qingdao / Hong Kong / Singapore / Port Kelang and Chennai. The constituents of the

consortium are identical to INDFEX-1 consortium. SCI deploys one 1,700 TEU vessel, m.v. Marivia, in this

service and its average weekly allocation has enhanced to 340 TEUs, including owner's merit of 115 TEUs

on account of the above vessel. Through the Indfex 1 and Indfex 2 services, SCI covers the booming

Chinese market extensively with direct calls at 4 mainland Chinese ports and Hong Kong.

38

Far East to Middle East ("HYPER GALEX") Service

SCI started this weekly service from the Far East to Middle East via India on 11.11.2006 with two other

partners namely, Emirates Shipping Lines and TS Line. The service, "HYPER GALEX" offers direct service

from Xingang, Qingdao and Ningbo to Cochin and Nhava Sheva and calls the Middle East ports of Jebel

Ali, Abu Dhabi and Dammam. It was operated with 6 vessels of 2700 TEU capacity and round voyage time

of 42 days. SCI and TS Line deployed one vessel each in the service and ESL 4 vessels, the ports of call

being Xingang - Qingdao - Shanghai - Ningbo - Hongkong - Singapore - Port Kelang - Colombo - Cochin -

Nhava Sheva - Jebel Ali - Abu Dhabi - Dammam - Jebel Ali - Colombo -Singapore - Xingang. However,

after operating the service for about a year, the partners gave 3 months notice of closure in mid-December

2007. This service has now been terminated in April 2008.

SCI Middle East India Liner Express (SMILE) Serivce:

SCI started its new independent service on 16.03.2008 as a weekly service to the Gulf. The service, operated

with 2 vessels of 1600 TEU each, has a round voyage duration of 14 days, and the ports of call are

Colombo / Cochin / Nhava Sheva / Jebel Ali / Dammam / Colombo. It caters to the requirement of the trade

in the Gulf markets as also the Far East, UK-Continent / US markets through transshipment at Colombo.

This is the first foray of the SCI in operating an independent service after 1994.

India - US East Coast Sector:

IDX Service

This service commenced with Zim, Emirates Shipping Line (ESL) and Mac Andrews as partners with first

sailing from Colombo on 24.05.2006. Subsequently the service was operated with 8 vessels by the

consortium of five partners namely ESL, Italia Maritima, OOCL, SCI and ZIM Lines; the Port Rotation being

Colombo, Tuticorin, Kochi, JNPT, Mundra, Barcelona, New York, Norfolk, Charleston, Barcelona, Colombo.

However, since all the partners were incurring considerable losses in the service, they have agreed to

terminate the service. The last sailing in the service from India was by the SCI vessel, departing Mundra

on 30.01.2008 and departing Charleston, USA on 02.03.2008. The service has been terminated in March

2008 with the completion of the voyage of SCI vessel. SCI is in the meantime reviewing options of

catering to the USA market and is looking for suitable consortia partners.

Breakbulk Services

The SCI is the only Indian Company providing overseas liner break-bulk services to Indian trade. The SCI

arranges for carriage of breakbulk cargoes on space charter basis on account of Government of India

Departments and PSUs which includes Shipments of Over-Dimensional Cargoes (ODC) / Project cargoes/

Heavy Lift cargoes / IMO Class I Cargoes etc. and also containers. Such shipments are being covered

from various ports across the globe.

Joint Breakbulk Service

A Joint Service was started with M/s. Rickmers Linie, Germany in September 2000 for shipment of break-

bulk / general cargo from European ports to India. This Service arrangement is structured with a view to

both the lines upgrading their services from time to time and responding to the needs of the market and

trade. Till 2006, the SCI had contributed one breakbulk vessel to this service. However, as there is no

owned / chartered breakbulk vessel with the SCI, at present the service arrangement is on the basis of

space sharing with due compensation from SCI to M/s. Rickmers Linie for using space on their vessels.

Feeder Services

The SCI is operating a Joint Feeder Service with M/s. Sea Consortium Ltd., Singapore on the Indian sub-

continent plying on the Kolkata / Colombo / Kolkata route since 1998 to cater to SCI's mainline services to

various destinations. From October 2002, SCI also commenced another Joint Feeder Service with M/s.

Sea Consortium Ltd., Singapore on the Chennai / Colombo / Chennai sector. The SCI continues to explore

opportunities for forging strategic alliances with other players in the private sector to offer a wide array of

services for the trade.


39

Coastal Operations

Your company on behalf of the Government of India for the Andaman & Nicobar Administration (A&N) and

the Union Territory of Lakshadweep Administration (UTL) as well as other Governmental organizations

(Geological Survey of India and Department of Ocean Development) undertakes the Coastal Operations

with 2 of its owned vessels and 32 managed vessels.

SCI's Owned Passenger-Cum-Cargo Vessels:

The Passenger cum-Cargo services to and from the Mainland to the A&N Islands and Inter Islands are

operated on behalf of the Government of India by the SCI by its two owned vessels, apart from managed

vessels. The table below shows the profile of Passenger-cum-Cargo carrier fleet owned by your Company.

Type of Ships As on 31.03.2007 As on 31.03.2008

No. Pax. Cap. Cargo No. Pax. Cap. Cargo

Cap. Cap.

(MTs) (MTs)

PAX-Cum-Cargo Ships 2 1,502 1,500 - - 2 1,502 1,500

Total 2 1,502 1,500 - - 2 1,502 1,500

Deployment of Passenger-cum-Cargo fleet of your Company

• The SCI owned Passenger-cum-Cargo vessel viz.m.v. "Harshavardhana" was deployed on the Mainland/

Andaman Sector.

• The SCI owned Passenger-cum-Cargo vessel m.v. "Ramanujam" was deployed on the Inter-Island

Services of the Andaman and Nicobar Islands

Manned and Managed Vessels

The following table shows the profile of the vessels managed by your Company on behalf of the various

Governmental Organisations / Departments.

Type of Ships As on 31.03.2007 As on 31.03.2008

Nos. Pax. Cap. Cargo Nos. Pax. Cap. Cargo

Cap. Cap.

(MTs) (MTs)

PAX-Cum-Cargo Ships 26 8,784 6,810 -- -- 26 8,784 6,810

Other Vessels 6 - - - -- 6 -- --

Total 32 8,784 6,810 -- -- 32 8,784 6,810

The deployment of these vessels on behalf of various organisations is as follows:

• Nine (9) Ships on account of the A&N Administration for carrying of Passenger and cargo between

the Mainland and Andaman and Nicobar Islands and Inter-Islands.

• Five (5) Ships on account of the Union Territory of Lakshadweep Administration, of which Four (4)

are for carriage of Passengers and Cargo between the Mainland and Lakshadweep Islands and Inter

Islands and the remaining One (1) is a Cargo Barge.

• Five (5) Ships on behalf of various Governmental Organisations/Departments, which are Research

vessels (three (3) ships on behalf of the Geological Survey of India and two (2) on behalf of the

Department of Ocean Development).

• Thirteen (13) ships on account of A&N Administration for carrying passengers on Inter-Island run.

Additions

Nos.

Scrapped

Nos.

Additions

Nos.

Withdrawn/

Scrapped

Nos.

40

During the year under review, the SCI carried Passengers and Cargo on the Mainland / Island sector

on owned and managed vessels as under:

Sector No. of Passengers General Cargo (MTs)

Mainland / A&N Islands 1,88,168 41,544

Mainland / UTL Islands 37,343 -

Total 2,25,511 41,544

Marketing

The SCI has intensified the marketing efforts for its break-bulk and container services. Sales calls are

being regularly made by the SCI's marketing team, through own offices and also through agents appointed

at various ports in India and abroad so as to build a sound rapport with its customers viz. various

Government of India Departments, Public Sector Undertakings and major Export / Import Business

Houses. The SCI has adopted a proactive approach towards competition by undertaking an all India

customer contact programme, gathering market intelligence on trade activities, cargo prospects and

projects in pipeline etc. The SCI's marketing efforts have also been specifically directed at various

Government of India Departments, Public Sector Undertakings etc for retaining their valuable patronage

and cargo support.

D) OUTLOOK

The US economy is expected to emerge from the slowdown in second half of 2008 paving the way for the

recovery in world economy and trade in 2009. Accordingly, the global container trade growth is projected

to bounce back to 10.2% in 2009, and in the 2010-2012 time frame, to average significantly higher at 10%

p.a. compared to the growth projected in 2008 as the developing and newly industrialized economies

continue to command a larger share of world's GDP. Thus China, India, Brazil and Russia are likely to gain

in prominence as major consumer markets. Asia-Europe markets would continue to gain in prominence

in terms of volumes as the mega-ships, which account for 50% of the cellular order book, are expected to

be deployed in these lanes.

On the fleet side, the growth is expected to be around 13% p.a. during the next three years with growth in

the larger vessel segment accelerating to 20% by 2010, which is likely to result in reduction in charter

rates. Though the `under-3000 TEU' fleet growth is expected to accelerate in 2008, it would moderate

thereafter. However, with the cascading down of larger vessels, the charter-vessel demand in the

under-3000 TEU' segment is likely to be restricted resulting in prolonged charter rate correction period.

With the weakening market conditions, and charter fleet growth accelerating from 6.4% in 2007 to 9% in

2008, a market correction is expected in 2008 till 2010 when the rates would bottom out. Subsequently,

the rates are likely to recoup by 2012.

On the other hand, as per a report by "Credit Suisse", an international bank, a cyclical upturn is expected

by 2008 bringing with it 4-5% rise in freight rates across all major trades in view of better than expected

demand.

Container Services: 2008 - 09

The losses in our Liner Services have been a matter of serious concern to the management. In order to

improve the profitability of the Liner services, the management has taken several measures. Two loss

making services, IDX and Hyper Galex Services were terminated. Consequent to termination of the above

two services and in order to increase the profitability of the vessels, the existing services have been

restructured with enhanced capacity and a new short haul service has been commenced.

With the above restructuring, the Liner Services are expected to improve on their performances and are

budgeted to make a profit in the year 2008-09.

Further, two 4400 TEU vessels are expected to be inducted in SCI fleet around November 2008. These

vessels are slated to be deployed in the ISES Sector. The existing vessels in ISES sector will be redeployed

and SCI is exploring possibility of commencing new services on South East Asia-India, Coastal Feeder on


41

East and West Coast of India, and additional services on India-Europe sectors. The feasibility studies in

respect of all these sectors are in progress. We have also restructured our Joint Feeder Services, and

presently are utilizing feeder services on common feeder services.

As regards the vessels under Coastal & Passenger Services Division, your Company would continue to

operate Coastal Passenger Vessels and Research Vessels for the Andaman & Nicobar Administration,

Union Territory of Lakshadweep Administration, Geological Survey of India and Ministry of Earth Sciences

successfully.

E) RISKS & CONCERNS

The possibility of increase in fuel costs is a factor of concern as such a development would impact the

margins in liner operations worldwide.

The risks of a global downturn are reported to have increased substantially since the beginning of 2008,

and a scenario of severe US recession continuing through second half of 2008 may not be ruled out. This

may result in substantial and prolonged impact on global financial markets, economic growth and world

trade, thereby affecting growth in the investments and trade of Export-oriented economies in Asia, including

China well into 2009. The World Bank forecast for Chinese economic growth in 2008 at 9.6% (i.e. 2%

below 2007) is also an issue of concern. Overall, under this scenario, global container trade growth would

decline steeply to 5% in 2008 from 10.8% in 2007, but would then recover to 8.5% as the global economy

bounces back in 2009.

F) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

During the year 2007-08, SCI's performance in two services, namely IDX and Hyper Galex Services has

been unsatisfactory. While the other services / sectors have recorded reasonable performance, the losses

on account of the two above mentioned services alone contributed to a negative performance of the Liner

Services. The freight rates in the India - US sector declined very sharply making this (IDX) service unviable.

Another major factor affecting the performance is the bunker costs, which from an average of USD 300

per mt. in March 2007 had increased to about USD 460 per mt. in March 2008. Falling freight rates and

increased operational costs have resulted in losses in two out of the five services of SCI.

The utilizations and revenue in our India-UK Sector (ISES), Far East-India Sectors (Indfex 1 and Indfex 2)

have, however, been stable and above expectations. After the termination of IDX and Hyper Galex Services,

the container services have been restructured and a new service SMILE has been launched on the India-

Middle East Sector.

In the Breakbulk sector, your Company achieved excellent positive results during the year under review.

Coastal and Passenger services sector also earned good remuneration thereby further enhancing the

Company's profitability.

In financial terms, the Liner segment recorded revenue of Rs.847.36 crores in 2007-08 as against Rs.731.31

crores in 2006-07. However, as compared to the loss of Rs.6.51 crores incurred in 2006-07, the Liner

Segment recorded a loss of Rs.94.59 crores in 2007-08.

(3) OTHERS

TECHNICAL & OFFSHORE SERVICES

OFFSHORE SERVICES

(A) DEVELOPMENTS

During the year under review, all the 10 OSVs (Offshore Vessels) of your Company continued to be gainfully

employed with ONGC. These vessels had secured the contract against ONGC's global tender floated in

2006 for charter hire of OSVs, Anchor Handling Towing & Supply (AHTS) Vessels, and Platform Supply

Vessels (PSVs) for Offshore operations for a period of 5 years from the date of mobilization of vessels. As

per ONGC's new tender requirements, the vessels need to be fitted with DP1 (Dynamic Positioning System-

1), fresh water generator, etc. and are required to be UKOOA-compliant (United Kingdom Offshore Owners'

Association-compliant). SCI has upgraded its vessels as per ONGC's tender requirements and have mobilized

7 OSVs to ONGC under the new contract for the period from September 2007 to March 2008. The eighth

42

vessel has been mobilized on 09.04.2008. Due to an urgent requirement of an Anchor Handling Tug-

Supply Vessel (AHTSV) for few days the ninth vessel was given on charter to IOC for commissioning of an

SBM off Paradip. The vessel was undergoing DP upgradation, UKOOA compliance, etc. as per ONGC’s

new tender requirement. Since the vessel was required to be mobilized prior 3rd June, 2008 to ONGC

and vessel was waiting for DP Service Engineer for Sea Trials, SCI took the opportunity of chartering this

vessel to IOC, keeping in mind the national interest. The vessel was on charter to IOC from 23.04.2008 till

15.05.2008. After release of vessel by IOC, vessel's DP Sea trials were completed and the vessel was

mobilized to ONGC under new contract on 24.05.2008. The tenth vessel has been mobilised to ONGC

under new contract on 14th June, 2008.

Your Company has also continued the Operation & Maintenance management (O&M) of ONGC's Seismic

Survey Vessel (SSV) 'Sagar Sandhani' which had been commenced in 1986. ONGC had renewed the

contract which had expired on 31.03.2007 for a period of 39 months w.e.f. 01.04.2007 to 30.06.2010 on

"cost plus" basis.

Your Company also continued to provide marine management services onboard ONGC's Well Simulation

Vessel (WSV) Samudra Nidhi on "cost plus" basis and on expiry of the contract period of three years on

31.03.2008, SCI was once again awarded the contract for a further period of 3 years w.e.f. 01.04.2008.

ONGC had entrusted operations, maintenance and management (O&M) contract of ONGC-owned 16 No.

Offshore Supply Vessels, comprising a mixed fleet of "Samudrika" and "Sindhu" series OSVs, to your

Company for a total period of 5 years which expired during the period from November 2006-July 2007

and before expiry of the contract period, the same had been extended for some more time. In the meantime,

after a tender was floated for O&M contract of 31 OSVs (a separate group of 17 Samudrika and 14 Sindhu

vessels) in which SCI had also participated, the contract had been awarded to the L1 bidders viz. M/s.

SICAL for the 17 Samudrika vessels and M/s. HAL Offshore for the 14 Sindhu vessels. SCI thereafter

handed over all the 16 OSVs to the new operators in a phased manner during the period May 2007 to

September, 2007. Subsequently, however, the O&M contract for the 16 "Samudrika" series OSVs, which

was initially given to M/s. SICAL, was entrusted to your Company for a period of three years on "nomination"

basis under the "cost plus" arrangement. Your Company has taken over the 15 OSVs during the period

November 2007 to March 2008 and the 16th OSV on 03.04.2008.

Your Company had been entrusted with the O&M contract of the ONGC's Multi Support Vessels (MSVs)

and Geotechnical Vessel (GTV) on nomination basis under 'Cost plus' arrangement in March 2003 initially

for a period of one year which was subsequently extended for three years + one year up to 23.03.2008.

The O&M contract for these vessels has again been awarded to your Company for a further period of 3

years w.e.f. 24.03.2008.

Outstanding amount from ONGC : An amount of Rs.11.73 crores was outstanding as of 31.03.2008 from

ONGC against SCI owned OSVs and the amount has since been recovered.

(B) OUTLOOK

Ever increasing demand of energy and limited available sources have led to continuous rise in oil prices -

to over US$ 110 a barrel - have encouraged oil and gas companies to increase exploration & development

in the search for new offshore reserves. This has resulted in the increased focus on deepwater and ultra

deep water as the potential locations for new Hydrocarbon reserves. NELP VII (New Exploration Licensing

Policy) offers 19 deep water blocks as against 9 shallow water blocks for exploration. The deep sea

drilling activity is highly specialized which requires lot of expertise, highly sophisticated off shore vessels,

hence very expensive. There is a huge demand for rigs, OSV, PSV, AHTS, barges, FPSO, Specialised

vessels such as SSV, DSV (Diving Support Vessel), WSV, MSV, etc.

In view of above, future prospects of offshore sector will remain attractive for several years and your

company is planning major expansion in offshore sector.

(C) RISKS AND CONCERNS

Evolution of new markets in the Offshore shipping Sector has led to entry of new players in the industry

including foreign operators, some of which are equipped with modern technologies. In order to face

competition, your Company would require adequate resources in the form of modern vessels and expertise.


43

Your Company's offshore fleet is about 23-24 years old which would have to be replaced soon.

Considering Indian Oil Industry's requirement of advanced vessels which are equipped with DP1, Reverse

Osmosis, etc., SCI also needs to acquire vessels such as MSVs, DSVs, PSVs, etc. meeting the existing /

future offshore logistic requirement. Your Company has already placed an order for 4 Nos. 80 Tons

Bollard Pull AHTS vessels with M/s. Bharti Shipyard Ltd. which are scheduled for delivery during 2010-11.

Since as per ONGC's new tender requirement all OSVs are required to be fitted with Dynamic Positioning

Sytem-1(DP1), DP trained Master and other officers are required to man these vessels. However, presently,

due to sudden increase in demand for DP trained officers, there is an acute shortage of these officers and

SCI Officers are being imparted specialized training to mitigate this situation.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The "Others" segment which includes the Technical & Offshore Services recorded a revenue of Rs.117.46

crores in 2007-08 as against Rs.138.34 crores in 2006-07. The Profit before Tax declined from Rs.76.24

crores in 2006-07 to Rs.13.70 crores in 2007-08. This was due to upgradation/modification of all the

vessels to meet ONGC’s new tender requirements such as installation of DP-1 system, fresh water generator

and to meet UKOOA requirements. Further all the vessels had to undergo structural inspection for enhancing

the safety of the vesslels.

Awards/ Accolades

Your company's owned OSVs which are on charter to ONGC are most favoured by ONGC for carrying out

Anchor Handling & Towing Operations of rigs in Offshore field due to reliable performance even though

the vessels are now above 23 years of age. This has been achieved by carrying out strict planned

maintenance schedule for better upkeep of the vessels.

TECHNICAL SERVICES

Technical Managerial services for acquisition of ships & supervision of construction of ships

During the year under report the Company continued to provide technical consultancy services to A&N

Administration, UTL Administration, UTL Tourism Dept., Directorate of Light Houses & Light ships, Geological

Survey of India, National Institute of Oceanography and other Government Departments for their various

ship acquisition/retrofit projects.

Tonnage Acquisition Programme

The year under report is the first year of the Country's Eleventh Five Year Plan. The Government has

approved a total outlay of Rs.13,135 crores for SCI under the Eleventh Five Year Plan. SCI has a proposal

to induct 62 new vessels of diversified fleet profile during the current Five Year Plan period. The Company's

tonnage acquisition programme for the year 2007-08 envisaged an outlay of Rs.1836 crores, which included

existing commitments as well as outlay for new projects.

During the period under report, your Company placed orders for following 16 vessels:

(i) 2 nos. LR-II Product Tankers of 105,000 dwt each at Hyundai Heavy Industries Co. Ltd. S.Korea.

The first vessel would be delivered in September 2010 and the second vessel would be delivered

in November 2010.

(ii) 4 nos. Aframax Crude Oil Tankers of 115,000 dwt each at Hyundai Heavy Industries Co. Ltd. S.Korea

which would be delivered during the period December 2010 to April 2011.

(iii) 4 nos. Anchor Handling, Towing & Supply Vessel (AHTSV) of 2000 dwt each (80 T Bollard Pull) at

Bharati Shipyard Ltd., India to be delivered during the period April 2010 to April 2011.

(iv) 6 nos. Handymax Bulk Carriers of 57,000 dwt each at STX (Dalian) Shipbuilding Co. Ltd. which

would be delivered during the period August 2011 to March 2012.

Eco - Friendly and Conservation of Energy

As a policy, the Company remained committed to environmental protection as per International Convention

for the Prevention of Pollution from Ships. All engines being fitted on board are meeting requirement of

NOx compliance. Necessary steps have been taken to minimize air pollution from ships. New designs of

44

critical ship's systems have been adopted which further minimize/eliminate risk of oil pollution. Further to

minimize risk of oil pollution we have already completed conversion to double hull of our tankers m.t.

Maharshi Karve and m.t. C.V. Raman. The Company took various steps to conserve energy loss at sea

through the exhaust of Marine Diesel Engines/ Boilers in addition to other forms of conservation e.g. use

of Fresh Water Generator. Application of Tin-free Self-Polishing Paints, etc. Ballast Water Management and

Silt Water Management are being introduced for the recent/new ships under construction. Vessels

antifouling coating has also been changed to TBT free paints.

Technology Absorption

The company has taken steps to install the following equipment/systems on board vessels towards

technology absorption :

• Inmarsat Fleet 77 - For economic and speedy communication from ship to shore and vice versa on E-

mail using High speed data/MPDS (Mobile Packet Data Service)/ISDN line. Incorporated ISDN telephones/

Video Telephones on new vessel.

• Implemented Installation of Water ingress detection system to detect the presence of water in Cargo

holds on all existing Bulk carriers in line with requirement of IMO.

• Implemented Installation of Ship-Security Alert system on applicable coastal and foreign going vessels

as per ISPS Code/ DGS circulars.

• Installed AIS (Automatic Identification system) on applicable vessels as per SOLAS amendment/DGS

circular.

• Installed ECDIS (Electronic Chart Display and Information Systems) on new constructions viz. Suezmax,

VLCCs, and would be installing on subsequent projects.

• Implemented the stringent requirements of High speed Craft (2000 HSC ) code for design and

construction of High speed Aluminium Ferries for UTL Administration.

• Incorporated in our technical specifications the feature of adequate hull girder strength to meet the

specified flooded conditions in each of the cargo and ballast loading conditions as per Unified

Requirement for New Bulk Carriers projects.

• CSR (Common Structural Rule) for Bulk Carrier and Tankers incorporated in our technical specification.

IMO PSPC (Performance Standard for Protective Coatings) is mandatory under CSR.

Performance and Safety Enhancement Measures

In accordance with the International Safety Management (ISM) Code, your company has obtained the

required ISM Certification from D.G. Shipping for its owned as well as managed vessels in two phases.

Under Phase I, the Document of Compliance (DOC) for Oil Tankers, Gas Carriers, Passenger Ships and

Passenger High-Speed Crafts, was renewed in November 2007 and is valid till 18.11.2012 subject to

periodical verification by the Administration. Under Phase II, covering Other Cargo Ships (Liner Ships and

Off-Shore Vessels), the Document of Compliance (DOC) was renewed in February 2006 and is valid till

14.03.2011. The DOC is subject to periodical verification by the Administration. Last periodical verification

of both Phase I and Phase II vessels was successfully completed in January 2008. As regards, Safety

Management Certificate (SMC) for SCI fleet, all ships are put up for periodical/renewal SMC audits within

time frame and respective SMCs are accordingly endorsed. Your Company's Safety Management System

policy was reviewed and renamed as "Safety, Occupational Health and Environment Protection Policy" by

incorporating Occupational Health and Safety Guidelines issued by the Administration.

Quality Management System (QMS)

Your Company is now ISO 9001-2000 complied. The certificate issued by Indian Register of Quality

System (IRQS) is valid from 8th May 2007 up to 9th May 2010 subject to surveillance audit in between at

interval of one year. The first annual surveillance audit of quality system has been successfully completed

in April 2008.


45

Implementation of ISPS Code

ISPS code (International Ship and Port Facility Security Code) has become mandatory from 1st July 2004

for foreign going vessels and India is among the very few countries in the world proud of 100 percent

compliance as far as the ships on International Voyage are concerned.

SCI completed the ISPS certification of 70 ships (internationally trading ships and daughter lighterage

tankers which may interface with ships on International Voyage) well ahead of the deadline of 1st July

2004.

Code for Coastal Vessels

Your Company has completed the ISPS certification for all the coastal vessels as per Directorate General

of Shipping guidelines.

Revision of the Ship Security Assessment of all vessels i.e. foreign going and coastal vessels is in progress

as per Administration guidelines.

PERSONNEL & ADMINISTRATION

Fleet Personnel

During the year, your Company has been facing acute shortage of fleet officers for our vessels which is a

world-wide phenomenon being faced by shipping companies all over the world. As per the recent BIMCO

and ISF Study, current shortage of officers will become severe unless the maritime training is increased

and it is predicted that by 2015, the shortage of officers is likely to treble as 27,000 from 10,000 now. In

order to mitigate the impact of the shortages in the immediate term, your company has granted increase

in the salary of officers on contract as also permitted the regular officers to draw the salary as applicable

to those on contract as a temporary measure. As a long term solution, your Company has been training

new entrants from both nautical side and engine side for last many years at the rate of 242 new entrants

per year to counter this problem. In addition, we have also recruited around 80 trainees who were trained

at various other institutions.

Your Company has been training the officers for manning the LNG carriers. The vessels m.t. Disha is

already manned with SCI officials by the January, 2008 and m.t. Rahi will be completely manned by SCI by

your officials by December 2008.

Your Company has implemented the MOU for the wage agreement between INSA & both the Seafarer

Unions for 2006-08 and 2008-10 signed in February, 2008.

There is no shortage of rating for your Company. Your company's vessels are being manned by ratings of

its own roster partly and the shortfall is filled up by engaging ratings temporarily selecting them from

open market.

Maritime Training Institute

During the year, your Company had vigorously continued its pursuit of training and developing its manpower

to meet the demands of its fleet for new trainees, especially, in regard to the requirements of the International

Maritime Organisation's Standard of Training and Certificate of Watchkeeping (STCW) Convention.

Your Company's Training Centre at the Maritime Training Institute (MTI) at Powai, Mumbai, had conducted

290 courses for 6791 participants and achieved a turnaround of 65630 man-days of training during the

year. These included 53059 man-days for SCI's personnel and 12571 man-days for personnel from other

shipping companies, thus helping the shipping industry in general to meet with the challenges posed by

international legislation. In addition to this, 313 of SCI's personnel were trained in India/abroad making the

total SCI's personnel trained to 3547 and the additional man-days of training is 22652 making SCI's man-

days trained to 75711.

MTI has been emphasizing on and has complied with STCW '95 requirements.

Your Company has approached D.G. Shipping to increase the training slot of trainee Nautical Officer

Cadets from present 160 to 200 per year and the permission has been granted. Permission has also been

sought from D.G Shipping for conducting 3 years' Degree Course in Nautical Science under Mumbai

University at MTI for 40 cadets.

46

Industrial Relations

Your Directors are happy to report that during the period under review, the matters of mutual interest have

been discussed from time to time between the Management and the employees' fora which have resulted

in maintaining harmonious industrial relations.

During the aforesaid financial year, 4 Masters and 2 Marine Engineers were absorbed from our fleet to the

shore cadre. Further 53 young professionals were recruited from open market during the year. The total

number of employees as on 31.3.2008 was 3726 comprising of 1017 shore staff and 2709 floating staff.

Welfare Activities

Welfare measures for the employees have been actively pursued. Your company has introduced a scheme

of annual Medical Check-up of employees and provided drinking water dispensation units and set-up gym

facilities at the office premises. Also facilities like employees group excursion, educational assistance to

the children of the deceased employees, scholarships to the children of the employees for academic

excellence have been extended. Workshops on "Stress Management for Women employees" and retirement

planning have been organized. Incentives have been given to the employees for acquiring professional

qualifications. We are happy that these measures are of immense benefit to the employees.

Assistance to the weaker sections of society

As per the Govt. of India Special Component Plan for the development of SCs and STs and as per the

recommendations of the Parliamentary Committee on Welfare of SCs/STs, a provision of Rs.35/- lakhs was

made for following purpose :-

• Function on account of Mahaparinirvan Din of Dr. Babasaheb Ambedkar in December 2007.

• Refund of part fees of TMEs / TNOCs (SC/ST) as recommended by the National Commission for SCs / STs.

• Donation / expenditure incurred for social activities in connection with the SC / ST Welfare Schemes.

Your Company has also been complying with the directives and guidelines issued by the Govt. of India regulations

for the SCs/STs and OBCs.

JOINT VENTURE COMPANIES

Irano-Hind Shipping Company

Your Joint Venture Company in Iran continues to perform satisfactorily and during the Iranian year ended 19th

March 2008 earned a provisional net profit after tax of Iranian Rials 19.285 billion (USD 2.087 million). The

aggregate provisional net profit after tax of your joint venture company and its subsidiaries for the Iranian year

ended 19th March 2008 stood at Iranian Rials 265.050 billion (USD 28.685 million). The fleet owned by your

Joint Venture Company together with its subsidiaries, as at 19th March 2008, stood at eight ships with an

aggregate of 0.494 million DWT. During the Iranian year 1386 the Company took delivery of one newbuilding

Suezmax Tanker of 159,000 DWT and contracted a newbuilding Suezmax tanker of Class 159,000 DWT with

Hyundai Samho Heavy Industries, Korea with delivery slated for January 2011. There were no deletions to the

fleet during the year 1386.

Your Joint Venture Company paid a dividend of Rials 9.050 billion (USD one million) for the year 2006-07

(Iranian year 1385) to shareholders SCI and IRISL of which an amount of equivalent USD 481,644.40 was paid to

SCI in March 2008. The Company has also recommended issue of bonus shares of Rials 75 billion to shareholders

at the Annual General Assembly held on 30th July 2007.

SCI's Joint Venture in LNG (Liquified Natural Gas) Vessels

Until 31st March 2008, both vessels, SS Disha and SS Raahi operated without any off-hires and have

carried about 157 cargoes and 120 cargoes of LNG each from the inception of the two Joint Venture

Companies (JVC) in May, 2001, namely India LNG Transport Companies No.1 & 2 Ltd. SS Raahi,

which started its operations from 16.12.04 was dry-docked in March-April 2007 and was back in service

during 2007-08.


47

Your Company extended Shareholders' loan to the two companies, which includes the equity component

along with interest on unpaid Shareholders' loan. During the year 2007-08 an amount of US$ 2.228 million

of Shareholders loan and US$ 2.569 million as interest on Shareholders' loan has been repaid by the joint

ventures to SCI. The outstanding amount of Shareholders' loan as on 31st March 2008 is US$ 34.726

million. On board operations on SS Disha has been taken over by SCI officers from October 2007 and for

SS Raahi this is expected to be completed by December, 2008.

The third JVC, India LNG Transport Company No. 3 Ltd, set up to service the Dahej Expansion Project, was

formed on 21.02.2006. Pursuant to the execution of the TCA (Time Charter agreement) and other related

project agreements viz. SBC (Ship Building Contract) etc., the Loan Agreement was executed on 19.12.2006

by the JVC for a loan of US$ 178.29 million. The conditions precedent set out in the Loan Agreement for

the first draw-down have been met on 24.04.2007 and about US$ 7.31 million has been reimbursed to SCI

by the lenders. The outstanding Shareholders' loan as on 31st March 2008 is US$ 17.41 million. The LNG

tanker, to be named SS Aseem, is scheduled to be delivered in September 2009 and will transport 2.5

million tons per annum of LNG from Ras Gas, Qatar to Dahej for Petronet LNG Ltd's expansion project.

Joint Venture Company for Chemical Carriers (SCI Forbes Ltd.)

Your company had formed a joint venture with M/s. Forbes Gokak Ltd. and M/s. Sterling Investment Pvt.

Ltd. for owning and operating Chemical Tankers. The JVC was incorporated on 18.07.2006 as 'SCI Forbes

Ltd.'. The company has placed orders for 4 Nos. Chemical Tankers of about 13,000 DWT each which

would be delivered in 2009 in a phased manner

SCI’s participation in the Sethusamudram Ship Canal Project

The Government of India through the Ministry of Shipping, Road Transport & Highways, has set up a

“Special Purpose Vehicle” (SPV) in the name and style “Sethusamudram Corporation Limited” (SCL), to

raise finance and to undertake such other activities as may be necessary to facilitate creation and

operation of a navigable channel from Gulf of Mannar to Bay of Bengal through Palk Bay (Sethusamudram

Ship Channel). As per the Government directive, this Project is to be funded by way of equity contributions

from various PSUs including SCI. Pursuant to the Government directive, the SCI Board decided to

participate in the project with a capital investment upto Rs. 50 crores. As on 31.03.2008, the SCI’s total

contribution towards equity in SCL is Rs. 40.50 Crores.

Proposal for issue of bonus shares

As you are aware, the Board had recommended a proposal for issue of bonus shares on 1:2 basis (1

bonus share for every 2 shares held) to its administrative Ministry viz. Ministry of Shipping, Road Transport

& Highways. This entails a capitalization of Rs.141,15,12,150/- out of General Reserve. Your Directors are

pleased to inform that the Ministry has considered the proposal favourably and the proposal was submitted

to the Board for its approval for recommendation to the esteemed shareholders. The proposal for issue of

bonus shares is now submitted to the shareholders for their favourable consideration and approval.

Conferment of Navratna status

Your company has received a letter dated 1st August 2008 from the Department of Public Enterprises,

Ministry of Heavy Industries & Public Enterprises, conferring thereby the very coveted "Navratna" status

on the Company. This has come through by the unstinted support and patronage received by the Company

from its stakeholders including our esteemed shareholders. Though the Navratna status grants enhanced

powers to the Company towards capital expenditure, formation of Joint Ventures, mergers, etc., suitable

resolutions have been proposed in the Notice convening the AGM for bringing the Company's Articles of

Association at par with Navratna guidelines. This places a higher responsibility for your Company to

continue to strive untiringly for volume growth as well as bottom line growth. As you are aware, the Board

of Directors and the Management are committed to make the Company an effective player in the global

shipping arena; thus the conferment of Navratna status is another step towards this end.

48

Memorandum of Understanding (MOU) with the Ministry of Shipping Road Transport & Highways

Performance Rating under MOU system

For over a decade, your Company's annual performance under the MOU system based on audited results

has been rated as "Excellent". For the Year 2006-2007, the performance on the basis of audited results has

also been rated as "Excellent".

MOU 2008 - 2009:

Your Company signed the MOU for the financial year 2008 - 2009 based on the revised guidelines issued

by the Department of Public Enterprise (DPE). The SCI has set challenging targets in the MOU and continues

to place high emphasis besides the Financial Parameters on important areas such as Quality & Safety,

Fleet Expansion & Modernization, Fleet Productivity, Utilization, IT, HRD etc. to further improve the overall

performance of the Company on a sustained basis.

Segment-wise Performance

A report on performance of the various operating segments of the Company (audited) is included at Item

No.12 of Schedule 25 - "Notes on Accounts", which is forming part of the Annual Accounts.

Internal Control Systems and their adequacy

Your Company has in place a system of internal controls commensurate with the nature and size of its

operations. Internal controls are supplemented by an extensive programme of internal audits carried out

by a firm of Chartered Accountants viz. M/s. Karnavat & Co. The internal audit reports along with

recommendations and implementation thereof are constantly reviewed by the Audit Committee of the

Board.

Role of Vigilance Cell in SCI

During the year under report, the Vigilance Division made efforts to improve the efficiency of the Company

by carrying out (a) Preventive Vigilance, (b) Punitive Vigilance and (c) Surveillance and detection. The

Vigilance Division also investigated into the complaints of corruption / mal-practice, undertook scrutiny of

APRs, systems study and made recommendations to the Management where necessary. Periodic

inspections of areas with public interface in the Company were undertaken. The Vigilance Division also

carried out surprise inspections of ship repair work and supplies of stores/ provisions to the ships. Selective

scrutiny of the voyage repairs, major works, dry docking bills, voyage accounts, general accounts, agents

port accounts, pre-funding and post funding of agents' accounts were carried out. The Company's Conduct

Discipline and Appeal (CDA) Rules were strictly enforced and action was taken on complaints. Wherever

the complaints were established to be correct, it was brought to the attention of the Management for

taking suitable disciplinary action against the delinquent employee as per the Company's CDA Rules.

From time to time, suggestions were given to the Management for streamlining the procedures in order to

check corruption and bring greater transparency. In conclusion, it is stated that the functioning of the

Vigilance Division in the Company has been conducive to achieving greater transparency and objectivity

in running the affairs of the Company.

Cautionary Statement

The statements made in the Management Discussion & Analysis describing Company's objectives,

projections, estimates and expectations may be "forward-looking statements" within the meaning of

applicable laws and regulations. Actual results might differ materially from those expressed or implied.

Implementation of Official Language Policy

Your Company made concerted efforts during the year with an objective to spread the use of Official

Language Hindi in its day to day official affairs and to ensure implementation of the provisions of the

Official Language Act, 1963 and the Official Language Rules, 1976 framed thereunder. Your Company

continued to impart Hindi training by conducting regular quarterly Hindi workshops at its Maritime Training

Institute, Mumbai for its employees so as to achieve the training and correspondence targets set out in the

Annual Programme issued by the Central Government.


49

Further, your Company organized quarterly meetings of its Departmental Official Language Implementation

Committee to review an overall progress of Hindi it its offices. Also, SCI focused to promote and popularize

the use of Hindi amongst its employees, and thus organized a number of Hindi competitions and

programmes during the year under report.

Particulars of Employees

Information as per Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of

Employees) Rules 1975 and Companies (Particulars of Employees) Amendment Rules, 1988, forms part of

this report. Any shareholder interested in obtaining a copy of this information may write to the Company

Secretary at the Registered Office of the Company.

Companies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988

In terms of the Notification No. GSR 1029 dated 31.12.1988, your Company is required to furnish information

under Clause (e) of Sub-section (1) of Section 217 of the Companies Act, 1956. The information to be

furnished in Form A is not applicable to the shipping industry. Your Company, being a shipping company,

has no particulars to furnish in Form B as regards technology absorption. The foreign exchange earnings

and outgo during the year under report were as under:

• Foreign exchange earned and saved including deemed earned and saved Rs.3,777.60 crores.

• Foreign exchange used including deemed used Rs.3,378.71 crores.

Expenses on Entertainment, Foreign Tours, etc.

During the year under report, your Company spent Rs.41 lakhs on entertainment, Rs.375 lakhs on publicity

and advertisements and Rs.458 lakhs on foreign tours of Company's executives.

Board of Directors

Shri P.C. Dhiman ceased to be a Director w.e.f. 05.06.2007 consequent upon relinquishment of the charge

of Joint Secretary (Shipping) I/C in the Ministry of Shipping, Road Transport & Highways. The Board

placed on record its appreciation for the valuable services rendered by Shri Dhiman. Shri Rajiv Gupta,

Joint Secretary (Shipping), Ministry of Shipping, Road Transport & Highways, has been appointed as

Director with effect from 05.06.2007 by the President of India under the provisions of Article 122 of the

Articles of Association of the Company.

S/Shri S.H. Khan, M.G. Bhide and Dr. Pritam Singh ceased to be Directors w.e.f. 24.07.2007, 26.07.2007

and 27.07.2007, respectively, consequent to the cessation of their tenure as non-official part-time Directors

as conveyed by the Ministry of Shipping, Road Transport & Highways. Shri S.S. Rangnekar, erstwhile

Director (Liner & Passenger Services) ceased to be a Director on the Board w.e.f. 18.06.2007 consequent

to cessation of his tenure as a whole-time Director. The Board has placed on record its appreciation for the

valuable services rendered by them.

The Board has appointed S/Shri A.K. Mago, A.D. Fernando, U. Sundararajan, J.N.L. Srivastava, B.H. Dholakia

and Keshav Saran as Directors on 28.07.2007 and Shri Nasser Munjee as Director on 13.8.2007 consequent

to their nomination by the Ministry of Shipping Road Transport & Highways as non-official part time Directors.

The Board has also appointed Shri S.C. Tripathi as non-official part time Director w.e.f. 13.12.2007 on his

nomination by the Ministry of Shipping Road Transport & Highways. Shri J.N. Das has been appointed as

Director (Liner & Passenger Services) w.e.f. 24.12.2007 by the President of India. They hold office up to the

date of the forthcoming Annual General Meeting and being eligible, offer themselves for appointment.

Shri A.K. Mago, Shri A.D. Fernando, Shri U. Sundararajan and Shri J.N.L. Srivastava are retiring by rotation

at the forthcoming Annual General Meeting and being eligible, offer themselves for appointment.

50

Corporate Governance

Pursuant to Clause 49 of the Listing Agreement, Report on Corporate Governance is attached to this

Report.

Directors' Responsibility Statement

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, with respect to Directors'

Responsibility Statement, it is hereby confirmed:

• That in the preparation of the accounts for the financial year ended 31st March 2008, the applicable

accounting standards have been followed along with proper explanation relating to material departures;

• That the Directors have selected such accounting policies and applied them consistently and made

judgements and estimates that were 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 the year under review;

• That the Directors have taken proper and sufficient care for the maintenance of adequate accounting

records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of

the Company and for preventing and detecting fraud and other irregularities;

• That the Directors have prepared the accounts for the financial year ended 31st March 2008 on a

"going concern" basis.

Acknowledgements

Your Directors take this opportunity to express their gratitude and thanks to Shri T.R. Baalu, Hon'ble Minister

for Shipping, Road Transport & Highways, for his continued support and guidance in managing the affairs

of the Company. Your Directors also express their grateful thanks to Shri A.K. Mohapatra, former Secretary

to the Government of India for his support and guidance extended to your Company. Your Directors

extend a hearty welcome to Shri A.P.V.N. Sarma, Secretary to the Government of India, Department of

Shipping, Ministry of Shipping, Road Transport & Highways, and look forward to his support and guidance

in managing the affairs of your Company. Your Directors also wish to express their thanks to the officials

in the Ministry of Shipping, Road Transport & Highways for the unstinted support given by them in various

matters concerning the Company. Your Directors would also like to convey their thanks to other Ministries,

Trade Organizations, Shippers' Councils, who have played a vital role in the continued success of your

Company.

The Directors thank the shareholders and valued customers for the continued patronage extended by

them to your Company.

Last but not the least, your Directors wish to record their deep appreciation for the dedicated and loyal

service of your Company's employees, both afloat and ashore, without whose co-operation and efforts

the achievements made by your Company would not have been possible.

For and on behalf of the Board of Directors

S. Hajara


Place : Mumbai

Dated : 18th August, 2008


51

REPORT OF THE DIRECTORS ON CORPORATE GOVERNANCE

SCI’s Philosophy on Corporate Governance

SCI constantly keeps the Corporate Governance issues in focus. It is SCI's policy to provide adequate

and timely information to all stakeholders. SCI's endeavour in this respect has been acknowledged and

appreciated year after year, SCI has been awarded accolades for providing meaningful information on

its activities. This year too, SCI will strive to meet the expectations of various stakeholders.

SCI’s Code of Conduct

The Board of Directors of the Company adopted "Code of Conduct for Board & Senior Management

Personnel". This Code of Conduct is bifurcated into the "Code of Conduct for Board Members" &

"the Code of Conduct for Senior Management Personnel". The Code is in alignment with Company's

vision and values to achieve the Mission & Objectives and aims at enhancing ethical and transparent

process in managing the affairs of the Company. The Code is posted on the Company's

Website - www.shipindia.com

The Board members and Senior Management Personnel have affirmed compliance to this code and a

declaration to this effect signed by Chairman & Managing Director is provided at the end of this Report.

Composition of the Board of Directors

As of date, the Board of Directors of your Company comprises 15 members with a mix of

5 executive (including Chairman & Managing Director) and 10 non-executive Directors. Of the 10 non-

executive Directors, 2 Government Directors represent the Promoters i.e. Government of India and 8 are

Independent Directors.

The Clause 49 of the Listing Agreement dealing with Corporate Governance requires at least 50% of the

total strength of the Board of Directors of a company to comprise of Independent Directors, which has

an Executive Chairman. In terms of the nominations received from the Ministry of Shipping, Road

Transport & Highways, the administrative Ministry of the Shipping Corporation of India Ltd., eight non-

official part time Directors have been appointed on the Board of Directors in the last financial year and

the Company is fully compliant with Clause 49 of the Listing Agreement at the current juncture.

The directorships held in other public limited companies and memberships/chairmanships held in the

Committees of such Boards by the members of the Board of your Company as on 31st March 2008 are

set out below:

Name Designation No. of Directorships and committee

memberships / chairmanships

Directorships in

Committee Committeeother public limited

memberships** chairmanships**companies**

Executive Directors (Whole-Time)

Shri S. Hajara Chairman &

Managing Director 02 NIL NIL

Shri B.K. Mandal Director (Finance) 01 NIL NIL

Shri U.C. Grover Director (Technical &

Offshore Services) NIL NIL NIL

Shri Kailash Gupta Director (Personnel &

Administration) NIL NIL NIL

Shri J. N. Das Director (Liner &

Passenger Services) NIL NIL NIL

Non-Executive Director (Part-Time Ex-Officio)

Shri C. Balakrishnan Addl. Secretary &

Financial Advisor NIL NIL NIL

Shri Rajeev Gupta Joint Secretary 02 NIL NIL

52

**In accordance with Clause 49(I)(C) of the Listing Agreement with the Stock Exchanges, only directorships

on public limited companies have been considered and the directorships on private limited companies,

foreign companies and companies under Section 25 of the Companies Act, 1956 have been excluded.

Similarly, in terms of the above Clause, membership/chairmanship of only the Audit Committee and

Shareholders'/Investors' Grievance Committee of all Public Limited Companies has been considered.

Board Meetings / Annual General Meeting

During the financial year 2007-2008, 16 Board Meetings were held, the dates being 12.04.2007, 16.05.2007,

15.06.2007, 19.06.2007, 11.07.2007, 28.07.2007, 31.07.2007, 13.08.2007, 27.08.2007, 08.09.2007,

09.10.2007, 27.10.2007, 13.11.2007, 30.01.2008, 22.02.2008 and 19.03.2008.

The details about attendance of the Directors at the Board Meetings and at the 57th Annual General

Meeting (AGM) held on 28.09.2007 are given below:

Name Designation No. of Directorships and committee

memberships / chairmanships

Directorships in

Committee Committeeother public limited

memberships** chairmanships**companies**

Non-Executive Directors (Part-Time Independent)

Shri A.K. Mago Director 02 NIL NIL

Shri A.D. Fernando Director 01 NIL NIL

Shri U. Sundararajan Director 05 02 NIL

Shri J.N.L. Srivastava Director 01 NIL NIL

Dr. Bakul H. Dholakia Director 05 03 03

Shri Keshav Saran Director NIL NIL NIL

Shri Nasser Munjee Director 14 06 04

Shri S.C. Tripathi Director 07 NIL NIL

No. of Meetings

Name of the Director held during the

attended

Attendance at the last

tenure of DirectorsAGM held on 28.09.2007

Shri S. Hajara 16 15 Yes

Shri C. Balakrishnan 16 11 No

Shri P.C. Dhiman * 02 NIL -

Shri Rajeev Gupta # 14 08 No

Shri M.G. Bhide * 05 03 -

Shri J.N. Das # 03 03 -

Dr. Bakul H.Dholakia # 11 04 No

Shri A.D. Fernando # 11 09 Yes

Shri U.C. Grover 16 16 Yes

Shri Kailash Gupta 16 16 Yes

Shri S.H. Khan * 05 05 -

Shri A.K. Mago # 11 10 No

Shri B.K. Mandal 16 16 Yes

Shri Nasser Munjee # 09 02 Yes

Shri S.S. Rangnekar * 03 01 -

Shri Keshav Saran # 11 06 Yes

Dr. Pritam Singh * 05 01 -

Shri J.N.L. Srivastava # 11 06 No

Shri U. Sundararajan # 11 06 Yes

Shri S.C. Tripathi # 03 02 -


53

Shri P.C. Dhiman 05.06.2007

Shri S.S. Rangnekar 18.06.2007

Shri S.H. Khan 24.07.2007

Shri M.G. Bhide 26.07.2007

Dr. Pritam Singh 27.07.2007

# The following Directors were appointed as Directors on the Board w.e.f. the dates mentioned

alongside their names :-

Shri Rajeev Gupta 05.06.2007

Shri A.K. Mago 28.07.2007

Dr. Bakul H.Dholakia 28.07.2007

Shri A.D. Fernando 28.07.2007

Shri U. Sundararajan 28.07.2007

Shri Keshav Saran 28.07.2007

Shri J.N.L. Srivastava 28.07.2007

Shri Nasser Munjee 13.08.2007

Shri S.C. Tripathi 13.12.2007

Shri J.N. Das 24.12.2007

Committees of the Board

To enable better and more focused attention on the affairs of the Company, the Board has constituted

Contracts Committee of the Board besides other Committees as required under Clause 49 :

Contracts Committee of the Board

This Committee of the Board comprises the whole-time Directors, including Chairman & Managing

Director as the Chairman of the Committee. The Committee deliberates on the matters pertaining to

contracts having financial implication of high value nature or any other matter, which in the view of

Chairman & Managing Director requires the attention of the Committee. During the year under review,

2 meetings of the Contracts Committee of the Board were held.

Committees of the Board constituted under Clause 49

Audit Committee

The Board of Directors of the Company had constituted an Audit Committee in 2000 comprising four

Non-Executive Independent Directors viz. Shri S.H. Khan, Shri M.G. Bhide, Shri N.C. Singhal and Dr.

Pritam Singh. Consequent to the cessation of their directorships from the Board of Directors and

subsequent appointment of six independent Directors on the SCI Board w.e.f. 28.07.2007, the Audit

Committee has been reconstituted with Shri U. Sundararajan as Chairman, and Shri A.K. Mago,

Dr. B.H. Dholakia and Shri Keshav Saran as its members. All the members of the Committee are 'financially

literate' and have accounting and financial management expertise.

The Company Secretary acts as Secretary to the Committee. The Finance Director and the Directors in

charge of operations attend the meetings as invitees. The Statutory Auditor and Internal Auditor also

attend meetings at which the audit reports / Company's financial statements are reviewed by the

Committee. The internal audit function continues to be outsourced to a firm of Chartered Accountants.

The terms of reference of Audit Committee include all matters specified in Clause 49(II) of the Listing

Agreement with Stock Exchanges and covers, inter-alia, overseeing Company's financial reporting process,

adequacy of internal control systems, reviewing financial risks management policies, compliance with

Accounting Standards, etc.

* The following Directors ceased to be Directors on the Board w.e.f. the dates mentioned alongside

their names :-

54

The Audit Committee held 12 meetings during the year. Apart from reviewing the quarterly / annual

financial results of the Company, the Committee devoted these meetings inter alia for detailed review

of the systems and procedures, accounting practices, internal control measures, status of risk management

and process review of statutory and regulatory compliances. The attendance of each member of the

Committee is given below:

Name of the Directors No. of meetings held No. of meetings attended

Shri S.H. Khan * 03 03

Shri M.G. Bhide * 03 03

Dr. Pritam Singh * 03 Nil

Shri U.Sundararajan # 09 08

Shri A.K. Mago # 09 08

Dr. Bakul H. Dholakia # 09 03

Shri Keshav Saran # 09 04

* Shri S.H. Khan, Shri M.G. Bhide and Dr. Pritam Singh ceased to be directors w.e.f. 24.07.2007,

26.07.2007 and 27.07.2007, respectively.

# Shri U. Sundararajan, Shri A.K. Mago, Dr. Bakul H.Dholakia and Shri Keshav Saran were appointed

as members of the Audit Committee after their appointment as non-executive Directors on the SCI

Board and its reconstitution w.e.f. 28.07.2007

The Chairman of Audit Committee was present at the Annual General Meeting of the Company held on

28.09.2007.

Share Transfer Committee

This Committee of the Board comprising of Chairman & Managing Director and an Executive Director,

regularly approves the transfer and transmission of shares and other related matters. Since the number

of shares in demat format hovered between 99.97% to 99.98%, the physical scrips were very few.

Further, as and when the shareholders made lodgements for transfer, the Share Transfer Committee

held their Meetings promptly to effect the transfers.

Shareholders/Investors Grievance Committee

The Shareholders/Investors Grievance Committee of the Board met four times during the financial year

2007-2008 i.e. on 15.06.2007, 31.07.2007, 27.10.2007 and 30.01.2008, which were attended by all its

members. On cessation of directorship of Shri M.G. Bhide (who was the Chairman of the Shareholders/

Investors Grievance Committee) from the Board of Directors of the Company on 26.07.2007, and

reconstitution of the Board on 28.07.2007, the Shareholders' Grievance Committee was reconstituted

with Shri A.K. Mago as Chairman and, Shri Keshav Saran and Shri B.K. Mandal, as its members.

• Grievances & their redressals : During the year under review, 6 complaints were received. All the

complaints have been replied/sorted out within 7 days of receipt of each complaint as against the

stipulated time of 15 days as per SEBI norms. No share transfers were pending at the end of the

financial year. The sources of complaints received and other details are given below:

Source(s) of Complaints Received Redressed Pending

SEBI 05 05 Nil

Stock Exchange, Mumbai Nil Nil Nil

Shareholders (other than SEBI) Nil Nil Nil

ROC 01 01 Nil


55

•Compliance Officer : The Compliance Officer for monitoring the share transfer process and for

carrying out other related functions as per Listing Agreement, is Shri Dipankar Haldar, Senior Vice

President (Legal Affairs) & Company Secretary and can be contacted at:

"Shipping House" Tel : 2277 2213 (D)

245, Madame Cama Road, 2202 4572 (D)

Nariman Point, Fax: 2202 2906

Mumbai - 400 021 E-mail: [email protected]

Investors can lodge their complaints, if any, on [email protected], by providing

their folio number, contact number and the address for correspondence which would enable us to

respond to them promptly.

As per the provisions of Section 205A read with Section 205C of the Companies Act, 1956, the Company

is required to transfer the unpaid dividends remaining unclaimed and unpaid for a period of 7 years

from the due date to the Investor Education and Protection Fund (IEPF) set up by the Central Government.

Given below are the due dates for transfer of unclaimed and unpaid dividend to the IEPF by the Company:

Financial Year Date of declaration Proposed date for transfer to IEPF

2000-01 (Interim) 14.06.2001 14.07.2008

2000-01 (Final) 28.09.2001 28.10.2008

2001-02 (Interim) 30.04.2002 30.05.2009

2002-03 (Interim) 10.03.2003 09.04.2010

2003-04 (Spl.Interim) 03.10.2003 02.11.2010

2004-05 (Interim) 30.10.2004 29.11.2011

2004-05 (Final) 28.09.2005 28.10.2012

2005-06 (Interim) 27.01.2006 26.02.2013

2006-07 (Interim) 17.03.2007 14.04.2014

2007-08 (Interim) 22.02.2008 21.03.2015

General Body Meetings

The date, time and venue of the last three Annual General Meetings of the Company held are given

below:

General Meetings Date Time Venue

55th

AGM (FY 2004-2005) 28.09.2005 1530 hrs. Registered Office of the Company, Mumbai

56th


57th


55th Annual General Meeting : At this meeting no Special Resolution was proposed.

56th Annual General Meeting : At this meeting one Special Resolution was proposed.

57th Annual General Meeting : At this meeting no Special Resolution was proposed.

Postal Ballot : During the year under review, no postal ballot voting was exercised in your Company as no

issue arose requiring consent by postal ballot.

56

Means of Communication

Half-yearly Report sent to No, as the unaudited financial results of the Company

each household of shareholders are published in the newspapers every quarter and

are also made available on the EDIFAR and the

Company's website.

Quarterly Results published Yes, the newspapers being:

in newspapers For Quarter ended June 2007 -

a. The Times of India, Mumbai Edition

b. Maharashtra Times, Mumbai Edition

For Quarter ended September 2007 -

a. The Times of India, Mumbai Edition.

b. Maharashtra Times, Mumbai Edition

For Quarter ended December 2007 -

a. Hindustan Times, Mumbai Edition

b. DNA, Mumbai Edition

c. Free Press Journal, Mumbai Edition

d. Nav Shakti, Mumbai Edition

For Year ended 31st March 2008

a. Hindustan Times, Mumbai Edition

b. DNA, Mumbai Edition

c. Free Press Journal, Mumbai Edition

d. Nav Shakti, Mumbai Edition

e. The Business Line, All India Edition

f. Navbharat Times, Mumbai Edition

Website, where results and/or official news On the Company's Website www.shipindia.com

are displayed On the Edifar Website www.sebiedifar.nic.in

The presentation made to Institutional No presentation has been made to any of these

Investors or to the analysts fraternities.

Whether Management Discussion and Yes.

Analysis is a part of Annual Report or not


57

General Shareholder Information

Annual General Meeting - 29th

September 2008, at 1130 hrs. at the Registered Office of the Company,

Date, Time & Venue “Shipping House”, 245, Madame Cama Road, Mumbai – 400 021.

Financial Calendar • The financial year under review covers the period from 1st April 2007 to

31st March 2008.

• First Quarter Results - July 2007.

• Second Quarter Results - October 2007.

• Third Quarter Results - January 2008.

• Audited Results in lieu of Fourth Quarter Results - June 2008.

Date of Book Closure 23.09.2008 to 30.09.2008 (both days inclusive)

Dividend Payment Date Interim Dividend @ 45% was declared on 22.02.2008.

Final Dividend.: The Board of Directors has recommended a final dividend

@ 40% which subject to approval at the AGM, will be paid to the shareholders

within the statutory time period. This is over and above the interim dividend

@ 45% already paid, thus making an aggregate of 85% dividend for the

financial year 2007-2008.

Listing on Stock Exchanges Bombay Stock Exchange Ltd., Phiroze Jeejeebhoy

& payment of listing fees Towers,Dalal Street, Mumbai - 400 001.

National Stock Exchange of India Limited, The Calcutta Stock Exchange

Exchange Plaza, 5th Floor, Plot No. C/1, Association Limited,

G Block, Bandra-Kurla Complex, 7, Lyons Range,

Mumbai - 400 051. Kolkata - 700 001.

The Delhi Stock Exchange Madras Stock Exchange Limited

Association Limited, DSE House, Exchange Building,

3/1, Asaf Ali Road, 11, Second Line Beach,

New Delhi - 110 002. Chennai - 600 001.

The Company has paid the annual listing fees for the year 2007-2008

to the aforesaid Stock Exchanges within the stipulated time.

The Stock Exchange, Mumbai - 523598

Stock Code National Stock Exchange of India Limited - SCI

Demat-ISIN Number for NSDL & CDSL - INE 109 A 01011

Monthly high and low quotation of

shares on the BSE and NSE during Please see ANNEXURE - 'A'.

the financial year 2007-2008

Stock Performance in

comparison to BSE SensexPlease see ANNEXURE - 'B'.

Registrar and Transfer Agents M/s. Sharepro Services (India) Pvt. Ltd.

Regd. Office: Investor Relation Centre:

Satam Estate, 3rd Floor, 912, Raheja Centre,

Above Bank of Baroda, Free Press Journal Road,

Cardinal Gracious Road, Chakala, Nariman Point, Mumbai - 400 021.

Andheri (E), Mumbai - 400 099. Tel. 2288 15 68 / 2288 15 69

Tel. 6772 03 00/01 Fax. 2282 54 84

Fax. 6772 03 51/52

The transfers' processing are done by the Registrar and Transfer Agents and

Share Transfer System approved by the Share Transfer Committee of the Company. There are no

pending share transfer requests as on 31st March 2008.

Distribution of Shareholding

as on 31st March 2007Please see ANNEXURE - 'C'.

Dematerialization of shares and With effect from 26.06.2000, trading in the Company's shares was made

liquidity compulsory in the dematerialized form. The Company's shares are available

for trading in the depository systems of both National Securities Depository

Limited (NSDL) and Central Depository Services (India) Limited (CDSL).

As at 31st March 2008, 99.97 % of the equity share capital, representing

282231386 shares was held in depository mode. The processing activities with

respect to the requests received for dematerialization are completed within

15 days from the date of receipt of request.

Outstanding GDRs/ ADRs/Not issued.

Warrants or any convertible

instruments, conversion date

and likely impact on equity

Plant locations The Company has no Plant.

Address for CorrespondenceShareholders' correspondences should be addressed to the Company's Share

Transfer Agents, M/s. Sharepro Services. (India) Pvt. Ltd. at their addresses

mentioned above.

58

ANNEXURE – ‘A’

Monthly high and low quotation of shares on the BSE and NSE during the financial year 2007-2008

Month

Share Price on BSE Share Price on NSE

High (Rs.) Low (Rs.) High (Rs.) Low (Rs.)

April-07 215.45 160.10 219.70 160.30

May-07 236.90 198.00 236.90 195.25

June-07 212.00 182.10 190.00 183.00

July-07 229.00 193.05 234.00 194.00

August-07 210.00 163.10 219.40 164.00

September-07 227.90 189.45 227.10 189.00

October-07 281.85 199.00 281.50 196.25

November-07 286.50 211.25 286.70 211.00

December-07 324.95 244.00 324.80 211.20

January-08 332.00 154.00 331.80 150.00

February-08 237.00 186.00 237.90 186.05

March-08 217.90 181.00 217.95 181.00

ANNEXURE – ‘B’

Stock Performance in comparison to BSE Sensex

Month SCI’s Closing Price (Rs.) BSE Sensex

April-07 212.55 13872.37

May-07 208.55 14544.46

June-07 195.25 14650.51

July-07 208.85 15550.99

August-07 191.70 15318.60

September-07 221.50 17291.10

October-07 240.50 19837.99

November-07 267.45 19363.19

December-07 322.05 20286.99

January-08 207.70 17648.71

February-08 215.05 17578.72

March-08 198.10 15644.44

Graph showing the SCI share price movement based on the above data


59

ANNEXURE – ‘C’

Distribution of Shareholding as on 31st

March 2008

Dematerialized Physical

Total %

No. ofHolding Holding

Shares No. of No. of No. of No. of Total Total Folios Holding

Held Folios Shares Folios Shares No. of No. of

Folios Shares

1-500 31413 3497473 160 22929 31573 3520402 92.1517 1.2470

501-1000 1414 1167162 6 5000 1420 1172162 4.1445 0.4152

1001-2000 612 946439 5 6415 617 952854 1.8008 0.3375

2001-3000 206 523837 0 0 206 523837 0.6012 0.1856

3001-4000 96 345224 1 4000 97 349224 0.2831 0.1237

4001-5000 90 430152 0 0 90 430152 0.2627 0.1524

5001- 10000 107 810610 0 0 107 810610 0.3123 0.2871

10001 & Above 150 274510489 2 32700 152 274543189 0.4436 97.2514

Total 34088 282231386 174 71044 34262 282302430 100.0000 100.0000*

Distribution of Shareholding by ownership as on 31st March 2008

* The figures are rounded off.

60

The details of the remuneration paid to the Executive Directors and sitting fees paid to the

Independent Directors during the year under review are set out below:

(Rupees)

Name of the Director Consolidated Perquisites, Performance Sitting Fees Total

Salary Allowances & Linked

(Note No.1) Other Benefits Incentives

Executive Directors (Whole-time)

Shri S. Hajara 765962 594642 - - 1360604

Shri U.C. Grover 663753 493631 - - 1157384

Shri Kailash Gupta 693921 199389 - - 893310

Shri B.K. Mandal 723680 239528 - - 963208

Shri J.N. Das # 167625 178596 - - 346221

Shri S.S. Rangnekar * 864237 102395 - - 966632

Non-Executive Director (Part-Time Ex-Officio)

Shri C. Balakrishnan - - - - -

Shri P.C. Dhiman * - - - - -

Shri Rajeev Gupta # - - - - -

Non-Executive Directors (Part-Time Independent)

Shri M.G. Bhide * - - - 35000 35000

Shri S.H. Khan * - - - 40000 40000

Dr. Pritam Singh * - - - 5000 5000

Shri A.K. Mago # - - - 105000 105000

Shri A.D. Fernando # - - - 45000 45000

Shri U. Sundarajan # - - - 70000 70000

Shri J.N.L. Srivastava # - - - 30000 30000

Dr. Bakul H. Dholakia # - - - 35000 35000

Shri Keshav Saran # - - - 60000 60000

Shri Nasser Munjee # - - - 10000 10000

Shri S.C. Tripathi # - - - 10000 10000

Director’s Remuneration

Note No. 1:- Consolidated Salary includes Basic Salary, Dearness Allowance, Contribution to Provident Fund,

Leave Encashment and Leave Salary on superannuation.


61

* The following Directors ceased to be Directors on the Board w.e.f. the dates mentioned alongside their

names :-

Shri P.C. Dhiman 05.06.2007

Shri S.S. Rangnekar 18.06.2007

Shri S.H. Khan 24.07.2007

Shri M.G. Bhide 26.07.2007

Dr. Pritam Singh 27.07.2007

# The following Directors were appointed as Directors on the Board w.e.f. the dates mentioned alongside their

names :-

Shri Rajeev Gupta 05.06.2007

Shri A.K. Mago 28.07.2007

Dr. Bakul H.Dholakia 28.07.2007

Shri A.D. Fernando 28.07.2007

Shri U. Sundararajan 28.07.2007

Shri Keshav Saran 28.07.2007

Shri J.N.L. Srivastava 28.07.2007

Shri Nasser Munjee 13.08.2007

Shri S.C. Tripathi 13.12.2007

Shri J.N. Das 24.12.2007

i) SCI, being a Government Company, the remuneration of the Executive Directors, who are Government appointees,

is decided by the Government.

ii) The part-time official Government Directors do not receive any remuneration from the Company.

iii) The non-executive Directors (Independent Directors) were paid sitting fees of Rs.5000/- per meeting per day of

attendance. They do not receive any other remuneration.

iv) In addition to above, wherever necessary, the Directors are reimbursed the travelling and other related expenses

for attending Board and other Meetings.

v) Criterion for payment of performance related link incentive is based on the policy prevailing in the Company.

vi) SCI being a Government Company, the appointment, tenure and remuneration of Directors are decided by the

Government of India. All appointments of Executive Directors are contractual in nature. Government nominates

non-official part-time Directors from time to time on board of the Company.

vii) The Company presently does not have any stock option scheme.

viii) Amongst the non-executive Directors, Shri A.K. Mago holds 100 shares in the SCI. Shri C. Balakrishnan and

Shri Rajeev Gupta, Government Directors, are holding 1010 and 20 shares, respectively.

Subsidiary Companies

The Company does not have any subsidiary company.

Disclosures

During the year under review, the Company has not entered into financial or other transactions of material nature

with its Promoters, the Directors, and senior management that may have potential conflict with the interests of the

Company at large.

No penalties/strictures have been imposed on the Company by the Stock Exchanges or SEBI or any statutory

authority on any matter related to capital market during the last three years.

62

Code of Conduct for Prevention of Insider Trading

SCI has its code of conduct for prevention of insider trading in accordance with the SEBI (Prohibition of Insider

Trading) Regulations, 1992. The Code lays down guidelines which advises management and staff on procedures to

be followed and disclosures to be made while dealing with shares of Company, and cautions them of the

consequences of violations.

Related Party Transactions

The details of all the transactions with related parties which are entered into the ordinary course of business are

placed before the audit committee on quarterly basis. However the related party disclosures, as required under

Accounting Standard 18 "Related Party Disclosures", are given in the Notes on Accounts of the Balance Sheet.

There were no material individual transactions with related party which were not in normal course of business

required to be placed before the Audit Committee that may have potential conflict with the interest of the Company

at large. All individual transactions with related parties were on arm's length basis.

Accounting Treatment

In the preparation of financial statements, the Company has followed the Accounting Standards issued by the

Institute of Chartered Accountants of India to the extent applicable.

Risk Management

As informed in the last Report, the Company had appointed M/s. Ernst & Young (E&Y) to undertake an analysis of

risk assessment and minimization procedures. M/s. E&Y reviewed the mechanism and submitted their report to the

Audit Committee and the Board, which was thereafter adopted by the Board. The Company appointed Divisional

Risk Officers who had put their first report to the Chief Risk Officer. The report was discussed internally and then

was discussed in the Management Committee. The review of risk for the second half has been completed and the

findings have been submitted to the Chief Risk Officer. The said report would be presented to the Audit Committee

and the Board.

Proceeds from public issues, right issues, preferential issues etc.

During the year under review, the Company has not raised any money through public issue, right issue, preferential

issue, etc.

Management Discussions and Analysis Report

The report forms a part of the Directors' Report to the Shareholders and it includes discussions on matters, as

required under the provisions of Clause 49 of the Listing Agreement with the Stock Exchanges.

Material Financial and Commercial Transactions of Senior Management Personnel

There have been no material financial and commercial transactions entered into by the Senior Management Personnel

where they have personal interest that may have a potential conflict with the interest of the Company.

CEO/CFO Certification

A certificate from Chairman and Managing Director and Director (Finance) on the financial statements of the company

and on the matters which were required to be certified according to the clause 49 (V) was placed before the Board.

Compliance with Non Mandatory Requirements of Clause 49

Maintenance of Office and reimbursement of expenses of Non-Executive Chairman

As the Company has an Executive Chairman, the requirements of this clause are not applicable.

Tenure of Independent Directors on the Board

SCI, being a Government Company, the appointment and tenure of the Directors are decided by the Government

of India; however, currently, they do not exceed the time limits provided in this Clause.

Remuneration Committee

SCI, being a Government Company, the remuneration of the Executive Directors, who are Government appointees,

is decided by the Government and hence, the Company has not constituted a Directors' Remuneration Committee.


63

DECLARATION OF COMPLIANCE OF CODE OF CONDUCT

BY CHAIRMAN & MANAGING DIRECTOR

The Company has adopted a Code of Conduct for the Board Members and Senior Management of the

Company, which has been posted on the web site of the Company.

It is hereby affirmed that all the Directors & Senior Management personnel have complied with the Code

of Conduct for the financial year 2007-08 and a confirmation to this effect has been obtained from the

Directors & Senior Management personnel.

For The Shipping Corporation of India Ltd.

S. Hajara


Place : Mumbai

Dated : 30th May, 2008

Shareholder Rights - Declaration of financial performance

The financial results are posted on the EDIFAR Website as also the Company's website immediately. The results of

the Company are also published in the newspapers within the time limits prescribed under the Listing Agreement.

Audit Qualifications

There are no qualifications made by Statutory Auditors and the Comptroller and Auditor General of India.

Training of Board members

Besides the executive directors who have wide experience in the field of shipping, the Company has drawn

professionals on its Board who have served as head of Financial Institutions, Banks and other institutions. The

Company’s Board is also represented by senior IAS Officers. Keeping the above in view, it appears that there is

no requirement for training of Board members at the current juncture.

Mechanism for evaluating Non-Executive Board Members

SCI being a Government Company where the Directors are appointed/nominated by the Government, the requirement

of performance evaluation as envisaged in this clause does not apply.

Whistle Blower Policy

The Company being a Government Company, Whistle Blower policy is followed as per Central Vigilance

Commission(CVC) guidelines which was approved by the Board.

For and on behalf of the

Board of Directors

S. Hajara


Place : Mumbai

Dated : 30th July, 2008

64

AUDITORS' CERTIFICATE ON CORPORATE GOVERNANCE

TO THE MEMBERS OF THE SHIPPING CORPORATION OF INDIA LTD.

We have examined the compliance of conditions of Corporate Governance by THE SHIPPING

CORPORATION OF INDIA LTD. for the year ended on 31st March 2008, as stipulated in Clause 49 of the

Listing Agreement of the said Corporation with Stock Exchanges.

The compliance of conditions of Corporate Governance is the responsibility of the Management.

Our examination was limited to procedures and implementation thereof, adopted by the Corporation for

ensuring the compliance of the conditions of Corporate Governance. It is neither an audit nor an expression

of opinion on the financial statements of the Corporation.

In our opinion and to the best of our information and according to the explanations given to us, we

certify that the Corporation has complied with the conditions of Corporate Governance as stipulated in

clause 49 of the above mentioned Listing Agreement, except that during the period from 1.4.2007 to

27.07.2007 the number of independent directors on the Board of Directors was lower than 50 per cent

of the total strength of the Board of Directors as required under Sub-Clause 1(A) of Clause 49 of the

Listing Agreement.

We further state that such compliance is neither an assurance as to the future viability of the Corporation

nor the efficiency or effectiveness with which the Management has conducted the affairs of the

Corporation.

For S. BHANDARI & CO.

Chartered Accountants

(P. D. Baid)

Partner

Membership No.72625

Place : Mumbai

Dated : 31st July 2008.

For KHANDELWAL JAIN & CO.

Chartered Accountants

(Narendra Jain)

Partner

Membership No.48725


65

S. BHANDARI & CO. KHANDELWAL JAIN & CO.

Chartered Accountants Chartered Accountants

AUDITORS’ REPORT

To the shareholders of The Shipping Corporation of India Ltd:

1) We have audited the attached Balance Sheet of The Shipping Corporation of India Ltd. as at 31st

March, 2008, and the Profit and Loss Account and Cash Flow Statement for the year ended on that

date, annexed thereto. These financial statements are the responsibility of the Company's

management. Our responsibility is to express an opinion on these financial statements based on

our audit.

2) We conducted our audit in accordance with auditing standards generally accepted in India. Those

Standards require that we plan and perform the audit to obtain reasonable assurance about whether

the financial statements are free of material misstatement. An audit includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial statements. An audit also

includes assessing the accounting principles used and significant estimates made by management,

as well as evaluating the overall financial statement presentation. We believe that our audit provides

a reasonable basis for our opinion.

3) As required by the Companies (Auditor's Report) Order, 2003 and the Companies (Auditor's Report)

(Amendment) Order, 2004, issued by the Central Government of India in terms of Section 227(4A)

of the Companies Act, 1956, and on the basis of such checks as we considered appropriate and

as per the information and explanations given to us, we annex hereto a statement on the matters

specified in paragraphs 4 and 5 of the said Order as are applicable to the Corporation.

4) Further to our comments in the Annexure referred to in Paragraph (3) above, we report that:

a) We have obtained all the information and explanations which to the best of our knowledge and

belief were necessary for the purposes of our audit;

b) In our opinion, proper books of account as required by law have been kept by the Corporation

so far as appears from our examination of those books;

c) The Balance Sheet, Profit and Loss account and Cash Flow Statement dealt with by this report

are in agreement with the books of account;

d) In our opinion, the Balance Sheet, Profit and Loss Account and Cash Flow Statement comply

with the Accounting Standards referred to in Sub section (3C) of Section 211 of the Companies

Act, 1956;

e) On the basis of the written representations received from the Directors as on 31st March, 2008

and taken on record by the Board of Directors, we report that none of the directors of the

Corporation are disqualified as on 31st March 2008 from being appointed as directors in terms

of Clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956 on the said date;

f) We draw attention to;

(i) Note No. 15 of Schedule 25 to the accounts regarding balances of Sundry Creditors, Debtors,

Loans & Advances and Deposits which are subject to confirmation and reconciliation.

(ii) Note No. 16 of Schedule 25 to the accounts regarding a sum of Rs.1454.78 lakhs payable to

catering staff on board OSV who are not the employees of the Corporation as arrears of wages

with retrospective effect from 17th April 2000 consequent to an award of the Tribunal constituted

under section 150 (1) of the Merchant Shipping Act, 1958, which has not been considered as a

liability of the Corporation.

(iii) Note No. 18 of Schedule 25 regarding non – provision of liability under the provisions of the Multiemployer

Pension Plan Amendment Act of 1980 (New York) on withdrawal from India/USA East Coast Service (IDX

66

Service), quantification of which is not ascertainable, as the management is of the opinion that in view

of Company’s intention to recommence US container service in due course, no liability is expected.

(iv) Note No. 23 of Schedule 25 to the accounts regarding write back of sundry credit balances of Rs.2588

lakhs and excess provision of Rs.3188 lakhs based on a review undertaken of old outstanding balances

of Sundry Creditors & Provisions.

g) In our opinion and to the best of our information and according to the explanations given to us, the said

accounts read together with the Significant Accounting Policies stated in Schedule 24 and Notes on the

Accounts in Schedule 25, give the information required by the Companies Act, 1956, in the manner so

required and give a true and fair view in conformity with the accounting principles generally accepted in

India:

i) in the case of the Balance Sheet, of the state of affairs of the Corporation as at 31st March, 2008;

ii) in the case of the Profit and Loss Account, of the Profit of the Corporation for the year ended on that

date; and

iii) in the case of Cash Flow Statement, of the cash flows for the year ended on that date

For S. BHANDARI & CO., For KHANDELWAL JAIN & CO.,


(S. S. BHANDARI) (NARENDRA JAIN)

Partner Partner

Membership No. 11332 Membership No. 48725

Mumbai,

Dated the 11th June 2008.


67

ANNEXURE TO THE AUDITORS' REPORT

Referred to in Paragraph 3 of our report of even date on the accounts of The Shipping Corporation of

India Limited for the year ended March 31, 2008:

i) (a) The physical verification of the fixed assets was conducted by the Management at reasonable

intervals. In our opinion, the frequency of the verification is reasonable and commensurate

with the size and operations of the Corporation and the nature of its assets. We are also

informed that no material discrepancies were noticed on such verification as compared to

book records.

(b) The Corporation generally maintains proper records showing full particulars including

quantitative details and situation of fixed assets.

(c) The Corporation has not disposed off a substantial part of its fixed assets during the year, so

as to affect the going concern status of the Corporation.

ii) (a) We are informed that the Management has conducted physical verification of fuel oil and

bonded items on board at reasonable intervals during the year and of stores and spares lying

in godowns at the year end.

(b) In our opinion, the procedures followed by the Management for such physical verification

are reasonable and adequate in relation to the size of the Corporation and nature of its

business.

(c) The Corporation is maintaining proper records of inventory. The discrepancies noticed on

verification between physical inventories and the book records were not material in relation

to the operations of the Corporation and the same have been properly dealt with in the

books of account.

iii) Based on the records examined by us and according to the information and explanations

given to us, there are no loans granted/taken to/from companies, firms or other parties

required to be listed in the register maintained under Section 301 of the Companies Act,

1956.

iv) In our opinion and according to the information and explanations given to us, there is an

adequate internal control system commensurate with the size of the Corporation and the

nature of its business for the purchase of inventory and fixed assets and sale of services.

The Corporation does not have any sale of goods. During the course of our audit, we have

not observed any continuing failure to correct major weaknesses in internal control systems

of the Corporation.

v) Based on the audit procedures applied by us and according to the information and explanations

given to us, we are of the opinion that there are no transactions during the year that need

to be entered into the register maintained under Section 301 of the Companies Act, 1956.

vi) In our opinion and according to the information and explanations given to us, the Corporation

has not accepted any deposits attracting provisions of Section 58A and 58AA of the Companies

Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975 or any other relevant

provision of the Act.

68

vii) The Corporation has an internal audit system commensurate with its size and nature of its business.

The audit is carried out by an independent firm of Chartered Accountants.

viii) As per the information and explanations given to us, maintenance of cost records has not been

prescribed by the Central Government under Section 209(1)(d) of the Companies Act, 1956.

ix) (a) We are informed by the Management that it is not possible to ascertain the Provident Fund

dues and tax deducted at source of the floating staff accurately and ad-hoc monthly payments

are made to the appropriate authorities on the basis of previous year and the final dues are

adjusted on the determination of the liability month to month. The Company is generally

regular in making such ad-hoc monthly payments. In respect of the shore staff, Provident

Fund deductions and tax deducted at source have generally been regularly paid to the

appropriate authorities. As regards the crew members, Provident Fund dues are paid to the

appropriate authorities on signing off. Further, we have been informed that the provisions of

the Employees State Insurance Act are not applicable to the Corporation. The Corporation is

generally regular in depositing dues payable in respect of Investor Education and Protection

Fund, Income Tax, Service Tax, Wealth Tax, Sales Tax, Custom Duty, Excise Duty, Cess and

other statutory dues applicable to it with the appropriate authorities.

(b) According to the information and explanations given to us, no undisputed amounts payable

in respect of income tax, wealth tax, sales tax, service tax, customs duty, excise duty and

cess were in arrears as at 31st March 2008 for a period of more than six months from the

date they became payable.

(c) According to the information and explanations given to us, there are no dues of sales tax,

income tax, customs duty, wealth tax, excise duty and cess, which have not been deposited

on account of any dispute except as under:

Sr. Name of the Statute Nature of Dues Amount Period to Forum

No (Rs. In lakhs) which the where dispute

amount relates is pending

1 Customs Act, 1962 Custom Duty 243 2003-2004 Company is

Penalty 243 2003-2004 in process of

filing an appeal

before the

Regional

Bench, CESTAT,

Mumbai

2 Income Tax Act, 1961 Tax u/s 143 (3) 122 2004-2005 Addl. CIT, Mumbai


69

x) The Corporation has no accumulated losses at the end of the financial year and it has not

incurred any cash losses during the financial year covered by our audit and the immediately

preceding financial year.

xi) According to the information and explanations given to us and records examined by us, the

Corporation has not defaulted in repayment of dues to a financial institution or bank. The

Corporation has not issued any debentures.

xii) Based on our examination of documents and records and according to the information and

explanations given to us, the Corporation has not granted any loans and advances on the

basis of security by way of pledge of shares, debentures and other securities.

xiii) In our opinion, the nature of the activities of the Corporation does not attract any special

statute applicable to chit fund and nidhi/mutual benefit fund/societies.

xiv) In our opinion, the Corporation is not dealing in and trading in shares, securities, debentures

and other investments.

xv) In our opinion and according to the information and explanations given to us, the terms and

conditions on which the Corporation has given guarantees for loans taken by others from

banks are not prejudicial to the interest of the Corporation.

xvi) On the basis of the records examined by us, we have to state that, the Corporation has,

prima facie, applied the term loans for the purposes for which they were obtained.

xvii) According to the information and explanations given to us and on an overall examination of

the financial statements of the Corporation, we are of the opinion that, prima facie the

Corporation has not utilised the funds raised on short term basis for long term investments.

xviii) The Corporation has not made any preferential allotment of shares to parties or companies

covered in the register maintained under Section 301 of the Act.

xix) The Corporation has not issued any debentures.

xx) The Corporation has not raised any money through a public issue during the year.

xxi) On the basis of information and explanations given to us by the Management, we report that

no material fraud on or by the Corporation has been noticed or reported during the year.

For S. BHANDARI & CO., For KHANDELWAL JAIN & CO.,



Partner Partner

Membership No. 11332 Membership No. 48725

Mumbai,

Dated the 11th June 2008.

70

COMMENTS OF THE COMPTROLLER AND AUDITOR GENERAL OF INDIA

UNDER SECTION 619(4) OF THE COMPANIES ACT, 1956 ON THE ACCOUNTS

OF THE SHIIPPING CORPORATION OF INDIA LIMITED FOR THE YEAR ENDED

31 MARCH 2008.

The preparation of financial statements of The Shipping Corporation of India Limited for the year ended

31 March 2008 in accordance with the financial reporting framework prescribed under the Companies

Act, 1956 is the responsibility of the management of the company. The statutory auditors appointed by

the Comptroller and Auditor General of India under Section 619(2) of the Companies Act, 1956 are

responsible for expressing opinion on these financial statements under Section 227 of the Companies

Act, 1956 based on independent audit in accordance with the auditing and assurance standards prescribed

by their professional body, the Institute of Chartered Accountants of India. This is stated to have been

done by them vide their Audit Report dated 11 June 2008.

I on the behalf of the Comptroller and Auditor General of India have conducted a supplementary audit

under Section 619(3)(b) of the Companies Act, 1956 of the financial statements of The Shipping

Corporation of India Limited for the year ended 31 March 2008. This supplementary audit has been

carried out independently without access to the working papers of the statutory auditors and is limited

primarily to the inquiries of the statutory auditors and company personnel and a selective examination

of some of the accounting records. On the basis of my audit nothing significant has come to my

knowledge which would give rise to any comment upon or supplement to Statutory Auditors' report

under Section 619(4) of the Companies Act, 1956.

For and on the behalf of the

Comptroller and Auditor General of India

(A. W. K. Langstieh)

Principal Director of Commercial Audit and

Ex-Officio Member, Audit Board-I, Mumbai

Place : Mumbai

Date : 17 July 2008


BALANCE SHEET AS AT 31ST MARCH, 2008

AS AT AS AT

31-03-2008 31-03-2007

Rupees Rupees Rupees

Schedule in lakhs in lakhs in lakhs

SOURCES OF FUNDS

SHAREHOLDERS’ FUNDS

Capital 1 28,230 28,230

Reserves & Surplus 2 534,980 481,743

563,210 509,973

LOAN FUNDS

Secured Loans 3 145,420 124,471

TOTAL 708,630 634,444

APPLICATION OF FUNDS

FIXED ASSETS

Gross Block 4 673,713 670,541

Less : Depreciation 404,723 374,426

Net Block 268,990 296,115

Assets under Construction 5 200,720 76,255

469,710 372,370

ASSETS HELD FOR DISPOSAL 2 -

INVESTMENTS 6 4,146 2,400

CURRENT ASSETS, LOANS & ADVANCES

Inventories 7 9,007 7,385

Sundry Debtors 8 37,774 32,117

Cash & Bank Balances 9 209,120 262,469

Deposit with Public Financial Institutions 16,500 -

Other Current Assets 10 9,313 10,639

Amounts Advanced to Joint Venture

Companies 11 26,589 31,405

Loans and Advances 12 30,032 32,627

338,335 376,642

Less :

CURRENT LIABILITIES & PROVISIONS

Sundry Creditors & Other Liabilities 13 84,266 111,172

Provisions 14 19,297 5,796

103,563 116,968

NET CURRENT ASSETS 234,772 259,674

TOTAL 708,630 634,444

SIGNIFICANT ACCOUNTING POLICIES 24

NOTES ON ACCOUNTS 25

As per our report of even date attached hereto.

For S BHANDARI & CO., For KHANDELWAL JAIN & CO., For and on behalf of the Board of Directors,


(S.S. Bhandari) (Narendra Jain) Dipankar Haldar B. K. Mandal S. Hajara

Partner Partner SVP (LA) & Director (Finance) Chairman &

Membership No.11332 Membership No.48725 Company Secretary Managing Director

Mumbai, Mumbai,

Dated the 11th June, 2008. Dated the 11th June, 2008.

72


PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH, 2008.

2007-2008 2006-2007


Schedule in lakhs in lakhs in lakhs

INCOME

Operating Earnings 15 372,684 370,344

Profit on sale of Ships (Net) 16 - 8,278

Interest Income 17 22,768 21,969

Other Income 18 4,940 2,164

400,392 402,755

EXPENDITURE

Operating Expenses 19 259,435 256,770

Administration Expenses 20 18,209 13,786

Other Expenses, Provisions etc. 21 3,917 1,156

Interest 22 6,163 8,013

Depreciation 4 30,318 30,308

318,042 310,033

PROFIT BEFORE ITEMS RELATING TO EARLIER YEARS 82,350 92,722

Prior period adjustments (net)

(Refer Note No.6 of Schedule 25) 2,268 2,462

Excess provision/Sundry credit balances written back 23 5,776 15,819

(Refer Note No. 23 of Schedule 25)

8,044 18,281

PROFIT BEFORE TAX 90,394 111,003

Provision for Indian Income Tax - Current 9,600 9,400

- Fringe Benefit Tax 385 290

- Wealth Tax (0.31 lakhs) - 2

9,985 9,692

Less Excess Provisions written back 981 147

9,004 9,545

PROFIT AFTER TAX 81,390 101,458

Less:Transferred to Tonnage Tax Reserve 17,000 22,500

u/s 115VT of Income Tax Act

BALANCE 64,390 78,958

Add : Balance brought forward from last year 58,080 48,770

AMOUNT AVAILABLE FOR APPROPRIATION 122,470 127,728

Appropriations

Staff Welfare Fund 75 60

Capital Reserve (Refer Note No. 21 of Schedule 25) 282 2,227

General Reserve 48,000 40,000

Interim Dividend 12,704 23,996

Tax on Interim Dividend 2,159 3,365

Proposed Dividend 11,292 Nil

Tax on Proposed Dividend 1,919 Nil

76,431 69,648

BALANCE CARRIED TO BALANCE SHEET 46,039 58,080

Rs. Rs.

Earnings per share (Basic / Diluted) 28.83 35.94

Nominal Value of Shares 10.00 10.00

(Refer Note No. 5 of Schedule 25)

SIGNIFICANT ACCOUNTING POLICIES 24

NOTES ON ACCOUNTS 25







Mumbai, Mumbai,

Dated the 11th June, 2008. Dated the 11th June, 2008.

73

74

SCHEDULES FORMING PART OF BALANCE SHEET AS AT 31ST MARCH, 2008

SCHEDULE ‘1’

SHARE CAPITAL

As at AS AT

31-03-2008 31.03.2007

Rupees Rupees

in lakhs in lakhs

Authorised :

45,00,00,000 Equity Shares of Rs. 10 each 45,000 45,000

Issued and subscribed :

In cash :

26,46,12,870 Equity Shares of Rs. 10 each fully paid 26,461 26,461

For Consideration Other than Cash :

1,76,89,550 Equity Shares of Rs. 10 each fully paid 1,769 1,769

Partly in Cash and partly for Consideration other than Cash :

10 Equity Shares of Rs. 10 each fully paid Nil Nil

Received in Cash Rs. 1.80 each

For Consideration other than Cash Rs. 8.20 each

TOTAL 28,230 28,230


75

SCHEDULE ‘2’

RESERVES AND SURPLUS

AS AT AS AT

31.03.2008 31.03.2007


in lakhs in lakhs in lakhs

Capital Reserve 11,507 9,280

Add : Transferred from Profit & Loss Account 282 2,227

11,789 11,507

General Reserve :

As per Last Balance Sheet 208,007 168,079

Add : Transferred from Profit & Loss Account 48,000 40,000

Less: Transitional impact of AS- 15 (revised 2005) - 72

256,007 208,007

Special Reserve U/S 33AC of I.T. Act, 1961 (Utilised)

As per last Balance Sheet 121,500 121,500

Tonnage Tax Reserve

As per Last Balance Sheet 52,500 30,000

Add : Transferred from Profit & Loss Account 17,000 22,500

69,500 52,500

Tonnage Tax Reserve (Utilised)

As per last Balance Sheet 30,000 30,000

Staff Welfare Fund :

As per Last Balance Sheet 149 153

Add : Interest Received 20 15

169 168

Less: Expenses incurred 99 79

70 89

Add : Transferred from Profit and Loss Account 75 60

145 149

Balance in Profit & Loss Account 46,039 58,080

TOTAL 534,980 481,743

76

SCHEDULE ‘3’

SECURED LOANS

AS AT AS AT

31.03.2008 31.03.2007

Rupees Rupees

in lakhs in lakhs

State Bank of India:

Secured by Statutory first ship mortgage of m.v. A.K. Azad

(Installments due within one year Rs.1067lakhs;

Prev yr. Rs. 1067 lakhs) 3,733 4,800

Oriental Bank of Commerce

(Out of the total balance of Rs 18989 lakhs

1) A sum of Rs 8988 lakhs is secured by Statutory

first ship mortgage of m.t. Desh Shakti

2) A sum of Rs. 10001 lakhs is secured by Statutory

first ship mortgage over m.t.Desh Shanti)

( Installments due within one year Rs. 4467 lakhs;

Prev. yr. Rs. 4469 lakhs) 18,989 23,458

Bank of Maharashtra

Secured against mortgage of part of the fleet

(Installments due within one year Nil; Prev. yr. - Nil) 12,000 12,000

FCNR Loan from State Bank of India

Against Refundment Guarantee of EXIM Bank, Korea 5,140 5,612

(Installments due within one year Nil; Prev. yr - Nil)

Foreign Banks ( In Foreign Currency )

Loans of Rs.51818 lakhs (Prev. yr - Rs. 72989 lakhs)

secured by mortgage of certain ships and Rs.53740 lakhs

(Prev. yr -Rs.5612 lakhs) secured by Refundment

Guarantee of EXIM Bank, Korea.

(Installments due within one year Rs. 9771 lakhs ;

Prev yr. - Rs.16413 lakhs ) 105,558 78,601

TOTAL 145,420 124,471


77

SCHEDULE ‘4’

FIXED ASSETS Rupees in lakhs

GROSS BLOCK DEPRECIATION NET BLOCK

Particulars Cost Additions Deduct- Cost Upto Provided Deduct- Upto As at As at

as at ions as at 31-3-2007 during ions/ 31-3-2008 31-3-2008 31-3-2007

31-3-2007 31-3-2008 the year Adjust

ments

Fleet 659,737 2,935 - 662,672 366,268 29,875 - 396,143 266,529 293,469

Ownership

Containers 5,291 - 28 5,263 3,985 180 21 4,144 1,119 1,306

Freehold Land 284 - 13 271 - - - 271 284

Buildings 1,104 - - 1,104 700 21 - 721 383 404

Ownership Flats

and Residen -

tial Buildings 318 - - 318 225 4 - 229 89 93

Furniture,

Fittings &

Equipments etc. 3,509 277 - 3,786 3,033 179 - 3,212 574 476

Motor Vehicles 82 - - 82 75 1 - 76 6 7

Computer

Software 216 1 - 217 140 58 - 198 19 76

Current Year's

Total 670,541 3,213 41 673,713 374,426 30,318 21 404,723 268,990 296,115

Previous Year's

Total 681,888 613 11,960 670,541 355,935 30,308 11,817 374,426 296,115

Notes : (1) Additions to Fleet include Rs.(-) 2972 lakhs(Prev. yr.-Rs. (-) 1827 lakhs) on account of difference in

exchange as per Significant Accounting Policy No. 8(d) of Schedule 24.

(2) Deductions/Adjustments in respect of containers include 7 lakhs(Prev.yr - Nil)

towards cost of containers held for disposal and Rs. 5 lakhs (Prev. yr - Nil) towards depreciation in

respect of such containers.

(3) Buildings include cost of Shipping House at Bombay Rs. 134 lakhs (Prev. yr.-Rs. 134 lakhs) which is on

leasehold land valued at Rs. Nil.

(4) Ownership Flats and Residential Buildings include : Cost of shares and bonds in Cooperative Societies/

Company of face value Rs. 0.73 lakh (Prev. yr.-Rs. 0.73 lakh).

SCHEDULE ‘5’

ASSETS UNDER CONSTRUCTION

AS AT AS AT

31.03.2008 31.03.2007

Rupees Rupees

in lakhs in lakhs

Ships-Work in progress & Advances 200,720 76,255

TOTAL 200,720 76,255

Additions to fleet under construction include Rs. 311lakhs Prev. yr (-) 399 lakhs on account of exchange

difference as per Significant Accounting Policy No. 8(d) of Schedule 24

78

SCHEDULE ‘6’

INVESTMENTS (At Cost - Unless otherwise specified)

AS AT AS AT

31.03.2008 31.03.2007

Rupees Rupees

in lakhs in lakhs

QUOTED :

Trade Investments :

In Shares

3438 Equity Shares of Rs. 20/- each of Scindia Steam Navigation

Company Ltd., Fully paid (Rs. 0.30 lakhs; Prev. yr.-Rs.0.30 lakh) -- --

Less : Provision for Diminution in Value of Investment

(Nil, Prev. yr. - Rs. 0.14 lakhs) -- --

Market Value Rs.0.33 lakh (Prev. yr. - Rs. 0.16 lakh). -- --

UNQUOTED :

TRADE INVESTMENTS :

* 245,00,000 Registered Shares of Rials 5,000 each of Irano Hind

Shipping Co. Ltd.,Tehran, Fully paid (including 244,93,385 Bonus Shares) 39 39

295,029 shares of 1 USD each fully paid of ISI Maritime Ltd. - -

(Shares are received as a gift from Irano-Hind Shipping Co. Ltd.)

**16 shares of 1 USD each fully paid up pf BIIS Maritime - -

(Shares are received as gift from Irano-Hind Shipping Co. (P.J.S)

500 shares of Rs. 10 each fully paid up of Jaladhi Shipping Services Pvt. Ltd. - -

(Shares are received as gift from Irano-Hind Shipping Co. (P.J.S)

***2908 Ordinary Shares of 1 Malta Lira each fully paid of

India LNG Transport Company (No. 1) Ltd. 3 3

*** 2908 Ordinary Shares of 1 Malta Lira each fully paid of

India LNG Transport Company (No.2 ) Ltd. 3 3

2600 (Prev. yr 5200) Ordinary Shares of 1 USD each fully paid of

India LNG Transport Company (No. 3) Ltd. 1 2

5,00,000 (Prev. yr 25000) ordinary Shares of

Rs. 10 each fully paid up of SCI Forbes Ltd. 50 3

3,10,00,000 (Prev. yr 1,60,00,000) ordinary Shares of

Rs. 10 each fully paid of Sethusamudram Corp. Ltd. 3,100 1,600

Share Application Money - Sethu Samudram Corporation Ltd. 950 750

TOTAL 4,146 2,400

* 30 Shares are held in the name of SCI Directors and are with Irano Hind Shipping Co. Ltd, Tehran

** Shares have been pledged to banks against loans given by them

*** The shares are pledged to banks against loans given by them to joint venture companies.

Refer Note No.8 of Schedule '25'


79

SCHEDULE ‘7’

INVENTORIES

AS AT AS AT

31.03.2008 31.03.2007



Fuel Oil 8,396 6,850

Provisions on Board 13 14

Stores and Spares in Godown 3 23

Stores and Spares In Transit 946 696

Less:

Adjustment made towards consumption 351 198

(Refer Significant Accounting Policy No. 7 (e) of Schedule 24) 595 498

TOTAL 9,007 7,385

(As verified, valued and certified by the Management)

SCHEDULE ‘8’

SUNDRY DEBTORS (UNSECURED)

AS AT AS AT

31.03.2008 31.03.2007



Debts outstanding for more than six months

(a) Considered good 13,524 13,341

(b) Considered doubtful 3,669 5,882

17,193 19,223

Less : Provision for Doubtful Debts 3,669 5,882

13,524 13,341

Other debts - Considered good 24,250 18,776

TOTAL 37,774 32,117

80

SCHEDULE ‘9’

CASH & BANK BALANCES

AS AT AS AT

31.03.2008 31.03.2007



Cash on hand 9 -

Remittances in Transit 438 548

447 548

Bank Balances

With Scheduled Banks :

In Current Accounts 9,461 35,195

In Deposit Accounts 194,943 226,341

204,404 261,536

For Staff Welfare Fund :

In Savings Bank Account (0.27 lakhs Prev.yr - 0.07 lakhs) - -

In Fixed Deposit Account 208 192

208 192

204,612 261,728

With Non-Scheduled Banks :

In Current Account

Uttara Bank, Bangladesh

(Maximum balance during the year Rs.107 lakhs;Prev. yr. - Rs.77 lakhs) 35 4

Bhumiputra Commerce Bank (formerly Bank of Commerce), Berhad,

Malaysia (Rs. 0.45 lakh, Prev. yr.-Rs.0.45 lakh) - -

(Maximum balance during the year Rs.0.46 lakh; Prev. yr. - Rs. 0.46 lakh)

Unicredit Banca d'impresa (formerly Credito Italino Bank, Genoa)

(Maximum balance during the year Rs. 200 lakhs; Prev. yr. - Rs. 154 lakhs) 37 102

Bayerische Hypo-und Vereins Bank AG(formerly Vereins Bank, Hamburg)

(Maximum balance during the year 848 lakhs; Prev. yr. - Rs. 441lakhs) 138 87

Citi Bank London - USD Pool 266 -

(Maximum balance during the year Rs.398 lakhs; Prev. yr. Nil)

Citi bank Germany Euro Freight 82 -

(Maximum balance during the year Rs. 176 lakhs; Prev. yr. Nil)

Citi bank Belgium Euro Freight 62 -


Citi Bank Spain Euro Freight 308 -


HSBC Honkong HKD Freight 103 -



81

SCHEDULE ‘10’

OTHER CURRENT ASSETS

AS AT AS AT

31.03.2008 31.03.2007



Interest Accrued on :

Deposits with Banks 2,504 3,076

Deposits with Public Financial Institutions 255 -

Loans to employees 655 685

3,414 3,761

Silver Medals (Rs. 0.01 lakh; Prev. yr. – Rs. 0.01 lakh) - -

Unfinished Voyages 5,877 6,878

Course fee receivable 22 -

TOTAL 9,313 10,639

HSBC Egypt USD Freight 5 -


HSBC Singapore SGD Freight 88 -


HSBC Malaysia MYR Freight 46 -


HSBC UAE AED Freight (0.04 lakhs) - -


HSBC London USD Pool 2,521 -


HSBC Honkong USD Freight 89 -


HSBC Honkong China USD Freight 8 -


HSBC Bank Japan - Yen Freight 272 -


HSBC Honkong - HKD Freight Saving 1 -

(Maximum balance during the year RS. 77 lakhs; Prev. yr. Nil)

4,061 193

TOTAL 209,120 262,469

82

SCHEDULE ‘11’

AMOUNTS ADVANCED TO JOINT VENTURE COMPANIES

AS AT AS AT

31.03.2008 31.03.2007

Rupees Rupees

in lakhs in lakhs

*Shareholder's Contribution towards project cost -

India LNG Transport Co. (No.3) Ltd. 6,152 9,895

*India LNG Transport Company (No. 1) Ltd - Loan 4,954 5,409

*India LNG Transport Company (No. 2) Ltd - Loan 4,966 5,422

**Shareholder's loan SCI Forbes 5,099 4,616

Other recoverables 5,418 6,063

TOTAL 26,589 31,405

* Refer Note No. 8 of Schedule 25

** Refer Note No. 10 of Schedule 25

SCHEDULE ‘12’

LOANS AND ADVANCES

AS AT AS AT

31.03.2008 31.03.2007



LOANS AND ADVANCES -

(Considered good unless otherwise stated)

(A) Secured :

Loans and Advances to Employees and Employees’

Co-operative Societies

- Considered Good 1,760 2,024

- Considered Doubtful 2 2

1,762 2,026

Less : Provision for doubtful Loans & Advances 2 2

1,760 2,024

(B) Unsecured :

Advances recoverable in cash or in kind or

for value to be received :

- Considered Good 21,857 24,791

- Considered Doubtful 943 1,072

22,800 25,863

Less : Provision for doubtful Advances 943 1,072

21,857 24,791

Excess of fair value of plan assets over acturial

gratuity liability (Refer Note No. 14 (E)of Schedule 25) 3,784 2,737

Loans and Advances to employees and employees'

Co-operative Societies under Staff Welfare Scheme 1 1

Other Loans 48 50

Advance Indian Income Tax & Tax Deducted at Source

(Net of Provisions) 641 -

Balances with Customs, Port Trust etc.

(a) Considered good 1,766 2,451

(b) Considered doubtful 763 -

2,529 2,451

Less : Provision for doubtful balances with 763 -

Customs, Port Trust etc.

1,766 2,451

Deposits 175 573

TOTAL 30,032 32,627


83

SCHEDULE ‘13’

SUNDRY CREDITORS & OTHER LIABILITIES

AS AT AS AT

Rupees 31.03.2008 31.03.2007

in lakhs Rupees Rupees

in lakhs in lakhs

Sundry Creditors

- Small and Medium Enterprises 152 1,324

- Others 61,712 69,879

61,864 71,203

Interest accrued but not due 1,118 1,235

Advances and Deposits 10,740 5,183

Security and other Deposits 118 98

Interim Dividend Payable - 23,996

Other Liabilities 7,784 6,707

Unpaid Dividend (Note 1) 57 34

Unfinished Voyages 2,585 2,716

TOTAL 84,266 111,172

Note 1 : There is no amount due and outstanding to be credited to Investor Education and Protection Fund

SCHEDULE ‘14’

PROVISIONS

AS AT AS AT

31.03.2008 31.03.2007

Rupees Rupees

in lakhs in lakhs

Foreign Taxation (Net of Advances) 176 305

Indian Income Tax (Net of Advances) - 571

Leave Encashment 3,928 3,402

Post retirement medical scheme 1,982 1,518

Proposed Dividend 11,292 -

Tax on Proposed Dividend 1,919 -

TOTAL 19,297 5,796

84

SCHEDULES FORMING PART OF THE PROFIT AND LOSS ACCOUNT FOR THE

YEAR ENDED 31ST MARCH, 2008

SCHEDULE ‘15’

OPERATING EARNINGS 2007-2008 2006-2007

Rupees Rupees

in lakhs in lakhs

Freight (Net) 227,466 251,553

Charter Hire 127,582 105,409

Demurrage 13,371 8,936

Receipts towards Managed Vessels -

- Remuneration 1,338 1,639

- Reimbursement of overheads 2,927 2,807

4,265 4,446

372,684 370,344

SCHEDULE ‘16’

PROFIT ON SALE OF SHIPS (NET)

2007-2008 2006-2007

Rupees Rupees

in lakhs in lakhs

Sales Realisation/Insurance Claims (Net) - 8,885

Less : Book Value - 136

Surplus - 8,749

Less:Expenses incurred upto date of sale:

Fuel Oil - - 388

Wages and Victualling - - 72

Stores and Maintenance - - 1

Sundries - - 10

- 471

TOTAL - 8,278

SCHEDULE ‘17’

INTEREST INCOME

2007-08 2006-07

Rupees Rupees

in lakhs in lakhs

Interest earned (Gross): ( TDS - Rs. 234 lakhs; Prev. yr. - Nil)

On Bank Deposits 19,250 18,263

On Deposits with Public Financial Institutions 1,640 1,501

Others 1,878 2,205

TOTAL 22,768 21,969


85

SCHEDULE ‘18’

OTHER INCOME

2007-08 2006-07



Sundry Receipts

- Core shipping activities 1,288 723

- Incidental activities 496 503

1,784 1,226

Profit on sale of Fixed Assets (other than Ships) 349 5

Dividend on trade Investments 193 933

Currency exchange difference 2,614 -

TOTAL 4,940 2,164

SCHEDULE ‘19’

OPERATING EXPENSES

2007-08 2006-07



DIRECT OPERATING EXPENSES :

Agency fees 1,454 1,499

Brokerage 928 875

Commission 6,055 5,466

Stevedoring, Dunnage, Cargo expenses etc. &

Slot Expenses on joint sector container services (Net) 26,236 19,878

Marine, Light and Canal Dues 24,341 24,628

Fuel Oil (Net) 67,374 57,522

Water charges 277 233

126,665 110,101

HIRE OF CHARTERED STEAMERS 48,189 56,072

*INDIRECT OPERATING EXPENSES :

Wages, Bonus and other expenses on Floating Staff 24,482 23,766

Gratuity (636) (1,185)

Contribution to Provident Fund 491 465

Victualling, Transfer and Repatriation and other benefits etc. 4,649 4,312

Stores 11,183 11,578

Sundry Steamer Expenses 1,299 1,289

Repairs and Maintenance, Survey expenses etc. 35,912 42,503

Insurance and Protection , Indemnity Club Fees &

Insurance Franchise etc. 7,201 6,616

Currency Exchange Difference (Net) - 1,253

84,581 90,597

TOTAL 259,435 256,770

* Net of recoveries on account of managed vessels.

86

SCHEDULE ‘20’

ADMINISTRATION EXPENSES

2007-08 2006-07

Rupees Rupees

in lakhs in lakhs

Salaries and Bonus 8,160 4,836

Gratuity (362) (281)

Contribution to Provident Fund 684 490

Staff Welfare Expenses 1,599 1,599

Remuneration to Directors 57 61

Directors' Sitting Fees 4 3

Directors' Travel Expenses 110 101

Donations & Grants ( Prev. yr - 0.30 lakhs) 402 -

Establishment Charges 4,928 4,361

Repairs and Maintenance-Buildings 653 861

Rent 521 465

Lease Rent to Shore Employees 1,217 968

Rates and Taxes 117 156

Insurance 14 28

Auditors' Remuneration 71 51

Bank charges 34 87

TOTAL 18,209 13,786

SCHEDULE ‘21’

OTHER EXPENSES, PROVISIONS ETC.

2007-08 2006-07

Rupees Rupees

in lakhs in lakhs

Provision for Off Hire Etc. 492 406

Provision for Doubtful Debts and Advances 1,201 209

Foreign Taxation 382 401

Miscellaneous Expenses 75 132

Debts / Advances written off 1,767 7

Provision for Sales Tax Liability - 1

TOTAL 3,917 1,156


87

SCHEDULE ‘22’

INTEREST

2007-08 2006-07

Rupees Rupees

in lakhs in lakhs

On Term Loans 6,141 7,922

Others 22 91

TOTAL 6,163 8,013

SCHEDULE ‘23’

EXCESS PROVISIONS/SUNDRY CREDIT BALANCES WRITTEN BACK

2007-08 2006-07



A. Excess Provision written back (core activities)

Direct Operating Expenses 433 5,538

Freight & Charter hire 1,552 381

Wages, Bonus & other expenses on floating staff 53 2,963

Insurance, P&I, Cargo claims & P&I Club fees 389 197

Provision for Doubtful Debts & Advances 537 26

Foreign Taxation 203 63

Provision for Offhire 3 124

Establishment Charges - 374

Ship Repairs, Stores and Maintainence 1 76

Shore staff expenses - 61

Sundry Steamer expenses 9 60

Others 8 -

3,188 9,863

B. Sundry credit balances written back (core activities) 2,588 5,956

TOTAL 5,776 15,819

88

SCHEDULE ‘24’

SIGNIFICANT ACCOUNTING POLICIES

1. ACCOUNTING CONVENTION :-

The financial statements are prepared to comply in all material aspects under the Historical

Cost convention and in accordance with generally accepted Accounting practices in India, the

Accounting Standards issued by the Institute of Chartered Accountants of India and the relevant

provisions of the Companies Act, 1956.

2. RECOGNITION OF REVENUE AND EXPENDITURE :-

(a) The Profit & Loss Account reflects,

(i) The Earnings and Direct Operating Expenses (Voyage related variable costs) in respect of

all Finished Voyages on accrual basis.

(ii) Standing Charges (Vessel related Fixed Costs) for all the vessels for the entire period of

operation during the year on accrual basis.

(iii) Income and Expenditure in respect of adhoc slot operations, the customs penalty claims,

and container detention charges which are accounted for on realisation.

(iv) In respect of slot sharing agreement with other shipping lines, the earnings and expenses

on an accrual basis based on voyages completed during the year.

(v) In respect of time charter arrangements, incomes and expenses are booked on accrual

basis.

(b) The criteria followed for the purpose of determining the Finished Voyages are as under:-

(i) Passenger cum Cargo Vessels:- Disembarkation of passengers and discharge of cargo

should be completed on or before the last date of the financial year.

(ii) Cargo Vessels (other than those serviced by Feeder or Daughter Vessels):- Discharge of

cargo should be completed on or before the last date of the financial year.

(iii) Cargo vessels serviced by Daughter vessels:- The ultimate discharge of cargo by all

daughter vessels should be completed on or before the last date of the financial year.

(iv) Cargo vessels serviced by feeder vessels:- The discharge of cargo at the transhipment

port by the mainline and feeder vessels should be completed on or before the last date

of financial year. Transhipment port is the point of commencement and completion of

both the services. The completion of the mainline and feeder voyage is determined

independent of each other.

(c) Unfinished Voyages:-

(i) Any voyage, which does not fulfil the above mentioned criteria is treated as an unfinished

voyage. Collections made on account of freight and other charges in respect of such

voyages are carried forward as Unfinished Voyage Earnings. Direct operating expenses

booked for such voyages including hire and freight for vessels chartered-in are carried

forward as Unfinished Voyage Expenses.

(ii) Drydock voyages are considered as finished voyages only on completion of entire

drydock jobs.

(d) Allocation of Container Expenses:-

Expenses relating to container activities such as stevedoring, stuffing and destuffing,

transportation, etc. are identified with the relevant voyage and classified as direct operating

expenses. Expenses such as container hire, kobi charges, ground rent and handling of empty

containers, etc., which are not directly identifiable with any particular voyage are allocated to


89

all voyages on the basis of units days for each voyage. The sum so allocated to unfinished

voyages is carried forward as Unfinished Voyage Expenses.

3. FIXED ASSETS AND DEPRECIATION :-

a) Fixed Assets are stated at cost of acquisition less accumulated depreciation. Cost includes

borrowing cost, duties and other expenses relating to acquisition of assets.

b) Depreciation on ships is charged on "Straight Line Method" at the rates prescribed in Schedule

XIV to The Companies Act, 1956 except in cases of Offshore Vessels, which are written off

over a period of 12 years and second hand vessels, which are written off over their respective

useful lives (not less than rates prescribed in Schedule XIV) as determined by Technical

evaluation.

On additions made to the existing ships (including adjustments resulting on account of

exchange rate fluctuation) depreciation is provided for the full year irrespective of the date of

addition and balance over the remaining useful life of the ships.

Additions made to the ships which have completed their useful life are fully depreciated in

the year of addition. However, in respect of additions made on or after 1st April 2007 involving

structural changes resulting in extension of useful life based on the technical evaluation, the

depreciation is provided over the extended remaining useful life.

c) On assets other than ships, depreciation is charged on the "Written Down Value Method" as

per the rates prescribed in Schedule XIV to the Companies Act, 1956 for the full year irrespective

of the dates of additions and no depreciation is being charged on assets sold/discarded

during the year.

d) Computer software is amortised over the useful life not exceeding five years.

e) Assets costing individually Rs.5,000/- and below are fully depreciated in the year of addition.

f) The carrying amounts of assets are reviewed at each Balance Sheet date for impairment so

as to determine the provision for impairment loss, if any, required, or the reversal, if any,

required of impairment loss recognised in previous periods.

4. CAPITALISATION OF EXPENSES :-

Interest and other expenses, incurred till the date of first loading, on amounts borrowed for

acquisition/improvement of assets, are charged to the cost of respective assets acquired/improved.

In addition, operating costs including initial stores and spares of newly acquired ships till the port

of first loading are added to the cost of the respective ship.

5. RETIREMENT AND DISPOSAL OF SHIPS :-

(a) Ships which have been retired from operations for eventual disposal are withdrawn from the

fixed assets and exhibited separately at book value in the Balance Sheet under "Ships Retired

From Operation".

(b) Anticipated loss, if any, in the disposal of such ships is recognised immediately and provision

for the same is made in the accounts for the year in which these have been retired. For the

purpose of determining the loss, the sale price is recognised, if contract for sale is concluded.

In other cases, assessment of the realisable value is made on the basis of the prevailing

market conditions. Losses on such ships are provided for after taking into account the expenses

such as customs duty, sales tax / Value Added Tax, etc. in connection with the disposal as

well as estimated expenses in maintaining the ship, till its sale. Wherever the exact amount

under each item of expenses is not known, an assessment is done on the best estimate basis.

(c) Profits on sale of ships are accounted for only upon completion of sale thereof.

90

6. MAJOR REPAIRS AND RENEWALS OF SHIPS :-

Advances given towards repairs/renewals of capital/revenue nature, are adjusted only on completion

of the entire work duly certified by the concerned Authority.

7. VALUATION OF STOCKS :-

(a) Inventories are valued at lower of cost and net realisable value unless otherwise stated.

(b) Fuel oil purchases are initially booked as stock. The value of year-end stock is arrived at after

charging consumption on 'First-in-First-out' method.

(c) As regards provisions purchased for victualling on board the ships, where catering is under

departmental catering system, all purchases are treated as consumed.

(d) Corporation maintains godowns for keeping certain limited items of stores pending issue to

the ships. Stock of stores lying in the godowns at the year end are valued at lower of cost

or net realisable value.

(e) Store/Spares including paints, etc. are charged to revenue as consumed when directly issued

to ships. Items of Stores/Spares, which cannot be delivered immediately are shown under

Stores/Spares in Transit and are cleared on receiving acknowledgement from the ship.

However, all items of Stores/Spares purchased within last 3 months of the financial year, for

which acknowledgement are not received, are treated as stock and valued at lower of cost or

realizable value.

8. ACCOUNTING OF FOREIGN CURRENCY TRANSACTIONS :-

(a) All transactions including on revenue account during the year are booked at rates published

in the last week of the preceding month in Financial Times, London..

(b) Liner freight is booked at rates referred to in (a) above relevant to the months in which

the dates of sailing fall.

(c) The year-end foreign currency balances other than in US Dollars appearing in the books

of account are converted into US Dollars at the rates published in Financial Times, London

in the last week of March and thereafter, the monetary assets and monetary liabilities as well

as the Long Term Loans are converted into rupees at SBI Mean Rate prevailing at the end

of the financial year.

(d) Exchange difference arising on repayment of liabilities and conversion of year-end foreign

currency balances pertaining to long term loans arising out of transactions entered before 1st

April 2004 for acquiring fixed assets from a country outside India are adjusted in the carrying

cost of fixed assets. In respect of such long term loans arising out of transactions entered on

or after 1st April 2004 such exchange differences are recognised in the Profit & Loss Account

except to the extent that they are regarded as an adjustment to the interest cost during the

period of construction.

(e) The exchange difference arising on revenue and other account except as stated under

(d) above is adjusted in the Profit & Loss Account.

9. EMPLOYEE BENEFITS :-

(a) Liabilities towards provident fund are accounted for on accrual basis.

(b) For defined benefit plans, in case of shore staff, officers afloat, and crew on Company's

roster, the cost of providing benefits is determined using the projected unit credit method,

with actuarial valuations being carried out at each balance sheet date. Actuarial gains

and losses are recognised in full in the profit and loss account for the period in which

they occur. The retirement benefit obligation recognised in the balance sheet represents


91

the present value of defined benefit obligation as reduced by the fair value of the plan

assets. Any asset resulting from this calculation is limited to the present value of available

refunds and reduction in the future contribution to the plan.

(c) In case of crew on the general roster, gratuity, which is insignificant in value, is accounted

on cash basis.

10. INSURANCE, P&I AND OTHER CLAIMS :-

(a) Provision in respect of claims against the Corporation and covered by Insurance and P&I risks

is made as under:-

i. In respect of claims falling under Hull & Machinery Insurance, which are estimated to be

above the deductible limit, to the extent of deductible limit.

ii. In case of Cargo claims, on the basis of the actual claims registered and/or paid pertaining

to the relevant year's voyages as ascertained at the year-end as reduced by the amounts

recoverable from the insurers.

(b) All types of claims settled and paid above the deductible limits are shown as recoverable

from Hull Underwriters / P&I Clubs until these are finally accepted by them as per the conditions

of insurance policy and/or P&I cover. Adjustments, if any of revenue nature are made after

statement of claims are received from the Average Adjusters.

(c) Claims made by the Corporation against other parties including ship repair yards, shipowners,

ship charterers, customs and others, etc. are accounted for on realisation, due to uncertainty

in the amounts of their ultimate recovery.

11. INVESTMENTS :-

(a) Long Term Investments are stated at cost. Provision for diminution is made to recognize a

decline, other than temporary, in the value of such investments.

(b) Current Investments are stated at lower of cost and fair value.

12. TAXES ON INCOME :-

In view of opting for Tonnage Tax scheme, provision for income tax liability is made as per special

provisions relating to income of shipping companies under Income Tax Act, 1961 from financial

year 2004-05.

13. LEASES:-

In respect of assets leased prior to 1st April 2001, lease rentals are accounted on accrual basis

over the period of the lease.

Assets acquired from 1st April 2001, are accounted in accordance with AS-19 "Accounting for

Leases".

14. PROVISIONS:-

Provisions are recognised when the company has a present obligation as a result of past events,

for which it is probable that an outflow of resources embodying economic benefits will be required

to settle the obligation and a reliable estimate of the amount can be made.

92

SCHEDULE ‘25’

NOTES ON ACCOUNTS

31.03.2008 31.03.2007

Rupees Rupees

in lakhs in lakhs

1. Estimated amount of contracts

on capital account, remaining

to be executed and hence not

provided for (Net of Advance paid) 467,254 297,013

(As certified by the management)

2. Contingent Liabilities not

provided for:-

(i) Claim against the corporation

not acknowledged as debts -

(1) Claim made by M/s. Chokhani International Ltd.

towards dry dock expenses pending before

High Court, Chennai 3,327 3,114

(2) Claim by National Institute of Oceanography

towards loss of ship and other incidental charges

due to fire 924 924

(3) Forfeiture of Earnest Money Deposit,

Cargo Loss, Freight, Demurrage, Slot Payments,

Fuel Cost and other operational claims. 6,265 4,869

(As certified by the Management)

(ii) Guarantees given by the Banks

on behalf of the Corporation 5,655 6,028

(iii) Undertaking cum Indemnity given by

Corporation 1,000 1,000

(iv) Cargo Claims covered by

P&I Club 638 1,722(v)

(v) Bonds/Undertakings given by the

Corporation to Customs Authorities. 19,097 19,097

(vi) Corporate Guarantees / Undertakings

In respect of Joint Ventures Not ascertainable Not ascertainable

Others 1494 Not ascertainable

(vii) Liability towards NYSA USA Pension - Not ascertainable Not ascertainable

Exit from INDAMEX / IDX service -

Management does not expect any liability to arise.

3. Remuneration to whole time Directors

(a) Salaries and Allowances 49.41 49.08

(b) Contribution to Provident Fund 3.31 3.86

(c) Medical Expenses 4.15 8.50

(d) Monetary value of perquisites 9.17 6.09

In addition to above;

The Corporation has made a provision for defined benefit of Rs. 10 lakhs during the year


93

4. (A) RELATED PARTY DISCLOSURES:

Related Party disclosures, as required by AS - 18 "Related Party Disclosures" are given below:

Names of related party entities with whom transactions were carried out during the year :

(a) Joint Venture Companies

1. Irano Hind Shipping Co. Ltd.

2. India LNG Transport Co. (No. 1) Ltd.



5. SCI Forbes Ltd.

(b) Key Management Personnel

Functional Directors

1. Shri S. Hajara, CMD

2. Shri S.S. Rangnekar ( up to 18.06.2007)

3. Shri B.K. Mandal

4. Shri Kailash Gupta

5. Shri U.C. Grover

6. Shri. J.N. Das ( w.e.f 24.12.2007)

The following transactions were carried out with related parties.

(a) Joint Venture Companies 2007-2008 2006-2007

(Rs. in lakhs) (Rs. in lakhs)

1. Investments made during the year 46 4

2. Dividends Received 193 933

3. Interest Charged 1797 2053

4. Expenses Charged 10 14

5. Loans/Advances given/ adj. during the year 692 9230

6. Loans/Advances realised/ adj. during the year 4863 0

7. Receivables as at year end 26589 31385

8. Charter Hire payments NIL 499

(b) Key Management Personnel 2007-2008 2006-2007


1. Remuneration 56.87 61

2. Loans recovered during the year 0.99 0.20

3. Loan amounts due as at the end of the year 6.48 6

4. (B) JOINT VENTURE INFORMATION:

Details of Joint Venture, as required by AS-27 "Financial Reporting of Interests in Joint Ventures" are

given below:

i) Details of Joint Venture Interest

Name Description of Country of Percentage Percentage of

Interest Incorporation of Interest of Interest

As on As on

31.03.08 31.03.07

1. Irano Hind Shipping Company Ltd Equity Shareholding Iran 49.00% 49.00%

2. India LNG Transport Company (No.1) Ltd. Equity Shareholding Malta 29.08% 29.08%



5. SCI Forbes Ltd. Equity Shareholding India 50.00% 50.00%

94

The above figures are based on latest available audited accounts except the figures of SCI Forbes Ltd which

are based on unaudited accounts.

5. EARNINGS PER SHARE:

6. Prior year's adjustments (Net) amounting to Rs. 2268 lakhs (Cr.) [Previous year Rs. 2462 lakhs (Cr.)] includes income

of Rs. 2682 lakhs (Previous Year Rs. 10652 lakhs) and expenses Rs. 414 lakhs (Previous year Rs. 8190 lakhs).

The summary of income is as follows :

As on 31.03.2008 As on 31.03.2007


a) Profit after tax 81390 101458

b) Weighted average number of Equity Shares (Nos) 282302430 282302430

c) Basic & Diluted Earnings per Share (in Rs.) 28.83 35.94

d) Nominal Value per Equity Share (in Rs.) 10.00 10.00

2007-2008 2006-2007


Freight 1698 979

Charter Hire (-) 168 409

Demurrage 662 6131

Recovery of Container Related Costs 176 2256

Remuneration from managed vessels (-) 3 17

Currency Exchange Difference Nil Nil

Insurance 317 451

Interest - others 1 46

Sundry receipts (-) 1 157

Others Nil (-) 3

Service tax Nil 209

TOTAL 2682 10652

The summary of expenses is as follows

2007-2008 2006-2007

(Rs. In lakhs) (Rs. In lakhs)

Stevedoring (-) 192 151

Marine, Light & Canal Dues 602 (-) 15

Brokerage & Commission 349 217

Agency Fees 8 14

Fuel Oil 707 (-) 210

Wages, Bonus & Other Exp. - Floating Staff (-) 3 859

Stores, Repairs & Maintenance (-) 591 1755

Insurance & P&I 30 1

Hire of Chartered Steamer (-) 98 4520

Establishment Expenses 25 (-) 28

Sundry Steamer Charges (-) 1 17

Salaries - shore staff 3 833

Currency Exchange Difference (-) 3 70

Service tax (-) 427 0

Others 5 6

TOTAL 414 8190

ii) Corporation's Interest in the Joint Venture

Name As on Assets Liabilities For the Income Expenditure

(Rs. in (Rs. in period (Rs. in (Rs. in

lakhs) lakhs) ended lakhs) lakhs)

1. Irano Hind Shipping 20-03-07 30409.10 10154.05 20-03-07 10018.71 6534.77

Company Ltd.

2. India LNG Transport 31-12-07 21383.55 23817.17 31-12-07 3038.12 2762.67

Company (No. 1) Ltd.

3. India LNG Transport 31-12-07 22364.57 24779.32 31-12-07 2821.14 3050.28


4. India LNG Transport 31-12-07 10067.84 10603.66 31-12-07 - 45.13


5. SCI Forbes Ltd. 31-03-08 5151.09 5494.96 31-03-08 731.29 1122.04


95

8. India LNG Transport Companies No. 1 & 2 Ltd. are two joint venture companies promoted by the corporation

and three Japanese companies Vis. M/S Mitsui O.S.K.lines Ltd. (MOL), M/S Nippon Yusen Kabushiki Kaisha Ltd

(NYK Lines) and M/S Kawasaki Kisen Kaisha Ltd (K Line) and M/S Qatar Shipping Company( Q Ship), Qatar. SCI

and MOL are the largest shareholders, each holding 29.08% shares while NYK Line, K Line & Q Ship hold the

rest. The Shares held by the Corporation and other partners in the two joint venture Companies have been

pledged against loans provided by lender banks to these companies.

The project is funded by a consortium of lenders which have provided a loan of US $ 282.69 million to the two

joint venture companies. India LNG Transport Company No.1 Ltd owns and operates one LNG tanker SS Disha

and India LNG Transport Company No. 2 Ltd owns and operates one LNG Tanker SS Raahi. Until 31.03.08, both

SS Disha and SS Raahi operated without any off-hires and have carried about 157 cargoes and 120 cargoes of

LNG each from the inception of the two Joint Venture Companies. SS Raahi was dry-docked in March-April 2007

and is back in service.

After the commencement of revenue stream for both the ships in terms of charter-hire, shareholders have

started receiving payment of shareholders loan interest as well as repayment of shareholders loan. The total

amount of shareholders loan and interest on shareholders loan received by the Corporation during the financial

year 2007-08 is US $ 2.23 million & US $ 2.57 million respectively.

As per the provisions of the Time Charter Agreement, transfer of know-how to the Corporation for SS Disha is

in progress and on-board management of SS Disha is completely handed over to the officers of Corporation on

24.10.07. The transfer of know-how for SS Raahi is in progress and the same would be completed by December,

08. Further the Corporation would carry out entire management (shore & on-board) of these two ships with

effect from January, 09.

India LNG Transport Company No. 3 Ltd. is a Joint Venture Company promoted by M/S Mitsui O.S.K. Line Ltd

(MOL), M/S Nippon Yusen Kabushiki Kaisha Ltd (NYK Lines) and M/S Kawasaki Kisen Kaisha Ltd (K Line), SCI,

M/S Qatar Gas Transport Company Ltd. (QGTC) and M/s Petronet LNG Ltd. (PLL) to construct, own and operate

one LNG Tanker of about 155,000 cbm, and is chartered under a long-term Time Charter Agreement for

25 years. The tanker is currently under construction and will be delivered in September 2009. The drawdown

of the loan was achieved on 23.04.07 and SCI was repaid US $ 7.31 million which was extended to the Joint

Venture as shareholders loan & the outstanding Shareholders Loan of SCI which is its equity contribution along

with accrued interest as on 31.03.08 is US$ 17.68 million.

As per the requirements under the Time Charter Agreement and in proportion to its shareholding, SCI assumed

certain obligations towards Joint Venture Companies (India LNG Transport companies No.1, No.2 and No.3)

including providing the Performance Bank Guarantee (PBG) to the charterer totaling to USD 8.339 million, which

has been included under contingent liabilities in Note No. 2(ii) of Schedule 25. However, it is expected that these

obligations may not devolve upon SCI in the normal circumstances on account of highly experienced Japanese

LNG operators who are the partners in the Joint Venture Companies. Corporate Guarantees / undertakings have

also been given in respect of loans taken by Joint Ventures which have been included under Contingent Liabilities

in Note 2(vi) of Schedule 25 and quantification of the same is not ascertainable.

7. Auditors' Remuneration (including service tax):

2007-2008 2006-2007


Audit Fees 24.72 22.45

Certification Work (incl. limited review fees) 20.22 20.35

Travelling & Out of Pocket Expenses 25.51 8.25

USD Rupees USD Rupees USD Rupees

Contribution 6,421 3,11,665 6,421 3,11,665 2,600 1,25,197

towards

equity

Contribution 1,24,43,621 49,54,42,760 1,24,71,746 49,65,62,573 1,54,52,060 61,52,23,769

towards

Shareholdar’s

loan

Details of contribution to joint ventures

NAME OF INDIA LNG TRANSPORT INDIA LNG TRANSPORT INDIA LNG TRANSPORT

THE COMPANY CO. NO. 1 LTD. CO. NO. 2 LTD. CO. NO. 3 LTD.

96

Particulars Amount ( Rs. In Lakhs )

Principal amount due to suppliers under 152

MSMED Act, 2006

Interest accrued and due to suppliers under NIL

MSMED Act, on the above amount

Payment made to suppliers (other than interest) NIL

beyond the appointed day, during the year

Interest paid to suppliers under MSMED Act, (Other than Section 16) NIL

Interest paid to suppliers under MSMED Act, (Section 16) NIL

Interest due and payable to suppliers under MSMED Act, NIL

for payments already made

Interest accrued and remaining unpaid at the end of the year NIL

to suppliers under MSMED Act.

The information has been given in respect of such vendors to the extent they could be identified as "Micro, Small

and Medium" enterprises on the basis of information available with the company.

9. Sethusamudram Corporation Ltd. (SCL), a Special Purpose Vehicle was incorporated on 06.12.2004 at Chennai

(for developing the Sethusamudram Channel Project) with M/s Tuticorin Port Trust, Ennore Port Ltd. Co., M/s

Visakhapatnam Port Trust, M/s Chennai Port Trust, Dredging Corporation of India Ltd., Shipping Corporation of

India Ltd. and M/s Paradip Port Trust as the shareholders. SCI participated for an investment not exceeding

Rs.5000 lakhs in the proposed project. SCI made its initial contribution of Rs.100 lakhs in the year 2004-05.

Further contributions were made as under (i) Rs.750 lakhs in 2005-06 (ii) Rs. 1500 lakhs in 2006-07 (iii) Rs. 1700

lakhs during 2007-08. The SCI's total contribution as on 31.03.2008 amounted to Rs.4050 lakhs (Previous year

Rs.2350 lakhs)

10. SCI Forbes Ltd, a Joint Venture Company (JVC) promoted by The Shipping Corporation of India Ltd (SCI),

Forbes Gokak Ltd. & Sterling Investment Pvt. Ltd was incorporated in July 2006 with an objective of owning and

operating chemical tankers. It has placed orders for four chemical tankers, delivery of which are awaited. During

the Financial year 2007 - 08, SCI Forbes started its commercial operations by way of in-chartering one chemical

tanker of 13000 dwt.

11. The company has amounts due to suppliers under The Micro, Small and Medium Enterprise Development Act,

2006, (MSMED Act) as at 31-3-2008. The disclosure pursuant to the said Act is as under :


97

12. SEGMENT REPORTING

Rs. in Lakhs

Sr. Particulars 2007-08 2006-07

1 Segment Revenue

i) Liner Segment 84736 73131

ii) Bulk Segment 288986 311155

iii) Others 11746 13834

iv) Unallocated Revenue 200 947

Total 385668 399067

2 Segment Results

Profit/(Loss) before tax & interest

i) Liner Segment (-) 9459 (-) 651

ii) Bulk Segment 82230 89323

iii) Others 1370 7624

Total 74141 96296

Less : Unallocated Expenditure (Net of income) 352 (-) 751

Add : Interest ( Net ) 16605 13956

Total Profit before tax 90394 111003

Segment Assets

Liner Segment 63236 42751

Bulk Segment 456960 380132

Others 23879 19513

Total 544075 442396

Unallocable Corporate Assets 268118 309015

Total 812193 751411

Segment Liabilities



Others 19946 17101

Total 85612 87081

Unallocable Corporate Liabilities 163372 154357

Total 248984 241438

Capital Expenditure during the year

Liner Segment 12 34


Others 2294 85

Total 3213 613

Depreciation



Others 2304 103

Total 30318 30308

98

Notes :-

1) Segment definitions - Liner segment includes break bulk and container transport. Bulk segment includes

tankers (both crude and product), dry bulk carriers, gas carriers and phosphoric acid carriers. Others include

offshore vessels, passenger vessels and services and ships managed on behalf of other organisations.

Unallocable items and interest income / expenses are disclosed separately.

2) All assets/liabilities and revenue items are allocated vessel wise wherever possible. Assets/liabilities and

revenue items that cannot be allocated vessel wise are allocated on the basis of unit cum GRT method i.e.

50% allocated on the basis of units and balance 50% on the basis of adjusted GRT. GRT is adjusted to one

third of GRT or 20000 GRT, whichever is more in case of vessels which are bigger than 20000 GRT.

3) The components of capital employed that cannot be directly identified are allocated on the basis of GRT

method.

13. The Corporation has with effect from 1st April 2007 changed the following accounting policies:

(a) The depreciation on additions made to ships which have completed their useful life involving structural

changes, resulting in extension of useful life based on technical evaluation of such ships, is now being

charged over the extended remaining useful life, which till previous year was being fully depreciated in the

year of addition itself. Pursuant to this change, depreciation for the year is lower by Rs. 1227 lakhs and

profit for the year is higher by the same amount.

(b) In view of notification issued by Ministry of Corporate Affairs dated 7th December, 2006 prescribing the

Companies (Accounting Standards) Rules 2006, the corporation has, with effect from 1st April, 2007,

changed the accounting policy relating to recognition of foreign exchange fluctuation on repayment and

conversion of liabilities pertaining to long term loans for fixed assets acquired from a country outside

India, arising out of transactions entered into on or after 1st April, 2004. Such foreign exchange fluctuation

(loss/gain) is now being charged / credited to the Profit and Loss Account, except to the extent they are

regarded as an adjustment to the interest cost during the period of construction, which till previous year

was adjusted to carrying value of respective assets. Pursuant to this change, foreign exchange variation

gain for the financial year amounting to Rs.4285 lakhs has been credited to Profit and Loss Account.

Further, due to the said change, depreciation and profit for the year are higher by Rs.176 lakhs and

Rs. 4109 lakhs respectively.

(c) In accordance with Accounting Standard 26 "Intangible Assets", the depreciation on computer software is

now being charged over the useful life not exceeding five years, which till previous year was being charged

on Written Down Value Method at the rates prescribed in 'Schedule XIV' applicable to computer hardware.

Pursuant to this change, the depreciation for the year is higher by Rs. 27.19 lakhs and Profit for the year

is lower by the same.

14. Disclosures of Employee benefits as per Accounting standard-15 "Employees benefits", as defined there in

are given below

A) Description of type of employee benefits

The Company offers to its employees defined benefits plans in the form of Gratuity, leave encashment and

post retirement Medical Scheme

The details under the plan are as follows:

i. Gratuity Represents benefits to employee on the basis of number

of years of service rendered by employee. The employee

is entitled to receive the same on retirement or resignation.

SCI has formed a trust for gratuity which is funded by the

Company on a regular basis. The assets of the trust have

been considered as plan assets.

ii. Leave Encashment Represents unavailed leave to the credit of the employee

and carried forward in accordance with terms of agreement

iii. Post Retirement Medical Benefit Scheme Represents benefits given to employees subsequent to

retirement on the happening of any unforeseen event

resulting in medical costs to the employee


99

Rs. in lakhsB) Movement in the net liability recognised in the balance sheet are as follows:

C) Analysis of Percentage of defined Benefit obligation into funded and unfunded

2007-08 2006-07

Total Amount of defined benefit obligation 19417 19410

Amount of funded Defined benefit obligation 13507 14492

Percentage of funded defined benefit obligation 69.56% 74.66%

Percentage of defined benefit obligation not funded 30.44% 25.34%

Gratuity Leave Encashment Post Retirement

Medical Benefit Scheme

2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Status Funded Funded Unfunded Unfunded Unfunded Unfunded

At the beginning of the year 14493 15937 3402 955 1517 1354

Current service cost 1002 1169 416 184 125 105

Interest Cost 1136 1053 289 121 136 104

Actuarial gains and losses

(including for prior years) (1677) (2875) 320 2704 295 42

Benefits Paid (1446) (792) (499) (562) (91) (89)

At the end of the year 13508 14492 3928 3402 1982 1516



2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Opening value of fair17229 17219 NIL NIL NIL NIL

value of plan assets

Expected Return on plan assets 1372 1376 NIL NIL NIL NIL

Benefits Paid (1446) (792) NIL NIL NIL NIL

Actuarial gain/(loss) 135 (574) NIL NIL NIL NIL

on plan assets

Closing value of17290 17229 NIL NIL NIL NIL

fair value of plan assets

D) Movement in Fair value of plan assets during the year



2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Present value of obligations13507 14492 3928 3402 1982 1516

at the end of the year

Less: Fair value of assets as17291 17229 NIL NIL NIL NIL

the balance sheet date

Net Liability/(Asset) disclosed(3784) (2737) 3928 3402 1982 1516

in the balance sheet

E) Reconciliation of the present value of defined obligation and fair value to the assets and liabilities recognised in the

balance sheet

Rs. in lakhs

Rs. in lakhs

100

L) Contribution expected to be paid in the next year NIL

M) Effect of an increase of one percentage point and the effect of a decrease of one percentage point in the

assumed medical cost trend rates on:

(i) the aggregate of the current service cost and interest cost components of net periodic post-employment

medical costs; and (ii) the accumulated post-employment benefit obligation for medical costs.

Rs. in lakhsF) Total Expense recognised in the profit and loss account

* For gratuity, the benefits are paid by the trust and are not debited to the profit and loss of the Company..

G) Percentage of category of plan assets to fair value of plan assets

2007-08 2006-07

Particulars Fair Value % of Total Fair Value % of Total

Investment in Government securities 5109 29.55% 4949 28.72%

Investment in Bonds 2773 16.04% 2929 17.00%

Investment in deposits 8888 51.40% 8854 51.39%

including bank balances

Other Assets including 520 3.01% 497 2.89%

accrued interest

Total 17290 17229

H) None of the financial assets of SCI have been considered in the fair value of plan assets.

I) The expected rate of return on plan assets have been estimated on the basis of actual returns of the trust in

the past years. The assets of the trust are in the nature of investments in securities, fixed deposits, Interest

accrued, and balances in current accounts with Bank. The securities of trust have an effect on the fair value

of plan assets as the value of the securities vary with the changes in the market interest rates.

J) Actual return on plan assets: Rs. 1507 Lakhs (Previous Year Rs. 802 lakhs)

K) Principal actuarial assumptions at the balance sheet date:



2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Current Service Cost 1002 1169 416 184 125 105

Interest Cost 1136 1053 289 121 136 104

Expected return on plan assets (1372) (1376) NIL NIL NIL NIL

Actuarial gains and losses (1677) (2875) 320 2704 295 42

Past Service Cost NIL NIL NIL NIL NIL NIL

Losses (gains) on NIL NIL NIL NIL NIL NIL

curtailments and settlements

Benefits Paid* NIL NIL (499) (562) (91) (89)

Actuarial gains/loss (135) 574 NIL NIL NIL NIL

on plan assets

Total charged to profit and loss (1046) (1455) 526 2447 465 162



2007-08 2006-07 2007-08 2006-07 2007-08 2006-07

Discount rate at 31 March 8.09% 8.13% 8.09% 8.13% 8.09% 8.13%

Expected return on plan 8.00% 8.00% NIL NIL NIL NIL

assets at 31 March

Future salary increases 7.50% 7.50% 6.00% 5.00% NA NA

Moratlity Rate LIC 1994-96 LIC 1994-96 LIC 1994-96 LIC 1994-96 LIC 1994-96 LIC 1994-96

Medical cost 16% 16%

incremental trend rates

Normal Retirement Age 60 Years 60 Years 60 Years 60 Years 60 Years 60 Years

Rs. in lakhs


101

N) The estimates of future salary increases, considered in the actuarial valuation, takes into account inflation,

security, promotion and other relevant factors.

O) The Guidance on implementing AS 15, Employee benefits (revised 2005) issued by Accounting Standard

Board (ASB) states benefit involving employer established provident funds, which requires interest shortfalls

to be recompensed are to be considered as defined benefit plans. Pending the issuance of the guidance

note from the Actuarial Society of India, the Company's actuary has expressed an inability to reliably

measure provident fund liabilities. Accordingly the company is unable to exhibit the related information.

However, such interest shortfall has been recompensed by the company upto the current period on

accrual basis.

15. Sundry Creditors, Debtors, Loans & Advances and Deposits are subject to confirmation and reconciliation.

During the year, letters for confirmation of balances have been sent to various parties by the Corporation and

same are under reconciliation wherever replies have been received. The management, however, does not

expect any material changes.

16. Consequent to an award of the Tribunal constituted under Section 150 (1) of the Merchant Shipping Act 1958,

a sum of Rs.1454.78 lakhs is payable to catering staff on board OSV, as arrears of wages with retrospective

effect from 17th April 2000, out of which a sum of Rs 1145.70 lakhs has been disbursed by the corporation

upto 31.03.2008.As these catering staff are not the employees of the corporation, based on the legal opinion

obtained, the corporation is of the view that liabilities towards arrears arising out of the aforesaid award is that

of the contractor in terms of the contract between the corporation and the contractor. Consequently, any

liability towards the award of the tribunal would be that of the contractor and not of the corporation and hence

no provision has been considered necessary.

17. The Company had paid Service Tax on operation and maintenance of vessels for ONGC relating to financial

year 2005-06 amounting to Rs. 1641 lakhs. As per ONGC's request the company preferred refund claim which

has been rejected by the Asst. Commissioner/Commissioner of Service Tax (Appeals). Reimbursement preferred

by the Company on ONGC has been disputed. As per the contractual agreement ONGC is liable to pay to

SCI actual expenses incurred by it on behalf of ONGC, including service tax, etc. as applicable and accordingly,

the amount is recoverable from ONGC. The company has gone for arbitration as stipulated in the contract and

also as per request of ONGC filed appeal with ITAT for review of the order of Commissioner (Appeal). Hence,

no provision has been considered necessary.

18. As per the provisions of the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) (New York), an

employer who withdraws, from the Multiemployer Pension Plan is required to continue funding its proportionate

share of plans unfunded vested benefits. During the year, the company has withdrawn from India/US East

Coast Service (IDX Service). However, no provision has been made in respect of such liability, as the

management is of the opinion that in view of efforts being made to recommence US container service for

strategic reasons in due course, no liability is expected on this account.

19. Borrowing cost and Interest capitalised during the year is Rs. 5248 lakhs (Previous year Rs.1182 lakhs).

20. (i) The Corporation has obtained exemption from complying with Para 4 (D) (a), (b), (c) & (e) of Part II of

Schedule VI to the Companies Act,1956.

(ii) Remittance of dividends in foreign currency Rs.NIL (Previous year Rs. Nil).

21. Sales proceeds received by the Corporation in excess of the original cost in respect of fixed assets sold during

the year amounting to Rs. 282 lakhs (net of tax) (previous year Rs.2227 lakhs) has been appropriated out of

profit and transferred to Capital Reserve.

22. Loans and Advances include an amount of Rs. 6.48 lakhs (Previous year Rs 6 lakhs) due from whole time

directors - maximum amount due during the year Rs. 6.48 lakhs (Previous year Rs.5.80 lakhs)

23. During the year the Corporation had undertaken an exercise for reviewing old outstanding balances of Sundry

Creditors and provisions. Based on the review, the Corporation has written back sundry credit balances of

Rs.2588 lakhs (Previous year balances Rs.5956 lakhs) and excess provision of Rs.3188 lakhs (Previous year

balances Rs. 9863 lakhs).

24. The figures of previous year have been regrouped or rearranged wherever necessary/practicable to conform

to current year's presentation. Further the figures are rounded off to the nearest lakh rupees.

Post Retirement Medical Benefit Scheme

Aggregate of the current Accumulated post-employment

service cost and interest cost benefit obligation for medical costs.

2007-08 2006-07 2007-08 2006-07

Effect of one percentage up 7 22 165 126

Effect of one percentage down (7) (19) (151) (115)

Rs. in lakhs

102

ADDITIONAL INFORMATION UNDER PART IV OF SCHEDULE VI OF THE

COMPANIES ACT, 1956.

I. Registration Details

State Code 1 1 Registration No. 8 0 3 3

Balance Sheet Date 3 1 0 3 2 0 0 8

Day Month Year

II. Capital Raised During The Year (Amount in Rs.Lakhs)

Public Issue Right Issue

N I L N I L

Bonus Issue Private Placement

N I L N I L

III. Position of Mobilisation and Deployment of Funds (Amount in Rs.Lakhs)

Total Liabilities Total Assets

8 1 2 1 9 3 8 1 2 1 9 3

Sources of Funds

Share Capital Reserves & Surplus

2 8 2 3 0 5 3 4 9 8 0

Secured Loans Unsecured Loans

1 4 5 4 2 0 N I L

Application of Funds

Net Fixed Assets Investments

4 6 9 7 1 2 4 1 4 6

Net Current Assets Misc. Expenditure

2 3 4 7 7 2 N I L

Accumulated Losses

N I L

IV. Performance of the Company (Amount in Rs.Lakhs)

Turnover Total Expenditure

4 0 8 4 3 6 3 1 8 0 4 2

Profit/(Loss) Before Tax Profit/(Loss) After Tax

9 0 3 9 4 8 1 3 9 0

Earnings Per Share Rs. Dividend Rate %

2 8 . 8 3 8 5

V. Generic Names of the Three Principal Services of the Company

Item Code No. N I L

Product Description N I L

Note: This is a SHIPPING Company.

As per our report of even date For and on behalf of the Board of Directors,

For For S BHANDARI & CO., For KHANDELWAL JAIN & CO.,



Partner Partner

Membership No.11332 Membership No.48725

Mumbai, Dated the 11th June, 2008. Mumbai, Dated the 11th June, 2008.

Dipankar Haldar B. K. MANDAL S. HAJARA

SVP (LA) & Director (Finance) Chairman &

Co. Secy. Managing Director


103

CASH FLOW STATEMENT

2007-2008 2006-07

Rs. in Lakhs Rs. in Lakhs

(A) Cash Flow from Operating Activities

Net profit before Tax & extraordinary items 90,394 111,003

ADJUSTMENTS FOR

Depreciation 30,318 30,308

Interest Income (22,768) (21,969)

Interest Paid 6,163 8,013

Dividend Received (193) (933)

Surplus on sale of Fixed Assets (other than ships) (349) (5)

Surplus on sale of Ships 0 (8,749)

Deferred Revenue Expenditure writtenoff 0 465

13,171 7,130

Operating profit before working capital changes (i) 103,565 118,133

Adjustments for : Increase in working capital

(a) Trade & other receivables (428) (9,378)

(b) Inventories (1,622) (360)

(c) Trade payables (2,072) (2,626)

(4,122) (12,364)

Cash generated from operations (ii) 99,443 105,769

Tax paid (Net of Refunds) (10,216) (11,515)

Net Cash From Operating Activities (A) 89,227 94,254

(B) Cash Flow from Investing Activities

Purchase / Acquisition of Fixed Assets (127,677) (53,142)

Sale of Fixed Assets 366 8,897

Income from Investments 1,990 2,986

Sale / Purchase of Investments (1,746) (1,504)

Advances to Joint Venture Companies 4,149 (9,244)

Net Cash used in investing activities (B) (122,918) (52,007)

C) Cash Flow from Financing Activities

Loans Borrowed (Net of Repayments) 20,949 (12,969)

Dividends Paid (Incl. Dividend Tax) (38,836) (3,381)

Interest received 20,971 19,916

Interest charges (6,163) (8,013)

Staff Welfare Activities (79) (64)

Net Cash Flow from financing activities (C) (3,158) (4,511)

NET INCREASE/(DECREASE) IN CASH & CASH EQUIVALENTS (A+B+C) (36,849) 37,736

Cash & cash equivalents at the beginning of the year 262,469 224,733

Cash & cash equivalents at the end of the year 225,620 262,469







Mumbai, Mumbai,

Dated the 11 th June, 2008 Dated the 11 th June, 2008

104

GLOSSARY

Aframax A Tanker measuring between 80,000-1,20,000 MT in DWT terms and primarily

used for the carriage of crude oil

APM Administered Price Mechanism

bbl barrel

BDI Baltic Dry Index

BHMI Baltic Handymax Index

Bpd Barrels per day

CSL Cochin Shipyard Ltd.

DWT Dead Weight Ton

DSME Daewoo Shipbuilding & Marine Engineering Co. Ltd.

FOB Free on Board

GRT Gross Registered Tonnage

Handymax A bulk carrier vessel of 35,000 to 55,000 DWT

Handysize A bulk carier vessel of 10,000 to 35,000 DWT

HHI Hyundai Heavy Industries Ltd.

ISM International Safety Management

JVC Joint Venture Company

K-Line Kawasaki Kisen Kaisha Ltd.

MOL Mitsui O.S.K. Lines Ltd.

MTI Maritime Training Institute

NSICT Nhava Sheva International Container Terminal

NYK Nippon Yusen Kabushiki Kaisha

ODC Over Dimensional Cargoes

OSV Offshore Supply Vessels

Panamax A vessel of 55,000 to 80,000 DWT whose dimensions enable her to pass through

the Panama Canal

SBM Single Buoy Mooring

SCP Special Component Plan

TMEs Trainee Marine Engineers

TNOCs Trainee Navigating Officer Cadets

ULCC Ultra Large Crude Carrier (320,000 dwt and above)

VLCC Very Large Crude Carrier (200,000 to 319,000 DWT)

WAG West Asia Gulf


e announce with immense pleasure the

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