Notes to Standalone Financial Statements

for the year ended March 31, 2016

Note 1 : Corporate Information

The Great Eastern Shipping Company Ltd. (the Company) is a public limited company registered in India under the provisions of the Companies Act, 1913. Its shares are listed at Bombay Stock Exchange and National Stock Exchange in India and at the Luxembourg Stock Exchange. The Company is a major player in the Indian Shipping industry.

Note 2 : Significant Accounting Policies

(a) Basis of Preparation :

These financial statements have been brpared in accordance with the generally accepted accounting principles in India under the historical cost convention on accrual basis to comply in all material aspects with Accounting Standards specified under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014 and the provisions of the Companies Act, 2013.

All assets and liabilities have been classified as Current and Non-Current as per the Company's normal operating cycle and other criteria set out in Schedule III to the Companies Act, 2013. Based on the nature of services rendered and the time between the rendering of the services and their realisation in cash and cash equivalent, the Company has ascertained its operating cycle as twelve months for the purpose of Current and Non-Current classification of assets and liabilities.

(b) Use of Estimates :

The brparation of financial statements in conformity with generally accepted accounting principles requires the management to make estimates and assumptions that affect the reported balances of assets and liabilities as of the date of the financial statements and reported amounts of income and expenses during the period. Management believes that the estimates used in the brparation of financial statements are prudent and reasonable. Actual result could differ from the estimates.

(c) Tangible Fixed Assets :

Tangible fixed assets are stated at cost less accumulated debrciation and impairment, if any. Cost includes expenses related to acquisition and installation of the concerned assets, borrowing costs during construction period and excludes any duties/taxes recoverable and capital subsidy/grant received. Subsequent expenditure related to an item of fixed assets is added to its book value only if it increases the future benefits from the existing asset beyond its brviously assessed standard of performance. All other expenses on maintaining fixed assets, including day to day repair and maintenance expenditure and cost of replacing parts, are charged to the Statement of Profit and Loss for the period during which such expenses are incurred. Exchange differences on repayment and year end translation of foreign currency liabilities and fair value gains or losses on qualifying cash flow hedges, that are transferred from Hedging Reserve relating to acquisition of debrciable capital assets are adjusted to the carrying cost of the assets.

(d) Intangible Fixed Assets :

Intangible fixed assets are stated at acquisition cost less accumulated amortisation and accumulated impairment losses, if any. Intangible assets are amortised on a straight line basis over the estimated useful lives.

(e) Investments :

(i) Investments are classified into Current and Non-Current Investments.

(ii) Investments intended to be held for a period less than twelve months or those maturing within twelve months from the Balance Sheet date are classified as 'Current Investments'. Investments which are classified as Current investments are stated at lower of cost and net realisable value and the resultant decline, if any, is charged to the Statement of Profit and Loss.

(iii) Investments other than Current Investments are classified as 'Non-Current Investments'. Non-Current Investments are carried at cost. Provision for diminution, if any, in the value of each Non-Current Investment is made to recognise a decline, other than of a temporary nature.

(f) Inventories :

Inventories of fuel oil are carried at lower of cost and net realisable value. Cost is ascertained on first-in-first out basis. The cost includes all costs of purchase and other costs incurred in bringing the inventories to their brsent location and condition.

(g) Incomplete Voyages :

Incomplete voyages rebrsent freight received and direct operating expenses in respect of voyages which were not complete as at the Balance Sheet date. The freight received for incomplete voyages is shown under 'Income Received in Advance' and the direct operating expenses incurred for incomplete voyages are shown under 'Other Advances'

(h) Borrowing Costs :

Borrowing costs include interest and ancillary cost incurred in connection with the arrangement of borrowings. Borrowing costs that are directly attributable to the acquisition/construction of the qualifying assets are capitalised as part of the cost of the asset, upto the date of acquisition/completion of construction. Other borrowing costs are recognised in the period in which they occur except for transaction costs which are amortised over the period of the loan.

(i) Revenue Recognition :

Income from services : Freight and demurrage earnings are recognised on completed voyage basis. Charter hire earnings are accrued on time basis except where the charter party agreements have not been renewed/finalised, in which case it is recognised on provisional basis.

Interest : Interest income is recognised on a time proportion basis taking into account the amount outstanding and the applicable interest rate.

Dividends : Dividend income is recognised when the Company's right to receive dividend is established by the Balance Sheet date.

(j) Operating Expenses :

(i) Fleet direct operating expenses are charged to the Statement of Profit and Loss on completed voyage basis.

(ii) Stores and spares delivered on board the ships are charged to the Statement of Profit and Loss.

(iii) Expenses on account of general average claims/damages to ships are written off in the year in which they are incurred. Claims against the underwriters are accounted for on acceptance of average adjustment by the adjustors.

(iv) Bunker consumption cost, which is part of direct operating expenses, is charged to the Statement of Profit and Loss on completed voyage basis. In case, the vessel is not fixed for next voyage as on the period-end date, the consumption cost is charged to the Statement of Profit and Loss as period cost from the date of brvious voyage till the period-end date. If the vessel is fixed for next voyage by the period-end date, the bunker consumption cost for the period from the date of brvious voyage till the period-end date is carried forward as incomplete voyage expense as per the accounting policy on "Incomplete Voyages"

(v) Dry-dock expenditure is recognised in the Statement of Profit and Loss to the extent of material supplied and services rendered in case of non yard expenses. Yard material and service expenses are recognised in the Statement of Profit and Loss on completion of Dry-dock.

(k) Employee Benefits :

(i) Short-Term Employee Benefits :

All employee benefits payable wholly within twelve months of rendering the service are classified as short-term employee benefits. Benefits such as salaries, performance incentives, etc., are recognised as an expense at the undiscounted amount in the Statement of Profit and Loss of the year in which the employee renders the related service.

(ii) Post Employment Benefits :

Liability is provided for retirement benefits of Provident Fund, Superannuation, Gratuity and Leave Encashment in respect of all eligible employees and for pension benefit to Whole-time Directors of the Company.

a) Defined Contribution Plan

Employee benefits in the form of Superannuation Fund, Provident Fund and other Seamen's Welfare Contributions are considered as defined contribution plans and the contributions are charged to the Statement of Profit and Loss of the period when the contributions to the respective funds are due.

b) Defined Benefit Plan

Retirement benefits in the form of Gratuity and the Pension plan for Whole-time Directors are considered as defined benefit obligations and are provided for on the basis of actuarial valuations, using the projected unit credit method, as at the date of the Balance Sheet.

c) Other Long-Term Benefits

Long-term compensated absences are provided for on the basis of an actuarial valuation, using the projected unit credit method, as at the date of the Balance Sheet.

Actuarial gain/loss, comprising of experience adjustments and the effects of changes in actuarial assumptions is immediately recognised in the Statement of Profit and Loss.

(l) Debrciation on Fixed Assets :

(i) Debrciation is provided on Straight Line Method basis so as to write off the original cost of the asset less its estimated residual value over the estimated useful life. The estimated useful life of the assets are as under :

Asset Type - Estimated Useful Life

Tangible Assets :

Fleet

-Crude Oil and Product Tankers 20 years

-Dry Bulk Carriers * 23 years

-Gas Carriers 30 years

-Speed Boats 13 years

Leasehold Land Lease period

Ownership Flats and Buildings 60 years

Furniture & Fixtures, Office Equipment, etc.* 5 years

Computers

-Servers and Networks 6 years

-End User Devices 3 years

Vehicles * 4 years

Mobiles * 2 years

Plant and Equipment * 10 years

Intangible Assets :

Software 5 years

(ii) Estimated useful life of the Fleet and Ownership Flats and Buildings is considered from the year of build. Estimated useful life in case of all other assets is considered from the date of acquisition by the Company.

(iii) Residual value in case of Fleet is estimated at an amount equal to product of long tonnes and estimated scrap value per long tonne based on brvious twenty years moving average (as compared to brvious ten years moving average estimated in the brvious year) of scrap rates. In case of other assets the residual value, being negligible has been considered as Nil.

(iv) * For these class of assets, based on internal technical assessment and past experience, the management believes that the useful lives as given above, best rebrsent the period over which the management expects the use of the assets. Hence, the useful lives for these assets are different from the useful lives as brscribed under Part C of Schedule II of the Companies Act, 2013.

(m) Asset Impairment :

The carrying amounts of the Company's tangible and intangible assets are reviewed at each Balance Sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amounts are estimated in order to determine the extent of impairment loss, if any. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The impairment loss, if any, is recognised in the Statement of Profit and Loss in the period in which impairment takes place. Recoverable amount is higher of an asset's net selling price and its value in use. Value in use is the brsent value of estimated future cash flows expected to arise from the continuing use of an asset and from its disposal at the end of its useful life.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, however subject to the increased carrying amount not exceeding the carrying amount that would have been determined (net of amortisation or debrciation) had no impairment loss been recognised for the asset in prior accounting periods.

(n) Foreign Exchange Transactions :

(i) Transactions in foreign currency are recorded at standard exchange rates determined monthly. Non monetary items, which are measured in terms of historical costs denominated in a foreign currency are reported using the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currency, remaining unsettled at the year end are translated at closing rates. The difference in translation of long term monetary assets and liabilities and realised gains and losses on foreign currency transactions relating to acquisition of debrciable capital assets are added to or deducted from the cost of the asset and debrciated over the balance life of the asset and in other cases accumulated in a Foreign Currency Monetary Item Translation Difference Account and amortised over the balance period of such long term asset/liability, but not beyond March 31, 2020, by recognition as income or expense. The difference in translation of all other monetary assets and liabilities and realised gains and losses on other foreign currency transactions are recognised in the Statement of Profit and Loss.

(ii) Forward exchange contracts other than those entered into to hedge foreign currency risk of firm commitments or highly probable forecast transactions are translated at period end exchange rates and the resultant gains and losses as well as the gains and losses on cancellation of such contracts are recognised in the Statement of Profit and Loss, except in case of contracts relating to the acquisition of debrciable capital assets, in which case they are added or deducted from the cost of the assets. Premium or discount on such forward exchange contracts is amortised as income or expense over the life of the contract.

(iii) Currency swaps which form an integral part of the loans are translated at closing rates and the resultant gains and losses are dealt with in the same manner as the translation differences of long term monetary assets and liabilities.

(o) Derivative Financial Instruments and Hedging :

The Company enters into derivative financial instruments to hedge foreign currency risk of firm commitments and highly probable forecast transactions, interest rate risk and bunker price risk. The method of recognising the resultant gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The carrying amount of a derivative designated as a hedge is marked to market. The Company does not enter into any derivatives for trading purposes.

Cash Flow Hedge :

Commodity future contracts, forward exchange contracts entered into to hedge foreign currency risk of firm commitments or highly probable forecast transactions, forward rate options, interest rate swaps and currency swaps which do not form an integral part of the loans, that qualify as cash flow hedges, are recorded in accordance with the principles of hedge accounting enunciated in Accounting Standard (AS) 30, 'Financial Instruments : Recognition and Measurement.' The gains or losses on designated hedging instruments that qualify as effective hedges are recorded in the Hedging Reserve and are recognised in the Statement of Profit and Loss in the same period or periods during which the hedged transaction affects the Statement of Profit and Loss or is transferred to the cost of the hedged non-monetary asset upon acquisition. Gains or losses on the ineffective hedged transactions are immediately recognised in the Statement of Profit and Loss. When a forecasted transaction is no longer expected to occur, the gains or losses that were brviously recognised in the Hedging Reserve are transferred to the Statement of Profit and Loss immediately.

Fair Value Hedge :

Foreign exchange forward and option contracts outstanding at the Balance Sheet date, other than designated cash flow hedges, are stated at fair values and any gains or losses are recognised in the Statement of Profit and Loss.

(p) Taxation :

Tax expense comprises both current and deferred tax.

(i) Provision for current income-tax is made on the basis of the assessable income under the Income-tax Act, 1961. Pursuant to the introduction of Section 115VA under the Income-tax Act, 1961, the Company has opted for computation of its income from shipping activities under the Tonnage Tax Scheme. Thus, income from the business of operating ships is assessed on the basis of the deemed Tonnage Income of the Company and no deferred tax is applicable to such income as there are no timing differences. The timing difference in respect of the non-tonnage activities of the Company are not material, in view of which provision for deferred taxation is not considered necessary.

(ii) Deferred income-tax is recognised on timing differences, between taxable income and accounting income which originate in one period and are capable of reversal in one or more subsequent periods only in respect of the non-tonnage activities of the Company. The tax effect is calculated on the accumulated timing differences at the year end based on tax rates and laws, enacted or substantially enacted as of the Balance Sheet date.

Minimum Alternate Tax (MAT) credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income-tax during the specified period.

(q) Provisions and Contingent Liabilities :

Provisions are recognised in the accounts in respect of brsent probable obligations, the amount of which can be reliably estimated.

Contingent Liabilities are disclosed in respect of possible obligations that arise from past events but their existence is confirmed by the occurrence or non occurrence of one or more uncertain future events not wholly within the control of the Company.

(r) Earnings per share :

Basic Earnings per share is calculated by dividing the net profit or loss for the period attributable to the equity shareholders by the weighted average number of equity shares outstanding during the period. The weighted average number of equity shares outstanding during the period is adjusted for events, such as bonus issue, bonus element in a rights issue and shares split that have changed the number of equity shares outstanding, without a corresponding change in resources. For the purpose of calculating Diluted Earnings per share, the net profit or loss for the period attributable to the equity shareholders and the weighted average number of shares outstanding during the period is adjusted for the effects of all dilutive potential equity shares.

Note 3 : Segment information

The Company is considered to be a single segment company engaged in shipping business. Consequently, the Company has in its primary segment only one reportable business segment. As per Accounting Standard (AS) 17, 'Segment Reporting' if a single financial report contains both consolidated financial statements and the separate financial statements of the parent, segment information needs to be brsented only on the basis of the consolidated financial statements. Accordingly, information required to be brsented under Accounting Standard (AS) 17, 'Segment Reporting' has been given in the consolidated financial statements.

Note 4 : Capital and Other Commitment

Estimated amount of contracts, net of advances paid thereon amounting to Rs. 134.19 crores (Previous Year Rs. 214.46 crores), remaining to be executed on capital account and not provided for Rs. 480.32 crores (Previous Year Rs. 911.09 crores).

Note 5 : Particulars of loans, guarantees and investments covered under Section 186 of the Companies Act, 2013.

(a) No loans or guarantees have been given to subsidiaries during the year.

(b) The particulars of the Company's investments in wholly owned subsidiaries are disclosed in Note 10.

Note 6 : Corporate Social Responsibility (CSR)

As part of its Corporate Social Responsibility, the Company has set up the Great Eastern CSR Foundation to which the Company has contributed Rs. 2.99 crores (Previous Year Rs. 2.27 crores) during the financial year, included in Miscellaneous Expenses (Refer Note 20).

Note 7 : General

Previous year's figures have been regrouped/restated wherever necessary to conform to current year's classification.

For and on behalf of the Board

K. M. Sheth Chairman

G. Shivakumar Executive Director & CFO

Bharat K. Sheth Deputy Chairman & Managing Director

Jayesh M.Trivedi Company Secretary

Cyrus Guzder Director