GREAT OFFSHORE LIMITED
ANNUAL REPORT 2007-2008
DIRECTOR'S REPORT
TO THE MEMBERS OFGREAT OFFSHORE LIMITED
The Directors hereby present the Third Annual Report on the business and operations of the Company together with the Audited Financial Accounts of the Company for the Financial Year ended March 31, 2008.
(Rs. in lakhs)Particulars 2007-08 2006-07
Total Income 75031 54465
Total Expenditure 52996 38187
Profit before tax 22035 16278
Less/Add: Provision for Tax :
I. Current 2009 2409
II. Deferred (345) (334)
III. Fringe Benefit Tax 50 61
Profit for the year after tax 20321 14142
Less: Transfer to Tonnage Tax Reserve Account under
Section 115VT of the Income Tax Act, 1961 4000 2000
Add: Surplus brought forward from previous year 12176 6011
Amount available for appropriation 28497 18153
Appropriations
Transfer to Foreign Currency Fluctuation Reserve 1000 -
Transfer to General Reserve 2500 2500
Interim Dividend on Equity Shares 3049 3049
Proposed Final Dividendson Preference Shares 848
on Equity Shares 3049
Tax on Dividends 1183 428
Balance Carried Forward 16868 12176
During the Financial Year 2007-08, the Company recorded a total income of Rs.75,031 lakhs and earned a Profit Before Interest Depreciation and Tax of Rs.38,439 lakhs.
Dividend on Preference Shares
Your Directors are pleased to recommend a pro-rata dividend of 5.66% on Optionally Convertible Redeemable Preference Shares (OCRPS) for the financial year 2007-08 as per the terms of offer.
The pro-rata dividend on the OCRPS amounts to Rs. 992.54 lakhs (including tax thereof).
Dividend on Equity Shares
During the year, your Directors declared and paid an interim dividend of Rs. 8/- per equity share resulting in an outflow of Rs.3,567 lakhs (including tax thereof).
The Board of Directors are pleased to recommend a final dividend of Rs. 8/- per equity share for the financial year 2007-08 amounting to Rs.3,567 lakhs (including tax thereof).
Hence, the total equity dividend post approval of the shareholders at the ensuing Annual General Meeting is 160% of face value (i.e. Rs.16 per share) resulting in an aggregate outflow of Rs.7,134 lakhs (including tax thereof) representing a dividend payout ratio of 35.11%.
Management Discussion and Analysis
Energy fuels industry, feeds transport and is a significant contributing factor in propelling economic growth momentum. Encouraging energy, security and its independence is a constant endeavour of governments worldwide.
Strong hydrocarbon demand in developing economies, in conjunction with the constraints in exploiting existing reserves and challenges faced in exploring new discoveries have redefined 'spare capacity' attracting aggressive investments in the sector. Oil Companies have thus, adopted a twin strategy: on the one hand, to improve the recovery yields of existing producing wells and on the other hand, to pursue efforts in discovering and developing new fields.
Exploration and production
Demand growth for oil/gas
Global Scenario - Rapidly rising demand for hydrocarbons and volatile oil and gas prices are providing fundamental strength to the Exploration & Production (E & P) Sector. As a consequence, the demand for offshore assets and other services is on the rise. Scenario in India - India's rapidly growing demand and spiralling hydrocarbon import bill poses a major challenge in sustaining economic growth. With ageing oil fields, domestic exploration programmes have never been as strong as before.
Under the first six rounds of New Exploration Licensing Programme (NELP), 154 blocks were awarded of which around 60% (94 blocks) are offshore. Of these offshore blocks, 64% are deep water blocks. As per the Directorate General of Hydrocarbons of the eligible 3.14 million square kms of sedimentary area, 2.15 million square kms are being licensed. Approximately 58% is located offshore with 0.86 million sq kms being located in deep waters. Company's Performance
Drilling Activities
On completion of the Companies contract with ONGC Videsh Ltd., 'Kedarnath' resumed her previous contract with ONGC on the west coast of India. 'Badrinath' resumed operations on the west coast of India under her contract with Deep Water Services (India) Ltd. (a wholly owned subsidiary of the Company) in September 2007, post dry dock.
Offshore Logistics & Support Services
The aggregate tonnage of these assets registered a utilization of around 89% as against 86% in the previous year. During the year, your Company entered into a mix of long term and spot fixtures. The fleet, comprising of two drilling vessels, twenty six offshore support vessels, eleven harbour tugs, one construction barge and one heavy load carrier, totaling to forty (40) vessels were deployed with global and Indian charters. Petronas Carigali , Chaston Navigation, Behtera Offshore , Total E & P, Energy Africa Kudu (Tullow Oil), P T Aquaria Shipping, Jamil Operations & Maintenance Co. and Dockwise Shipping B V, etc. are some of your Company's existing global clients whereas Hercules Offshore, Allseas Marine and Leighton Contractor (India) Pvt. Ltd. are some of the Indian clients.
Marine Engineering Services
During the year, the completion of the revamping of existing free gas module at SHG Platform for handling condensate at SHG/SHP Platform and the installation of walkways at the jetty head for the LNG Terminal for Ratnagiri Gas and Power Private Limited (RGPPL) at Dabhol, Maharashtra were a vital part of success that your Company takes pride in sharing with you. ONGC awarded your Company the NC Platform Revamp Project, which is presently under execution in consortium with Supreme Offshore Construction & Technical Services Ltd., Mumbai.
On completion of her previous contract with British Gas, 'Gal Constructor' was chartered to Dolphin Energy (Qatar) after which she worked for Dolphin Offshore, Mumbai on the west coast of India. 'Gal Constructor' registered a utilization of around 84% during the year as against 56% in the corresponding year.
Port and Terminal Services
The 11 'harbour tugs' continued their existing contracts with the port administration and recorded satisfactory results with an average utilization of 90% as against 96% in the previous year.
Fleet Profile
As on March 31, 2008 the fleet of 40 vessels comprising of 2 drilling vessels, a construction barge, 26 offshore support vessels and 11 harbour tugs. During the year, the Company took delivery of a new built Anchor Handling Tug Supply Vessel (AHTSV) which entered service on a two year charter with Gujarat State Petroleum Corporation Ltd (GSPCL).
The Company acquired a second hand Heavy Load Carrier Vessel, which is currently undergoing refurbishment and upgradation and thereafter is due to commence operations.
The Company also sold and delivered a 1983 built AHTSV during the fourth quarter of financial year 2007-08.
New building contracts on order aggregating around USD 230 million include a multi support vessel (delivery expected during mid of the second quarter of the financial year 2009-10) and a jack up rig (delivery expected during the fourth quarter of the financial year 2008-09).
Sector Outlook
Assets servicing the Oil and Gas Sector are poised to witness positive sentiments on the back of the mismatch in demand and supply. The urgent need and overriding concern for energy security is pushing global National Oil Companies (NOCs) to enhance their Exploration and Production (E&P) budgets. This is further accentuated by the need to improve recovery rates in the existing field reserves which have been on the decline over the years due to the increased production.
India's position is no different. Led by ONGC, all the E&P operators are aggressively chasing development programmes. The viability of marginal fields has also added a further dimension to the offshore activities within the country. As per the Directorate General of Hydrocarbons, the basin area is relatively under explored given that only 21% has been extensively explored and around 32% only partially explored.
Risks Identification and Mitigation
Your Company has institutionalized it's risk identification and risk mitigation process which are adapted to meet the needs at operating levels. Individual risk owners have been identified with implementation of risk polices clearly being laid down.
Your Company is fully conscious of the age of the Company's fleet and is taking action by not only ordering new assets but also by periodically upgrading the existing assets through the installation of modern and technologically advanced equipments to cater to the charter's requirements. Your Company evaluates such decisions based on the considered view of senior management keeping in mind the parameters of financial and business risk prudence.
Earnings variation in asset deployment could result in volatility in your Company's profitability.
A significant part of long term asset deployment is based on charter contracts which are a result of competitive tendering process. Tender bids are invited throughout the year with job / assignment requirement / specifications varying in tenure and complexity from bid to bid . As per industry norm your Company participates in the bidding process and is awarded varied charting period depending upon the needs of the clients.
Liberalization of the laws governing the sector and rationalisation of existing cabotage laws, currently protecting Indian owners may impact your Company's operations. Liberalization of the existing laws could invite competition from international players. Having operated internationally, the assets of your Company have proved their operational efficiency and competitiveness and hence, the risk is relatively well mitigated.
Availability of Key Personnel and Continuity of employment
With talent being a resource which has no boundaries, your Company cannot isolate itself from attrition. However, your Company's endeavour in addressing the needs of its employee pool by nurturing talent and imparting training will go a long way in building continuity.
Foreign Exchange Risk
Being a Company with assets deployed in different geographies and with earnings denominated in foreign exchange there could be a risk in the earnings, on the basis of rupee to dollar exchange parity. Foreign exchange risk has and impact on the portion of operating expenses denominated in foreign currency. Nevertheless, there exists a significant exposure to exchange rate volatility.
Quality and Safety
Your Company has been successfully carrying out asset operations governed by the stipulations of Integrated Management System duly certified by DNV. Periodic inspections and Internal Audits ensure adherence to the relevant codes of ISO 9001:2000, ISO 14001:2004 and OHSAS 18001:1999.
During the year under review, interim certification for 'Malaviya Thirty Three', full term certification for 'Malaviya Thirty Six' and 'Malaviya Twenty Three' were obtained.
External SMC / ISPS audits have been successfully carried out on 'Malaviya Twenty Three', 'Malaviya Four', 'Malaviya Thirty Six', 'Malaviya Twenty', 'Malaviya Twenty One', 'Malaviya Twelve' and 'Gal Ross Sea'.
Your Company has not only brought all harbour tugs under the Safety Culture recommendations but is also in the process of introducing an Integrated QHSE culture for marine construction turnkey jobs.
Training
Statutory training requirements are being complied on the board of your Company's vessels. Furthermore, your Company has initiated steps in the organization and provision of non mandatory training programmes in cooperation with and with assistance from organizations like BIBY, Anglo Eastern Maritime Training Centre and Naval Maritime Academy. These include, amongst others, Dynamic Positioning Training (Induction and Advanced), Anchor Handling Operations, operation and handling of Fast Rescue Crafts, working in environments prone to H2S leakages etc. Your Company has the distinction of having in place a fully functional in-house Bridge Stimulator on which training programmes are being conducted with real life case studies.
Subsidiary Companies
The Audited Statement of Accounts alongwith the report of the Board of Directors relating to the Company's subsidiaries namely Great Offshore (Fujairah) L.L.C.-FZC and Deep Water Services (India) Limited for the year ended March 31, 2008 are annexed. In anticipation of better global business prospectus, your Company has formed two wholly owned foreign subsidiaries.
Consolidated Financial Statements
Your Directors have pleasure in attaching the Consolidated Financial Statements pursuant to Clause 41 of the Listing Agreements entered into with the Stock Exchanges and prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India, in this regard.
The Audited Consolidated Financial Statements together with the Auditors' Report thereon forms part of the Annual Report. The Auditors' Report to the Board of Directors does not contain any qualification. For the financial year ended March 31, 2008, consolidated income from operations at Rs.74,590 lakhs increased by 28% as compared to previous year. The financial year 2007-08 registered a consolidated profit after tax of Rs.20,163 lakhs (previous year Rs. 14,518 lakhs) on a total income of Rs. 81,937 lakhs (previous year Rs. 59,007 lakhs).
Share Capital
Fund Raising
During the financial year 2007-08, your Company increased its Share Capital employed by 32% to Rs. 136,947 lakhs. During the year under review, your Company issued and allotted 15,00,000 Optionally Convertible Redeemable Preference Shares (OCRPS) of Rs 1000/- each aggregating Rs.15,000 lakhs to Export Import Bank of India (EXIM) which carries a coupon rate of 10% p.a. Consequently, the Authorised Share Capital of your Company as on March 31, 2008 is Rs.20,000 lakhs.
Additionally, your Company also issued and allotted 7.25% Unsecured Foreign Currency Convertible Bonds (FCCBs) due 2012 aggregating US$ 42 million. These FCCBs are listed on the Singapore Exchange Securities Trading Limited.
Buy back of Equity Shares
Your Company considered the buy back of equity shares, keeping in view the Company's desire to maximise shareholders' value. This is expected to result in reduction of short term volatility in your Company's share price, giving a boost to earnings per share and return on equity in future, creating a long term shareholders' value.
The Board of Directors of your Company, at its meeting held on March 31, 2008, have approved the buy back of the Company's equity shares at a price not exceeding Rs 750/- per equity share, and up to an aggregate amount of Rs 5,524 Lakhs, which does not exceed 10% of the total paidup capital and free reserves, as per the audited Balance Sheet, as at March 31, 2007. The buy back of equity shares is from the open market through Bombay Stock Exchange Ltd. ('BSE') and / or the National Stock Exchange of India Ltd. (NSE), where these shares are listed, from time to time in compliance with SEBI (Buy Back of Securities) Regulations, 1998.
IT Initiatives
The IT team has carried out a detailed analytical review of core systems, modules and applications. With a view to strengthen your Company's commitment to implement company-wide solutions, a strategic development plan has been designed that will create enhanced and dynamic management information systems and intelligence tools. As the strategic plan unfolds over the coming months, new features and facilities will be added to the systems framework. During the course of the year, your Company implemented solutions in the areas of spares and stores procurement, document management, departmental intranet and in decision support. Planned upgrades to servers have been carried out and installation of systems and communications links strengthened.
Your Company continues to apply its close-monitoring approach to hardware/software security and operations and during the course of the year, there have been no security incidents resulting in the system downtime being less than 0.01% during the year.
Insurance
Internationally, the offshore marine insurance industry has had a challenging year. Tight market conditions and continuously rising vessel valuations have put pressure on the insurance and reinsurance markets, resulting in increased premium. Your company is exposed to the volatilities faced in the markets through its P&I insurance program and indirectly through its Hull reinsurance contracts.
However, the de-tariffing of Hull and non-Hull rates in India has resulted in a relatively softer Indian domestic Insurance market, which your Company has strived to capitalise by contracting and negotiating finer terms, resulting in securing improved renewal rates for Indian placed Hull and non-Hull insurance for the fleet.
Your Company remains committed to continuous assessment of its insurance arrangements to provide the optimum cover in acceptable structures.
Adequacy of Internal Control System
Your Company has adequate system of internal controls to safeguard its assets and duly protect them against loss from unauthorised use or disposition and ensure that operations are reliably authorised by competent personnel and accurately recorded and reported. Internal Auditors,
M/s. Ashok Kapadia & Co., Chartered Accountants provides their valuable inputs in assuring the adequacy of Internal Control systems.
Human Resources
Human resource policies of your Company have the interests of the work force at heart. Your Company believes in aligning business priorities with the aspirations of the employees leading to the development of empowered and responsive human capital. One of the constant efforts of the Company is to attain organisational excellence by developing and exploring the true potential of the Company's human capital and providing opportunities for growth and enrichment. Your Company tries to inculcate an environment of creativity and innovation and is constantly working towards providing job content to its employees through empowerment, accountability and responsibility. Your Company cares for each and every employee and has an in-built system of performance appraisal to recognise and reward him or her periodically and has incorporated schemes like performance incentive pay. Your Company fosters mutual faith, trust and respect by providing ample growth opportunities and challenges to all its employees.
Your Company strives to acquire, engage and retain a workforce that is diverse, innovative, insightful and knowledgeable and this be achieved only by investing in and upgrading organisational talent by providing training and education to reinforce its existing strengths.
Particulars of Employees
In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the annexure to the Directors' Report. However, as per the provisions of Section 219(1)(b)(iv) of the Act read with Clause 32 of the Listing Agreement as notified by Securities and Exchange Board of India, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and other entitled thereto. Members desirous of receiving the statement pursuant to Section 217 (2A) will be provided the same on receipt of written request from them. The statement is also available for inspection at the Registered Office on working days during business hours between 10 am to 1 pm, up to the date of the Annual General Meeting.
Directors
Your Company's Board consists of seven Directors, of which Mr. Vijay Kantilal Sheth, Vice Chairman cum Managing Director, is an Executive Director.
While Mr. Sevantilal J. Parekh is the Non Executive Chairman of the Company, Mr. Naresh Chandra, Mr. Shailesh V. Haribhakti, Mr. Rajiv K. Luthra, Mr. Suresh Balasubramaniam and Mr. Madhava Menon Shankar Narayanan are Independent Directors on the Board.
Mr. Naresh Chandra and Mr. Rajiv K. Luthra are due to retire by rotation at this Annual General Meeting, and being eligible, offer themselves for re-appointment.
Directors' Responsibility Statement
As required by sub-section (2AA) of Section 217 of the Companies Act, 1956, Directors states:
a. That in the preparation of Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;
b. That the Directors have selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;
c. 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;
d. That the Annual Accounts have been prepared on a going concern basis.
Companies (Disclosure of Particulars in the Report of Board of Directors') Rules, 1988
Pursuant to the Notification No. GSR 1029 dated 31.12.1988 your Company is not required to furnish prescribed information regarding conservation of energy and technology absorption as the Shipping Industry is not covered by the schedule to the said rules.
The details of Foreign Exchange Earnings and Outgoings are:
(a) Foreign Exchange earned and saved (on account of freight, charter hire earnings) Rs.57,478 lakhs.
(b) Foreign Exchange used including operating expenses, capital repayment, down payments for acquisition of ships, interest payment amounted to Rs.41,125 lakhs.
Auditors' Report
The Auditors' Report to the Members read together with the relevant notes thereon are selfexplanatory and hence do not warrant any comments under Section 217 of the Companies Act, 1956.
Auditors
M/s. Kalyaniwalla & Mistry, Chartered Accountants, the Statutory Auditors of your Company holds office until the conclusion of the forthcoming Annual General Meeting and being eligible have offered themselves for reappointment. Certificate from the Auditors has been received to the effect that their reappointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956 and since they are not disqualified for such reappointment within the meaning of Section 226 of the said Act, they shall continue to be the Statutory Auditors.
Corporate Governance
Your Company is diligently pursuing and implementing the standards of Corporate Governance adhering to the stipulations set out in the Listing Agreement with the Stock Exchanges. Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges is an intrinsic part of the Annual Report.
Certificate from the Statutory Auditors, M/s. Kalyaniwalla & Mistry, Chartered Accountants confirming the compliance of the conditions of Corporate Governance as stipulated under the aforesaid Clause 49 of the Listing Agreement.
Dematerialisation of Securities
As Members are aware, your Company's Equity Shares are compulsorily tradable in electronic form. As on March 31, 2008, 95.44% of your Company's paid up capital representing 36,380,283 Equity Shares are in dematerialised form. In view of numerous advantages emanating from the depository system, Members holding Equity Shares in physical mode are requested to avail the facility of dematerialisation of the Company's shares on either of the depositories, viz. CDSL/NSDL.
Acknowledgements
The Directors are grateful for the support, guidance and co-operation received from Government of India, all regulatory authorities including Ministry of Petroleum and Natural Gas, Ministry of Shipping, Ministry of Corporate Affairs, Ministry of Finance, Director General Shipping, Directorate of Hydrocarbons, Department of Civil Aviation, Port Trusts and Port authorities, RBI, SEBI, Registrar of Companies, Stock Exchanges and the Depositories.
Your Directors would like to express their sincere appreciation and gratitude to all valuable clients of the Company, Shareholders, Borrowers, Business Associates, Agents, Banks and Financial Institutions for their support and continued patronage.
Your Directors appreciate the hard work, loyalty and professionalism of the employees of your Company whose relentless efforts have enabled the Company to continue its journey at the forefront of the offshore oil field services sector.
For and on behalf of the Board of Directors Sevantilal J. ParekhMumbai ChairmanApril 30, 2008
ANNUAL REPORT 2007-2008
DIRECTOR'S REPORT
TO THE MEMBERS OFGREAT OFFSHORE LIMITED
The Directors hereby present the Third Annual Report on the business and operations of the Company together with the Audited Financial Accounts of the Company for the Financial Year ended March 31, 2008.
(Rs. in lakhs)Particulars 2007-08 2006-07
Total Income 75031 54465
Total Expenditure 52996 38187
Profit before tax 22035 16278
Less/Add: Provision for Tax :
I. Current 2009 2409
II. Deferred (345) (334)
III. Fringe Benefit Tax 50 61
Profit for the year after tax 20321 14142
Less: Transfer to Tonnage Tax Reserve Account under
Section 115VT of the Income Tax Act, 1961 4000 2000
Add: Surplus brought forward from previous year 12176 6011
Amount available for appropriation 28497 18153
Appropriations
Transfer to Foreign Currency Fluctuation Reserve 1000 -
Transfer to General Reserve 2500 2500
Interim Dividend on Equity Shares 3049 3049
Proposed Final Dividendson Preference Shares 848
on Equity Shares 3049
Tax on Dividends 1183 428
Balance Carried Forward 16868 12176
During the Financial Year 2007-08, the Company recorded a total income of Rs.75,031 lakhs and earned a Profit Before Interest Depreciation and Tax of Rs.38,439 lakhs.
Dividend on Preference Shares
Your Directors are pleased to recommend a pro-rata dividend of 5.66% on Optionally Convertible Redeemable Preference Shares (OCRPS) for the financial year 2007-08 as per the terms of offer.
The pro-rata dividend on the OCRPS amounts to Rs. 992.54 lakhs (including tax thereof).
Dividend on Equity Shares
During the year, your Directors declared and paid an interim dividend of Rs. 8/- per equity share resulting in an outflow of Rs.3,567 lakhs (including tax thereof).
The Board of Directors are pleased to recommend a final dividend of Rs. 8/- per equity share for the financial year 2007-08 amounting to Rs.3,567 lakhs (including tax thereof).
Hence, the total equity dividend post approval of the shareholders at the ensuing Annual General Meeting is 160% of face value (i.e. Rs.16 per share) resulting in an aggregate outflow of Rs.7,134 lakhs (including tax thereof) representing a dividend payout ratio of 35.11%.
Management Discussion and Analysis
Energy fuels industry, feeds transport and is a significant contributing factor in propelling economic growth momentum. Encouraging energy, security and its independence is a constant endeavour of governments worldwide.
Strong hydrocarbon demand in developing economies, in conjunction with the constraints in exploiting existing reserves and challenges faced in exploring new discoveries have redefined 'spare capacity' attracting aggressive investments in the sector. Oil Companies have thus, adopted a twin strategy: on the one hand, to improve the recovery yields of existing producing wells and on the other hand, to pursue efforts in discovering and developing new fields.
Exploration and production
Demand growth for oil/gas
Global Scenario - Rapidly rising demand for hydrocarbons and volatile oil and gas prices are providing fundamental strength to the Exploration & Production (E & P) Sector. As a consequence, the demand for offshore assets and other services is on the rise. Scenario in India - India's rapidly growing demand and spiralling hydrocarbon import bill poses a major challenge in sustaining economic growth. With ageing oil fields, domestic exploration programmes have never been as strong as before.
Under the first six rounds of New Exploration Licensing Programme (NELP), 154 blocks were awarded of which around 60% (94 blocks) are offshore. Of these offshore blocks, 64% are deep water blocks. As per the Directorate General of Hydrocarbons of the eligible 3.14 million square kms of sedimentary area, 2.15 million square kms are being licensed. Approximately 58% is located offshore with 0.86 million sq kms being located in deep waters. Company's Performance
Drilling Activities
On completion of the Companies contract with ONGC Videsh Ltd., 'Kedarnath' resumed her previous contract with ONGC on the west coast of India. 'Badrinath' resumed operations on the west coast of India under her contract with Deep Water Services (India) Ltd. (a wholly owned subsidiary of the Company) in September 2007, post dry dock.
Offshore Logistics & Support Services
The aggregate tonnage of these assets registered a utilization of around 89% as against 86% in the previous year. During the year, your Company entered into a mix of long term and spot fixtures. The fleet, comprising of two drilling vessels, twenty six offshore support vessels, eleven harbour tugs, one construction barge and one heavy load carrier, totaling to forty (40) vessels were deployed with global and Indian charters. Petronas Carigali , Chaston Navigation, Behtera Offshore , Total E & P, Energy Africa Kudu (Tullow Oil), P T Aquaria Shipping, Jamil Operations & Maintenance Co. and Dockwise Shipping B V, etc. are some of your Company's existing global clients whereas Hercules Offshore, Allseas Marine and Leighton Contractor (India) Pvt. Ltd. are some of the Indian clients.
Marine Engineering Services
During the year, the completion of the revamping of existing free gas module at SHG Platform for handling condensate at SHG/SHP Platform and the installation of walkways at the jetty head for the LNG Terminal for Ratnagiri Gas and Power Private Limited (RGPPL) at Dabhol, Maharashtra were a vital part of success that your Company takes pride in sharing with you. ONGC awarded your Company the NC Platform Revamp Project, which is presently under execution in consortium with Supreme Offshore Construction & Technical Services Ltd., Mumbai.
On completion of her previous contract with British Gas, 'Gal Constructor' was chartered to Dolphin Energy (Qatar) after which she worked for Dolphin Offshore, Mumbai on the west coast of India. 'Gal Constructor' registered a utilization of around 84% during the year as against 56% in the corresponding year.
Port and Terminal Services
The 11 'harbour tugs' continued their existing contracts with the port administration and recorded satisfactory results with an average utilization of 90% as against 96% in the previous year.
Fleet Profile
As on March 31, 2008 the fleet of 40 vessels comprising of 2 drilling vessels, a construction barge, 26 offshore support vessels and 11 harbour tugs. During the year, the Company took delivery of a new built Anchor Handling Tug Supply Vessel (AHTSV) which entered service on a two year charter with Gujarat State Petroleum Corporation Ltd (GSPCL).
The Company acquired a second hand Heavy Load Carrier Vessel, which is currently undergoing refurbishment and upgradation and thereafter is due to commence operations.
The Company also sold and delivered a 1983 built AHTSV during the fourth quarter of financial year 2007-08.
New building contracts on order aggregating around USD 230 million include a multi support vessel (delivery expected during mid of the second quarter of the financial year 2009-10) and a jack up rig (delivery expected during the fourth quarter of the financial year 2008-09).
Sector Outlook
Assets servicing the Oil and Gas Sector are poised to witness positive sentiments on the back of the mismatch in demand and supply. The urgent need and overriding concern for energy security is pushing global National Oil Companies (NOCs) to enhance their Exploration and Production (E&P) budgets. This is further accentuated by the need to improve recovery rates in the existing field reserves which have been on the decline over the years due to the increased production.
India's position is no different. Led by ONGC, all the E&P operators are aggressively chasing development programmes. The viability of marginal fields has also added a further dimension to the offshore activities within the country. As per the Directorate General of Hydrocarbons, the basin area is relatively under explored given that only 21% has been extensively explored and around 32% only partially explored.
Risks Identification and Mitigation
Your Company has institutionalized it's risk identification and risk mitigation process which are adapted to meet the needs at operating levels. Individual risk owners have been identified with implementation of risk polices clearly being laid down.
Your Company is fully conscious of the age of the Company's fleet and is taking action by not only ordering new assets but also by periodically upgrading the existing assets through the installation of modern and technologically advanced equipments to cater to the charter's requirements. Your Company evaluates such decisions based on the considered view of senior management keeping in mind the parameters of financial and business risk prudence.
Earnings variation in asset deployment could result in volatility in your Company's profitability.
A significant part of long term asset deployment is based on charter contracts which are a result of competitive tendering process. Tender bids are invited throughout the year with job / assignment requirement / specifications varying in tenure and complexity from bid to bid . As per industry norm your Company participates in the bidding process and is awarded varied charting period depending upon the needs of the clients.
Liberalization of the laws governing the sector and rationalisation of existing cabotage laws, currently protecting Indian owners may impact your Company's operations. Liberalization of the existing laws could invite competition from international players. Having operated internationally, the assets of your Company have proved their operational efficiency and competitiveness and hence, the risk is relatively well mitigated.
Availability of Key Personnel and Continuity of employment
With talent being a resource which has no boundaries, your Company cannot isolate itself from attrition. However, your Company's endeavour in addressing the needs of its employee pool by nurturing talent and imparting training will go a long way in building continuity.
Foreign Exchange Risk
Being a Company with assets deployed in different geographies and with earnings denominated in foreign exchange there could be a risk in the earnings, on the basis of rupee to dollar exchange parity. Foreign exchange risk has and impact on the portion of operating expenses denominated in foreign currency. Nevertheless, there exists a significant exposure to exchange rate volatility.
Quality and Safety
Your Company has been successfully carrying out asset operations governed by the stipulations of Integrated Management System duly certified by DNV. Periodic inspections and Internal Audits ensure adherence to the relevant codes of ISO 9001:2000, ISO 14001:2004 and OHSAS 18001:1999.
During the year under review, interim certification for 'Malaviya Thirty Three', full term certification for 'Malaviya Thirty Six' and 'Malaviya Twenty Three' were obtained.
External SMC / ISPS audits have been successfully carried out on 'Malaviya Twenty Three', 'Malaviya Four', 'Malaviya Thirty Six', 'Malaviya Twenty', 'Malaviya Twenty One', 'Malaviya Twelve' and 'Gal Ross Sea'.
Your Company has not only brought all harbour tugs under the Safety Culture recommendations but is also in the process of introducing an Integrated QHSE culture for marine construction turnkey jobs.
Training
Statutory training requirements are being complied on the board of your Company's vessels. Furthermore, your Company has initiated steps in the organization and provision of non mandatory training programmes in cooperation with and with assistance from organizations like BIBY, Anglo Eastern Maritime Training Centre and Naval Maritime Academy. These include, amongst others, Dynamic Positioning Training (Induction and Advanced), Anchor Handling Operations, operation and handling of Fast Rescue Crafts, working in environments prone to H2S leakages etc. Your Company has the distinction of having in place a fully functional in-house Bridge Stimulator on which training programmes are being conducted with real life case studies.
Subsidiary Companies
The Audited Statement of Accounts alongwith the report of the Board of Directors relating to the Company's subsidiaries namely Great Offshore (Fujairah) L.L.C.-FZC and Deep Water Services (India) Limited for the year ended March 31, 2008 are annexed. In anticipation of better global business prospectus, your Company has formed two wholly owned foreign subsidiaries.
Consolidated Financial Statements
Your Directors have pleasure in attaching the Consolidated Financial Statements pursuant to Clause 41 of the Listing Agreements entered into with the Stock Exchanges and prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India, in this regard.
The Audited Consolidated Financial Statements together with the Auditors' Report thereon forms part of the Annual Report. The Auditors' Report to the Board of Directors does not contain any qualification. For the financial year ended March 31, 2008, consolidated income from operations at Rs.74,590 lakhs increased by 28% as compared to previous year. The financial year 2007-08 registered a consolidated profit after tax of Rs.20,163 lakhs (previous year Rs. 14,518 lakhs) on a total income of Rs. 81,937 lakhs (previous year Rs. 59,007 lakhs).
Share Capital
Fund Raising
During the financial year 2007-08, your Company increased its Share Capital employed by 32% to Rs. 136,947 lakhs. During the year under review, your Company issued and allotted 15,00,000 Optionally Convertible Redeemable Preference Shares (OCRPS) of Rs 1000/- each aggregating Rs.15,000 lakhs to Export Import Bank of India (EXIM) which carries a coupon rate of 10% p.a. Consequently, the Authorised Share Capital of your Company as on March 31, 2008 is Rs.20,000 lakhs.
Additionally, your Company also issued and allotted 7.25% Unsecured Foreign Currency Convertible Bonds (FCCBs) due 2012 aggregating US$ 42 million. These FCCBs are listed on the Singapore Exchange Securities Trading Limited.
Buy back of Equity Shares
Your Company considered the buy back of equity shares, keeping in view the Company's desire to maximise shareholders' value. This is expected to result in reduction of short term volatility in your Company's share price, giving a boost to earnings per share and return on equity in future, creating a long term shareholders' value.
The Board of Directors of your Company, at its meeting held on March 31, 2008, have approved the buy back of the Company's equity shares at a price not exceeding Rs 750/- per equity share, and up to an aggregate amount of Rs 5,524 Lakhs, which does not exceed 10% of the total paidup capital and free reserves, as per the audited Balance Sheet, as at March 31, 2007. The buy back of equity shares is from the open market through Bombay Stock Exchange Ltd. ('BSE') and / or the National Stock Exchange of India Ltd. (NSE), where these shares are listed, from time to time in compliance with SEBI (Buy Back of Securities) Regulations, 1998.
IT Initiatives
The IT team has carried out a detailed analytical review of core systems, modules and applications. With a view to strengthen your Company's commitment to implement company-wide solutions, a strategic development plan has been designed that will create enhanced and dynamic management information systems and intelligence tools. As the strategic plan unfolds over the coming months, new features and facilities will be added to the systems framework. During the course of the year, your Company implemented solutions in the areas of spares and stores procurement, document management, departmental intranet and in decision support. Planned upgrades to servers have been carried out and installation of systems and communications links strengthened.
Your Company continues to apply its close-monitoring approach to hardware/software security and operations and during the course of the year, there have been no security incidents resulting in the system downtime being less than 0.01% during the year.
Insurance
Internationally, the offshore marine insurance industry has had a challenging year. Tight market conditions and continuously rising vessel valuations have put pressure on the insurance and reinsurance markets, resulting in increased premium. Your company is exposed to the volatilities faced in the markets through its P&I insurance program and indirectly through its Hull reinsurance contracts.
However, the de-tariffing of Hull and non-Hull rates in India has resulted in a relatively softer Indian domestic Insurance market, which your Company has strived to capitalise by contracting and negotiating finer terms, resulting in securing improved renewal rates for Indian placed Hull and non-Hull insurance for the fleet.
Your Company remains committed to continuous assessment of its insurance arrangements to provide the optimum cover in acceptable structures.
Adequacy of Internal Control System
Your Company has adequate system of internal controls to safeguard its assets and duly protect them against loss from unauthorised use or disposition and ensure that operations are reliably authorised by competent personnel and accurately recorded and reported. Internal Auditors,
M/s. Ashok Kapadia & Co., Chartered Accountants provides their valuable inputs in assuring the adequacy of Internal Control systems.
Human Resources
Human resource policies of your Company have the interests of the work force at heart. Your Company believes in aligning business priorities with the aspirations of the employees leading to the development of empowered and responsive human capital. One of the constant efforts of the Company is to attain organisational excellence by developing and exploring the true potential of the Company's human capital and providing opportunities for growth and enrichment. Your Company tries to inculcate an environment of creativity and innovation and is constantly working towards providing job content to its employees through empowerment, accountability and responsibility. Your Company cares for each and every employee and has an in-built system of performance appraisal to recognise and reward him or her periodically and has incorporated schemes like performance incentive pay. Your Company fosters mutual faith, trust and respect by providing ample growth opportunities and challenges to all its employees.
Your Company strives to acquire, engage and retain a workforce that is diverse, innovative, insightful and knowledgeable and this be achieved only by investing in and upgrading organisational talent by providing training and education to reinforce its existing strengths.
Particulars of Employees
In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the annexure to the Directors' Report. However, as per the provisions of Section 219(1)(b)(iv) of the Act read with Clause 32 of the Listing Agreement as notified by Securities and Exchange Board of India, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and other entitled thereto. Members desirous of receiving the statement pursuant to Section 217 (2A) will be provided the same on receipt of written request from them. The statement is also available for inspection at the Registered Office on working days during business hours between 10 am to 1 pm, up to the date of the Annual General Meeting.
Directors
Your Company's Board consists of seven Directors, of which Mr. Vijay Kantilal Sheth, Vice Chairman cum Managing Director, is an Executive Director.
While Mr. Sevantilal J. Parekh is the Non Executive Chairman of the Company, Mr. Naresh Chandra, Mr. Shailesh V. Haribhakti, Mr. Rajiv K. Luthra, Mr. Suresh Balasubramaniam and Mr. Madhava Menon Shankar Narayanan are Independent Directors on the Board.
Mr. Naresh Chandra and Mr. Rajiv K. Luthra are due to retire by rotation at this Annual General Meeting, and being eligible, offer themselves for re-appointment.
Directors' Responsibility Statement
As required by sub-section (2AA) of Section 217 of the Companies Act, 1956, Directors states:
a. That in the preparation of Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures;
b. That the Directors have selected such Accounting Policies and applied them consistently and made judgements and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for that period;
c. 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;
d. That the Annual Accounts have been prepared on a going concern basis.
Companies (Disclosure of Particulars in the Report of Board of Directors') Rules, 1988
Pursuant to the Notification No. GSR 1029 dated 31.12.1988 your Company is not required to furnish prescribed information regarding conservation of energy and technology absorption as the Shipping Industry is not covered by the schedule to the said rules.
The details of Foreign Exchange Earnings and Outgoings are:
(a) Foreign Exchange earned and saved (on account of freight, charter hire earnings) Rs.57,478 lakhs.
(b) Foreign Exchange used including operating expenses, capital repayment, down payments for acquisition of ships, interest payment amounted to Rs.41,125 lakhs.
Auditors' Report
The Auditors' Report to the Members read together with the relevant notes thereon are selfexplanatory and hence do not warrant any comments under Section 217 of the Companies Act, 1956.
Auditors
M/s. Kalyaniwalla & Mistry, Chartered Accountants, the Statutory Auditors of your Company holds office until the conclusion of the forthcoming Annual General Meeting and being eligible have offered themselves for reappointment. Certificate from the Auditors has been received to the effect that their reappointment, if made, would be within the limits prescribed under Section 224(1B) of the Companies Act, 1956 and since they are not disqualified for such reappointment within the meaning of Section 226 of the said Act, they shall continue to be the Statutory Auditors.
Corporate Governance
Your Company is diligently pursuing and implementing the standards of Corporate Governance adhering to the stipulations set out in the Listing Agreement with the Stock Exchanges. Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges is an intrinsic part of the Annual Report.
Certificate from the Statutory Auditors, M/s. Kalyaniwalla & Mistry, Chartered Accountants confirming the compliance of the conditions of Corporate Governance as stipulated under the aforesaid Clause 49 of the Listing Agreement.
Dematerialisation of Securities
As Members are aware, your Company's Equity Shares are compulsorily tradable in electronic form. As on March 31, 2008, 95.44% of your Company's paid up capital representing 36,380,283 Equity Shares are in dematerialised form. In view of numerous advantages emanating from the depository system, Members holding Equity Shares in physical mode are requested to avail the facility of dematerialisation of the Company's shares on either of the depositories, viz. CDSL/NSDL.
Acknowledgements
The Directors are grateful for the support, guidance and co-operation received from Government of India, all regulatory authorities including Ministry of Petroleum and Natural Gas, Ministry of Shipping, Ministry of Corporate Affairs, Ministry of Finance, Director General Shipping, Directorate of Hydrocarbons, Department of Civil Aviation, Port Trusts and Port authorities, RBI, SEBI, Registrar of Companies, Stock Exchanges and the Depositories.
Your Directors would like to express their sincere appreciation and gratitude to all valuable clients of the Company, Shareholders, Borrowers, Business Associates, Agents, Banks and Financial Institutions for their support and continued patronage.
Your Directors appreciate the hard work, loyalty and professionalism of the employees of your Company whose relentless efforts have enabled the Company to continue its journey at the forefront of the offshore oil field services sector.
For and on behalf of the Board of Directors Sevantilal J. ParekhMumbai ChairmanApril 30, 2008
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