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NOTES TO ACCOUNTS

Seamec Ltd.

You can view the entire text of Notes to accounts of the company for the latest year
Market Cap. (₹) 1158.87 Cr. P/BV 2.70 Book Value (₹) 169.00
52 Week High/Low (₹) 507/187 FV/ML 10/1 P/E(X) 14.16
Bookclosure 26/09/2018 EPS (₹) 32.19 Div Yield (%) 0.00
Year End :2018-03 

1 Corporate Information

SEAMEC Limited is a public Company incorporated in India under the provision of the Companies Act, 1956 having its registered office at A- 901-905, 9th Floor, 215 Atrium, Andheri Kurla Road, Andheri East, Mumbai- 400 093. Its shares are listed on two recognised stock exchanges in India. The Company operates Multi Support Vessels for providing support services including marine, construction and diving services to offshore oilfields and bulk carrier vessel for providing bulk carrier services. The Company caters in both domestic as well as International Market.

The Standalone Financial Statements were authorised for issue in accordance with a resolution of the directors on May 25, 2018.

2 Basis of preparation

The financial statements of the Company have been prepared in accordance with the Indian Accounting Standards (referred to as Ind AS) as prescribed under section 133 of the Companies, Act, 2013 read with Companies (Indian Accounting Standards) Rules as amended from time to time.

The financial statements have been prepared on a historical cost basis, except for certain financial assets and liabilities measured at fair value (refer accounting policy regarding financial instruments).

The Standalone Financial statements are presented in Indian Rupees (?) and all values are rounded to the nearest million, except otherwise stated.

(a) Terms/ rights attached to equity shares

The Company has only one class of equity shares having par value of ‘10 per share. Each holder of equity shares is entitled to one vote per share. The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing General Meeting.

In the event of liquidation of the Company, the holders of equity shares will be entitled to receive remaining assets of the Company, after distribution of all preferential amounts. The distribution will be in proportion to the number of equity shares held by the shareholders.

(b) Shares held by holding Company

Out of equity shares issued by the Company, shares held by its holding Company are as below:

During the year ended March 31, 2016, the Company had bought back a total of 84,75,000 equity shares of Rs. 10 each at a total consideration of Rs. 1,059.38 million. Accordingly, the face value of shares bought back amounting to Rs. 84.75 million had been adjusted against Share Capital and the balance amount of Rs. 501.75 million and Rs. 472.88 million have been adjusted against the securities premium and general reserve respectively. Further, in accordance with the Section 69 of the Companies Act, 2013, the Company had transferred an amount of Rs. 84.75 million, being a sum equal to nominal value of equity shares bought back, from general reserve to capital redemption reserve.

(1) Capital redemption reserve:

Capital redemption reserve was created upon buy back of equity shares. The Company may utilise this reserve in compliance with the provisions of the Companies Act 2013.

(2) Tonnage tax reserve u/s 115VT of Income Tax Act, 1961:

A tonnage tax company shall, subject to and in accordance with the provisions of section 115VT of the Income Tax Act, 1961, on yearly basis credit to tonnage tax reserve account, an amount not less than twenty percent of the book profit derived from the activities referred to in clauses (i) and (ii) of sub-section (1) of section 115V-I of the Income Tax Act, 1961. The Company can utilise this reserve as per provisions of Income Tax Act 1961.

A) The Company has availed Buyers Credit Facility from IDBI bank, carries rate of Interest at the rate 1 Year Libor 80 bps (31.03.2017 6 Months Libor 80 BPS) the same is secured by hypothecation charge on all of the Company’s Current Assets. The Facility was repaid in July 2017.

B) The ‘Overdraft against FD’ facility is availed from IDBI bank. The rate of Interest for the said Facility is 1% above the interest rate of Fixed Deposits under lien with IDBI bank. The same is secured by fixed deposits with margin as 100%.

a The case against the Company alleging violation of Foreign Exchange Regulation Act 1973 (FERA), related to acquisition of Land drilling Rig, is pending before the Hon’ble Mumbai High Court. The Company has furnished a Bank Guarantee of Rs. 100 million to the Enforcement Directorate, FERA, towards penalty imposed, as directed by the Hon’ble Mumbai High Court. The bank guarantee is valid till September 30, 2018. No provision is considered necessary in respect of the said penalty as the management believes, based on legal opinion, that there has been no contravention to FERA.

b Against the Directorate of Revenue Intelligence (DRI) Show Cause Notice in July - August 2012, the adjudication proceedings was conducted by Commissioner of Customs (Import) who vide order dated March 28, 2013 imposed duty Rs. 350 million, penalty for equivalent amount, interest and confiscation and made appropriation of Rs. 126 million paid in 2011 under protest. Accordingly, Company disclosed the contingent liability of Rs. 1197 million.

Against the above adjudication order, the Company filed before Hon’ble CESTAT for stay of the order as well as appeal. Stay was granted while appeal was disposed off vide order of Hon’ble CESTAT dated 6th December, 2017.

Being aggrieved, Company as a legal recourse, had filed Rectification of Mistake (ROM) before designated forum of CESTAT. The Hon’ble CESTAT vide order dated February 27, 2018 remanded the matter to the original authority, set aside the demand, duty, penalty and confiscation with a specific direction of commencement of adjudication subject to settlement of jurisdiction issue by the Hon’ble Supreme Court.

In view of the above, the Company is at present has no demand and therefore, there is no further requirement of disclosing this matter under contingent liability.

c Represent claim by vendor not acknowledged as debt as in the opinion of the management the same is not payable.

Notes:

(a) The Company does not expect any reimbursement in respect of the above contingent liabilities.

(b) It is not practicable to estimate the timing of cash flows, if any, in respect of matters at (a) to (d) above, pending resolution of the proceedings.

3 Commitments

a Capital Commitments

Estimated amount of contracts remaining to be executed on capital account and not provided for Rs. NIL million (31.03.2017 : Rs. NIL million).

4 Draft Scheme of Arrangement

Board of Directors of the Company on November 14, 2017 had considered the demerger proposal of EPC and Vessel Division of HAL Offshore Ltd (HAL), the parent Company with SEAMEC Limited, the appointed date being July 1, 2017. Pursuant to above, the Company made application to BSE Limited (BSE), the designated Stock Exchange and National Stock Exchange of India Limited (NSE) in accordance with Regulation 37 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 for approval of Scheme of Arrangement of Demerger. BSE and NSE vide their letter dated May 15, 2018 and May 16, 2018 have communicated to the Company their “No-objection” along with the observations of SEBI. The Company is now contemplating on the activities to process the demerger.

5 Trade Receivables as disclosed in Notes 7 & 14, are net of provisions for:

(a) Trade Receivables from Swiber Offshore Constructions Pte Ltd, Singapore (SOC) and Swiber Offshore India Private Ltd. (SOI) is Rs. 1 134.70. These outstanding arising out of the services rendered by the Company to above Swiber entities towards the contract awarded by ONGC to Swiber. SOC as per the Hon’ble High Court, Singapore is under the Judicial Management. The Company initially initiated legal recourse against SOI in Mumbai High Court under the terms of the Contract invoking Section 9 of the Arbitration and Conciliation Act, 1996. The matter before Singapore and India are pending. ONGC, principal Contractor has suspended the Contract of Swiber and stepped into contractual commitment of Swiber for completion of balance work. The Company along with large number of affected Vendors are pursuing with ONGC for recovery of outstanding. The necessary provisions have already been made in the accounts to the above receivables.

(b) Rs. 168.48 million (Previous year Rs. 228.72 million) receivable from Sea Horse General Contracting Establishment, UAE, relating to charter hire for a vessel. During the year, the Company has entered into settlement agreement for Rs. 206.36 million, payment in installment, accordingly Rs. 22.36 million has been written off. The Company has received Rs. 37.88 million till date installment towards its part share of settlement and accordingly provision has been written back.

(c) Rs. 37.42 million (Previous year Rs. 71.30 million) receivable from Synergy Subsea Engineering LLC, UAE (‘Synergy’) relating to charter hire for a vessel. During the year, the Company has entered into settlement agreement with the M/s Synergy Sub Sea Engineering LLC Dubai for realization of outstanding dues. The Company has received Rs. 33.88 million during the year.

6 Segment Information

For management purposes, the company is organised into business units based on its services and has two reportable segments i.e Domestic and Overseas.

The chief operational decision maker monitors the operating results of its Business Segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on profit or loss and is measured consistently with profit or loss in the financial statements. The Operating segments have been identified based on geographical location of the vessel. The operating segments have been disclosed based on revenues within India and outside India.

7 Related Parties disclosure

Names of Related Party & related party relationship

i Related parties where control exist

Holding Company HAL Offshore Limited

Subsidiary Seamec International FZE

ii Related Parties with whom transactions have taken place during the year ended March 31, 2018. Refer Annexure- A

8 Earning Per Share

The following reflects the profit and share data used in the basic and diluted EPS computations:

9 Leases

Operating Lease Commitments

Office premises are obtained on operating lease / leave and license. The lease term is for the period of 1 to 9 years and renewable at the option of the Company. There are no restrictions imposed by lease arrangements. The total lease term is for a period of 108 months out of which there is a lock-in period of initial 60 months.

Minimum lease payments under non-cancellable operating lease / leave and license are as follow :

The lease fees shall be increased by 15% over the last monthly lease fee paid after completion of every 36 months from the rent commencement date of the lease deed agreement.

The management assessed that the fair value of Trade receivables, cash and cash equivalents, other Bank Balance, Other financial assets, Trade payables, Borrowings and other financials liabilities, approximate their carrying amounts largely due to the short-term maturities of these instruments. For financial assets and liabilities that are measured at fair value, the carrying amounts are equal to the fair values.

Fair Value Hierarchy

The following table provides the fair value measurement hierarchy of the company’s assets.

Quantitative disclosures fair value measurement hierarchy for assets as at March 31, 2018, March 31, 2017:

10 Gratuity and other post-employment benefit plans.

1 Defined Contribution Plans :

Amount of Rs. 1.66 million (31.03.2017 : Rs. 1.81 million) is recognised as an expense and included in Employee Benefit Expense (refer note 31) in statement of profit and Loss.

2 Defined Benefit Plans :

The Company has a defined benefit gratuity plan. Every employee (other than crew who have covered under separate scheme) who has completed five years or more of service gets a gratuity on departure at 15 days salary (last drawn salary) for each completed year of service. The scheme is funded with an insurance Company in the form of a qualifying insurance policy. The gratuity plan is governed by the Payment of Gratuity Act, 1972. Under the act, employee who has completed five years of service is entitled to specific benefit. The level of benefits provided depends on the member’s length of service and salary at retirement age. The fund has the form of a trust and it is governed by the Board of Trustees, which consists of an equal number of employer and employee representatives. The Board of Trustees is responsible for the administration of the plan assets and for the definition of the investment strategy. Each year, the Board of Trustees reviews the level of funding in the India gratuity plan. Such a review includes the asset-liability matching strategy and investment risk management policy. The Board of Trustees decides its contribution based on the results of this annual review. The Obligation of the Company is limited to the amount contributed and it has no further contractual nor any constructive obligation.

The following tables summaries the components of net benefit expense recognized in the statement of profit and loss and other comprehensive income the funded status and amounts recognized in the balance sheet for the respective plans.

Statement of Profit and Loss

Net employee benefit expense (recognised in contribution to provident, gratuity fund and other funds) (^million)

The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors, such as supply and demand in the employment market.

A quantitative sensitivity analysis for significant assumptions as at March 31, 2018 is as shown below:

* Dues to Micro, Small and Medium Enterprises have been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.

11 Financial Risk Management- Objectives And Policies

The Company’s principal financial liabilities, comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Company’s operations. The Company’s principal financial assets include loans, trade and other receivables, and cash and cash equivalents that derive directly from its operations.

The Company is exposed to market risk, credit risk and liquidity risk. The Company’s senior management oversees the management of these risks. The management assures that the Company’s financial risk activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company’s policies and risk objectives.

The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below: a Market Risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings.

The below assumption has been made in calculating the sensitivity analysis:

(1) The sensitivity of the relevant profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at March 31, 2018 and March 31, 2017.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of financial instrument will fluctuate due to change in market interest rates. The company is not exposed to any significant interest rate risk as at the respective reporting dates.

Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The company’s exposure to the risk of changes in foreign exchange rates relates primarily to the company’s operating activities (when revenue or expense is denominated in a foreign currency). Currency risk arises when future commercial transactions and recognized assets and liabilities are denominated in a currency that is not the company’s functional currency. The company’s foreign currency transactions are mainly in United State Dollars (USD).

The Company manages its foreign currency risk by natural hedging.

The following tables demonstrate the sensitivity to a reasonably possible change in USD and other exchange rates, with all other variables held constant. The impact on the company’s profit before tax is due to changes in the fair value of monetary assets and liabilities.

b Credit Risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Company is exposed to credit risk from its operating activities primarily trade receivables and from it’s financing activities, including deposits with banks, foreign exchange transactions and other financial instruments.

Trade Receivables

Outstanding customer receivables are regularly monitored. An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on exchange losses historical data. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets.

Financial Instruments and cash deposits

Credit risk from balances with banks is managed by the company’s senior management. The company’s maximum exposure to credit risk for the components of the balance sheet at March 31, 2018, March 31, 2017 is the carrying amounts as illustrated in respective notes.

c Liquidity risk

Liquidity risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from inability to sell a financial asset quickly at close to its fair value. Liquidity risk is managed by monitoring on a regular basis that sufficient funds are available to meet any future commitments.

The table below summarises the maturity profile of the company’s financial liabilities based on contractual undiscounted payments.

12 Capital management

For the purpose of the Company’s capital management, capital includes issued equity capital, share premium and all other equity reserves attributable to the equity holders of the company. The primary objective of the company’s capital management is to maximise the shareholder value.

The company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. The company monitors capital using debt equity ratio, The debt equity ratio as on March 31, 2018 is 3% (March 31, 2017: 7%)

13 Previous year figures

Previous year figures have regrouped / reclassified, where necessary, to conform to this year’s classification.

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