1. Significant accounting policies
a) Basis of preparation
The financial statements of the Company have been prepared in accordance with Indian Accounting Standards (hereinafter
referred to as Ind-AS) notified under section 133 of Companies Act, 2013 read with Companies (Indian Accounting Standards)
Rules, 2015 and other relevant provisions of the Act.
The company’s presentation and functional currency is Indian Rupees. All amounts in these financial statements, except per
share amounts and unless as stated otherwise, have been rounded off to two decimal places and have been presented in
crore.
All accounting policies used in the preparation of these financial statements are consistent with those used in the previous
year.
Authorisation of Financial Statements: The Financial Statements were authorized for issue in accordance with a
resolution of the Board of Directors in its meeting held on 29th May, 2025.
Historical cost convention
The financial statements have been prepared on a historical cost basis, except for the following assets and liabilities which have
been measured at fair value amount:
• Certain financial assets and liabilities (including derivative instruments) and
• Defined Benefit Plans - Plan assets.
Going concern basis of accounting
These accounts have been prepared on a going concern basis.
In assessing the Company’s going concern status, the Management has taken account of:
• the financial position of the Company;
• anticipated future business performance;
• Expected settlement with lenders;
• its capital investment plans;
• the likelihood of any material adverse legal judgments.
Refer Note 28 for further details.
b) Use of estimates
The estimates and judgments used in the preparation of the financial statements are continuously evaluated by the Company
and are based on historical experience and various other assumptions and factors (including expectations of future events)
that the Company believes to be reasonable under the existing circumstances. Differences between actual results and
estimates are recognised in the period in which the results are known/materialised. The management believes that the
estimates used in the preparation of financial statements are prudent and reasonable.
The said estimates are based on the facts and events, that existed as at the reporting date, or that occurred after that date
but provide additional evidence about conditions existing as at the reporting date.
Critical estimates and judgments
This note provides an overview of the areas that involved a higher degree of judgment or complexity, and items which are
more likely to be materially adjusted due to estimates and assumptions turning out to be different than those originally
assessed. Detailed information about each of these estimates and judgments is included in relevant notes together with
information about the basis of calculation for each affected line item in the financial statements.
The areas involving critical estimates or judgment are:
Estimation of Defined benefit obligation - refer note 10
Estimation of current tax expenses and Payable - refer note 19
Useful lives of property, plant and equipment- refer note 2
Impairment of investments in subsidiaries & associate - refer note 3 and 18
Going Concern- refer note 28
Contingent Liabilities - refer note 22
Fair Value measurement of financial instrument - refer note 20
c) Current versus non-current classification
The company presents assets and liabilities in the standalone balance sheet based on current/ non-current classification.
All the assets and liabilities have been classified as current/non-current as per the Company’s normal operating cycle and
other criteria set out in Division II to Schedule III of the Companies Act, 2013.
The operating cycle is the time between the acquisition of assets for processing and their realisation in cash or cash
equivalents. Based on the nature of activities of the Company and the normal time between acquisition of assets and their
realisation in cash or cash equivalents, the Company has determined its operating cycle as 12 months for the purpose of
classification of its assets and liabilities as current and non-current.
d) Property, plant and equipment
Freehold land is carried at historical cost. All other items of property, plant and equipment (PPE) are stated at cost less
accumulated depreciation and impairment losses, if any. Historical cost includes expenditure that is directly attributable to
the acquisition of the item.
The cost of an item of PPE comprises its purchase price net of any trade discounts and rebates, any import duties and other
taxes (other than those subsequently recoverable from the tax authorities), any directly attributable expenditure including
brokerage and start-up costs on making the asset ready for its intended use, other incidental expenses and interest on
borrowings attributable to acquisition of qualifying assets up to the date the asset is ready for its intended use.
Subsequent expenditure is capitalized only if it is probable that the future economic benefits associated with the expenditure
will flow to the Company.
When significant parts of PPE are required to be replaced at intervals, company depreciates them separately based on their
specific useful lives.
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when
no future economic benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset
(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the
income statement when the asset is derecognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial
year end and changes if any are accounted in line with revisions to accounting estimates.
Capital Work in Progress:
Capital work in progress is stated at cost, net of impairment losses, if any.
Depreciation:
Depreciation on PPE is provided as per straight line method as per the useful life prescribed in Schedule II of the Companies
Act, 2013
Assets costing less than ' 5,000/- are fully depreciated in the year of capitalization. Depreciation on additions/deductions to
PPE made during the year is provided on a pro-rata basis from / up to the date of such additions /deductions, as the case
may be.
The property plant and equipment acquired under finance lease is depreciated over the asset’s useful life or over the shorter
of the asset’s useful life and the lease term if there is no reasonable certainty that the Company will obtain ownership at the
end of the lease term.
e) Borrowing costs
General and specific borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset
are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Borrowing
costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time
to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the
period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing
of funds. Borrowing cost also includes exchange differences to the extent regarded as an adjustment to the borrowing costs.
f) Leases
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time
in exchange for consideration.
As a lessee
(A) Lease Liability
At the commencement date, the Company measures the lease liability at the present value of the lease payments that
are not paid at that date. The lease payments shall be discounted using incremental borrowing rate.
(B) Right-of-use assets
Initially recognised at cost, which comprises the initial amount of the lease liability adjusted for any lease payments
made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives.
Subsequent measurement
(A) Lease Liability
Company measure the lease liability by (a) increasing the carrying amount to reflect interest on the lease liability; (b)
reducing the carrying amount to reflect the lease payments made; and (c) remeasuring the carrying amount to reflect
any reassessment or lease modifications.
(B) Right-of-use assets
Subsequently measured at cost less accumulated depreciation and impairment losses. Right-of-use assets are
depreciated from the commencement date on a straight line basis over the shorter of the lease term and useful life of
the under lying asset.
Short term lease:
Short term lease is that, at the commencement date, has a lease term of 12 months or less. A lease that contains a
purchase option is not a short-term lease. If the company elected to apply short term lease, the lessee shall recognise the
lease payments associated with those leases as an expense on either a straight-line basis over the lease term or another
systematic basis. The lessee shall apply another systematic basis if that basis is more representative of the pattern of the
lessee’s benefit.
As a lessor
Leases for which the company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All
other leases are classified as operating leases.
Lease income is recognised in the statement of profit and loss on straight line basis over the lease term.
Transition to Ind AS 116
Ministry of Corporate Affairs (“MCA”) through Companies (Indian Accounting Standards) Amendment Rules, 2019 and
Companies (Indian Accounting Standards) Second Amendment Rules, has notified Ind AS 116 Leases which replaces the
existing lease standard, Ind AS 17 leases, and other interpretations. Ind AS 116 sets out the principles for the recognition,
measurement, presentation and disclosure of leases for both lessees and lessors. It introduces a single, on-balance sheet
lease accounting model for lessees.
The Company has adopted Ind AS 116, effective annual reporting period beginning 1st April, 2019 and applied the standard
prospectively to its leases.
g) Impairment of non-financial assets
Non-financial assets other than inventories are reviewed at each standalone balance sheet date to determine whether
there is any indication of impairment. If any such indication exists, or when annual impairment testing is required for an
asset or group of Assets, called Cash Generating Units (CGU), the recoverable amount of an asset or CGU is estimated to
determine the extent of impairment, if any. When it is not possible to estimate the recoverable amount of an individual asset,
the Company estimates the recoverable amount of the CGU to which the asset belongs.
An impairment loss is recognised in the Statement of Profit and Loss to the extent, asset’s carrying amount exceeds its
recoverable amount. In case of non-financial assets company estimates asset’s recoverable amount, which is higher of
an asset’s or Cash Generating Units (CGU’s) fair value less costs of disposal and its value in use. Recoverable amount
is determined for an individual asset, unless the asset does not generate cash flows that are largely independent of those
from other assets or group of assets. Value in use is based on the estimated future cash flows, discounted to their present
value using pre-tax discount rate that reflects current market assessments of the time value of money and risk specific to
the assets.
The impairment loss recognised in prior accounting period is reversed if there has been a change in the estimate of
recoverable amount.
h) Valuation of Inventory
Cost of Inventories includes all charges in bringing the inventories to their present location and condition, including octroi
and other levies, transit insurance and receiving charges and excluding rebated and discounts, if any. Inventories are
valued at the lower of cost determined on first-in-first-out basis and the net realisable value after providing for obsolescence
and other losses, where considered necessary. Net realisable value is the estimated selling price in the ordinary course of
business.
i) Revenue recognition
Fleet operating & chartering earnings represent the value of charter hire earnings, demurrage, freight earnings and fleet
management fees, and are accounted on accrual basis in accordance with Ind AS 115. Freight earnings are recognised on
a pro-rata basis for voyages in progress at standalone balance sheet date after loading of the cargo is completed and Bill
of Lading is obtained. Revenues and related expenses for voyages where cargo has not been loaded as on the standalone
balance sheet date are deferred and recognised in the following year. Normal credit period generally does not exceed 20-30
days.
The Company recognises revenue from contract with customers based on a five-step model as set out in Ind AS 115:
Step 1. Identify Contracts with a customer: A contract is defined as an agreement between two or more parties that creates
enforceable rights and obligations and sets out the criteria for every contract that must be met.
Step 2. Identify performance obligations in the contract: A performance obligation is a promise in a contract with a customer
to transfer a good or service to the customer.
Step 3. Determine the transaction price: The transaction price of services rendered is net of variable consideration on
account of various discounts and schemes offered by the Company as a part of contract.
Step 4. Allocate the transaction price to the performance obligations in the contract: For a contract that has more than
one performance obligation, the Company allocates the transaction price to each performance obligation in an amount
that depicts the amount of consideration the Company expects to be entitled in exchange for satisfying each performance
obligation.
Step 5. Recognise revenue when (or as) the Company satisfies a performance obligation.
Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined
terms of payment and excluding taxes or duties collected on behalf of the government.
Supervision and Management Fees
Revenue from sale of services is recognized on accrual basis as and when the related services are rendered as per the
terms of the contract with the customer.
Interest income
Interest income is recognised on a time proportion basis taking into account the amount outstanding and the rate applicable.
For all debt instruments measured either at amortised cost or at fair value through other comprehensive income (FVTOCI),
interest income is recorded using the effective interest rate (EIR).
Dividend income
Dividend income is accounted for when the right to receive the same is established, which is generally when shareholders
approve the dividend.
Insurance Claims
Insurance claims are accounted for on the basis of claims admitted / expected to be admitted and to the extent that the
amount recoverable can be measured reliably and it is reasonable to expect ultimate collection.
Other Income
Other income is accounted for on accrual basis except where the receipt of income is uncertain in which case it is accounted
for on receipt basis.
j) Fleet operating expenses
All expenses relating to the operation of the fleet including crewing, insurance, stores, bunkers, charter hire and special survey
costs, are expensed under fleet operating expenses on accrual basis. Dry-docking expenses are amortised over 30 months.
k) Employee benefits
i) Short term employee benefits
The undiscounted amount of short-term employee benefits expected to be paid in exchange for the services rendered
by employees is recognised during the period when the employee renders the services. These benefits include
compensated absences such as paid annual leave, and performance incentives.
ii) Long term employee benefits
Compensated absences which are not expected to occur within twelve months after the end of the period in which the
employee renders the related services are recognised as a liability at the present value of the defined benefit obligation
determined actuarially by using Projected Unit Credit Method at the standalone balance sheet date.
iii) Post employment benefit plan
The Company (employer) and the employees contribute a specified percentage of eligible employees’ salary- currently
12%, to the employer established provident fund “Essar Shipping Limited Employees Provident Fund” set up as an
irrevocable trust by the Company. The Company is generally liable for annual contributions and any shortfall in the fund
assets based on government specified minimum rates of return - currently @ 8.5%, and recognises such provident
fund liability, considering fund as the defined benefit plan, based on an independent actuarial valuation carried out at
every statutory year end using the Projected Unit Credit Method.
Provision for gratuity for floating staff is made as under:
(i) For offshore officers on actuarial valuation.
(ii) For offshore crew on accrual basis as per rules of the National Maritime Board and is charged to the Statement of
Profit and Loss.
Contribution to defined contribution retirement benefit schemes are recognised as expense in the Statement of Profit
and Loss, when employees have rendered services entitling them to contributions.
For defined benefit schemes, the cost of providing benefits is determined using the Projected Unit Credit Method, with
actuarial valuations being carried out at each standalone balance sheet date. Actuarial gains and losses are recognised
in full in Other Comprehensive Income, for the period in which they occur. Past service cost is recognised immediately
to the extent that the benefits are already vested, and is otherwise amortised on a straight line basis over the average
period until the benefits become vested.
The retirement benefit obligation recognised in the standalone balance sheet represents the present value of the
defined benefit obligation and is adjusted both for unrecognised past service cost, and for the fair value of plan assets.
Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future
contributions to the scheme, if lower.
iv) Employee Options
The fair value of the options granted under the value of the Company, Employee Option Plan is recognised as employee
benefits expense with the corresponding increase in equity. The total amount to be expensed is determined by the
reference to the fair value of the options granted:
- including any market conditions (e.g., the Company’s share price)
- excluding the impact of any service and non-market performance vesting conditions (profitability, sales growth
targets and remaining an employee of the Company over the specified period), and
- including the impact of any non-vesting conditions (e.g. the requirement for the employee to save or holding shares
for the specific period of time)
The total expense is recognised over the vesting period, which is the period over which all the specified vesting
conditions are to be satisfied. At the end of each period, the Company revises its estimate of the number of options that
are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision
to original estimates, if any, in profit or loss, with the corresponding adjustments to equity.
l) Foreign currencies
(i) Functional and presentation currency
The Company’s financial statements are presented in Indian Rupee (INR), which is also the Company’s functional and
presentation currency.
(ii) Transaction and balances
Transactions in foreign currencies are translated into functional currency using the exchange rate at the dates of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation of monetary assets and liabilities denominated in foreign currencies at the yearend exchange rates
are generally recognised in Statement of Profit and loss. They are deferred in Equity if they relate to qualifying cash
flow hedges. A monetary item for which settlement is neither planned nor likely to occur in the foreseeable future is
considered as a part of the Company’s net investment in that foreign operations.
Foreign exchanges differences regarded as adjustments to borrowing costs are presented in the statement of Profit and
loss, within finance cost. All other foreign exchange gains and losses as presented in the Statement of Profit and loss on a
net basis within other gains / (losses).
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when
the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated
in line with the recognition of the gain or loss on the change in fair value of the item (i.e. translation differences on items
whose fair value gain or loss is recognised in OCI or Statement of Profit and Loss are also recognised in OCI or Statement
of Profit and Loss, respectively).
In case of an asset, expense or income where a non-monetary advance is paid/received, the date of transaction is the date
on which the advance was initially recognised. If there were multiple payments or receipts in advance, multiple dates of
transactions are determined for each payment or receipt of advance consideration.
Non-monetary items that are measured in terms of historical cost in a foreign currency, are translated using exchange rates
on dates of initial recognition.
Exchange differences relating to Long term foreign currency monetary items are accounted in terms of para D13AA of Ind-
AS 101 as under:
(i) In so far as they relate to the acquisition of a depreciable capital asset, such differences are added to/deducted from
the cost of such capital asset and depreciated over the balance useful life of the asset
(ii) In other cases, such differences are accumulated in “Foreign currency Monetary Items Translation differences account
and amortised in the statement of Profit and loss over the balance useful life of the long term foreign currency monetary
item.
m) Investment in Subsidiaries and Associates
Investments in subsidiaries and associates are recorded at cost and reviewed for impairment at each reporting date.
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