Varun Shipping reports 59% growth profit

Mumbai: Varun Shipping, which reported a 59 per cent growth in its full year profit, made a Rs 62-crore provision for foreign exchange losses.

“This is a notional figure and not realised in actual,” said Mr Yudhisthir Khatau, Managing Director of the company.

Under Accounting Standard 11, companies are allowed to account for foreign exchange gains and losses into profit and loss account.

The company reported a net profit of Rs 225.8 crore for the year ended March 31, 2008, against Rs 141.3 crore for the corresponding period last year on account of improved freight and charter hire income, particularly in the offshore sector.

In a note to stock exchanges Varun Shipping said, “In the opinion of the management, considering the wide fluctuations in US dollar to Indian rupee exchange rate parity which may prevail at the time of repayment of foreign currency loans taken for acquisition of ships, and as a matter of prudence and abundant caution, a provision of Rs 50 crore is made.” Remaining Rs 12 crore is included as impairment loss on certain ships due to exchange rate variation.

Replying to a question that this situation would not be unique to Varun Shipping and would imply to all shipping companies, Mr Khatau explained, “Our forex loans are higher in percentage terms compared with other companies. We are a fast expanding company and, therefore, this fluctuation impacts us more. This (Rs 62 crore) is not a realised amount but a conservative stand taken by the company as this provision.”

He added that the current ratio of debt and equity stands at 2.3:1 with a loan amount of Rs 2,200 crore.

Total income of Varun for the year ended grew by 29 per cent to Rs 937 crore (Rs 724 crore).

Varun Shipping, primarily into shipping activity did not report results for the fourth quarter ended March 31, 2008, as the company has announced audited results for the full financial year. The total net profit for the last three quarters as reported to stock exchanges, amounted to Rs 258 crore. Against this, the full year profit is only Rs 225.8 crore.

The company proposes to invest $300 million in the current fiscal to acquire four more vessels, said Mr Khatau.

He said these vessels will be used in offshore oil and gas operations and the acquisition will be complete by end of the financial year 2009.

Varun currently has a fleet of 21 vessels and has already invested $100 million to acquire a vessel earlier this year. Mr Khatau said, “of the total investment of $300 million, $50 million will come from internal accruals, while the rest will be raised through debt”.