To
The Members of SKS Logistics Limited

Your directors have pleasure in presenting the 18th Annual Report together with the Audited accounts of the company for the financial year ended on 31st March 2008.

Income from operations during the current year was Rs. 45.93 Crores as against Rs. 40.62 crores in the previous year registering a growth of about 13% over the previous year. The gross profit of Rs. 19.33 crores registered an increase of about 14% over previous year’s Rs. 16.97 crores. This is considered significant in view of the fact that during the current year the Interest and Finance Charges have increased by Rs. 1.86 crores.

Indian Economy has been poised for major growth. It expanded by an impressive 9.2% growth during 2006-2007 and by 9% during 2007-2008. With all sectors of the economy including services sector registering robust growth rates, the Government is now targeting a sustained 9% future growth. This definitely augurs well for shipping and logistics industry as well.

The Government has also been giving boost to shipping industry and accordingly has undertaken various measures such as encouraging public and private investment in development and improvement of ports, tonnage tax, dedicated freight corridors, 100% FDI in shipping etc.

Pursuant to section 217(2AA) of the Companies Act, 1956, the Directors confirm that:

1. In the preparation of the annual Accounts, the applicable accounting standards have been followed with explanatory notes relating to material departures.
   
   
2. Appropriate accounting policies have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give true and fair view of the state of affairs of the company at the end of the financial year and the profit and loss account of the company for that year.
   
   
3. Proper and sufficient care has been taken for maintaining 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.
   
   
4. The annual accounts have been prepared on a going concern basis.

Pursuant to the notification No GSR 1029 dated 31-12-1988; companies are required to furnish prescribed information regarding conservation of energy and technology absorption. However this does not apply to your company as the shipping industry is not included in the schedule to the relevant rules. The details, however, as regards Foreign exchange earnings and out go are given below.

(a) Foreign Exchange Earned : Rs. NIL
(b) Foreign Exchange Outgo : Rs. 27.88 lacs

Mr. Tony Adam and Mr. B. B. Bhawsar retire by rotation and being eligible offer themselves for reappointment. The Board recommends their reappointment.

During the year under review, Shareholder Agreement have been signed by your company for joint venture with Inland Waterways Authority of India Limited, for acquisition, operation, management and /or maintenance of barges/ vessels on National Waterway No. 1 viz Kolkata - Pandu stretch and National Waterways No.2 viz 9 S K S LOGISTICS LTD. 18th Annual Report 2007-2008 Kolkata – Mongla stretch and Companies, Royal Logistics (Ship) Ltd. and SKS Waterways Ltd. were incorporated. The Company has also signed a Joint Venture Agreement with a Norwegian Party.

The overall economic growth coupled with removal of trade barriers resulted in growth for the Indian shipping industry. Statistics reveals that the shipping industry in general is expected to grow at 11% in the next few years. The shipping industry can be generally classified into wet bulk, dry bulk and liners. Your Company is in the coastal shipping business and operates within the territorial waters of Indian ports and provides a variety of support services. The activities in this segment can broadly be classified into providing liquid cargo lighterage operations of petroleum and chemical products, lighterage operations of bulk cargo, tug services, supply of bunkers to vessels, container feeder service on Indian coasts, water supply services and port services. The need for such services primarily is a result of ships needing to anchor away from the harbour on account of the shallow coastal waters and non availability of berths inside the port thereby needing a variety of support services. Your company specialises in transportation of container, bulk and liquid cargo in sea. The Indian freight transport system carries more than 1000 billion tonne-kilometers in India. The share of coastal shipping in this is barely 6-7% and bulk of transport takes place through rail/road transportation means. The share of coastal shipping in western countries is more than 40%. With Indian economy registering a growth of more than 9%, the freight transport demand is likely to grow to 2000 billion tonne-km in next 8-10 years. As such, there is a need for integrated transport planning accompanied by modal shifts in favour of cost efficient mode such as coastal shipping.

With a view to give much needed fillip to Indian shipping industry, the government is formulating a comprehensive National Maritime Policy, which will facilitate enhanced private investment, improve service quality and promote competitiveness. With this objective, the Department of Shipping has taken up the preparation of National Maritime Development Programme (NMDP) to complement the National Maritime Policy by implementing time bound schedule for schemes/projects for enhancing capacity and transport efficiency. The NMDP would also include a major drive for promotion of coastal shipping through various schemes such as Coastal Shipping Development Fund (CSDF) for soft lending for the purpose of acquisition of coastal vessels and Centrally Sponsored Scheme (CSS) for development of coastal shipping infrastructure.

As India continues to pursue liberalized economic regime, it is expected that industry would post a healthy growth rate in the coming years. Continuous robust economic growth accompanied by increase in domestic consumption would lead to vibrant growth especially for shipping industry in container, bulk cargo both in liquid and dry cargo segments.

The government, with a view to give boost to shipping industry, is undertaking various initiatives such as encouraging private and public investments in development of ports, tonnage tax, dedicated freight corridors, 100% FDI in shipping etc. As per the draft NMDP, the government proposes to invest Rs. 1,00,000 Crores in NMDP in the next 10 years.

All these initiatives coupled with the economic growth would translate into better opportunities for Indian Shipping Industry including the Coastal Shipping.

With certain inherent advantages i.e. mixed fleet with a focus on coastal shipping, efficient utilization of fleet, experienced personnel and innovation and diversification, that your Company has, it is expected to be benefited from this emerging scenario

Amongst the cyclical industries, the shipping industry is considered to be most cyclical with shortest buoyancy and longest recessionary periods. This is reflected in volatile freight rates. Thus, aligning with the international trends, the shipping industry in India is also exposed to perceived risks of decline in charter/freight rates from time to time.

India’s shipping industry is governed by the Ministry of Shipping and thus is exposed to risks arising from political instability and changes in government policies from time to time.

Shipping Industry being highly capital intensive, there is no assurance that additional resources would be available when needed.

The substantial upsurge in fuel costs world over in the past year has created a hindrance in the growth of the profitability of the company since fuel forms a major part of operating costs for ships.

The Company in its endeavor to minimize the risks associated with its type of business is employing competent team of professionals and is focused towards implementation of modern shore based management practices. Manning scale standards, levy of duty on oil bunkers and spares continue to be a concern.

In order to mitigate the risks the Company has taken various steps to limit the various factors that emanate risks. These factors include:

• Insurance
• Proper credit check of the client portfolio
• A judicious mix of time and voyage charters
• Supporting customers, growth and competitiveness
• Engaging in long term charter hires.

The Indian Shipping industry is poised for growth in the next few years. Your Company, with some inherent advantages such as low operational costs, committed professional manpower and proper upkeep of vessels, is expected to cash on the opportunities provided.

Your Company has since last few years taken initiatives to broaden its fleet base to minimize the risks and maximize the gains. In its effort in this regard, the Company is in talks to acquire two more vessels for international charter. With expansion of fleet the Company would be in a better position to maximize its gains from the buoyant markets.

The process of setting up dry-dock facility at Alibaug, in the state of Maharashtra, is in its final stage and the commencement of work will take place soon. The project is spread over 35 Acres of land.

The Company is converting one of the dumb barge into offshore accommodation vessel, which will accommodate nearly 500 persons and will have helipad and crane to carry out various support services in offshore field.

The Company has adequate and effective internal control systems commensurate with the size of its operations. The internal control system provides for well-documented policies, guidelines, authorizations and approval procedures and ensures optimal use of resources at its disposal.

Internal audit is being carried out extensively throughout the year in areas such as Income, Expenditure, Financial Accounting and Statutory Compliances. The primary objective of such audit is to test the adequacy and effectiveness of all internal controls laid down by the Management and to suggest improvements.

SKS Logistics Limited is committed to good corporate governance in order to enhance the shareholders’ value and promote national interest.

In order to achieve the objectives of good corporate governance, SKS Logistics Ltd follows the principles of transparency, disclosure, fairness, independent supervision, healthy competition, provision of equal opportunity in employment, political non alignment, promotion of health, safety and welfare, generation of quality service, compliance with all the relevant laws, regulations, improvement in quality of life and meeting social responsibility.

It is expected that good corporate governance by SKS Logistics Ltd would protect and enhance the trust of shareholders, customers, suppliers, financiers, employees, government agencies and the society at large.

The company has Executive Chairman. The number of independent directors is more than fifty percent of the total number of Directors.

None of the Directors on the Board is a member of more than 10 committees and Chairman of more than five committees (as specified in clause 49) across all the companies in which he is a director. The necessary disclosures regarding committee positions have been made by the Directors.

The names and categories of the Directors on the Board, their attendance at Board Meetings during the year and at the last Annual General Meeting as also the number of Directorships and Committee Memberships held by them in other companies is given in separate tables below.

A total of five meetings of the Board of Directors were held during the year under review on 27-04-07, 30-07-07, 14-08-07, 29-10-07 and 29-01-08.

The maximum time gap between two board meetings was less than four months.

Attendance of each director at the Board meetings and the last Annual General Meeting (AGM) is as under.

• To investigate any activity within its terms of reference.
  
  
• To seek information from any employee/records of the company.
  
  
• To obtain outside legal or other professional advice.
  
  
• To secure attendance of outsiders with relevant expertise, if it considers necessary.
  
  
• Overseeing Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statements are correct, sufficient and credible.
  
  
• Recommending the appointment and removal of external auditor, fixation of audit fees and also approval of payment for any other services.
  
  
• Reviewing with management quarterly/half yearly/annual financial statements before submission to the Board.
  
  
• Reviewing the adequacy of internal audit function including discussions with internal auditor any significant findings and follow up thereon.
  
  
• Discussion with external auditors before the commencement of audit, the nature and scope of audit and also to discuss the areas of concern on basis of audit findings.
  
  
• Reviewing the company’s financial and risk management policies including any other item referred to it by the Board of Directors.

• To investigate any activity within its terms of reference.
• To seek information from any employee/records of the company.
• To obtain outside legal or other professional advice.
• To secure attendance of outsiders with relevant expertise, if it considers necessary.

During the year 2007-2008 five meetings of the Audit Committee were held on the following dates:

27th April 2007, 30th July 2007, 14th August 2007, 29th October 2007 and 29th January 2008.

1. Reviewing the overall compensation policy, service agreements and other employment conditions of Managing / Wholetime Director(s)
   
2. Reviewing the performance of the Managing/Whole time director(s) and recommending to the Board the quantum of annual
   increments and annual commission.

The Non Executive Directors are paid sitting fees @ Rs 2500/ for each meeting of the Board or any committee thereof attended by them.

The compensation of Non Executive Directors is approved unanimously by the Board.

None of the Non Executive Directors has any material pecuniary relationship or transactions with the
company.

The appointment of Chairman and Managing Director and whole time director(s) is governed by resolutions passed by the Board of directors and shareholders of the company which covers the terms of such appointment and remuneration read with service rules of the company. Payment of remuneration to Chairman and Managing Director and whole time Director(s) is governed by the respective agreements executed between them and the company. Remuneration paid to Chairman and Managing Director and Whole time Director(s) is recommended by the Remuneration committee, approved by the Board and is within the limits set by the shareholders at the Annual General Meetings. The remuneration package of Chairman and Managing Director and whole time Director(s) comprises of salary, perquisites and allowances, commission and contribution to Provident and other retirement benefit funds as approved by the shareholders at the Annual General Meetings. Annual increments are linked to performance and are decided by the Remuneration Committee and recommended to the Board for approval thereof.

The remuneration policy is directed towards rewarding performance, based on review of achievements, it is aimed at attracting and retaining high caliber talent. There is no separate provision for payment of severance fees under the resolutions governing the
appointment of Chairman and Managing Director and whole time Director(s). Presently the company does not have a scheme for grant of stock options or performance linked incentives for its Directors.

The committee met 24 times during the year to discuss various matters relating to:

• Transfer/transmission/transposition of shares
• Consolidation/splitting of folios
• Issue of share certificates for lost, sub divided, consolidated, rematerialized, defaced shares
• Review of shares dematerialized and all other related matters
• Investors’ grievances and redressal mechanism and recommend measures to improve the level of investor services

1. At the last Extra Ordinary General Meeting held on 09.01.2007 the company obtained approvals of shareholders by passing Special Resolutions (a) for change of name of the Company from SKS Logistics Limited to SHAHI LOGISTICS LIMITED. (b) for revision in the remuneration payable to Capt. Walter Gonsalves,
   Whole time Director.
2. At the EGM held on 29th May 2007, an amendment to object clause by addition of the following object “acquisition of barges with power plants”
   
   
3. At the 17th Annual General Meeting held on 27.09.2007, Cmde M. Bhada and Capt. Walter Gonsalves were reappointed as Directors.
   
   
4. At the 16th Annual General Meeting held on 22.09.2006 the company obtained approval of share holders by passing Special Resolution for revision in the remuneration payable to Mr. S.K. Shahi, Chairman & Managing Director.
   
   
5. At the 15th Annual General Meeting held on 28.09.2005 the following Special Resolutions were passed (a) amending the Main Object Clause of Memorandum of Association of the Company (b) appointing Capt. Walter Gonsalves as a Whole Time Director. The Resolution at (a) was passed with requisite majority through Postal Ballot and resolution at (b) was passed unanimously.
   
6. At the 14th Annual General Meeting held on 29.09.2004 the following Special Resolutions were passed (a) Increasing the Authorised Share Capital (b) Alteration of Articles of Association consequent to increase in the Authorized Share Capital (c) Enabling resolution for issue of further shares. The said resolutions were passed unanimously.

The company has made investments in various entities in the past as a result of which subsidiaries have been created. The details of the same are provided in Directors’ Report.

There is however no material non listed Indian subsidiary whose turnover or net worth (paid up capital and free reserves) exceeds 20% of the consolidated turnover or net worth respectively of the listed holding company and its subsidiary companies in the immediately preceding accounting year.

During the last three years, no penalty or strictures have been imposed on the Company by the Stock Exchange/ SEBI/Statutory Authorities on matters related to capital markets.

There are no materially significant related party transactions i.e. transactions of the Company of material nature, with its promoters, directors or the management, their subsidiaries or relatives etc. that may have potential conflict with the interests of the Company at large, except as reported elsewhere in the report/accounts.

The Company has not issued any GDRs/ADRs/Warrants or any convertible instruments during the year and there are no such instruments which are outstanding as of the date of this Report.

The Company has complied with the mandatory requirements and has not adopted any non-mandatory requirement of Clause 49 of the Listing Agreements.

The Securities and Exchange Board of India (SEBI) has, effective February 20, 2002, introduced amendments to the existing Insider Trading Regulations of 1992 which require new action steps by the corporate and market intermediaries for the purpose of prevention of Insider Trading.

Pursuant to the above requirements of SEBI (Prohibition of Insider Trading) Regulations, 1992 as amended, the company has adopted a “Code of Conduct for Prevention of Insider Trading”. The code is applicable to all the Directors and such designated employees who are expected to have access to unpublished price sensitive
information relating to the company.

Mr. A. Thanthoni Rao, Company Secretary is the compliance officer for adherence to the Regulations.

The statutory auditors have certified that the company has complied with the conditions of Corporate Governance as stipulated in clause 49 of the listing agreement with the stock exchange and the same is annexed to the Directors Report and Management Discussion and Analysis.

The certificate from the auditors will be sent to the stock exchange where company’s shares are listed.