INDEPENDENT AUDITORS’ REPORT

To,

The Members of

THE SHIPPING CORPORATION OF INDIA LIMITED 1. Report on the Standalone Financial Statements

We have audited the accompanying standalone financial statements of The Shipping Corporation of India Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2018, the Statement of Profit and Loss and the Cash Flow Statement and the Statement of Changes in Equity for the year then ended, and a summary of significant accounting policies and other explanatory information.

2. Management’s Responsibility for the Financial Statements The Company's Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance, changes in equity and cash flows of the Company in accordance with accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 3 of the Companies (Accounts) Rules, 2015, Companies (Indian Accounting Standards) (Amendment) Rules, 2016 and Companies (Indian Accounting Standards) (Amendment) Rules, 2017.

This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial control, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

3. Auditors’ Responsibility

Our responsibility is to express an opinion on these standalone financial statements based on our audit. We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made there under. We conducted our audit in accordance with the Standards on Auditing, issued by the Institute of Chartered Accountants of India, as specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors’ considered internal financial control relevant to the Company's preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Company's Directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Standalone financial statements.

4. Opinion

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid Standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2018, and its profit (financial performance including other comprehensive income), its cash flows and the changes in equity for the year ended on that date.

5. Emphasis of Matter:

We draw attention to the following:

i. Trade Receivables and ‘Agents balances’ are subject to the balance confirmations, Subsequent reconciliation and consequential adjustments, if any, as on March 31, 2018.

ii. The direct access of certain overseas foreign agents to funds, collected on account of freight and other charges, without adequate security and regular monitoring mechanism is prone to risk of non /short-payment.

iii. As mentioned in the Note No. 41 to the Financial Statements, the revision in the method of allocation of Management Overheads is in the process of approbation with the respective customers.

Our Opinion is not qualified in respect of this matter.

6. Report on Other Legal and Regulatory Requirements

I. As required by the Companies (Auditors’ Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of sub-section (11) of section 143 of the Act, we give in the “Annexure A”, a statement on the matters specified in paragraphs 3 and 4 of the Order, to the extent applicable.

As required under sub section (5) of Section 143 of the

Act, in case of the Government Company, we give in the “Annexure B” a statement on the matters specified in the directions and sub -directions issued by Office of the Comptroller and Auditor General of India.

II. As required by section 143(3) of the Act, we report that:

a) We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;

b) In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books;

c) The Balance Sheet, the Statement of Profit and Loss, the Cash Flow Statement and Statement of Changes in Equity dealt with by this Report are in agreement with the books of account;

d) In our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under section 133 of the Act, read with Rule 3 of the Companies (Accounts) Rules, 2015, Companies (Indian Accounting Standards) (Amendment) Rules, 2016 and Companies (Indian Accounting Standards) (Amendment) Rules, 2017;

e) As per Notification No. G.S.R. 463 (E) dated June 5th,2015 issued by Ministry of Corporate Affairs,

Section 164 (2) as regards the ‘Disqualifications of Directors’ is not applicable to the Company, since it is a Government Company;

f) With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our Standalone Report in “Annexure C” to this Report;

g) With respect to the other matters to be included in the Auditors’ Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014 and as amended from time to time, in our opinion and to the best of our information and according to the explanations given to us:

i. The company has disclosed the impact of the pending litigations on its financial position in its financial statements (Refer Note 28 to the financial statements).

ii. The Company does not have any material foreseeable losses on long-term contracts including derivative contracts.

iii. There were no delays in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company.

“Annexure A” to Independent Auditors’ Report

(Referred to in paragraph I under ‘Report on Other Legal and Regulatory Requirements’ section of our Independent Auditors’ Report to the members of the Company on the Financial Statements for the year ended March 31, 2018)

(i) a) The Company has maintained proper records showing full particulars including quantitative details and situation of fixed assets.

b) As per the information and explanations given to us, the fixed assets have been physically verified by the management at reasonable intervals, which in our opinion is reasonable, having regard to the size of company and nature of its business.

c) According to the information and explanations given to us and on the basis of our examination of records of the company, the title deeds for all immovable properties are held in the name of the Company, except as mentioned in the Table No.1, for which no records were made available to us for verification.

Table No. 1 (Amount in lakhs)

(ii) The physical verification of inventories has been conducted at reasonable intervals by the management during the year. No material discrepancies were noticed on such verification.

(iii) The Company have granted loans to four Body Corporates covered in the register maintained under section 189 of the Act.

a) The terms and conditions of the grant of such loans are prima facie not prejudicial to the company’s interest.

b) In the case of the loans granted, the terms of arrangements do not stipulate any repayment schedule and the loans are repayable on demand. Payment of interest has been stipulated, and the receipts thereof are regular.

c) There are no overdue amounts for more than ninety days in respect of the loans granted.

(iv) According to information and explanation given to us and in our opinion, the Company has not advanced loans to the Directors/ to a Company in which the Directors are interested to which the provisions of section 185 of the Act apply. The Company has complied with the provision of Section 186 to the extent applicable.

(v) In respect of deposits accepted, in our opinion and according to the information and explanations given to us, directives issued by the Reserve Bank of India and the provisions of section 73 to 76, of the Act, or any other relevant provisions of the Act, and the rules framed there under, are not applicable and hence not commented upon.

(vi) To the best of our knowledge and as explained, the Central Government has not specified the maintenance of cost records under clause 148(1) of the Companies Act, 2013, for the Company, and therefore the provisions of clause (vi) of the order are not applicable to the company.

(vii) a) According to the records of the Company verified by us, we report that the Company is generally regular in payment of undisput ed statutory dues including Provident Fund, Employees’ State Insurance, Income Tax, Sales Tax, Service Tax, Duty of Customs, Duty of Excise, Value Added Tax, Cess and other statutory dues with the appropriate authorities.

According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, employees’ state insurance, income tax, service tax and other statutory dues were in arrears as at March 31, 2018 for a period of more than six months from the date they became payable.

b) According to the information and explanations given to us, there are no dues, of duty, of Customs and Excise, which have not been deposited with the appropriate authorities on account of any dispute. However, according to information and explanation given to us, the following dues in respect of Income Tax, Sales Tax, Service Tax and Value Added Tax which have not been deposited on account of dispute:

Amount (Rs. in Lakhs)

(viii) According to the information and explanations given to us, we are of the opinion that the company has not defaulted in repayment of loans or borrowings to financial institutions and banks. The company has not issued any debentures.

(ix) The Company has raised the money from the follow up proceeds in the earlier years. Out of the unutilized proceeds amounting to Rs. 29,628 Lakhs as on March 31, 2017 the company has utilized Rs.16,243 Lakhs during the year for the purpose for which it has been raised. However, balance amounting to Rs. 13,385 Lakhs as on March 31, 2018 have not been utilized and kept in a Fixed Deposit pending utilization. In our opinion, the term loans have been applied for the purpose for which those have been raised.

(x) We report that certain complaints have been received by the vigilance division of the company for the reporting period for which the investigations are under process. We have neither come across any instance of fraud by the company or any fraud on the company by its officer or employees noticed or reported during the year nor have been informed of any such case by the management.

(xi) The Company is a Government Company, and the provisions of section 197 are not applicable to the company. Therefore, clause (xi) of the said order is not applicable to the company.

(xii) In our opinion the company is not a Nidhi Company. Therefore, clause (xii) of the said order is not applicable to the company.

(xiii) According to the information and explanations given by the management, transactions with the related parties are in compliance with sections 177 and 188 of Companies Act, 2013 where applicable and the details have been disclosed in the financial statements etc., as required by the applicable accounting standards.

(xiv) The company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year under review and therefore clause (xiv) of the said order is not applicable to the company.

(xv) The company has not entered into any non-cash transactions with the directors or persons connected with him and therefore the clause (xv) of the said order is not applicable to the company.

(xvi) According to the information and explanation provided by the management, the company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934.

Sub-directions under Section 143(5) of the Companies Act, 2013 in respect of the Shipping Corporation of India Limited for the year

2017-18

Annexure-‘1’ to the Directions issued under section 143 (5) of the Companies Act, 2013.

“Annexure C” to Independent Auditors’ Report

(Referred to in paragraph II (f) under ‘Report on Other Legal and Regulatory Requirements’ section of our report)

Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)

To the Members of ‘The Shipping Corporation of India Limited’

In conjunction with our audit of the standalone financial statements of The Shipping Corporation of India Limited (“the Company”) as of and for the year ended March 31, 2018, we have audited the Internal Financial Controls over financial reporting of the Company as of that date.

Management’s Responsibility for Internal Financial Controls

The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (‘ICAI’). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.

Auditors’ Responsibility

Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Act, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India.

Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.

Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.

Meaning of Internal Financial Controls over Financial Reporting

A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that:

(1) pertains to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and

(3) Provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Inherent Limitations of Internal Financial Controls over Financial Reporting

Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Qualified Opinion

According to the information and explanation given to us and based on our audit, the following material weaknesses have been identified in the operating effectiveness of the Company’s internal financial control over financial reporting as at March 31, 2018.

a) The timely updating and monitoring of the data, with respect to Fleet Personnel, needs to be strengthened. Maker checker concept in case of initial entering of the floating staff data needs to be strengthened.

b) The control on the booking of bunker consumption to the correct voyage of the vessels needs to be strengthened. Also, timely updating of telegrams should be followed to avoid delays in booking of Bunker Consumption.

c) Legacy balances should be reconciled.

d) The control in the system, to ensure that the bunker consumption in case of time charter is recovered from the charterer instead of debiting to the consumption account needs to be further strengthened.

e) The system has to ensure that the tax is deducted at source on all the provision for expense made.

f) Maker Checker concept with respect to preparation and raising of Invoices to the Customers’ needs to be strictly followed.

g) System of monitoring and clearing of Vendors Accounts and Clearing Accounts needs to be followed on timely basis.

h) FDA’s and PDA’s reconciliation needs to be done on timely basis.

i) Expenses booking in the correct profit centres needs to be further strengthened. j) Forex Valuation system needs to be strengthened.

In our opinion, the Company has, in all material respects, maintained adequate internal financial controls over financial reporting as of March 31, 2018 based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India and except for the possible effects of the material weaknesses described above on the achievement of objectives of the control criteria, the internal financial controls over financial reporting of the company were operating effectively as at March 31, 2018. We have considered the material weaknesses identified and reported above in determining the nature, timing and extent of audit tests applied in our audit of the financial statements of the company as of March 31, 2018 and these material weaknesses do not affect our opinion on the Standalone Financial statements of the Company.

For GMJ & Co. For G. D. Apte & Co.

Chartered Accountants Chartered Accountants

FRN: 103429W FRN: 100515W

CA Sanjeev Maheshwari CA Chetan. R. Sapre

Partner Partner

ICAI Membership No. 38755 ICAI Membership No. 116952

Place: Mumbai Place: Mumbai

Date: 23^rd May, 2018 Date: 23^rd May, 2018