seamec ltd Management discussions

1. INDUSTRY STRUCTURE AND OUTLOOK OIL & GAS:

The oil and gas Industry is not new to surprise, disruption and price volatility but the situation is unique today. With war in Ukraine and subsequent boycott of Russian gas to a great extent, a sort of trilemma was created - Energy Security, Supply diversification and low carbon transactions. The biggest unknown factor impacting prices now in this geo-political risk in Ukraine and cascading effect around the world. In this context, for the oil & gas sector, 2023 appears to be a year of opportunity as well as uncertainty. In the absence of any flare up event, there are several compelling reasons for oil prices to stay in an upbeat mood. Natural gas has tremendous potential to further clean energy transactions over the coming year. The Industry continues to make significant progress in reducing carbon and methane emission from natural gas production. Europe and US are implementing policies incentivizing natural gas investments. Decision making has shifted from phasing out natural gas to reducing emission from this energy source while cleaner alternatives are developed and deployed.

Adequate investment is needed for stable markets now and in future. If investments fall short, high prices and high volatility could become a new standard. Underinvestment threatens to undermine energy sector security in the short and medium term, and it can also stall progress on climate goals by increasing reliance on more carbon incentive options in short term.

In India, the Oil & Gas sector is among the eight core industries and plays a major role in influencing the decision making for all the other important sections of the economy.

India s economic growth is closely related to its energy demand, therefore, the need for Oil and Gas commodities is projected to increase, thereby making the sector quite conducive for investment.

Energy demand of India is expected to grow faster than energy demand of all major economies globally on the back of continuous robust economic growth. The countrys share in global primary energy consumption is projected to increase two fold by 2035.

While Oil & Gas Companies recognize geopolitical and macro-economic uncertainty in the year ahead, they have also given a clear mandate to secure adequate (O&G) supply in short term while transiting to cleaner energy in long term.

The Government has adopted several policies to fulfill increasing energy demand. It has allowed Foreign Direct Investment in many segments of sectors including natural gas, petroleum products and refineries. This has resulted in increase of FDI inflows in India significantly. ONGC has announced plans to invest USD 4 billion from FY 2022 to 2025 to increase its exploration efforts in India. In Union Budget 2022-2023, Government of India provided concession in heavy feed stocks and critical chemicals used in Refinery segment.

2. OPPORTUNITIES AND THREATS

SEAMEC continues as a leading player in the offshore oilfields providing services through its owned and operated Multi Support Diving vessels. As a market leader, SEAMEC understands the market dynamics and adopts all required steps to retain its position as a prominent player. As a part of process, addition of new Assets are made to enhance the Fleet Strength to desired level.

Age restrictions of Diving Vessels remain as a threat. Strategic planning has been made for the acquisition of a new Fleet. This has become essential as ONGC has come up with Age restrictions in new tender. Older Tonnage have respite to operate for few more years. These vessels are well maintained and are rendering commendable services to the clients satisfaction. These will be utilized in line with regulatory requirements before phasing out. During the year, SEAMEC added another DSV in its fleet, named SUBTECH SWORDFISH, to strengthen its fleet and ensure stronghold over its market. SEAMEC continues to evaluate opportunities of buying some more DSVs in the coming year to ensure that its fleet is in compliance with the "Age norm" requirement in place as well as remain ahead of curve against upcoming regulations.

SEAMEC has a diverse mix of assets in its portfolio viz; Diving Support Vessel (DSV), Accommodation Barge and Bulk Carriers. On a confident note, SEAMEC looks forward to augmenting its growth in terms of owning additional assets and suitable utilization, earning and profit its progress year by year. On Bulk Carrier front, management decided to keep all Bulk Carriers under the umbrella of its overseas subsidiaries and accordingly one Bulk Carrier owned by SEAMEC brought under its Wholly Owned Subsidiary in Dubai.

In Bulk Market, the Atlantic Bulk market had been pressure in end 2022 with most stems covered until mid-January 2023, resulting softer rates mainly due to less activity. The Bulk Carrier market is picking up gradually having increase movement of cargo in coal grains and minerals complementing to the requirement of different types of Bulk Carrier.

The long-term prospect of dry bulk market is poised to be encouraging. Looking forward from the second half of 2023 onwards to 2024, further improvements in the bulk market is likely to materialize on the back of more positive underlying supply demand fundamentals. As a strategic diversion, the Company has set up a Venture Company venturing into tunnel construction jobs and other EPC contracts. Joint Venture Companys maiden execution is underway. This new line of business gives new experience and with initial struggling, now being overcome. The Company objectively pursuing to explore the immense opportunities to its advantage.

3. BUSINESS SEGMENT ANALYSIS

The business segment for the Company during the year under review has been the offshore segment in domestic market and bulk carrier operations in overseas boundaries.

The performance of the Company and segment reporting are presented in the financial statements and notes annexed thereto.

4. FINANCIAL PERFORMANCE

F or meaningful comparison, the pertinent standalone financial parameters are provided below:

Particulars	FY 2022-23	FY 2021-22
Total Income	41,449	33,775
Operating Expenses	28,333	19,128
Operating Profit	13,116	14,647
Operating Profit Margin	0.32	0.43
Interest Expenses	329	336
Depreciation	9,267	6,624
Profit / (Loss) before Tax & exceptional item	3,520	7,687
Exceptional item (income)		-

Particulars	FY 2022-23	FY 2021-22
Profit / (Loss) before Tax	3,520	7,687
Tax Expenses	(608)	112
Profit / (Loss) after Tax	4,128	7,575
Net Profit Margin	0.09	0.22
Debtor/Sales	5.60	5.14
Creditor/Purchase	5.67	10.35
Inventory / Turnover	6.84	6.23
Current Ratio	1.66	3.47
Debt Equity Ratio	0.08	0.10
Net worth	68,695	64,592
Interest Coverage Ratio	11.70	23.91

 

Note:With respect to details of significant changes in key financial ratios with explanations, please refer to Note No. 44 of the Standalone Financial Statements forming part of this Annual Report.

Comments on Current Years Financial Performance:
Revenue	: The increase in revenue is due to new acquisition and lumpsum contract for SEAMEC PRINCESS.
Operating Cost	: Operating cost has increased due to lumpsum contract for SEAMEC PRINCESS and additional cost for SEAMEC GLORIOUS.
Depreciation	: Higher depreciation is due to new acquisition of Vessel SUBTECH SWORDFISH and additional depreciation due to dry dock & modification of SEAMEC II and SEAMEC GLORIOUS.
Operating Profit (Loss)	: Operating profit has come down because of disproportionate increase in operating expenses.
Current Tax Exp.	: The Company is being assessed under Tonnage Tax Scheme. Current tax is decreased due to loss from fleets which are not covered under Tonnage Scheme and its set off against the income from other heads.
Net Profit (Loss)	: Overall profit on a comparative basis is less because of increase in depreciation and decrease in non-operating income because of redemption of investment for acquisition of vessel.

05. HUMAN RESOURCES AND INTERNAL CONTROL ADEQUACY

Human Resources and Internal Control System and adequacy thereof have been stated in the Directors Report that forms part of this Report.