shreyas shipping logistics ltd Management discussions

CO2

emissions by up to 50% by 2050. As a step in this direction, the COP27 saw the shipping industry become a key highlight of discussion, partly due to the Green Shipping Challenge presented by the US and Norwegian Governments, which received widespread support from countries, ports, and shipping companies.

The global shipping container market is categorised by product type, including dry storage containers, flat rack containers, refrigerated containers, and special purpose containers, among others. Currently, dry storage containers are dominating the market, with the largest-market share. Furthermore, the market is segmented geographically into North America, the Asia-Pacific region, Europe, Latin America, the Middle East, and Africa. Currently, the Asia-Pacific region is leading the global market. In 2022, the global shipping container market was valued at US$ 10.3 bn, with IMARC Group projecting that the market will reach US$ 16.4 bn by 2028, exhibiting a growth rate (CAGR) of 8.02% during the 2023-2028 period. The primary driver of the global shipping container market is the increasing number of trade-related agreements and the demand for RFID and NFC-integrated shipping containers for remote monitoring and real-time tracking of shipments.

On the demand side, with an improvement in the global economic outlook, demand growth is expected to stay moderate in 2023 and increase in 2024. This demand is expected to be driven by the gradual return of economic activities and global production to pre-Covid-19 levels, based on the relationship between GDP, head-haul and regional trade volumes.

Container fleet supply is expected to increase by 6.3% in 2023 and by 8.1% in 2024, after a growth of 4.0% in 2021-22. Fleet productivity will be affected by congestion and sailing speed, resulting in supply growth of 11.3% in 2023 and 3.1% in 2024. In 2023 and 2024, 4.9 mn TEU is expected to be delivered by the fleet, with nearly 1 mn TEU being recycled due to worsening market conditions and IMO climate regulations. The impact of CII and EEXI on sailing speeds has been revised, and the remaining port congestion is expected to be resolved by the end of 2023.

Starting 1st January 2023, stricter environmental regulations have affected ship owners. The new IMO regulations aim to reduce greenhouse gas emissions and environmental impact, with the CII regulation resulting in 30%-40% of containerships and dry bulk carriers being considered non-compliant. Ship owners can reduce emissions by adopting slow sailing or retrofitting their ships with energy-e_cient technologies and alternative fuels, but this will increase costs and potentially impact insurance coverage and future access to capital.

The global container shipping market experienced a softening trend towards the end of 2022, with rates returning to normal after the exceptional highs in the years first half. This softening was due to easing congestion, resulting in the Containership Port Congestion Index averaging 33.2% in November 2022, the lowest since September 2020. By the end of December 2022, the Shanghai Containerised Freight Index (SCFI) spot box freight index had decreased by 30% from November and 78% from the start of 2022.

Looking ahead to 2024, the global container shipping market is projected to experience continued pressure on market conditions, with rates potentially moving further towards the bottom of the cycle. Firm fleet growth of around 5-6% is anticipated, despite expectations for slippage and higher recycling. Various factors, such as capacity management efforts, vessel speeds, and ine_ciencies like congestion, will continue to shape rate levels. Upcoming environmental policies may have a moderating effect on the supply, although alone, they are unlikely to transform softer markets. Economic headwinds may start to ease, leading to improved demand in the coming years.

The dry bulk shipping market is segmented based on type, such as Capesize, Panamax, Supramax, Handysize, and others. The market is largely dominated by the Capesize sector due to the increased demand for the transportation of steel, iron ore, and basic commodities. Capesize is considered to be the largest bulk carrier in the world, primarily used for ore transportation. The Asia-Pacific region is recognised as one of the fastest-growing dry bulk transportation markets in the world, mainly due to the high demand for fertilisers, animal feed supplements, and food preservation. Moreover, the need for dry bulk cargo in this region is also high due to the requirement of phosphate rock for the production of water treatment, cosmetics, and chemicals.

The market value of dry bulk shipping was US$ 4.1 bn in 2022, and it is expected to increase to US$ 5.3 bn by 2030, representing a compound annual growth rate (CAGR) of 4.0% during the projected period 2023-2030.

The demand for dry transportation materials is influenced by factors, such as industrialisation, urbanisation, and economic growth. Steel demand has grown due to construction in the industrial, residential, and non-residential sectors, which has led to a shift in the market share for dry bulk shipping. Technological advancements, such as automation in automotive production planning systems and the ability to track individual components of shipping cargo, have increased the efficiency and profitability of the dry bulk shipping sector. This, in turn, has driven market growth. With increased urbanisation, there are more growth opportunities. Despite a temporary dip in the market value of dry cargo due to the Covid-19 pandemic, growth has been steady with a rise in demand for steel as infrastructure projects expand. Manufacturers are implementing strategies to increase the value of their production, leading to a rapid expansion of the dry bulk shipping markets revenue.

On the supply side, the dry bulk shipping industry is expected to experience fleet growth rates of 2.7% in 2023 and 2.0% in 2024, with low levels of deliveries and demolitions. However, due to the impact of EEXI and CII regulations on sailing speed, supply growth is estimated to be 0.5-1.5% less than fleet growth. Currently, the orderbook represents 7.5% of the dry bulk fleet, which is anticipated to constrain fleet growth, particularly in 2024. Furthermore, recycling is projected to reach 7.8 mn DWT and 7.2 mn DWT in 2023 and 2024, respectively.

The dry bulk market is predicted to experience improvement in its fundamentals in 2023, although notable risks persist with regards to the demand outlook. Despite short-term apprehensions and uncertainties, the dry bulk market is foreseen to maintain its stability over the next few years, buoyed by robust fundamentals and stable trade expansion.

India boasts a coastline of approximately 7,517 km and is strategically located along the worlds shipping routes. Around 70% of Indias trading in value-terms is handled through maritime transport. The country has 12 major ports and 200 non-major or intermediate ports. The largest major port in India is the Jawaharlal Nehru Port Trust, while Mudra is the largest private port. Globally, India is also one of the top 5 ship recycling countries, with a 30% share of the global ship recycling market. The maritime transport sector moves approximately 95% of the countrys trade by volume and 68% by value.

Indias major ports had a capacity of 1,598 MT in 2021-22. During the period from April 2022 to December 2022, the cargo tra_c handled by these ports increased by 8.9% to 575.98 MT, up from 529.09 MT in the corresponding period in the previous year. With growing trade, demand for containers is expected to increase. In 2021-22, container tra_c in major ports in India reached 11.22 mn TEUs, while as of October 2022, the container tra_c stood at 6.58 mn TEUs. In 2021-22, Indias merchandise exports amounted to US$ 417.8 bn, which represented a 40% increase from the previous year. As of September 2022, merchandise exports in 2022-23 reached US$ 231.88 bn.

The Ministry of Ports, Shipping and Waterways has funded 171 projects worth 10,900 Crores under the Sagarmala Scheme, with 48 projects completed and 123 under development. In 2022-23, 37 projects worth 2500 Crores have been sanctioned. To harness the efficiency from private sector, 52 projects worth 40,200 Crores have been completed in public-private partnership (PPP) mode and 84 projects worth 49,500 Crores are under development. These efforts have resulted in a 16% increase in coastal freight handling and an 8.6% growth in total cargo handling in 2022-23.

The Indian ports sector is poised for growth, with increasing investments and cargo tra_c. As a result, service providers, such as operation and maintenance (O&M), pilotage, harbouring, and marine asset companies, including barges and dredgers, are experiencing positive momentum. Additionally, domestic waterways have proven to be a cost-e_ective and environmentally sustainable mode of freight transportation. As a part of this initiative, the Government has set a target to operationalise 23 waterways by 2030. It has implemented several measures to improve operational efficiency, through mechanisation, deepening the draft, and speedy evacuations. These measures, coupled with the Indian shipping industrys efforts to develop its infrastructure and capabilities, contribute to Indias economic independence and competitiveness in the global market.

The Indian Government has been actively taking initiatives to promote and develop the port sector in the country. One of the major objectives of these initiatives is to make India a leading player in the global maritime industry.

The Tripartite Agreement signed in 2022 aims to develop modern multi-modal logistics parks under the ‘Bharatmala Pariyojna

The proposed Indian Ports Bill 2022 seeks to bring minor ports that are currently under the management of State Governments under centralised administration

In October 2022, the Cabinet Committee on Economic Affairs approved the development of a container terminal at Tuna-Tekra, Deendayal Port, under a public-private partnership model

The Marine Aids to Navigation Bill, 2021, incorporates global best practices and technological developments to ensure safe and effective navigation

Inland Vessels Bill 2021, aims to provide a single piece of legislation for the entire country instead of separate regulations created by the states

E_orts towards attracting foreign investment in the ports sector

Focus on improving the infrastructure of Indian ports

Indias dry bulk shipping industry is experiencing a significant shift in trading patterns and increasing tonne-miles. Additionally, ports in India seek greater control over supply chains through cross-border mergers and acquisitions, and end-to-end logistics solutions. India is strengthening and upgrading its port capacity, and launching new services to improve shipping connections with neighbouring countries.

The Indian dry bulk shipping industry has been adversely affected by the Indian Governments restrictions on the export of wheat, iron ore and iron products, steel, and sugar. However, recent global events such as the Russia-Ukraine crisis and trade wars have made India a significant player in the development of dry bulk trade flows. From a freight market perspective, the coal flow into India has been positive, particularly for geared bulkers to meet demand. Import volumes have seen a recovery, due to lower levels of domestic coal supply. Despite the restrictions, favourable pricing, and sufficient credit for traders, India can be perceived as a focal point for Asian coal trades. While the Indian dry bulk shipping industry has been impacted by the Governments restrictions on exports, the countrys strategic location and growing trade demand make it an important player in global dry bulk trade flow developments.

In addition, Your Company entered the dry bulk segment by acquiring two small dry bulk carriers deployed in a pool arrangement. This arrangement mitigates risk in the dry bulk market business operations, as the pool vessel deployment involves a mix of long-term, short-term, and spot operations.

The Board anticipates that Shreyas future growth will be well-served by acquiring vessels and entering long-term chartering arrangements, particularly with a modern, forward-thinking, suitable, marketable, and economically viable fleet.

Your Company is committed to creating a work environment that attracts and retains top talent. Its human resource management efforts are focussed on providing employees with opportunities for growth and development, recognising and rewarding their contributions, and fostering a culture of collaboration and teamwork.

Your Company values diversity and inclusion in the workplace, and is committed to creating a safe and inclusive environment for all employees. Your Company provides all employees equal opportunities regardless of gender, age, race, religion, or nationality, and strives to create a culture of respect and inclusion. Your Company has a gender diversity of 64% male and 36% female ratio and also hired 1 staff who is a ‘Person of Determination.

Your Company believes in engaging employees and recognising their contributions to the organisation. It organises various employee engagement initiatives, such as team-building activities, sports events, and cultural events to promote teamwork and camaraderie among employees. Shreyas also recognises outstanding performance and contributions through various recognition programmes, such as Employee of the Month and Long Service Awards.

Your Company understands the importance of training and development in enhancing employee skills and productivity and hence provides various inhouse and external skill-based/ behavioural training programmes for its employees. Further, your Company encourages its key staff to pursue certifications from renowned business schools in India to enhance their competencies.

Your Company provided access to PANKH platform powered by Percipio and Skills Soft, Knimbus, a digital learning module relaunched with advanced features and courses for employee knowledge enhancement.

Your Company has implemented a performance appraisal and feedback system to assess employee performance and provide constructive feedback for improvement. This system helps the employees to understand their strengths and areas of improvement, enabling them to enhance their skills and achieve their career goals.

Your Company recognises the importance of work-life balance in maintaining employee well-being and productivity. Your Company provides various work-life balance initiatives, such as work from home, flexible work arrangements, telecommuting, and employee assistance programmes to support employees in managing their personal and professional lives.

Your Company places a strong emphasis on employee well-being throughout the year. Mental wellness sessions and E-Yoga sessions were conducted onboard ships for crew members. Your Company also started an inhouse Weekly Live Yoga Sessions and offered subscription to an App to track and monitor their fitness goals along with inculcating good eating habits. Also, your Company started sports activities on a weekly basis to inculcate fitness as a part of life.

Your Company initiated ‘The Rhythm of Life Series, inviting inspirational and transformational speakers from various walks of life. Employees and their families attend this interactive series.

Your Company has adopted a policy at the group level to provide support to families in the event of an employees untimely demise. This support includes financial assistance and counselling services for the employees family.

Standalone revenues of your Company for the year 2022-23 stood at 483.78 Crores as against 513.59 Crores that dropped by 6%. EBITDA for 2022-23 is at 266 Crores as against 231 Crores during 2022 and EBITDA Margin stood at 53%. PAT stood at 197 Crores as against 251 Crores in 2022 and PAT Margin stood at 39%.

Your Company internal control systems commensurate with the nature of its business, size, and complexity of its operations. Your Company ensures that its internal controls are tested and certified by statutory and internal auditors, as well as key business areas, on a routine basis.

Through an internal audit system, Your Company evaluates and tests the effectiveness of controls, and assesses the risks and business processes involved. This is carried out at regular intervals and involves benchmarking your Companys controls with industry best practices to ensure that they are up-to-date and effective. The internal auditor makes significant observations and recommendations for improvement, which are reported to the Audit Committee. The Audit Committee is responsible for reviewing the adequacy and effectiveness of Your Company internal control environment.

It also monitors the implementation of audit recommendations, particularly those that relate to strengthening risk management policies and systems. Your Company ensures its internal control environment is robust, effective, and aligned with best practices in the industry. This ultimately helps in managing risks and smooth functioning of the business.

Statements in this report describing your Companys objectives, projections, estimates, and expectations may be ‘forward-looking statements, within the meaning of applicable laws and regulations, based on the beliefs of Shreyas Management. Your Companys current views concerning future events are subject to risks and uncertainties. Many factors could cause the actual result to be materially different from those projected in this report, including changes in general economic and business conditions, changes in currency exchange rates and interest rates, the introduction of competing services, a lack of acceptance of new services, and changes in business strategy. Shreyas Shipping does not intend to assume any obligation to update any forward-looking statements or information that speak as of their respective dates to reflect circumstances arising after this date or to reflect the occurrence of underlining events, even if the underlining assumptions do not come to fruition.