Economic Overview
Global Economy
The growth of the global economy during 2022 slowed to 3.2%, as per OECD data, bogged
down by the economic fallout of the Russia-Ukraine war and the consequent disruptions
caused in global commodity markets. This followed closely on the heels of the Covid-19
pandemic and the recovery from it, which cast a cloud over the two years prior to the war.
The political fallout of the war and the turmoil created in the commodity markets caused
the skyrocketing prices of essential commodities like crude oil, natural gas, coal, grains
and cooking oil, fueling inflationary economic pressures across the globe.
The supply shocks that disrupted energy markets caused prices of essential commodities
to reach unforeseen heights and remain elevated for much of 2022. These disruptions kicked
off a temporary commodity super cycle and fueled inflation across economies in Europe,
North America, Africa and Asia. The inflationary pressures kicked off a cycle of monetary
policy tightening across the global economy. This cycle reversed a period of loose
monetary policy regimes that were implemented in the backdrop of the 2008 financial crisis
and the recession brought about by the Covid-19 pandemic. Commodity prices began to
decrease and return closer to pre-Russia-Ukraine conflict levels near the end of the
financial year. Elowever, inflation remained elevated across the global economies, fueled
by factors like Covid-19 pandemic era supply chain disruptions, climate change, and labor
market disruptions across advanced economies.
Indian Economy
Amidst the global turmoil, the Indian economy furthered its credentials as the worlds
fastest-growing major economy, beating estimates to record an economic growth rate of 7.2%
for 2022-23. Building on the rapid vaccination campaign conducted in the previous year,
the economy underwent structural reforms enabled by factors, such as lower corporate tax
rates, PLI schemes, and increased Government spending on capex and infrastructure. These
measures further boosted Indias recovery from the effects of the Covid-19 pandemic.
Additional measures
like increased offtakes of Russian crude oil and fertilizers insulated the economy from
the heavy inflation seen in the West. However, the economy still experienced above-
average inflation rates due to the higher commodity prices, triggering imported inflation
and even forcing restrictions on exports of wheat, sugar, rice, and various metals and
minerals, necessitating monetary tightening by the Reserve Bank of India. The impact of
monetary tightening and stabilizing global commodity markets led to cooling inflation near
the end of the financial year.
Energy Services
Industry Overview
The Global Scenario
The cyclical nature of the hydrocarbon industry moved into a heavy upswing for much of
the past financial year, with prices of crude oil, natural gas and coal hitting levels
unforeseen in more than a decade since the shale revolution kicked off in North America.
According to Bank of America, Brent averaged USD 100.93, JKM LNG spot price averaged USD
33.98, and thermal coal averaged USD 334 for the year. The impact of the Russia-Ukraine
conflict and Western sanctions on Russian energy destabilized the flow of global
hydrocarbon market, because of which Government policies increasingly prioritized energy
security, giving greater ease of operations to hydrocarbon producers.
Benefiting from rising demand from economies reopening post-Covid-19 pandemic
lockdowns, policy measures aimed at maximizing output and higher revenue from higher
prices, the industry was able to increase investments in new fields and substantially
increase output across the global economy. According to the IEA, coal consumption
increased by 1.2% in 2022 and surpassed a volume of 8 Billion tons for the very first
time, led by a temporary increase in Europe to optimize energy security, and robust demand
in the emerging economies of Asia. This has heavily benefited supplementary industries
based around exploration and building infrastructure for hydrocarbon extraction.
The commodity super cycle, which has brought renewed optimism for the industry, might
fizzle out earlier than expected, among other downside risks. Inflation in the West and
monetary tightening have already led to commodity prices cooling down from the highs of
late 2022 to below pre-Russia-Ukraine conflict levels, and prices are anticipated to
decline further as the industry ramps up supplies and recessionary conditions are expected
to persist for the coming financial year, leading to lower demand for hydrocarbons.
Additionally, climate challenges faced by the planet worsen with every passing year, with
droughts and heatwaves affecting billions across the globe, posing risks to agriculture,
health, and well-being. The temporarily increased coal consumption by European economies
is not projected to last as renewable energy infrastructure across the globe ramps up, and
the industry must brace for an increasingly decarbonized future.
The Indian Scenario
As the worlds fastest-growing major economy and widely projected by many as the
worlds newly most populousnation, India is still the worlds third-largest consumer of
oil and second-largest consumer and producer of coal.
In the past financial year, demand for both commodities increased. According to
Government data, petroleum consumption increased by 10.2%, despite stagnant domestic
production, whereas coal consumption again exceeded a billion tons to reach 1,029 Billion
tons, with production recording a rapid 14.76% growth to reach 893.08 Million tons. The
countrys hydrocarbon industry benefited from the global commodity boom, Government
interventions in pricing and the imposition of windfall restricted the gains compared to
global corporations.
The Governments capital expenditure spending boost of 35.4% lifted economic growth
throughout the economy, particularly in energy and infrastructure sectors, as evident from
the growth of core industry sectors like steel, cement, and coal, with the core industries
recording a growth of 7.6% for 2022-23. Much of this increased demand was successfully
fulfilled by rising domestic coal production, although the same success was not seen in
the petroleum industry, with crude oil production declining by 2.8% and natural gas
production stagnant with a mere 2.8% rise, attributed to aging fields and a lack of new
discoveries. Such downside risks to the hydrocarbon industry create challenges but also
opportunities, particularly in the need to increase exploration for new prospects and
enhance domestic production over the long-term.
Industry Outlook
According to the IMF, Indian economic growth in the upcoming year is estimated to be
6%, dragged down by recessionary conditions in advanced economies, while maintaining its
status as the worlds fastest-growing major economy. The Indian Governments focus on
infrastructure growth is expected to continue, and the Union Government Budget for 2023-24
further hiked capital expenditure by 37.4%. According to the Ministry of Coal, it is
projected that coal consumption will reach 1.27 Billion tons in 2023-24.
12 • ASIAN ENERGY SERVICES LIMITED
The economy is still reliant on abundant fuel for 70% of its electricity generation,
and the past financial year saw record forex outgo on 162.46 Million tons of imported
coal, 30% higher than the preceding financial year.
Building on the nearly 15% growth of domestic production to 893 Million tons for
2022-23, the Government has laid out an ambitious target of 1.31 Billion tons of domestic
production for 2024-25. However, this target can only be achieved with significant
investments in infrastructure. These measures are aimed at boosting the countrys
self-reliance and energy security, and is expected to be coupled with ambitious plans to
enhance exploration for coal and petroleum prospects in onshore and offshore sites across
the nation.
The outlook for oilfield service companies is promising both domestically and
internationally, with Consegic Business Intelligence estimating the industry will grow at
a healthy rate of 5.9% until 2030 to reach a global market size of USD 468.58 Billion,
with the majority of the growth coming from the Middle East and Asia-Pacific regions, and
much of the growth coming in areas, such as drilling services, seismic services, and
operations and maintenance services. Much of this growth will come from India, China,
Malaysia, and Thailand.
Company Overview
Asian Energy Services Limited (also referred to as ‘AESL or ‘the Company) is
an energy services company dedicated to specialized services for the energy sector,
particularly the hydrocarbon and minerals sectors. Services offered include seismic data
acquisition, and the design, building, operations, and maintenance of facilities and
infrastructure for the hydrocarbon and mineral sectors, with esteemed clientele ranging
from ONGC, Oil India Limited, and CMPDIL in the public sphere to stalwarts like Vedanta
Resources and Oilmax Energy in the private sector.
This past financial year saw the continued structural evolution of 2022-23 as AESL
entrenched itself deeper into the new verticals of designing and building coal handling
plants and running O&M for oilfields alongside its legacy business of seismic.
Building on the successful completion of seismic campaigns in Chhattisgarhs Rajadai, the
Company also successfully completed seismic campaigns contracted by Vedanta in Assams
Jagun, and won another seismic project in the same region for the upcoming financial year.
AESL is poised to partake in bidding for upcoming seismic programs. These include National
Seismic Program I hosted by Oil India Limited, National Seismic Program II hosted by the
Government of India, OLAP block seismic exploration by the likes of ONGC, Oil India
Limited and Vedanta, as well as the seismic projects for mineral exploration newly
introduced by the coal ministry.
The Company is built on the growth of coal infrastructure across the nation by
furthering advancement on its existing projects for coal handling plants at Hura,
Singareni, and Gevra, dotted across the nations mineral belt. Rapid progress was made in
Hura, which is on track to be commissioned during 2023-24, and Singreni, which is on track
to be commissioned during early 2024-25. Developments under the O&M vertical also sped
along as the Company built on its success in running O&M atSuvali for Vedanta and
Amguri for Oilmax by being awarded O&M contracts for the Indrora field, situated in
Gujarat, for Oilmax and the PY-3 field, situated offshore near Tamil Nadu, owned by a
consortium of Hardy Oil and Gas, HO EC, Invenire Energy and ONGC.
In 2023-24, AESL will focus on expanding its seismic portfolio and further
consolidating progress on projects in the CHP and O&M verticals. Additionally, the
Company will partake in opportunities presented by the fast- developing nations rapidly
growing energy industries.
Financial Review (Consolidated Basis)
Revenue from Operations
Revenue from operations decreased by 57.79% from Rs 25,047.11 Lakhs in 2021-22, to Rs
10,995.14 Lakhs in 2022-23.
Profit After Tax (PAT)
AESL posted a loss of Rs. 4,444.22 Lakhs in 2022-23 compared to profit of Rs. 3,881.11
Lakhs in 2021-22.
Earnings Per Share (EPS)
The EPS/loss per equity share for the year is Rs. (11.77), as against Rs. 10.25 in the
previous financial year.
Net Worth
The business net worth stood at Rs. 19,945.25 Lakhs as of March 31, 2023, compared to
Rs. 24,157.27 Lakhs as of March 31, 2022.
Debt
The debt as of March 31, 2023 stands at Rs. 355.61 Lakhs, compared to Rs. 331.89 Lakhs
as of March 31, 2022.
I Particulars |
2022-23 |
2021-22 |
Debtors Turnover Ratio |
0.96 |
2.21 |
Current Ratio |
1.92 |
2.30 |
Operating Profit Ratio |
26% |
41% |
Net Profit/Loss Margin |
(40%) |
15% |
Change in Return on Net Worth |
(22.28%) |
16% |
Risk and Mitigation
Risk |
Description |
Mitigation |
Environmental Risk |
As the global focus on the consequences of climate change intensifies,
non-compliance with environmental standards can have adverse implications for AESL. Such
non-compliance may ultimately impact the long-term demand for coal and potentially lead to
a decrease in coal prices. |
AESL has established a comprehensive Health, Safety, and Environment
(HSE) policy to uphold business excellence and prioritize customer satisfaction.
Recognizing the nature of the industry, the Company implements environmental protection
measures in conjunction with its coal activities to promote environmental conservation. |
Supply Chain Risk |
AESLs ability to meet clients requirements and market demand is at
risk due to the unavailability of raw materials caused by supply chain disruptions. |
AESL is continuously making efforts to enhance its supply chain in
order to optimize business operations and improve efficiency. |
Financial Risk |
AESLs financial risk is influenced by factors, such as the ability
and willingness to reduce debt, minimize overhead costs, improve critical ratios, and
increase profitability. Additionally, the volatility of the Indian rupee further
contributes to the financial risk. |
AESL has demonstrated a consistent commitment to reducing debt and
bolstering reserves and surplus, resulting in an improvement in its expense to sales
ratio. These efforts have also contributed to strengthening the balance sheet of the
Company. |
Operational
Risk |
Geopolitical factors and weather volatility pose significant risks in
the energy sector. Additionally, the shift in energy consumption patterns from traditional
oil and gas sources to renewable energy sources is another major concern. |
AESL has strategically pursued project development in significant oil
and gas regions, both domestically and internationally. This approach has helped the
Company mitigate potential issues that may arise from a specific location.
Considering the sustained demand for oil and gas, AESL maintains
confidence in its business model. Furthermore, the versatility of crude oil that is
utilized in various industries, such as plastics, pharmaceuticals, paint, chemicals, and
asphalt, serves as a catalyst for the Companys growth. |
Competition Risk |
The growing number of seismic suppliers in the market could
potentially affect AESLs ability to secure deals. |
To thrive in this environment, the Company leverages several
strategies. This includes offering better prices, nurturing long-term client
relationships, and demonstrating a strong track record of successfully completing
projects. These factors collectively contribute to the Companys ability to secure
contracts. |
Regulatory Risk and Legal Risk |
AESLs global operations are influenced by the varying legal
frameworks in different geographical locations, which can result in variations in its
global presentation. |
AESLs legal department diligently identifies and adheres to every
regulatory obligation, demonstrating a strong commitment to compliance. |
Human Resources
AESL values its team as the foundation of its operations and is committed to empowering
and motivating them. The primary objective is to nurture the personal and professions
development of employees, while also inspiring them to achieve their highest potential. To
boost productivity and efficiency, the Company promotes the formation of crossfunctional
teams across all hierarchical levels. Additionally, it acknowledges the importance of
gender equality by ensuring equal opportunities for women. AESL gives top priority to
refining its human resource policies and internal procedures to cultivate a culture of
ongoing improvement, heightened accountability, and increased responsibility among its
team members.
AESL places a strong emphasis on fostering motivation and enhancing productivity by
recognizing individual accomplishments and promoting a culture of continuous improvement.
The Companys comprehensive business and human resource strategy prioritizes equality in
employment as a fundamental aspect. It is committed to eradicating workplace
discrimination at all levels, regardless of any defined characteristics. Furthermore, AESL
holds an ISO 9000:2015 certification, which serves as a testament to its dedication to
quality management.
EHS
AESL places great importance on adhering to environmenta regulations and upholding
high-quality standards to ensure the safety of all stakeholders. This commitment is a
vital aspect of the Companys operations as it strives for excellence and customer
satisfaction. It is dedicated to protecting the health, safety, and security of its
employees and all individuals associated with its business. Regular inspections and
maintenance are conducted on equipment and assets to prevent potential disasters, and AESL
has implemented strict standard operating procedures within its facilities for the
well-being of workers and visitors. Furthermore, the Companys personnel undergo extensive
training to acquire comprehensive knowledge and understanding of quality, safety, and
environmental standards.
Internal Control System
An internal control system ensures the adherence to and adequacy of all internal
controls and mechanisms within the Company. The Audit Committee, constituted by the Board
of Directors, evaluates the efficacy and sustainability of the internal control systems
and suggests improvements, if any. The Company has adequate internal financial controls in
place with regards to the financial statements. Such controls were evaluated throughout
the year, but no reportable material weaknesses in the design or operations were observed.
Cautionary Statement
Statements in this Report on Management Discussion and Analysis relating to the
Companys objectives, projections, estimates, expectations, or predictions may be forward-
looking within the meaning of applicable securities laws and regulations. These statements
are based on certain assumptions and expectations of future events. Actual results might
differ materially from those expressed or implied depending upon factors such as climatic
conditions, global and domestic demand-supply conditions, raw material costs,
availability, and prices of finished goods, foreign exchange market movements, changes in
Government regulations, tax structure, economic and political developments within India
and the countries where the Company conducts its business, and other factors such as
litigation and industrial relations. The Company assumes no responsibility in respect of
the forward- looking statements herein, which may undergo changes in the future on the
basis of subsequent developments, information, or events.
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