Jindal Drilling & Industries Ltd Management Discussions.

FORWARD LOOKING STATEMENT

The statements in the Directors Report and Management Discussion and Analysis Report contains "forward-looking statements" about the business, financial performance, skills and prospects of the Company. Statements about the plans, intentions, expectations, beliefs, estimates, predictions or similar expression for future are forward-looking statements.

Forward-looking statements should be viewed in the context of many risk issues, and events that could cause the actual performance to be different from that contemplated in the Directors Report and Management Discussion and Analysis Report, including but not limited to, risks arising from uncertainties as to future Oil & Gas prices and their impact on investment programs by oil & gas companies and domestic, economic and political conditions. We cannot assure that outcome of the forward looking statement will be realized and disclaim any duty to update any information in the same.

OIL INDUSTRY BRIEF

Oil price is a key factor in determining E&P companies offshore spending budget and the demand of offshore drilling rigs. During December 2019 Oil prices rebounded from its 12-year lows, experienced during early 2016. In 2017 first increase in average prices were noticed since the downfall, with prices ranging from a low of $44 to a high of $75 per barrel. Oil price fluctuations have been limited to a reasonable range after another period of volatility.

Your company was encouraged to experience the broad industry improvement during the year and believe our customers have implemented important structural changes over the past four years that have played a crucial role in expanding their interest in offshore programs. These changes include revised engineering strategies and simplified production solutions that have led to a reduction in operating costs and improved project economics, as well as efforts to reduce the industrys cycle time in achieving the first barrel of production. Although these technical achievements are highly supportive of future offshore activity, your company recognizes the importance of a stable crude oil price environment as our customers determine their annual upstream spending budgets. Your company has received long term contract for 5 No. of Jack-up Rigs, out of which 4 are under operations and one is currently undergoing contract preparation, as compared to 2 operating rigs last year. The improvement in activity drove an increase in day rates across the industrys fleet of jack- up and floating rigs. Although this improvement may not be immediately visible on financial results considering timing of rollover of contracts. A number of contracts awarded prior to the day rate appreciation continues to be in force through much of the year.

Industrys contracted jack up fleet which is active stands at an impressive 80-85 % by the end of this year, compared to previous years active fleet utilization of 70 - 75%, excluding cold-stacked rigs. Utilization by the end this year will be the highest since early 2015, throughout this year industry witnessed firm demand growth.

Towards the end of FY 2019-20, the ongoing COVID-19 (coronavirus) pandemic, along with breakdown of disciplined exploration among the worlds largest oil and gas producers, caused extreme crude oil market volatility, with the price of Brent crude oil declining significantly from its high price in January 2020. Although it remains too early to predict the consequences for oil industry, your company recognizes the likelihood for reduced activity as customers reassess their 2020 spending plans in the face of uncertain global demand for oil and gas.

REVIEW OF OPERATIONS

Your Companys performance is directly influenced by the activities in the oil & gas sector. However, in spite of continued difficult market conditions, the core operations of your Company remain profitable. Your Company has used this as an opportunity to become more efficient and conducted detailed internal reviews to weed out any inefficiencies. In line with this, your Company has purchased a jack-up rig ‘Discovery-I thereby expanding its operations. Short term bank borrowings are restricted to need based capital requirements. Operational surpluses continue to be invested to earn reasonable returns with a high degree of safety. We have also continued our sharpened focus on working capital efficiency Your Company performance has been remarkable even in the present challenging scenario. Rig ‘Jindal Explorer continues its full fledge operations under the ongoing ONGC contract. Rigs ‘Discovery I, ‘Jindal Star and ‘Virtue I commenced operations with 3-year ONGC contracts in July 2019, October 2019 and January 2020 respectively. All 4 rigs have shown excellent operational efficiency and safety in performance in keeping with best industry standards and practices. One more rig ‘Jindal Supreme has received long term 3-year contract with ONGC and expected to commence operations in October 2020 post monsoon. Rig ‘Jindal Pioneer has also completed 1 year successful operations in the Gulf of Mexico under Saipem.

Even during the Covid 19 pandemic lockdown severely affecting movement of men and material, your company has continued operations on all 4 rigs in ONGC contract with crews working non-stop for over 120 days at a stretch with high efficiency, morale and commitment to safety and operations while maintaining strict compliance with industry standards ensuring all operational targets were met and the rigs did not suffer loss of revenues even for a single day. This is an unprecedented achievement and a milestone in offshore crew endurance aptly supported by the Base office logistically and morally ensuring no compromise in operations and crew comfort.

Summary of operating performance (including claims): (In Crore)

Particulars FY 2019-20 FY 2018-19
Revenue 216.2 207.39
Other Income 33.63 53.92
Total Income 249.83 261.31
Income Tax 7.2 6.22
Net Profit 26.21 34.11

Key financial Ratios:

Ratios Explanation 31-03-2019 31-03-2020
Debtors Turnover Net Sales/Avg Debtors 2.05 1.91
Inventory Turnover Net Sales/Avg Stock 22.82 10.62
Interest Coverage Ratio EBIT/Interest Expenses 4.22 3.66
Current Ratio CA/CL 1.45 1.33
Debt Equity Ratio# LTD / Equity - 0.24
Operating Profit Margin (%) 28.37% 31.05%
Net Profit Margin (%) 19.45% 15.45%

HUMAN RESOURCES

Your Company recognises that its people are the primary source of its competitiveness and firmly believe that its Human Resources are one of the biggest strengths and major driving force behind its success and growth. We strive continuously to foster a climate of openness, discipline, trust and team work. We reiterate our focus on encouraging investments in people through merit oriented pay revisions and differential pay reviews. Your Companys management firmly believes that strong and stable industrial relations are essential for the success of any organisation. Over the years the management has made sincere and continued efforts for the development of an atmosphere of mutual cooperation, confidence and respect duly recognising rights of all workers.

Your Company recognises that women staff being an increasing part of Jindal work force are provided safe work environment and equal rights in terms of opportunities and promotion. As we strive for empowerment and safety of women, we have laid down strict guidelines for the prevention of sexual harassment of women at work place providing them with a forum for grievance redressal (if any).

We review policies and practices with a view to make them contemporary and uniform in application. We implement new activities to ensure our employees are engaged and motivated. For better control and improved productivity, pioneering steps and measures are taken constantly.

The commitment and passion of our people is one of the key factor that has sustained us in this difficult period.

RISK MANAGEMENT

Risk management is an integral part of the way your Company works. Your Companys business activities are subject to various risk and threats associated to its business and the industry in which it operates. Your Company recognises that these risks need to be managed to protect its customers, employees, shareholders and other stakeholders to achieve its business objectives and enable sustainable growth. Effective identification, assessment and management of all these risks is of prime importance to the Company. The oil and gas industry is high risk industry and needs special focus on the safety of operations. Operations of JDIL have been very safe due to meticulous safety checks and following recommended maintenance schedules. In the present scenario of the industry getting sustainable operating rates and long duration contracts is the area of concern to one and all.

INTERNAL CONTROL SYSTEM

Your Company has a robust system of internal controls for all major processes to ensure reliability of reporting. The system also helps management to have timely data and feedback on various operational parameters for effective review. It also ensures proper safeguarding of assets. The internal control system of your Company is commensurate with its size, scale and complexity of its operations. The systems and controls are periodically reviewed and modified based on the requirement.

Scope of internal audit is prepared on basis of the internal control framework. Audit Committee critically reviews the observations of the internal audit report and acts to ensure compliance is completed. This control system also provides comfort to the management of your Company.

ENVIRONMENT, CORPORATE SUSTAINABILITY AND SOCIAL RESPONSIBILITY

Your Companys commitment towards maintaining high standards with respect to clean and healthy environment, shows your firm belief that health and prosperity for an individual and the community at large are dependent on mother nature. Always ensuring best environment engineering controls and practices are being adopted at all locations aiming for ‘Zero accidents and preventing all possible hazards to human health and the environment. The policies of your Company give highest priority to safety, environment protection and well-being of its employees. Your company has been consistently accredited by national and international bodies for Health, Safety and Environmental standards. As a responsible corporate citizen, your Company is a strong believer in giving back to the society. CSR initiatives help elevate the quality of life of the people by promoting healthcare, education and employment opportunities. Your Company has undertaken numerous initiatives aimed at developing local community and aims to continue its efforts to build on its tradition of social responsibility to empower communities.

For & on behalf of the Board of Directors
D. P. JINDAL
Place : Gurugram
Chairman
Dated : 21st August, 2020 DIN: 00405579