Jindal Drilling & Industries Ltd Management Discussions.

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 forwaard-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

The oil and gas sector is a global powerhouse generating hundreds of billions of dollars globally every year and generating millions of employment worldwide.

After facing trough since mid of last decade the sector is finally witnessing the crest again. Throughout 2021 the oil and gas industry has strongly rebounded with crude prices reaching highs of $ 84.65 per barrel. Year 2022 too started on positive note with increase in Oil & gas demand and higher crude prices of $ 123 per barrel.

In recent years Indian government has unveiled many policy initiatives to enhance domestic oil and gas production, increasing investment, generating sizable employment, enhancing transparency and reducing regulatory burden. The below data clearly supports the positive impact of these initiatives on oil & gas sector [data from makeinindia website -

• Exports of Petroleum products valued at USD 8547.64 mn in May 2022 and records positive growth of 60.87% vis-a-vis May 2021.

• Exports of Petroleum product valued at USD 65044.80 mn from F. Y. 2021-22 and records positive growth of 152.07% vis-a-vis F. Y. 2020-21.

• Petroleum products share 15.57% of the total exports of the country in the period April 21-March 22.

Growing Demand - Global & Domestic

• Worldwide crude oil consumption is expected to grow at a CAGR of 4.66% to 500 MMTPA by 2040 from 201.26 million tonnes in 2021. Indias oil demand is projected to rise at the fastest pace in the world to reach 10 million barrels per day by 2030, from 4.9 million barrels per day in 2021

• Oil demand in India is projected to register a 2x growth to reach 11 million barrels per day by 2045.

• Diesel demand in India is expected to double to 163 MT by 2029-30, with diesel and gasoline covering 58% of Indias oil demand by 2045.

• Consumption of natural gas in India is expected to grow by 25 billion cubic metres [bcm], registering an average annual growth of 9% until 2024.

But at the same time, the impact of COVID-19 is still being felt. Between rising and diminishing consumer demand, price fluctuations, and of course, geopolitical issues, every day holds new surprises and risks. The increasing measures across the globe promoting decarbonization and growing activist pressure over climate change are adding uncertainty and a potential volatility.

Your company has long term contracts for all 5 Nos. of Jack-up Rigs and all the rigs are currently under operations.

One of the rig has recently commenced operations under second contract after successfully completing the first term. Another rig has received renewed contract and will be completing the present contract in next couple of months, it is planned to undergo pre-commencement preparations and is expected to join operations early next year under the renewed contract.

REVIEW OF OPERATIONS

With oil & gas sector gaining back its previous glory your company too is showing favorable outcomes. Though during difficult market conditions the core operations of your Company remained profitable. Your Company has used the adverse conditions 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-1 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 Companys performance has been remarkable throughout even during the adverse phase. Rigs ‘Discovery I, ‘Jindal Star, ‘Virtue I and ‘Jindal Supreme continues its full fledge operations under the ongoing ONGC contracts. Rig ‘Jindal Explorer successfully completed its first contract with ONGC in November 2021 and was awarded new contract with ONGC for second term. The rig went to UAE for maintenance and commenced operations with 3-year ONGC contract in May 2022.

All the rigs have shown excellent operational efficiency and safety in performance in keeping with best industry standards and practices. Rig ‘Jindal Star has received renewed 3-year contract with ONGC. The Rig is expected to complete operations under the current contract by November 2022 and scheduled to join operations early next year under the new contract.

Your company has always shown its commitment towards human safety, environment protection and operational efficiency, while maintaining strict compliance with nation and international standards. Even during Covid 19 pandemic all of your rigs where in ONGC contract and have shown excellent performance.

Key financial Ratios:

Ratios</td> Explanation F.Y. 2020-21 F.Y. 2021-22 % Change
Debtors Turnover Net Sales/Avg Debtors 2.72 2.62 (0.10)
Inventory Turnover Net Sales/Avg Stock 10.87 10.40 (0.47)
Interest Coverage Ratio EBIT/Interest Expenses 2.19 12.05 9.87
Current Ratio CA/CL 1.15 1.33 0.18
Debt Equity Ratio# LTD / Equity 0.20 0.15 (0.05)
Operating Profit Margin (%) 26.02% 32.13% 6%
Net Profit Margin (%) 4.25% 20.67% 16%

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 factors 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 the 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

It is vital to comprehend that human and environment are connected in every aspect, even a slight change in environment have huge impacts on human life.

Your Companys commitment towards a clean environment is clearly visible in the high standards adopted in your daily practices. 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.