SEAMEC Ltd Management Discussions

1. INDUSTRY STRUCTURE AND OUTLOOK

Oil and Gas industry outlook aims to uphold capital discipline and prioritize viable low-carbon projects to help successfully navigate the changing energy demand landscape.

The O&G industry is not new to supply disruptions and price volatility. Over the past seven years, the industry has seen several peaks and troughs. But the situation is unique today. A confluence of several economic, geopolitical, trade, policy, and financial factors have exacerbated the issue of underinvestment and triggered a readjustment in the broader energy market.

All three components of a balanced energy equation— energy security, supply diversification and low-carbon transition—are under severe pressure or facing a "trilemma" of concerns.

The disruption of energy trade between Europe and Russia has driven global gas markets to new highs. Furthermore, the shortage of agricultural products for renewable fuels and supply chain challenges for low- carbon technologies have impacted the progress of energy transition.

The Asia Pacific region accounts for over half of incremental global gas consumption in the coming years, driven principally by the development of gas in China and India. The prospects of natural gas remain strong for these two markets. The outlook is highly dependent on Chinas and Indias future policy direction. Future growth in the industry sector, which constitutes the main driver of incremental gas demand in both countries, will however highly depend on the pace of economic recovery, both for domestic and export markets for industrial goods, supported by the combination of supportive government policies and improved infrastructure.

Gas consumption in industrial uses is the main contributor to demand growth to 2025, increasing at an average rate of 2.5% per year and accounting for 40% of incremental consumption. Additional demand for gas as a fuel for industrial processes principally comes from China, India and other Asian markets, while demand for gas as a feedstock is driven by gas-rich countries and regions such as the United States, Russia, North Africa and the Middle East, for manufacturing fertilisers and petrochemicals for both exports and domestic markets.

Growth from the power generation sector is expected to grow moderately. Demand growth loses speed in mature markets as additions of renewables capacity further reduce the space for thermal sources. In faster- growing markets, the role of gas in power generation remains challenged by fuel cost competition as well as the emergence of renewables.

Notwithstanding the current macroeconomic headwinds, natural gas enjoys broad policy support in India. This is reflected in the governments stated ambition of building a gas-based economy and increasing the share of natural gas in the primary energy mix. The outlook for gas, however, will greatly depend on the timely execution of planned infrastructure projects, further gas market reforms and the affordability of imported gas for Indias price-sensitive consumers, also influence domestic gas supply.

India relies on imports for nearly 85% of its crude oil needs, making it the worlds second largest oil importer after China. Indias demand for crude oil is expected to increase to 5.5 million barrels per day (bpd) in 2024.

Today, India uses more fundamental energy resources, such as petroleum, coal, and natural gas, due to its developing economy and rising population. India is the second-biggest refinery in Asia, with a capacity of 253.91 MMT as of April 2023. Roughly 35% of the overall refining capacity is managed by private enterprises.

The diesel market in India is projected to reach 163 MT by 2029-30, and by 2045, petrol and diesel will account for 58% of Indias oil consumption. Rapid economic growth and increasing urbanisation indicate that demand is not going anywhere soon.

In response to the rising demand, the government also implemented several regulatory measures. Multiple areas of the industry, like oil refineries, natural gas, and petroleum-based goods, have been able to draw 100% foreign direct investment (FDI) as a result.

Because of this link between Indias energy demands and economic development, there will likely be a greater demand for oil and gas in the coming years as well. This will undoubtedly make the sector attractive to new investors.

Many global oil majors such as Total Energies, ExxonMobil, Equinor and Baker Hughes are presently in discussions with state-owned upstream players for collaboration.

The Indian government in recent years has released no-go areas in the Indian Exclusive Economic Zone for E&P operations covering a total area of 1 million sq km offshore areas in west coast, east coast and the Andaman and Nicobar Islands to provide a boost to the oil and gas exploration.

A very positive momentum is witnessth in the upstream sector of India, which will further accelerate with government of Indias vision of enhancing and expediting exploration in Indian sedimentary basins.

Although renewables energy will see the highest growth, oil will continue to hold the maximum share in the primary energy mix. With natural gas being accepted as a transition fuel, towards adopting cleaner form of energy, it is visualized that overall growth and further investment in oil and gas projects at the global upstream level.

ONGC boosts Indias energy production with first oil from $5 billion deep-sea project

2. OPPORTUNITIES AND THREATS

SEAMEC continues as unparallel in the offshore oilfields retaining its reputation as a prominent player. SEAMEC has increased Fleet strength. As a market leader, SEAMEC closely follow the market dynamics and take appropriate steps through its strong vision.

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 thereafter have to be phased out. Despite being older tonnage, the vessels are well maintained and are rendering commendable services to the clients satisfaction. During the year, to strengthen its fleet and ensure stronghold over its market, SEAMEC extends its wing to other areas and pursuance to that purchased an OSV, namely, "SEAMEC DIAMOND".

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.

The enhanced combination of Fleets will strengthen the Companys position in diverse area.

3. BUSINESS SEGMENT ANALYSIS

The business segment for the Company during the year under review has been the offshore segment in domestic market.

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

4. FINANCIAL PERFORMANCE

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

(Rs In Lakhs)

Particulars	FY 2023-24	FY 2022-23
Total Income	70,673	41,449
Operating Expenses	41,720	28,333
Operating Profit	28,952	13,116
Operating Profit Margin	0.41	0.32
Interest Expenses	1,135	329
Depreciation	10,582	9,267
Profit / (Loss) before Tax & exceptional item	17,235	3,520
Exceptional item (income)	1,301
Profit / (Loss) before Tax	18,536	3,520
Tax Expenses	(123)	(608)
Profit / (Loss) after Tax	18,659	4,128
Net Profit Margin	0.26	0.09
Debtor/Sales	4.06	5.60
Creditor/Purchase	4.64	5.67
Inventory / Turnover	8.45	6.84
Current Ratio	2.35	1.66
Debt Equity Ratio	0.26	0.08
Net worth	87,094	68,695
Interest Coverage Ratio	16.19	11.70

Note: With respect to details of significant changes in key financial ratios with explanations, please refer to Note No. 43 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 increase in deployment days and lumpsum contract for SEAMEC III & SEAMEC PRINCESS and hire rate of deployment for SEAMEC SWORDFISH
Operating Cost :	The Operating cost has increased due to lumpsum contract of SEAMEC III & SEAMEC PRINCESS as deployed with L&T and due to increase in deployment days of SEAMEC GLORIOUS
Depreciation :	Higher depreciation is due to acquisition of vessel SEAMEC DIAMOND and SEAMEC SWORDFISH and additional depreciation on SEAMEC III due to dry dock.
Operating Profit (Loss) :	Operating Profit has increased due to increase in deployment days and hire rate of deployment for SEAMEC SWORDFISH.
Current Tax Exp. :	The company is being assessed under Tonnage Tax Scheme. Since there is carry forward unabsorbed depreciation from previous year Non tonnage profit is being set off against unabsorbed depreciation so this year also there is no current tax liability.
Net Profit (Loss) :	Increased in operating Profit has increased due to increase in deployment days and hire rate of deployment for SEAMEC Swordfish.
Exception Item :	Income from Sale of Vessel SEAMEC GALLANT

5. 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.