Shahi Shipping Ltd Management Discussions

a) INDUSTRY STRUCTURE AND DEVELOPMENT

Shahi Shipping Ltd. has the largest and most diverse fleet of coastal shipping vessels in India. Established in 1985 as a Partnership Firm, the company went public in the year 1990. We operate primarily in Mumbai harbor with a branch office in Goa offering cost-effective sea logistics solutions to our clients. We pioneered transshipment operations in India building the first

3000 DWT multipurpose cargo vessels. We handle the complex operation of fuel oil distribution to Indian Oil Corporation under the supervision of our experienced and qualified personnel. Our detailed commitment towards the goals of customer satisfaction, growth and excellence has yielded rich dividends through our arduous voyage. 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 Indian ports sector is poised for growth, with increasing investments and cargo traffic. As a result, service providers, such as operation and maintenance (O&M), pilotage, harboring, and marine asset companies, including barges and dredgers, are experiencing positive momentum. Additionally, domestic waterways have proven to be a cost-effective and environmentally sustainable mode of freight transportation. As a part of this initiative, the Government has set a target to operationalize 23 waterways by 2030. It has implemented several measures to improve operationalefficiency,through mechanization, 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 Shipping Industry plays a crucial role in Indian economy. As 95% of nations trade by volume is done by sea. India has been largest merchant shipping fleet amongst the developing nations. The Indian Shipping Industry supports transportation of national and international cargoes and also provide various facilities such as ship building, repairing, lighthouse facilities, freight forwarding etc. Indian Shipping Industry with emergence of globalization and liberalization is firmly ready to acquire new dimensions in terms of demand and infrastructural development. The Indian shipping industry has been growing in the last two decades; however the competitive position of the

Indian shipping industry needs to be strengthened. Government of India has been supporting the growth of the industry through various measures. Government has a role to develop Indian port sector, which would contribute to the growth of the Indian shipping. The players in the shipping and associated sectors have also a role to play for the development of the industry, for it to carve a niche in the world shipping map. Indian shipping industry needs to team up with foreign consortium of fleet owners to tap the growing LNG transportation business. Indian ship builders must focus on benchmarking their own processes to international standards to improvetheefficiency,delivery time, price and quality. Innovative financing measures such as German KG model may be adopted to encourage fund flow into this sector. It is therefore essential for India to put together all such strategies that would lead to optimal and effective contribution towards developing the shipping industry. b) GLOBAL SHIPPING INDUSTRY :

The global shipping industry is divided into various segments such as container, dry bulk, oil and gas, offshore etc. Container shipping is dominated by large Companies transporting standardized containers of manufactured goods, while dry bulk shipping involves dry vessels carrying unpackaged goods like coal, ores and grains. Oil and gas shipping is instrumental in transportation of crude oil, refined products and gases whereas offshore shipping supports the oilfields and the gas industry. All shipping segments face similar opportunities and challenges but have distinct characteristics that impact their markets. The global shipping industry saw growth rebound in 2025, as supply chain pressures eased, resulting in freight rates moving towards normalization. The trends of automation and increased focus on achieving sustainability goals form an underlying aspect of the shipping industrys growth outlook, with market players emphasizing higher efficiencies and cost reduction. On one hand, the shipping industry is leveraging technologies such as AI, machine learning, computer vision, connected IoT networks, and block chain, while on the other hand, the industry is also committed to becoming carbon-neutral and reducing 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. 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-efficient 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.

c) OUTLOOK OF OPPORTUNITIES:

India has a rich maritime history. The shipbreaking and shipbuilding industry flourished during the Indus Valley civilization.

Today, India has the biggest shipbreaking yard in the world. It is estimated that around half of the worlds ships are broken down by Alang. Through the various initiatives introduced by the government, Indias shipping industry has grown significantly since independence. As of 2022, Indias fleet has a total of 1405 ships, which is equivalent to a deadweight tonnage of approximately

19.2 million. The countrys infrastructure projects have also helped the industry. Govt. of India worked upon various key initiatives to ensure smooth functioning of India. Although governments ambitious Sagarmala initiative aims to double the share of the port industry in Indian cargo movement by 2025. This initiative was launched in 2017 to rationalize the freight costs and improve the competitiveness of the export market. Government is also planning to spend $123 billion on various port modernization projects through the Sagarmala Program. This will help boost the countrys export efficiency and create jobs. In

2022, around 161 projects under the Sagarmala Program have been completed. In 2021, the total port capacity has increased to 1534.91 million tons a year. It was previously estimated that the port capacity would reach 871.52 million tons in 2014. The Merchant Shipping Bill, 2020, aims to promote the growth of the Indian marine industry and prevent air pollution. Projects related to inland water transport are also under the Jal Marg Vikas focused on improving the efficiencyand safety of navigation. The government has also lowered the Goods and Services Tax (GST) for foreign-flagged help boost the marine industry. Out of the 200 non-metro ports in India, 44 are already operational and strategically located.

This is largely due to the huge cargo trafficthat has shifted from the major ports to the smaller ones. The non-major ports traffic grew at a robust rate of 45% during the financial year 2020 as the governments initiatives to decongest the roads and railways continued. Major ports handled a total of 704.6 million tonnes of cargo during the year under review, up 0.8% from the previous year. The capacity of these facilities is expected to grow at a robust rate of 6% over the next couple of years. The Indian governments plan to establish 23 waterways by 2030 is geared toward addressing the countrys logistics needs. Whereas, The Make in India campaign will help boost the countrys marine repair industry and its shipbuilding industry. And Due to the increasing awareness about the environment, the maritime industry is pushing for the use of cleaner fuels. The Indian Oceans strategic location makes it the most advantageous place for Indias shipping industry. Its trade with other countries is 95 percent based on volume. Indias maritime sector is one of the countrys top priority areas for foreign direct investments. It is estimated that the industry could generate annual revenue of over US$81 billion. In line with this, the countrys Ministry of Shipping is planning to improve the concession agreement (MCA) to attract more private investors. As Indian subcontinent has a coastline of over 7,517 kilometers, which is strategically located near the Indian Ocean Region. This region supports around 80 percent of the global maritime oil trade. The countrys shipping industry is expected to contribute significantly to the countrys economic growth. A recent study conducted by the MoPSW revealed that around 95 percent of Indias international trade volume is carried out through its maritime channel.

Opportunities

- Enhancing the Functionality of Private Ports:

With the rise in imports of crude oil, coal, and containerised goods, public ports face a challenging situation, which presents an opportunity for private docks to step up and fulfil the additional demand from significant ports. As a result, private ports are increasing their capacity to meet projected future demand

- Government Initiatives:

The Indian Government has also taken initiatives to boost the countrys maritime sector through the Maritime India Vision (MIV) 2030. The vision was launched by the Honourable Prime Minister, Shri Narendra Modi, in March 2021. It was developed in consultation with over 350 public and private stakeholders. These stakeholders included ports, shipyards, inland waterways, trade bodies, associations, and legal experts. It outlines over 150 initiatives to accelerate and coordinate the comprehensive development of Indias diverse maritime sector.

- Digitalization of Operations:

The shipping industry is embracing technological advancements, such as automation, big data analytics, and artificial intelligence to improveefficiency,accuracy reliability, reduce costs, and enhance safety, presenting opportunities for companies to adopt new technologies and stay competitive.

- Environmental Regulations:

Governments and international organizations are introducing regulations to reduce emissions and promote sustainability in the shipping industry, offering prospects for companies to invest in eco-friendly technologies and solutions.

- Emerging Markets:

Emerging markets, such as China, India, Middle East and Southeast Asia are experiencing rapid economic growth and increasing demand for goods, creating opportunities for shipping companies to expand their operations and tap into new markets.

- Infrastructure Development:

Developing new ports, terminals, and other infrastructure projects presents opportunities for shipping companies to expand their operations and improve efficiency.

RISKS AND CONCERNS:

- Indian Ship Repair Industry:

Indian dry docks face difficulty due to the shortage of ports with ship repair facilities, high funding costs, ship spares, and technical challenges.

- International Disputes and Regulatory Policies:

Changes in regulatory policies can hamper mobilization and supply chains, requiring alternate dispute resolution options to mitigate such risks.

- Shortage of Trained Workforce and Competent Seafarers:

The industry faces a shortage of executives with technical experience and officers at the managerial level, with demand exceeding supply.

- Rising Costs of Operation:

Rising input costs, inflation, and poor market conditions can lead to higher operating costs, hampering supply chain management and mobilization.

- Cybersecurity Risks:

Increased reliance on digitization and automation has brought along a set of cyber threats and challenges, requiring a cyber-risk management system to identify and respond to these challenges efficiently.

- Security Risks:

Piracy and armed robberies in Southeast Asia and West Africa pose a growing threat to the industry

THREATS

- Infrastructure:

Poor infrastructure, such as inadequate port facilities or underdeveloped transportation networks, can cause delays and disruptions to business operations. It may also increase transportation costs and affect the delivery of goods and services.

- Trade Regulations:

Unfavorable and differentiated Government regulations can create hurdles for building infrastructure and may limit the scope of business opportunities. Strict regulatory policies may significantly impact coastal maritime operations, which could affect port traffic and trade volume in particular.

- Geopolitical Tensions and Trade Sanctions:

Political tensions and trade sanctions can lead to increased shipping costs, disruption of global trade, and financial risks for all parties involved. This can include financial institutions, ship owners, charterers, suppliers, insurers, ports, and cargo owners.

- Crew Changes:

Due to the Covid-19 pandemic, travel restrictions and border closures resulted in seafarers being stranded on board ships for extended periods. This increased the risk to their mental and physical health, which may also impact the availability of skilled workers and lead to additional costs for your Company.

- Surveys, Inspections, and Servicing:

Delays in carrying out surveys, inspections, and maintenance of ships due to technician shortages and social distancing measures at shipyards, can result in operational disruptions, downtime, and additional costs. This can also affect the overall safety and efficiency of the ship, which may lead to increased risks for the crew and cargo. d) SEGMENT WISE PERFORMANCE:

The Company operates in only one segment i.e. shipping, and therefore, has no separate reportable segments. Your company continued to provide services in the areas of Container Liquid Cargo lighter age operations of Petroleum & Chemical Products, lighter age operations of Bulk Cargo, Tug services for port related activities, supply of bunkers to vessels and Container Feeder

Service on Indian Coasts through its fleet of vessels. The business development period provides an opportunity to create value and lean period provides to undertake major repairs and maintenance of vessels. The fleet utilization during the period under review was efficient. e) OUTLOOK:

The shipping industry is poised for growth in the coming years. Your company with some inherent advantages such as low operation cost, committed professional manpower and proper upkeep of vessels is expected to cash on the opportunities provided.

Your Company has since the last few years taken initiatives to broaden its fleet base to minimize the risks and maximize the gains. f) PROJECT:

Your Company has carried out a market survey on Indian coastal business opportunities and based on its finding proposing to acquire suitable petroleum and allied carrying vessels, which if commenced, will significantly grow the profitability of the

Company. g) DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

Much of the success of your company is attributed to the quality of its people, their dedication and contribution. The dedicated team of shore and floating staff provides continuous support to the operations of the company, which is reflected Voyage operations are managed professionally, ensuring high productivity levels, thus increasing the operationalefficiency. revenues. Your Company employs skilled personnel to monitor and maintain its oil-spill and other emergency response plans. The seasonality in this industry stemming from the scattered monsoon and drydocking of the vessel which is carried out once in five years and keeps the vessel out of charter for a short time has impacted the operational performance of the Company, resulting adversely on the financial capacity of the Company. improvement of operational performance having a positive impact on financial performance as well. h) QUALITY AND SAFETY:

Your company continues to focus on the safety, training and development of the employees. The company also conducts frequent training sessions including onboard drills to enhance the effectiveness of the safety of the staff. Your company firmly believes that the pursuit of excellence is one of the critical components for competitive success in the global market. Your directors take pleasure in informing you that your company has upgraded ISO to the latest gradation standards. The Company has also obtainedcertificatefrom Trademark Registry Certification to safeguard the interest of the Company and is on a continuous journey towards continual improvement to make its Quality Management System more effective. i) HUMAN RESOURCES:

The Company considers its employees as partners in growth. Theyhaveplayed significantrole and enabled the Company to deliver superior performance year after year. j) ADEQUACY OF INTERNAL CONTROLS AND RISK MANAGEMENT

Your company believes in formulating adequate and effective internal control systems and implementing the same strictly to ensure that assets and interests of the company are adequately safeguarded. The Company has adopted the all reasonable processes and procedures that management puts in place to help and make sure that its assets are protected and that company activities are conducted in accordance with the organizations policies and procedures. As observed by auditors, the company, going forward, would deploy news tools and technique to strengthen its Internal Financial Controls and to facilitate smooth and efficient functioning of the activities of business paving way for compliance of internal control norms stated in on ‘Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India. The

Companys robust Risk Management Framework (RMF) identifies and evaluates all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks. The Company recognizes that these risks need to be managed and mitigated to protect its shareholders and other stakeholders, to achieve its business objectives and enable sustainable growth. k) CAUTIONARY STATEMENT:

Statements in the Management Discussion and Analysis describing the Companys strategies on business, projections and estimates are forward looking statements within the meaning of applicable securities laws and regulations. Forward-looking statements are based on certain assumptions and expectations of future events. The actual results may vary from those expressed or implied, depending upon economic conditions, Government policies, regulations, tax laws and other incidental factors