South West Pinnacle Exploration Ltd Management Discussions

INTRODUCTION

Mining sector in India is presently highly unexplored in comparison to the world standard and the mineral reserves India possess. There is ample scope to boost the exploration activities to unlock the reserves. This will help in boosting our GDP enhance employment opportunities and the per capita income. This will also reduce the dependence on imports, which would save our precious foreign exchange.

The Government of India is taking effective steps to gradually enhance the mining activities as much as possible. Present, policy of opening up of coal and other sectors for private sector players are welcome steps in that direction.

Infrastructure development, power and cement industries are also aiding growth for the sector. Demand for iron and steel is set to continue given the strong growth expectations for the residential and commercial building industry.

Besides, Governments efforts to reduce dependence on imports of oil and gas will pave way for opening up of more and more tracks of land for exploration and production in oil and gas.

Ministry of Petroleum and Natural Gas, GOI has recently oated a program called as Mission Anveshan for carrying out 2D seismic survey in various states to discover new oil bearing blocks under supervision of ONGC and Oil India.

The encouraging part is your company operates in most of the exploration domains and is well placed to take up all kinds of exploration and mining related activities across sectors, matching with the requirement as summarised in the following paragraphs.

A. EXPLORATION AND ALLIED SERVICES OFFERFED

- COAL & NON-COAL MINERAL DRILLING SERVICES

- SWPEL offers Core Drilling, Large Diameter Core Drilling and non-core drilling through RC (Reverse Circulation), DTH (Down the-Hole) & Mud Rotary Technologies.

- SWPEL has completed more than 2.6 Million Meters of drilling using above-mentioned technologies till date.

- 2D/3D SEISMIC EXPLORATION SERVICES

SWPEL has the knowledge and ability to handle challenges involved with 2D/3D land seismic exploration, Coal,Oil & Gas. We provide seismic solutions including;

2D/3D LAND SEISMIC DATA ACQUISITION

2D/3D LAND SEISMIC DATA PROCESSING

- GEOLOGICAL & GEOPHYSICAL SERVICES

SWPEL has a strong Geological & Geophysical Services Division with a team of 15 experienced Geoscientists capable of providing on-site integrated exploration services, both for coal and other mineral resources like Limestone, Atomic Minerals, etc.

- MINING SERVICES

SWPEL is equipped to provide Mining Services for Coal including OB, Ferrous and Non-ferrous minerals.

SWPEL is presently imparting Copper/Gold Mining Services through a JV in Oman.

- CBM EXPLORATION SERVICES

SWPEL is leading CBM exploratory drilling service provider in the country, having provided services to some of the prominent clients like Reliance Industries, Oil India, Dart Energy.

The Company has so far completed more than 60 CBM core wells which to our knowledge is highest in the country.

- CBM PRODUCTION SERVICES

During the year under review, the Company has bagged a new order from Reliance Industries Ltd. valuing over Rs. 84 Crores with a potential to go upto Rs. 270 crores over a period of 3-4 years. The Company has imported a special rig and other equipments to accomplish this project. The project is going on smoothly.

SWPEL has achieved the feat of having drilled over 200 of CBM production wells for its client Reliance Industries Ltd.

- GEOTHERMAL AND SHALE GAS EXPLORATION SERVICES

SWPE can drill 4 number of wells each for Shale Gas & Geothermal Exploration respectively. Development of Geothermal Energy is present day focus area for the Government.

- AQUIFER MAPPING SERVICES

SWPEL envisions to identify & map aquifers across the country to quantify the available groundwater resources and to propose plans appropriate to the scale of demand and aquifer characteristics.

The Company is equipped with multiple disciplines and scienti c approaches, including remote sensing, hydrogeology, geophysics, hydrochemistry, drilling, groundwater modelling, and management for providing time bound & cost-effective services for completion of Aquifer mapping studies.

Recent four order wins from Central Ground Water Board (CGWB) for Gujrat, Maharashtra, Madhya Pradesh and Chhattisgarh are welcome developments in this direction.

B. COAL BLOCK ACQUISITION

As reported earlier, SWPEL has won a partially explored coal block in the state of Jharkhand by participating in forward auction conducted by Ministry of Coal, Government of India during FY 2021-22. It has completed

DGPS survey and have applied for PL cum ML with Government of Jharkhand. Once PL is received, exploration activities will be undertaken for preparation of GR, Mining plan etc. Other related activities of mine development including approvals/ clearances from various agencies/authorities will also be undertaken simultaneously for early operationalization of the coal block.

Broad details of the coal block are depicted below:

- The coal block falls in Ramgarh and Bokaro Districts of Jharkhand

- Total Geological block area is 2.66 Sq. Km. with an estimated Geological reserve of 84 MT

- Grade of coal is W-IV

- Rail and road connectivity from the block is quite good.

GOVERNMENTS IMPETUS ON COAL PRODUCTION

· The Government of India has made a significant policy change sometime back allowing commercial coal mining by private players to cater to the ever-increasing coal demand of the country.

· Private players are free to sell coal in the open market after winning the coal block by going through the auction process.

· The Government is putting more & more coal blocks for auction regularly for faster development of mines by private players to accelerate coal production.

· The Government of India had set a target of domestic coal production of 1 billion ton by FY 2024 which has since been achieved.

· Ministry of Coal has reengineered and simpli ed the Mining plan preparation and approval processes and is facilitating the private players by providing single window clearance besides other industry-friendly measures to

SIGNIFICANCE OF COAL IN INDIAN CONTEXT

- India cannot do away with coal at least for the next 3 to 4 decades, as India is endowed with large reserves of coal, which can last for over 200 years at the current rate of production.

- 135 coal red power plants in the country meet more than half of its energy needs.

- Hydro power potential is about 1.5 lakh MW, of which, only 30 per cent has been exploited so far due to environmental issues, hence, hydro power may not contribute in a major way to future capacity additions

- Solar and wind will be the main contributors to renewable energy. It is a myth that renewable energy can meet all of the ever increasing energy needs of our country in near future despite many initiatives taken by GOI.

- Increase in nuclear power is uncertain, since it depends upon many environmental and safety issues and peoples support.

- Phasing out of coal red power plants cannot be done quickly, as much of Indias electricity is generated using coal.

- Thus, coal is inevitable in the energy mix of the country in foreseeable future.

A. OPERATIONS IN OMAN

South West Pinnacle Exploration Limited has won a contract through its Joint Venture company named Alara Resources LLC, Oman. The aggregate value of the contract is around USD 125 Million. The contract is to be executed over a total period of 11 years. The mining service operations in Oman are going on since last over two years.

The mining operations broadly include: -

- Plan the mine and its development and construction to the reasonable design standards; O Clear land, remove and store top soil for reuse and prepare banks; O Mine and extract ore in accordance with the production schedule;

- Implement and comply with the obligations with the Environmental management system (EMS);

The Company also provides drilling and exploration services to various clients in Oman.

NEW AVENUES/ OPPORTUNITIES FOR THE COMPANY:

Your Company has various new avenues/ opportunities of drilling & exploration in various sectors as summarized below:-

1. Drilling and Exploration of Coal

- Significant scope for drilling and exploration as India has a large number of unexplored new mines of coal, iron ore and bauxite and considerable opportunities exists for future discoveries of sub-surface deposits.

- With the availability of such a large coal reserve in India and Governments thrust to enhance its production, there is a vast scope of drilling & exploration in the coal sector.

2. Drilling and Exploration of Non-Coal Minerals

- Over 500 mineral blocks, partially or minimally explored under current leases, are now up for grab through competitive bidding. The target now is to complete this exercise by 2025-26.

- Reallocation of several non-producing blocks of the state-run companies is a move that is giving a lot of enthuse to the private players as many of these blocks have abundant proven resources.

- This way, the employment-intensive, but highly under-invested sector is getting llip to do away with end-use restrictions, and those with captive leases are allowed to sell the minerals in open market as per the new provisions.

3. Oil & Gas Exploration

- The Government has taken several measures to fulfill the increasing oil demand. It has allowed 100% FDI in many segments of the sector, including natural gas, petroleum products, and re neries. Today, it attracts both domestic and foreign investment.

- To reduce our countrys dependence on imports, the OLAP pronounced by the Government is reaping results.

- To enhance the oil production , Ministry of Petroleum and Natural Gas , GOI has recently oated a program called as Mission Anveshan for carrying out 2D seismic survey in various states to discover new oil bearing blocks under supervision of ONGC and Oil India during FY 2024-25 and 2025-26.

- Such a scenario of oil and gas in India throws open lot many opportunities of exploration in this sector.

4. Unconventional Sources of Energy

- India has many unconventional sources of energy and most of them are highly unexplored giving us many opportunities in this area.

- These unconventional sources of energy mainly include

Geothermal Power

Shale Gas

Coal bed Methane (CBM)

5. Infrastructure Projects

- Infrastructure sector is a key driver for the Indian economy. With the Governments impetus to create infrastructure, the demand for steel and cement is bound to increase, which will help in creating opportunities for exploration and mining.

6. Coal Block for Commercial Mining

- Government of Indias policy announcement regarding the opening up of coal blocks for commercial coal mining by private payers is reaping results.

- Being natural extension, we participated and won one such coal block namely Jogeshwar and Khas Jogeshwar through forward auction. The coal block is located in the state of Jharkhand.

- The process of mine development is underway wherein after completing DGPS survey, we have applied for PL cum ML from Government of Jharkhand. Once PL is issued, preparation of GR, mining plan and other related activities including obtaining other clearances etc. etc. would be initiated at a faster pace. We strongly believe that this has great potential and throws open immense opportunity for the growth of Company.

7. Aquifer Mapping & Hydro Geological Services

- The importance of groundwater for national development has deemed it necessary to be more speci c, and hence "groundwater management" has become "aquifer management". Central Ground Water Board (CGWB) has taken up the National Project on Aquifer Management to formulate a sustainable aquifer management plan.

- CGWB has accordingly, launched the aquifer mapping projects on PAN India basis. Our company is also bene ciary of such projects. Recently we have been awarded four such contracts in four states .We expect to get some more contracts in the times ahead.

8. Mining and Exploration Activities in Oman

- Oman is the second largest country after Saudi Arabia in the Gulf Cooperation Council region with huge resources of copper, Gold, Silver, Chromite, Lead, Nickle Manganese, and Zinc. These reserves are highly undeveloped due to preference for oil sector growth.

- In 2014 Sultanate of Oman has decided to diversify and move away from dependence on oil reserves and has created public authority under the Ministry of Commerce and Industry named Mining Development Oman (MDO) to regulate and expand the mining activities and to strengthen the private sector involvement and investment in the sector.

OUTLOOK

Exploration and Allied Services

- As on date, the current order book position stands at over Rs.221 Crores.

- Besides, SWPEL participated in various new tenders and expect at least few to fructify enriching our order book

- SWPEL expects core exploration service business continues to grow at about 15% % p.a. over the near to medium term.

- SWPEL also expects EBITDA Margins to be in the range of 20% to 22%.

- Opening up of 500 mineral blocks for private players by Central Government will give a boost to Drilling and Exploration business in India. The new target of GOI is to complete this exercise by FY 2025-26.

- Oil and Gas Sector is among the eight core sectors in India and plays a major role in meeting energy demand in India.

- The impetus to explore Oil & Gas through seismic technology is a welcome step and brightens prospects of our exploration business in the times ahead.

- Un-explored non-conventional source of energy further enhances the potential of drilling and exploration business in future.

Coal Mining

- SWPEL won coal block namely Jogeshwar and Khas Jogeshwar located in the state of Jharkhand. After completing DGPS survey we have applied for PL cum ML with Government of Jharkhand. Once PL is received, exploration, GR and mining plan preparation and other related activities will commence.

- Expect quantum jump in revenue and profits after operationalization of coal block.

Operations in Oman

- The mining services operations in Oman are going on since last over two years.

SWOT ANALYSIS

1. Strengths: -

a. Full- edged exploration and mining company with presence across almost all domains of drilling & exploration

b. Capability to deliver the projects successfully within timelines

c. Qualification Credentials

d. Experienced manpower & Management Team

e. Client Retention

f. Robust Order Book

g. Renowned Cliental from both Public & Private Sector.

h. Best in class equipments

2. Weakness: -

a. Being Tender based business, sometimes we have to win a contract on a relatively lower rate to beat the competition.

b. Our business needs forest/environment clearances in most cases, which sometimes takes longer than expected time.

c. Weather sometimes plays a vital role in project completion.

3. Opportunity: -

a. Over 500 Mineral Blocks are now available for Drilling and Exploration through competitive bidding, the exercise is proposed to be completed by FY 2025-26.

b. A large number of unexplored / partly explored coal blocks for Drilling and Exploration of Coal are available in the wake of new policy of Government of India.

c. The policy announcement of GOI, allowing 100% FDI in Oil & Gas Sector throws open many opportunities.

d. The OLAP pronounced by the Government is a welcome step giving new opportunities.

e. Mission Anveshan launched by Ministry of Oil and Natural Gas, GOI for carrying out 2D seismic survey in various states to discover new oil bearing blocks under supervision of ONGC and Oil India throws open new opportunities for us . The total work to be carried out under it, is estimated to be of around Rs. 800 Crores.

f. The ground water management has become aquifer management now. CGWB has launched the aquafer mapping projects in a big way and we are able to win some of the contracts.

g. The coal block bidders who have been successful in getting coal block allocation, are looking for some service provider who can help them and do hand holding in developing the coal block. We have recently won two such contracts in a similar eld.

4. Threats: -

a. Stringent Environment laws & probability of change in those laws.

b. Change in Government Policies & GST Act/rules.

c. Local unrest and non- cooperation by local villagers which sometimes may result in delay in completion of projects.

d. Recent judgement pronounced by Hble Supreme Court allowing State Governments to levy taxes on minerals produced in their states, if they wish to do so.

FINANCIAL PERFORMANCE:

The financial performance of the Company during the year was little subside. SWPEL has clocked a turnover of Rs. 13,575.12 Lacs on standalone and Rs. 13,584.61 Lacs on consolidated basis registering a modest growth of 5.98% and 5.76% respectively. The Company has achieved profit before tax of Rs. 972.26 Lacs on standalone and Rs. 1090.75 Lacs on consolidated basis. The margins during the year were under pressure mainly due to the increase in input cost coupled with interest cost and depreciation.

RATIO ANALYSIS

Particulars	Numerator	Denominator	For the year ended March 31, 2024	For the year ended March 31, 2023	Variance **
Current Ratio	Current assets	Current liabilities	1.78	1.94	-8.07%
Debt Equity Ratio	Total Debt	Shareholders? Equity	0.73	0.53	37.65%
Debt Service Coverage Ratio	Earnings available for debt service	Debt service	1.12	1.18	-5.59%
Return on Equity*	Net Pro t after taxes	Avg. shareholders equity	5.85%	7.32 %	-20.13%
Inventory Turnover Ratio	Revenue	Avg. Inventory	3.14	3.24	-3.01%
Trade receivable Turnover Ratio	Revenue Purchases+ Other operating	Avg. Trade receivables	2.40	2.06	16.47%
Trade payable Turnover Ratio**	expenses+ Other expenses	Avg. Trade payables	5.70	4.50	26.58%
Net Capital Turnover Ratio	Revenue	Avg. Working Capital	2.22	2.12	4.46%
Net Pro t Ratio*	Net Pro t	Revenue	5.31%	6.71%	-20.94%
Return on Capital employed *	Earnings before interest and taxes	Capital employed	8.24%	9.68 %	-14.86%
Return on Investment	Interest and Rental Income	Investment	11.07%	12. 52%	-11.61%

* The debt- Equity Ratio had a negative variance of 37.65% because of additional loan to tune of Rs. 28.29 Crores taken mainly to fund RIL Project. This will fetch better profits in current year and in subsequent years.

** Trade payable turnover ratio improved due to better cash to cash cycle.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has adequate internal control systems in place, commensurate with its size and complexity of its operations. There are pre-de ned systems and processes with authorization matrix to deal with variety of transactions in different situations. The company has qualified internal auditor and other qualified personnel who monitor the operations of the company very closely and ensure that the transactions/operations are done in accordance with the standard operating procedures formulated by the company from time to time. The internal auditor makes report of his observations periodically which is discussed with the management and nally with the Audit Committee and Board Members.

The internal auditor also interacts regularly with the statutory auditors for proper recording of transactions and physical veri cation of inventory as well as xed assets of the company.

HUMAN RESOURCE AND THEIR CONTRIBUTION:

Biggest strength of any company is the human resource, especially in the service provider company like SWPEL. It has the privilege of having excellent work force with very talented employees. The present strength of employees is around 600 with a very minimal attrition rate as compared to industry average. The hallmark of the Company is timely completion of projects, most of the credit for the same goes to it employees who work tirelessly to accomplish the given task within the permissible timelines. Many clients have given very rich tributes for the for our employees commitment and professionalism. There is a culture of open discussion of employees with Management and views and suggestions of employees are given due weightage by the Management. SWPEL certainly takes pride in saying that it has one of the best work forces in the industry.

DISCLAIMER ON THE MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

The Board of Directors have reviewed the Management Discussion and Analysis report prepared by the Management of the company statement in this report of the Companys objective, projections, estimates, exceptions, and predictions are forward looking statements subject to applicable laws and regulations besides the prevailing market situation at relevant time.

The statements are subjected to certain risks and uncertainties. Companys operations are affected by many external and internal factors which are beyond the control of company / management. Thus, the actual situation may differ from what is expressed or implied hence any call or decision be taken only after doing the self-assessment.

The Company or the management assumes no responsibility in respect of forward looking statements that may be amended or modified in future on the basis of subsequent developments, information or events and reiterates that company or the management shall in no way be responsible for any decision taken by anyone based on this MDA.