ANNEXURE-III
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, present
contribution is less than 2% enhance employment opportunities and the per capita income.
This will also reduce the dependence on imports, which would save our colossal 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 mining
sectors for private sector players are few 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 sector.
The good part is your company operates in most of the exploration domains and is well
placed to take up all kinds of exploration and mining 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
SWPE offers Core Drilling, Large Diameter Core Drilling and non-core drilling through
RC (Reverse Circulation), DTH (Down ?the-Hole) & Mud Rotary technologies.
SWPE has completed more than 2.3 Million Meters of drilling through all above mentioned
technologies till date.
2D/3D SEISMIC EXPLORATION SERVICES
SWPE has the knowledge and ability to handle challenges involved with Land 2D/3D
seismic exploration, Coal, Oil & Gas. We supply seismic solutions including
• 2D/3D LAND SEISMIC DATA ACQUISITION
• 2D/3D LAND SEISMIC DATA PROCESSING
GEOLOGICAL & GEOPHYSICAL SERVICES
SWPE has a strong Geological & Geophysical Services Division with a team of 15
experienced Geo scientists capable of providing on-site integrated exploration services,
both for coal and other mineral resources like?Limestone, Atomic Minerals, etc.
MINING SERVICES
We are equipped to provide Mining Services for Coal including OB, Ferrous and
Non-ferrous minerals.
SWPE has already commenced Copper/Gold Mining Services through JV in Oman.
CBM EXPLORATION SERVICES
We are leading CBM exploratory drilling service provider in the country, having
provided services to some of the prominent customers like ? Reliance Industries, Oil
India, Dart Energy.
Completed more than 60 CBM core wells to date - the highest in the country. SWPE has a
fleet of 2 CBM Exploratory Drill Rigs which are capable of drilling up to 2000 m depth.
CBM PRODUCTION SERVICES
SWPE has accomplished the feat of having drilled 184 nos. of CBM production wells up to
1,200m depths, for its customer ? Reliance Industries Ltd. During the year the company
has bagged a new order from Reliance Industries Ltd. valuing over Rs. 84 Crores with a
potential to go upto 270 crores over a period of 3-4 years. The company has imported a
special rig and other equipments to accomplish this project.
GEOTHERMAL AND SHALE GAS EXPLORATION SERVICES
SWPE is the leading company to drill 4 numbers of wells each for Shale Gas &
Geothermal Exploration respectively.
Development of Geothermal Energy is present day focus area for our Government.
AQUIFER MAPPING SERVICES
SWPE 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. A recent order win from Central Ground Water Board with two-
three more in pipeline is a very welcome development.
We are equipped with multiple disciplines and scientific approaches, including remote
sensing, hydro geology, geophysics, hydro chemistry, drilling, groundwater modelling, and
management for providing time bound & cost effective services for completion of
Aquifer mapping studies.
B. COAL BLOCK ACQUISITION
As reported earlier we have 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. The mine development activities are presently underway and we
expect to start the coal production well within the stipulated timelines.
Details of the coal block are depicted below:
The coal block is situated in Ramgarh and Bokaro District 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;
Process for getting clearances and other Mine development activities are going on at
full swing ;
Plan to start coal production within next 24 to 30 months;
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 has targeted to accelerate the pace of coal production
so as to reach 1 billion ton level by 2024 and is about to touch this milestone soon.
• Ministry of Coal has reengineered and simplified the Mining plan preparation and
approval process and is facilitating the private players by providing single window
clearance besides other industry-friendly measures to attract investment in this sector.
COAL AS AN ENERGY SOURCE
India has estimated geological coal reserves of ~300 Billion Tons
Total coal production in India at present is around 950 Million Tons per Annum
Coal continues to be the biggest energy source with more than half of power generation
is from coal- based plants at present
Coal is a preferred source of energy due to its abundant availability and
affordability
By 2029-30 the total installed capacity of power generation is estimated to be more
than double
Besides, power generation, Coal supports many non power industries as well viz. Cement,
Fertilizer, Sponge Iron, Aluminum and host of other industries in organized and
unorganised sector
PRESENT MARKET SCENARIO
01 There is an ever increasing demand of coal for power generation by thermal plants
02 The Government of India is putting all-out efforts to enhance the coal production
and is carrying out various policy changes for the same
03 To accelerate the coal production, the Ministry of Coal has also set up a committee
to review/bench- mark the timelines in the execution of coal Mining projects
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 fired 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 addition.
Solar and wind will be the main contributors to renewable energy. It is a myth that
renewable can meet all of the ever increasing energy needs of our country.
Increase in nuclear power is uncertain since it depends upon environmental and safety
issues and peoples support.
Thus, coal is inevitable in the energy mix of the country in the foreseeable future.
Till new sources of energy are developed, India has no option but to depend on coal.
Phasing out of coal fired power plants cannot be done quickly as much of Indias
electricity is generated using coal.
C. OPERATIONS IN OMAN AND NEARBY REGION
South West Pinnacle Exploration Limited has won a contract through its Joint Venture
company named Alara Resources LLC, Oman. The aggregate value of contract is around Rs. 125
Million USD. The contract is to be executed over a period of next 11 years. The mining
operations in Oman have been started since last one year and are going on well and smooth.
The mining operations are broadly include: -
• Plan the mine and its development and construction to the reasonable design
standards;
• Clear land, remove and store top soil for reuse and prepare banks;
• Mine and extract ore in accordance with the production schedule;
• Implement and comply with the obligations with the Envoi mental management
system (EMS);
• Construct and maintain all excess ways and haul ways.
Seeing the potential in that region, the company has recently set up a step down
subsidiary of ARL in Saudi Arabia. We have also signed an MOU for forming another company
in Oman to explore new businesses in the field of exploration and mining.
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 or 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 non-coal mineral blocks, partially or minimally explored under current
leases are now up for grabs now through competitive bidding.
• 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
fillip to do away with end-use restrictions, and those with captive leases are allowed to
sell the minerals in the open market as per the new provisions.
3. Oil & Gas Exploration
• The Government has adopted several policies to fulfill the increasing oil
demand. It has allowed 100% FDI in many segments of the sector including natural gas,
petroleum products, and refineries. Today, it attracts both domestic and foreign
investment.
• To reduce our countrys dependence on imports, the OLAP pronounced by the
Government is reaping results. The Government has recently launched the OLAP Bid for
International Competitive Bidding.
• Such a scenario of oil and gas in India throws open lots of opportunities for
exploration in the 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 to what we had been doing, we participated and won such
coal block namely Jogeshwar and Khas Jogeshwari located in the state of Jharkhand through
forward auction for the said coal block.
• The process of mine development is underway. We strongly believe that this has
great potential and throws open immense opportunity for growth of the Company.
7. Aquifer Mapping & Hydro Geological Services
• The importance of groundwater for national development has deemed it necessary
to be more specific and hence “groundwater management” has become “aquifer
management”. CGWB has taken up 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 beneficiary of such projects. We expect to get some more projects in
the times ahead.
8. Mining and Exploration Activities in Oman and nearby region
• 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 Omani Government 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. Seeing the
potential there, we have recently signed an MOU for tapping those new opportunities. The
MOU is amongst Alara, Al Tasnim, Al Hadeetha Investment and Al Hadeetha Resources LLC and
us.
• To reduce dependence on oil revenue, Saudi Arabia Government is throughing open
lot many opportunities to tap their non-oil mineral reserves which are in abundance. The
creation of step down subsidiary to our JV in Oman is a step taken by us to exploit the
opportunities there.
OUTLOOK
Exploration and Allied Services
• As on August 2023, the current order book position in this vertical stands at
Rs. 290 Crores.
• We have already participated in tenders worth Rs. ~422 Crores till August 2023.
• We expect our core exploration service business continue to grow at about
15%-20%- p.a. over the near to medium term.
• We expect EBITDA Margins to be in the range of 20% to 22%.
• Opening up of 500 non-coal minerals block for private players by Central
Government will give a boost to Drilling and Exploration business in India.
• Oil and Gas Sector is among the eight core sectors in India and plays a major
role when we talk about energy demand in India.
• Impet us 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
• We won coal block namely Jogeshwar and Khas Jogeshwari located in the state of
Jharkhand. The mine development activities are underway. We plan to start coal production
over the next 24-30 months.
• We expect revenues to kick in from FY2026.
• Expect ~Rs. 700 ? 800 crores of revenue between FY26-FY28.
• We expect EBITDA Margins to be in the range of 40% to 42%.
• Driven by the improved domestic economic outlook and significant infrastructure
development, demand for coal is expected to grow in coming years.
Operations in Oman and nearby region
• The mining services operations in Oman are going on well since last over one
year. We expect net margin in the range of 5% - 6% annually.
• As the Oman Government looks to diversify and move away from dependence on oil
revenue and to create jobs for Omani nationals, growth is anticipated in the mining sector
following the discovery of significant reserves of minerals including gold and copper. The
recently signed MOU will enhance scope in getting new mining licences.
The way things are progressing in Saudi Arabia, we expect to garner good amount of
business there too through our step down subsidiary of ARL.
SWOT ANALYSIS
1. Strengths: -
a. Presence across almost all domains of Drilling & Exploration.
b. Capability to deliver the Projects successfully within timelines.
c. Qualification Credentials.
d. Experienced Management Team.
e. Client Retention.
f. Robust Order Book.
G. Renowned Clientals from both Public & Private Sector.
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 plays a vital role in project completion.
3. Opportunity: -
a. Over 500 Non- coal Mineral Blocks are now available for Drilling and Exploration
through competitive bidding
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 in the sector
d. The OLAP pronounced by the government is reaping results for us.
E. The ground water management has become aquafer management now. CGWB has launched
the aquafer mapping projects in a big way and we are able to win some of the contracts.
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. FINANCIAL PERFORMANCE:
The financial performance of the company during the year was little subdued. We have
clocked a turnover of Rs. 12809.25 Lacs on standalone basis and Rs. 12845.05 Lacs on
consolidated basis registering a modest growth of 6.17% and 6.46% respectively. The
company has achieved profit before tax of Rs. 1105.18 Lacs on standalone basis and
Rs.1130.98 Lacs on consolidated basis. The margins during the year where under pressure
mainly due to increase in input cost namely increase in steel prices coupled with increase
in finance cost due to revision in repo rates by Reserve Bank of India three four times
during the year.
RATIO ANALYSIS
Particulars |
Numerator |
Denominator |
For the year ended March 31, 2023 |
For the year ended March 31, 2022 |
Variance |
Current Ratio |
Current assets |
Current liabilities |
1.94 |
1.87 |
3.47% |
Debt Equity Ratio |
Total Debt |
Shareholders Equity |
0.53 |
0.45 |
19.11% |
Debt Service Coverage Ratio |
Earnings available for debt service |
Debt service |
1.50 |
1.43 |
4.71% |
Return on Equity* |
Net Profit after taxes |
Avg. shareholders equity |
7.32% |
11.74% |
-37.64% |
Inventory Turnover Ratio |
Revenue |
Avg. Inventory |
3.24 |
3.49 |
-7.22% |
Trade receivable Turnover Ratio |
Revenue |
Avg. Trade receivables |
2.06 |
1.87 |
10.07% |
Trade payable Turnover Ratio** |
Purchases+ Other operating expenses+ Other expenses |
Avg. Trade payables |
4.49 |
3.50 |
28.28% |
Net Capital Turnover Ratio |
Revenue |
Avg. Working Capital |
2.12 |
2.26 |
-5.83% |
Net Profit Ratio* |
Net Profit |
Revenue |
6.71% |
10.32% |
-34.94% |
Return on Capital employed* |
Earnings before interest and taxes |
Capital employed |
9.68% |
13.62% |
-28.93% |
Return on Investment |
Interest and Rental Income |
Investment |
12.52% |
12.47% |
0.44% |
*Two of the projects met with rough weather resulting in loss of revenue. This has also
effected the profitability and the return on equity.
**Better Realisation of Trade Receivables led to better cash inflows, entailing faster
payments to supplier, resulting in improvement in ratio.
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-defined 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 a report of his observations periodically which
is discussed with the management and finally with the Audit Committee and Board Members.
The internal auditor also interacts regularly with the statutory auditors for proper
recording of transactions and physical verification of inventory as well as fixed assets
of the company.
HUMAN RESOURCE AND THEIR CONTRIBUTION:
Biggest strength of any Company is the human resource specially in the service company
like us. SWPE has the privilege of having excellent work force with very talented
employees. The present strength of our employees is around 650 with a very minimal
attrition rate as compared to industry average. The hallmark of our company is timely
completion of projects, most of the credit for the same goes to our employees who work
tirelessly to accomplish the given task with in the permissible timelines. Many clients
have given very rich tributes for the for our employees commitment and professionalism.
There is a complete culture of open discussion of employees with Management and views and
suggestions of employees are given due weight age by the Management. We certainly take
pride in saying that we are having one of the best work force in the industry.
RESPONSIBILITY FOR THE MANAGEMENT DISCUSSION AND ANALYSIS REPORT:
The Board of Directors have reviewed the Management Discussion and Analysis prepared by
the Management and the Independent Auditors have noted its contents. Statement in this
report of the Companys objective, projections, estimates, exceptions, and predictions are
forward looking statements subject to the applicable laws and regulations. The statements
may be subjected to certain risks and uncertainties. Companys operations are affected by
many external and internal factors which are beyond the control of the management. Thus,
the actual situation may differ from those expressed or implied.
The Company 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.
|
For South West Pinnacle Exploration Limited |
|
Sd/- |
|
Vikas Jain |
| Place : Gurugram |
Chairman & Managing Director |
| Date : August 14, 2023 |
DIN: 00049217 |
+91-9892691696
