We take absolute pleasure in reaching out to you through this annual report and alsofeel proud to announce a successful conclusion to 2021-22. KMEW maintained a track recordof being India's young and leading marine time industry service provider through itsfleet of vessels well supported by professionals who work round the long to make theCompany reach new heights.
Being in an industry historically dominated by large PSU corporations on one hand andsmall unorganised players on the other we have won the trust of our customers withvaluable engineering inputs and through sustainable operations to help the marine tradefunction without any adverse implications and we are proud of this achievement.
Successful Initial Public Offering
We are grateful for the overwhelmingly positive response to our initial public offering(IPO) which was oversubscribed 2.97 times and today is a family of 596 shareholders. As acompany we are honoured by your trust and this response reinstates our faith in thebusiness strategy and a promising future. This is a big moment for all of us at KMEWheralding a new beginning in our 7 years of services since inception. The support wereceive from you continues to inspire us to work harder.
To say the world is in uncharted waters would be an understatement. The adverse impactof a mix of the pandemic armed conflict and climate change has exposed the fragility ofthe global system that we had largely considered as having competently learned how tomanage itself. It has now dawned on governments across the world that the implications ofthis multidimensional crisis are hard to predict may complicate further and that signs ofits damaging effects uncontrolled inflation disrupted food supplies increasedhuman displacement exposed healthcare machinery stalled education levels and falteringjob creation ecosystems are evident and testing the resilience of every nation.
The overarching takeaway is that despite global instability India has fared betterthan almost any other major nation. While there were situations over the past 24 monthswhen it appeared that events were getting out of control we must give credit where creditis due India was able to bounce back each time a testimony to our nation'sresilience.
Future demand outlook and our diversification strategy
As far as the future prospects we are confident that the Indian port infrastructure isexpected to grow in the long-term. This will provide an accelerating growth opportunity toancillary support industries such as dredging companies. The government is also focusingon expanding the sea infrastructure to allow direct trade lines to its ports. This willavoid transit ports thereby reducing the lead times for critical supplies and improve thefinancial viability of the local ports and also further the growth of geographies.Government is intending to reduce the project timelines of these infra projects byincentivising the ancillary industries for speedy execution and delivery. Few of theestimated market sizes are:
(a) Port Ancillary Craft Market Size (500 Plus crafts Rs. 2000 Crores Annual Basis)
(b) Dredging Market (Govt and Private Port Defence Shipyard and Oil PSU Business Rs.5000 Crores annual basis and
(c) River Dredging Potential Business (Rs. 5000 Cr annual basis).
KMEW is proud of its portfolio of its legacy services which have gained huge nationalimportance for the reasons of national security trade and service opportunities. Ourportfolio of services includes dredging and other key port related ancillary servicesshipbuilding conducting hydrographic surveys pilotage services patrolling servicesship mooring services repair refit services of naval and merchant ships and providingtechnical solutions for maintenance and operations of vessels etc. In the years to comethese services will strongly emerge as opportunities of great potential for the company'sgrowth story for our industry.
Considering the bright future outlook we have strategised to diversify into newbusiness segments like developing Fishing Harbours river dredging rock dredgingentering into Cutter Suction Dredger (CSD) Market ship building etc. They all are in ourconsideration for our medium to long term growth story. KMEW has been able to exhibit itsoperational and managerial expertise in managing various services with firm commitment.Our critical focus on having a judicious capital management has helped us in undertakingprudent investment decisions on acquisition of new vessels and technology. We havedemonstrated our competency through various projects undertaken across geographies andfierce global competition
Operation front at KMEW
We are delighted to report that the Company has shown an immense resilience in itsfinancial performance even under market distress. Our operational revenue was up by 84%and EBIDTA up by 53% on Y-o-Y FY22 basis. Our capital management strategy to reduce debtoverhang by repaying the debts before the contract tenure has helped us to reduce the costof debt to 7.5% vis-a-vis over 15% earlier. All thanks to our competent and professionalteam of all disciplines and their dedication to performance excellence.
KMEW also considers FY22 as a watershed year. We have secured the largest dredgingproject in our history - the award of our first International contract in assistance withthe Government of India to build the strategic port at Sittwe Myanmar. The project is acollaboration between India and Myanmar and is valued at Rs. 118 Crores with a projecttenure of 2.5 years and further extendable by an additional 2 years. The project isfinanced by the Ministry of External Affairs as part of its Kaladan MultiModal TransitTransport Project located near the mouth of the Kaladan River.
Currently we have a strong order book of more than Rs. 210 crores with an averagetenure of 2.5 years. On the operations side FY22 saw us successfully executing 4 dredgingcontracts and completed more than 6 million cubic meters of dredging.
We have invested in expanding our fleet assets with new additions to the current fleetstrength of 9. Two more fleets are in pipeline to be ready by December 2022.
We have been able to manage and maintain healthy financial and operationaljurisprudence. All our contracts have a project duration between 36 Months to 84 Months.On a cautious note our investments in assets are committed only after award of securedlong term government contract. Our strong receivable cycle ensure that all liabilities areaccounted in less than 45 days as evidenced for last 7 years with GOI.
We have sufficient financial operational and managerial muscle to compete and bid forsingle Contract worth Rs.200 Cr thus assuring us of little to no competition. Ourlong-term debts are
Strategic tie ups with strategic Partners to create Special Purpose Vehicles(SPVs) with the objective to enter sand mining and Cutter Suction Dredger (CSD) Market
Venture into Costal /Inland Dredging
Optimize Capacity Utilization.
Expansion of our geographical presence to nearby countries.
Enhancement of the Fleet.
Reducing Capital & Operational Costs.
Enhancement of market share in maintenance dredging and more participation incapital dredging in India aligned with contract duration so that it is ensure that theentire debt is repaid within 60-70% of contract completion.
The Indian dredging and marine time industry is likely to experience significantexpansion in the coming years. The government's plans to create new waterways and portsas well as upgrade and expand the current ports will account for the majority of thisexpansion. The demand for dredging is estimated to reach about 170 million cubic me-tresin the coming years at existing major ports. In addition at least eight dredging projectsare being considered at existing non-major ports with an estimated 18 million cubicmetres of material to be dredged as part of these projects. Furthermore the six new portsplanned under Sagarmala will create opportunities in the dredging market.
The identification of 106 additional national waterways has created significantpotential. Over 200 million cubic metres of dredging volu-me has been assessed for thenext decade for the existing five waterways as well as the 32 new waterways that have beenidentified as viable for development. Given this increase in dredging re-quirements thesector presents ample opportunities.
Employees and Society Welfare
We recognise and appreciate our human resources and their constant value-additions.They are our strategic business partners and play a prominent role in supporting anddriving our business strategies. Although our major challenge will be to find the rightmix of people with domain expertise and skill- sets appropriate for projects requiringhigh degree of technical skills. We aim to develop competencies of our people by trainingthem in the latest developments in their respective domain.
We have always ensured on boarding the right talent across all the levels of theorganisation. We have also provided right work environment for the growth of ouremployees ensuring complete job satisfaction. Our employees adapted the 'new covidnormal' situation in a very quick time and continued to display same levels of commitmenteven during the lockdowns and the subsequent waves of pandemic.
We are all passing through a crisis of unprecedented magnitude and we would like tothank Team "KMEW"as well as our customers vendors and other stakeholders forthe confidence and trust they have reposed in us. We also thank our fellow Board Membersfor their invaluable support in guiding the Company and enabling another year of growth.
Mr. Saurabh Daswani