Dear Shareowners,
India is undergoing significant structural reforms with a major focus
on infrastructure development, particularly within the Port sector. These improvements in
capacity and efficiency are creating tremendous opportunities in this high entry barrier
industry, underscoring the strategic importance of economic growth.
At Knowledge Marine & Engineering Works Limited (KMEW), we have
always been optimistic about India's growth and the vast opportunities it offers to
emerging players like us. This year's business expansion - entering new segments such
as Inland Waterways, and the successful completion of Maintenance dredging at Sittwe Port,
Myanmar and Rock Dredging at Mangrol Fishing Harbor projects - reflects our sustained
efforts in this direction and marks the beginning of a new era.
Our constant expansion strategy and foray into new segments have
allowed us to develop expertise in driving our fleet. As on financial year closing, we own
and operate 16 Fleets out of which 3 are under construction. Out of 16 vessels, 6 are
dredgers and 10 are port ancillary crafts, and we are committed to expanding this to 40 or
more crafts in the coming years. The repetition of orders and high utilization of our
vessels have further ensured our profitability.
We have successfully added three more vessels to our fleet, and we are
immensely proud to share an update on our Company's performance. Our journey this year has
truly embodied our vision to become a global player in marine services, providing
holistic, innovative, and environmentally sustainable solutions that will guide us into
the future.
Reviewing the year gone-by
FY24 has been a year of significant expansion for our business, both in
international and domestic markets. We proudly secured our Independent First international
contract from the Myanmar Port Authority for the dredging and enhancement of the Yangon
River Channel. This contract marked our first independent project, which we successfully
executed on time. This accomplishment led to a subsequent maintenance contract for the
river, doubling the previous order value. This achievement underscores our ability to
secure high-value orders and maintain an excellent track record of timely execution.
Another major milestone in our international ventures is our entry into
the Bahrain market with a robust order book of approximately Rs. 45,000 Lakhs for the next
five years, significantly enhancing our business visibility and sustainability. We have
successfully deployed our vessel and are executing substantial sand dredging projects for
Bahrain infrastructure companies. We anticipate this will fully contribute to our topline
over the next five years. These contract wins are a testament to our triumph in converting
waste to wealth.
Our unwavering dedication to expanding into new segments has led us to
enter the Inland Waterways sector. We are aggressively pursuing more opportunities in this
market. The supervision of these projects by the World Bank provides the project financial
stability. The Inland Waterways sector presents significant opportunities, given its vast
14,500 km of navigable waterways, of which we have secured a 220 km stretch. Approximately
126 million metric tonnes (MMT) of cargo are moved annually by Inland Water Transport
(IWT), a fuel-efficient and environmentally-friendly mode of transport. The size of this
market, coupled with the limited number of players possessing the required technical
know-how, capital, and equipment, creates a substantial opportunity for KMEW to gain a
competitive edge both nationally and globally.
In addition to our expansion into new segments, we continue to focus on
enhancing our current port operations. We leverage our contract wins to secure more orders
or extend contract tenures, with a key focus on winning at higher prices. This year, we
added a new customer, the Mumbai Port Authority, with a seven-year tenure. Our existing
contract at Vishakhapatnam Port has been extended by three more years at a higher bid,
demonstrating our reliability and excellence. Additionally, we secured an order from the
Paradip Port Authority for the supply of a 20-knot speed patrol boat for a period of 5
years.
We are immensely proud of our accomplishments this year, which embody
our vision of becoming a global player in marine services. Our focus on providing
holistic, innovative, and environmentally sustainable solutions will guide us into the
future.
Financial overview
We are pleased to share with you the highlights of our financial
performance and strategic progress in FY24. Despite external site conditions impacting our
revenue, we achieved a revenue of approximately Rs.16,400 Lakhs and recorded an EBITDA of
around Rs. 5,000 Lakhs, maintaining strong EBITDA margins at 30%. This underscores our
commitment to stability and operational efficiency.
Our profit after tax (PAT) reached Rs.3,300 Lakhs, with our PAT margin
rising to 20%. While our net debt increased due to the acquisition of new vessels and
entering into international markets, we have strategically aligned our existing debt
facilities with specific fleet contracts, ensuring timely repayment before the completion
of each contract. This approach reflects our strategic vision of establishing a
sustainable and reliable dredging and marine engineering company in India.
Looking ahead, we remain optimistic about our revenue outlook and
expect improved performance in the coming years, with continued EBITDA margins of around
30%. Our confidence is bolstered by a robust order book of Rs.73,300 Lakhs, including
significant wins of Rs.69,400 Lakhs in FY24. These contracts, with an average tenure of
3-4 years, provide a strong foundation for our future growth and strengthen our position
both nationally and internationally as a global leader in marine services.
We are immensely proud of our accomplishments this year, which reflect
our vision of becoming a global player in marine services.
Economic Overview Global Economy
According to IMF, global growth is projected to stay at
3.1%in 2024 and rise to 3.2%in 2025. Elevated central bank rates to
fight inflation and a withdrawal of fiscal support amid high debt weigh on economic
activity. Inflation is falling faster than expected in most regions, amid unwinding
supply-side issues and restrictive monetary policy. The global economy has been
surprisingly resilient, despite significant central bank interest rate hikes to restore
price stability
Indian Economy
India is one of the fastest growing major economies and is currently
ranked as the world's sixth largest economy. Projections of growth, over the medium
term, remain encouraging and optimistic for India. The underlying strengths are indicative
of the potential of India to achieve a USD 5 trillion economy by 2025.
The recent economic survey highlights a decline in the unemployment
rate. This represents a strong recovery from the COVID-19 pandemic's economic effects with
formal sector employment growth reflected in the more than doubling. As the global job
landscape evolves, particularly due to AI, India must invest in research and guide
technological progress towards equitable prosperity.
The global economy is expected to witness a synchronous rebound in 2025
as major election uncertainties are out of the way and central banks in the West likely
announce a couple of rate cuts later in 2024. India will likely see improved capital flows
boosting private investment and a rebound in exports. The World Bank said that India will
continue to be the fastest-growing among the world's largest economies, though its
pace of expansion is expected to moderate. It is projected to grow an average of 6.7% per
fiscal year from 2024 through 2026 making South Asia the world's
fastest-growing region
However, growth is projected to pick up slightly through FY 25-26 as
inflation moderates back towards the midpoint of the tolerance range, and the benefits of
reforms start to materialize. India is expected to maintain its position as the
fastest-growing economy (in terms of both aggregate and per capita GDP) among the largest
Emerging Market and Developing Economies (EMDEs).
Indian Dredging Industry and Outlook
According to Future Market Insights (FMI), the global dredging market
value in 2023 was USD 16.14 billion, up from USD 15.24 billion in 2019. The market is
expected to expand at a CAGR of 2.15% from 2024 to 2034, with the industry projected to
grow from USD 16.68 billion in 2024 to USD 20.63 billion by 2034.
The Indian port sector has been experiencing significant growth,
leading to a surge in demand for dredging activities. Currently, about 84.20 million cubic
meters (mcum) of dredging is conducted at major ports, 10 mcum at inland waterways, and
over 80 mcum at non-major ports.
This demand is largely driven by capacity augmentation plans at
existing and upcoming Greenfield ports. Many key ports are implementing measures to deepen
and widen their navigational channels to attract deep draft vessels. It is estimated that
about 100 mcum of capital dredging will be carried out in the near future, with
approximately 200 mcum of capacity available for maintenance dredging. The annual
maintenance dredging for major ports and waterways is around 100 million cubic meters, for
which about INR 1,000 crore is spent each year by the Ports and Inland Waterways Authority
of India.
With India's ambitions to deepen the maritime and waterways
economy, dredging has become a core requirement. Both inland waterways and ports are
grappling with the issue of low draft depth, making the development of indigenous dredgers
and project monitoring systems a priority for the ministry. The online portal developed by
the National Technology Centre for Ports, Waterways, and Coasts will enhance synergy among
multiple inputs, such as daily dredging and pre- and post-dredging survey data, ultimately
producing real-time reports.
In summary, the growing Indian port sector and its ongoing capacity
augmentation efforts present ample opportunities for the dredging industry. With
substantial capital and maintenance dredging activities projected, the sector is poised
for significant growth, supported by innovative technological solutions and strategic
initiative, the Global Dredging market is anticipated to rise at a considerable rate
during the forecast period, between 2024 and 2031.
Government Initiatives
India is poised to become a global economic superpower, with a robust
maritime sector playing a crucial role in this journey. The principle of Atma Nirbharta
emphasizes self-reliance, extending to the shipping and shipbuilding industries. Despite
significant efforts and developments in port infrastructure and inland waterways, we
remain dependent on foreign vessels and have yet to capture a significant share of the
global shipbuilding market. Recognizing this, the Ministry is now focusing on enhancing
our shipbuilding and ship repair infrastructure to meet the ambitious goals of MIV 2030
and MAKV 2047.
One of government's key projects is Sagarmala, which aims to improve
ports and waterways infrastructure. There are 839 projects worth approximately Rs.5.8 lakh
crore slated for implementation under the Sagarmala Programme. Of these, 241 projects
worth around Rs.1.22 lakh crore have been completed. According to the latest report, a
total of 171 projects worth Rs.4,525 crore have been supported under the Sagarmala scheme
for partial funding, with 55 projects already completed. Additionally, under the Sagarmala
Programme, the development of 63 infrastructure projects at 57 locations to facilitate
passenger and cargo transportation through RoPax and Passenger ferry services have been
undertaken. Ten projects have already been completed, and four locations are now
operational.
Several measures have been implemented to improve the performance of
ports in recent years through initiatives such as Sagarmala, Bharatmala, PM Gati Shakti,
and the National Logistics Policy 2022. These initiatives aim to reduce the cost of
logistics and improve performance. The impact of these initiatives is evident in enhanced
port efficiency. Turnaround time, a key indicator of port efficiency, has seen significant
improvement. Over the past decade, the average turnaround time for major ports has
decreased by about 50%, dropping from 4.3 days in 2012-13 to 2.1 days in 2022-23.
These government initiatives are set to greatly benefit the dredging
industry. Improved port infrastructure and the development of inland waterways will
necessitate extensive dredging activities to ensure navigable depths and efficient cargo
movement. The focus on self-reliance in the maritime sector, coupled with substantial
investments under the Sagarmala Programme, will drive demand for dredging services.
Additionally, the reduction in turnaround times at ports will further boost the efficiency
and attractiveness of Indian ports, creating more opportunities for the dredging industry
to support ongoing and future projects.
In summary, the government's initiatives and strategic investments in
the maritime sector are not only enhancing port efficiency and reducing logistics costs
but also creating a thriving environment for the dredging industry. As India continues its
journey towards becoming a global economic superpower, the dredging industry stands to
benefit immensely from these progressive developments.
Survival Strategies
Future is promised to no one and therefore belongs to people who are
ready to create it. At KMEW, we have built a well-integrated Company with a business model
relevant for all market cycles through the following initiatives:
By retaining our industry pre-eminence through quality services
supported by robust technical capabilities, rich project management skills and large,
complex project execution.
Improved the consistency and discipline of its business
practices across all business verticals.
Increased capacity to execute contracts through the addition of
engineers and technical members on the one hand and the expansion of design centre on the
other.
Pursue continuous improvement in everything we do.
Sound Governance & Sustainability
We are committed to high standards in corporate governance and aim to
implement best practices beyond compliance requirements. Our Board currently comprises of
professional directors, from varied background and considerable working experience. The
Company had also adopted various measures for a cordial working relation between the
workers and the management. Workshops are being organized on a regular basis to impart
training to the Company's personnel and also to make them aware of the developments in the
Industry.
As a socially responsible corporate citizen, we always undertake
significant steps to uplift the morale of the people and betterment of the environment in
our surrounding.
Concluding note
To conclude, we would like to thank everyone who have believed in our
company and would like to mention that Company will never deviate from its fundamentals.
We remain committed to protect our margins in the future also. Our team is our strength
and the same is growing every day. We are maintaining repeat orders from three countries
right now, Myanmar, India and Bahrain. We are set to grow in the same countries and add
another country in the next 2 years and keep our promises intact. With warm regards
Team KMEW