SEAMEC Ltd Q1 FY2025 Concall Summary

Key Takeaways

• Flat quarter, fleet build-up underway: Consolidated revenue was flat YoY at INR223 crores, but the quarter saw the inking of the NPP Nusantara acquisition and progress on a second OSV, setting up a materially larger fleet for H2.
• UK subsidiary drag persists: The UK sub posted an INR18 crores PAT loss from interest and depreciation on a property under construction; management targets profitability only in the exit quarter (Q4) of this year.
• Repricing catalysts stack in H2: Three vessels (Seamec III, Seamec Princess, and Swordfish) come up for contract renewal or recontracting, with management calling a 5-10% rate increase on renewal a fair assumption.
• Management commits to 15-20% CAGR: The stated growth ambition is backed by fleet expansion, EPC project pipeline, and a strong balance sheet, though current visibility is contract-to-contract with no order book.
• What to watch next quarter: Closure of the Nusantara acquisition, resolution of the second OSV delivery issues, and any firm contract renewals for the three vessels up for repricing.

Fleet Expansion & Capex

• NPP Nusantara acquisition: A diving support vessel built around 2011, inked at \$24 million with a 5% advance deposit paid; acquisition expected to complete around October 2025. Management is confident of a 5-year payback on the acquisition cost once the vessel is acquired.
• Second OSV purchase: An agreement to purchase exists but delivery issues are being sorted with the seller; the advance deposit was placed in escrow per international practice. No timeline or amount disclosed.
• HAL Offshore vessel transfer: Management's philosophy is to consolidate all operations in Seamec; a new build vessel owned by HAL Offshore may be shifted to Seamec, with a decision to be conveyed to exchanges if taken.
• Fleet composition post-acquisition: Five DSVs, one accommodation barge, one offshore support vessel (seven vessels in Seamec), plus two bulk carriers in overseas subsidiaries; Nusantara would add an eighth vessel to the Seamec fleet.
• Funding approach: Most capex to be funded from internal accruals; some debt is possible but management says it is repayable from enhanced revenues. The company is currently cash surplus on a net-debt basis and expects reasonably good cash flows for FY25-27.

Sunil Gupta: "And what we try to gauge is when we do a capex, can we get a 5-year payback of the vessels acquisition cost? Just to answer your question, in the current case of Nusantara, we are quite confident that this 5-year payback will be achieved once the Nusantara is acquired by us."

Contract Renewals & Revenue Triggers

• Repricing opportunity in Q3: Seamec III and Seamec Princess, currently on an EPC contract, will come up for renewal; management sees a repricing opportunity in Q3, though actual rates will only be known once contracts are sealed.
• DSV Swordfish recontracting: Completed an 80-day contract with Zamil Offshore for Saudi Aramco and is currently under dry dock; no charter rate or contract has been finalized for its next deployment.
• Revenue triggers identified: One OSV coming in, GLORIOUS recontracting, Swordfish recontracting, Nusantara acquisition, and possibly one more vessel from HAL Offshore.
• Charter rate renewal assumption: Management called an analyst's assumption of a 5-10% increase on contract renewal fair, though it stressed that talks are ongoing and nothing is certain.
• EPC project pipeline: Similar kinds of EPC projects are in the pipeline; as and when finalized, details will be conveyed to the stock exchange.
• No order book visibility: The company operates contract-to-contract with only confirmed contracts, not a traditional order book; management declined to give specific deployment days or day rates, arguing contract types vary too much for a single rate to be meaningful.

Sunil Gupta: "talking about such rates here would not justify. As an investor, what you need to look at is with the healthy mix, are we able to improve our bottom line and continue to grow the company, which is our endeavour for our investors."

UK Subsidiary & Legacy Issues

• Loss driver: The INR18 crores PAT loss in the UK subsidiary arose because a property under construction had interest and depreciation charged against it; the loan funding the property was extended by Seamec, which booked interest income, and the notional was eliminated on consolidation.
• Property rationalization: The UK subsidiary was set up to expand business horizons in Europe and invested in purchasing a property under construction for a global office; management is now trying to liquidate part of that property and maintain a smaller office to recover money.
• Profitability timeline: Management expects the UK subsidiary to become profitable in the exit quarter (Q4) of this year as new contracts are being discussed and repricing is hoped for; in Q2 and Q3, a reduction in losses is expected.
• Seamec Nidhi sale: The subsidiary Seamec Nidhi, which was incurring huge losses, was sold in the previous year, removing one source of drag.

Costs & Shared Services

• Fuel cost dynamics: Fuel charges are borne by chartering firms when vessels are on pure charter, but when executing an EPC job (e.g., with L&T for the last two seasons), fuel is on Seamec's account; this explains why 8.2% of FY24 top line was fuel expenses. Fuel cost is expected to continue at current levels.
• Shared services fee structure: The 4% of turnover or 10% of cash profit (whichever lower) arrangement was inherited from when TECHNIP Group was parent; it covers group management advisory including legal, financial, and investment advice from corporate teams, not solely the non-executive chairman's role. Management said it will debate internally whether this structure should continue.

Sunil Gupta: "It is not alone, Sanjeev Agarwalji. It is basically group management advisory fee, wherein the legal advice, the financial advice, the investment advices are given by the relevant financial teams of the corporate management. And this is not pertaining to Sanjeev Agarwal's role into the system."

Market Position & Strategy

• Client concentration: The majority of revenue is currently from ONGC, with one vessel deployed internationally with Saudi Aramco; management does not see concentration risk given three decades of service to ONGC and its expertise.
• Diversification pivot: The company had tried a tunnel construction project for a high-speed rail at Vapi but now wants to focus on core diving support services and subsea construction where its expertise lies.
• International ambition: Management will tap more profitable opportunities in both international and domestic waters, and some shift from ONGC may happen over time.
• Market tailwind: India's long growth story with focus on Make in India and internal energy generation is expected to drive demand for maintaining energy infrastructure, which Seamec is positioned to serve.

Sunil Gupta: "We had tried to do some diversification by getting this project. But as of now, we would like to focus on our core activities, which is diving support services and subsea construction where our expertise lies."

Guidance & Commitments

Key Metrics