Dredging Corporation India Ltd.

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Series: EQ | ISIN: INE506A01018 | SECTOR: Miscellaneous

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Annual Report

For Year :
2018 2017 2016 2015 2014 2013 2012 2011 2010

Auditor's Report

INDIAN DREDGING - OUTLOOK & POLICY GUIDELINES

1. India has an extensive coastline of approximately 7517 kilometers. There are 13 Major Ports under the administrative control of the MoS and approximately 187 Non-Major Ports under the administrative control of the Government of India (“GoI”) and State Governments and the private ports, strategically located on the world’s shipping routes, its long tradition of seafaring with a large pool of trained maritime personnel and its dynamic and rapidly globalizing economy with a vast potential to expand its participation in trade and development. A few such ports are natural harbors with sufficient water depth to handle vessels plying cargo to and from them. Most of the other ports require capital dredging to expand vessel size handling capability and maintenance dredging for maintenance of their existing/expanded capability to berth vessels of different shapes and sizes.

1.1 India has rich maritime history with trade and cultural contacts with multiple countries and cultures around the globe. Ports give significant economic pay offs for their city and state- they help generate jobs, add value, mobilize new investment, bring in tax revenues and support trade through reduced logistic costs. The Government of India has initiated Sagarmala National perspective plan with the concept of patrolled development. Port-led development focuses on logistics intensive industries (where transportation either represents high proportion of costs or timely logistics is a critical success factor). These industries can be structurally competitive, if developed proximate to coast or waterways. This would be supported by efficient and modern port infrastructure and seamless multi-model connectivity. The Sagarmala National Perspective Plan (NPP) has identified range of projects and enablers under four pillars - logistic intensive industries, efficient ports, seamless connectivity and requisite skill base which can unlock opportunities for port led development.

1.2. The Indian dredging market consists primarily of maintenance dredging and capital dredging in addition to a limited amount of inland dredging, beach nourishment and reclamation dredging. We are a very prominent player on account of our expertise in this highly technical and skilled sphere of business.

1.3. As per the report of the Working Group for Ports Sector for 12th Plan, a total quantity of 675.25 MCM and 429.99 MCM had been planned for capital and maintenance dredging respectively for all the ports in the country during the 11th Plan. This quantity includes the dredging to be done for fishing harbours also besides the major and non major ports. Against this targeted plan, only 278.93 MCM and 291.63 CM had been achieved under the capital and maintenance dredging respectively. This constitutes 41.31% and 67.82% against the targeted quantity. The major ports achieved 31.97% of the targeted quantity, the non-major ports achievement was 49.55% in capital dredging work. In maintenance dredging work, the figures are 68.89% and 59.92% respectively. The shortfall in achieving the set target is due to many factors. Delay or failure to takeoff number of port development projects, financial and environmental constraints, the need to carry out engineering studies to assess the quantum of dredging and the type of dredging to be performed, poor response from bidders to undertake the work are some of the reasons attributable to the shortfall. Overall, the ports had done better in achieving the target in maintenance dredging. The non major ports had done better than the major ports in capital dredging work.

2. Dredging requirement :- The capital dredging requirements for major ports stem from the various port projects planned by the major ports. Ports of Kolkata, Paradip, Visakhapatnam, Ennore, Chennai, Tuticorin, Mormugao, Jawaharlal Nehru and Kandla are planning to undertake the capital dredging of quantities more than 10 MCM. The capital dredging quantities in respect of other major ports are less than 10 MCM. The total quantity planned is 221.11 MCM of all the 12 major ports including the requirement for Navy. The projection for maintenance dredging at Major Ports is 404.25 MCM. In total the requirement is 625.36 mCm which is almost at the same level when (92.5%) compared with 676.34 MCM projected for the major ports during 11th Five Year plan. The non major ports have projected a total requirement of 543.61 MCM of which 418.03 MCM is for capital dredging and 128.58 MCM is for maintenance dredging. When compared with the projection of 368.59 MCM and 46.41 MCM respectively for capital and maintenance dredging during 11th Five year plan, there is an increase of nearly 31%. Capital dredging requirement of the State of Orissa, Andhra Pradesh and Gujarat constitute 57.8% of total capital dredging due to development of Gopalpur and Dhamra ports in Orissa, development of Machilipatnam, Krishnapatnam, Kakinada and Gangavaram ports in Andhra Pradesh, and development of Hazira port in Gujarat state.

3. The 12th plan dredging requirements, if achieved, will enable all the Major Ports (except Kolkata) and non-Major Ports to handle the vessels with 14 meters draft at the end of 12th plan period. In case translating facilities installed at sandheads by Kolkata Port, then Kolkata Port can also handle 14 m draft vessels.

4. The Ministry during the year formulated the Maritime Agenda 2020 which is the perspective plan of the Ministry for this decade. It identifies the priority areas for Government intervention and is a road map for creation and up gradation of infrastructure in the Ports and also for augmentation of Indian tonnage in the shipping sector. The document says that Shipping lines have been representing time and again that port charges at Indian Ports are very high as compared to other comparable International Ports. As a matter of fact, vessel related charges are perhaps higher than some of the International Ports whereas cargo related charges are much lower in some Indian Ports in comparison to ports abroad. The document says that if Vessel related charges alone are taken, the reasons for higher charges are mainly two: (1) higher cost of dredging in certain ports, requiring perennial dredging and (2) lack of subsidy on the part of Government. In many parts of the world, some part of dredging (at least Capital) is funded by Provincial Governments or Federal Governments. If the same approach is adopted by Central Government or State Governments, the vessel related charges also could be brought to the reasonable levels. The document says that Major Ports in India have drawn up some ambitious expansion plans during the next decade including several dredging major dredging projects by some ports, thereby intending to create substantial additional capacity. The dredging projects are mainly for deepening of channels, enhancing the available draft at berths or for construction of more berths.

5. DCI participates in the open competitive bids for dredging issued by major ports as per the dredging policy guidelines issued by Ministry of Shipping. DCI has secured the dredging project for Kandla port on open tender basis. Further, as per the dredging policy, Government of India reserves the right to assign in public interest any contract for dredging work in any of the major ports on nomination.

6. With the entry of global players either directly or through their Indian arms competing to get the contracts at competitive rates has constrained DCI to quote competitively. This has put the financials of the Company under severe strain because of increasing cost due to frequent repairs and lay-up of the ageing dredgers. The addition of the dredgers XIX and XX to the fleet in December, 2012 and July, 2013 and XXI in March, 2014 has augmented the capacity of the Company.

7. CORPORATE PERFORMANCE CAPACITY UTILISATION

The capacity utilization in number of days and quantity as against the targets during the year is as under:-

Target Actual % Utilization

No.of Days 2850 2605 91.4% Quantity (Lakh Cu.M) 72 69 96%

FINANCIAL PERFORMANCE

(Rs. Lakhs)

2015-16

2014-15

Income from Operations

66586

73496

Other income

1036

883

Total turnover

67622

74379

Profit before interest, depreciation and tax

20153

15636

Interest

2043

2566

Depreciation

9820

9214

Profit Before Tax

8290

6423

Provision for Tax

323

296

Profit after Tax

7967

6241

Proposed/Declared Dividend (30%)

840

840

Earnings Per Share (Rs.)

28.45

22.29

Book Value per share (Rs.)

551.39

526.54

8. OUR COMPETITIVE STRENGTHS

We believe that we are well -positioned to maintain and enhance our leadership position in the Indian dredging market, on account of our competitive strengths, which include the following:

Premier and the only PSU dredging company in India

We are a premier and the only PSU dredging company in India. We are also the preferred dredging company for Major Ports and the Indian Navy. We have been in this business since 1976 and have been catering to the dredging requirements of the major ports/ Indian Navy since then. Owing to the long association with the Major Ports, our Company is the most preferred company for dredging requirements of most of the Major Ports and the India Navy.

Flexible portfolio of dredging assets

Our Company operates a diverse dredging fleet which is the largest in India in terms of capacity. The size, versatility and technical capabilities of our fleet improves its competitiveness as it generally permits our Company to select the appropriate equipment for a particular maintenance dredging job. To maintain the value and effectiveness of fleet, the Company emphasizes preventive maintenance so as to reduce the downtime, increase profitability, enhance the vessel life.

Strong relationships with Customers

Our Company caters to the dredging requirements of the Major Ports and the Indian Navy right from its inception in 1976 and has a better understanding of the dredging requirements of the Indian Ports. Our Company is the leader in maintenance dredging in India through its combination of usage of advanced equipment and experience. Our Company believes that its size as the largest dredging company in India and its extensive experience significantly enhanced its ability to profitably bid for and complete the contracts awarded to it.

Experienced management team

Our Company’s senior managers have vast experience in the dredging and maritime industries. Our Company believes that this experience provides the Company with a significant advantage over its competitors. The Company’s floating personnel who manage the dredgers and the management team who give the support services are well trained professionals having vast experience in the dredging and maritime industries

9. OUR STRATEGIES

We intend to increase income from operations and strengthen our domestic and international competitive position by expanding our operations in both our traditional and new dredging services and adopting a pro-active marketing strategy for our domestic and foreign operations. We aim to achieve our mission by pursuing the following business strategies:

Enhancement of market share in maintenance dredging and more participation in capital dredging in India

With the addition of the two new dredgers in December 2012 and July 2013 respectively and third dredger in March 2014 respectively of higher capacity, our Company expects to maintain its domestic leadership position in maintenance dredging by becoming more customer-focused and tailoring marketing initiatives that differentiate between specific groups of customers. In particular, it is consolidating its relationships with the Major Ports and developing marketing efforts aimed at non-Major Ports and new private port developers in India. Also at present company is undertaking Capital dredging assignment at Mormugao Port . We plan to undertake more such assignments subject to the availability of the fleet.

Making forays in foreign dredging market

Apart from consolidation in the Indian dredging market, we have plans to make forays in the foreign dredging market. The initiatives taken for setting our foot once again in foreign waters is likely to materialize in this financial year.

Enhancement of the fleet capability

In continuation of the efforts to sustain the existing capacity for which orders were placed for three dredgers meant as replacement of existing aged dredgers, our Company plans to higher hopper capacity trailer suction hopper dredgers. The detailed Project Report for the same is under preparation. Our Company also plans to refurbish the existing aged dredgers so as to increase their effectiveness and enhance their economic life. Further, with the impetus given to inland waterways by the Government and the consequent necessity and demand for inland dredging, the company has placed order for an inland cutter suction dredger and the same its expected to join fleet very shortly.

Reducing operational costs

Further, to the capacity enhancement initiatives discussed above, your Company also has taken initiatives to reduce operational costs by focusing on fuel efficiency in ship operations and ship procurement and further streamlining the spare parts procurement systems. Your Company also proposes to have tie-ups with ship repair yards for continued maintenance of our vessels for a period of time so as to make available the dredgers for a guaranteed minimum number of days every year. In this direction a long term MOU was signed with Cochin Shipyard Limited.

Strategic alliances through long term contracts with major ports

Your Company proposes to have strategic alliances with major ports. This will ensure assured business for the Company and enable the Company to plan in advance regarding the deployment of the vessels. The Company also proposes to act as nodal agency to meet all dredging requirements for major ports in the country.

Optimize capacity utilization

Your Company intends to continue to optimize its capacity utilization by continuous project monitoring and review, reducing equipment downtime through preventive maintenance and working with repair yards to accelerate dry dock repair periods, and increasing computerization, including introducing online connectivity between dredgers, projects and the head office. Our Company also intends to continue to invest in quality pre-dredging surveys and equipment and continue to invest in repairs and maintenance. Through a renewed focus on training, your Company intends to introduce specific project planning and management initiatives to educate its staff to identify and develop new market opportunities. Your Company believes in the introduction of best practices in procurement, costing and working capital management, along with the introduction of tailored human resources practices, participatory management and new technologies, which will create new competencies in its organization and add value for its dredging customers.

10. THREATS

The Company perceives the following threats

i Increasing foreign competition.

ii Increasing competition from Indian dredging companies.

iii Frequent and expensive repairs to dredgers due to ageing.

The increased competition has in a way helped the company to tighten up and become more competitive. The company has takne steps in this regard by appointing a consultant to benchmark different parameters -both technical and operational against the best in the world as well take corrective steps to match the same..

11. INDIAN DREDGING MARKET OUTLOOK

While the consistent maintenance dredging requirements at the major ports are expected to continue, increasing private sector participation in port development and related capital dredging activity is expected. At the same time, the dynamics in the Indian market are rapidly changing. The key changes taking place include changes in customer profile for dredging companies from Government to private sector developers, changes in payment patterns for dredging work with stringent performance parameters the expansion of Indian port capacity and increasing participation of international companies in the Indian dredging market. Other developments include:

i Deeper draught requirements of Indian Ports.

ii Tourism development and increasing need for beach nourishment.

iii Land reclamation for low lying areas.

The Sagarmala initiative of the Government gives impetus to port led development and consequent increase in demand for dredging.

DCI’s customers include Major Ports under the administrative control of the Ministry of Shipping, Non-Major Ports under the administrative control of the GoI and State Governments, private ports, the Indian Navy and shipyards. The Indian dredging market is primarily maintenance dredging-oriented. However, some capital dredging projects are also in the offing. DCI has already secured the Ennore Capital dredging project on tender basis.

12. RISKS AND CONCERNS

The foreign exchange variations may cause a dent in the cash flows apart from effecting the results of the Company due the debt service obligations in foreign exchange.

13. INITIATIVES TAKEN/FUTURE PLANS OF THE COMPANY

Keeping the various developments in the dredging industry in view, your Company has initiated action in several areas, including:

i Appointment of marketing consultants for promoting DCI business abroad.

ii Appointment of strategic consultants for preparation of documents for growth and diversification into new business and to increase revenue and profits.

iii Consolidation of share in maintenance dredging in India

iv More participation in capital dredging - acquiring necessary skills, training company personnel, acquiring/chartering dredgers.

v Acquisition of dredgers with fuel efficient design and advanced technology, fitted with sophisticated and state-of-the-art technology.

vi Reducing operational costs - Focusing on fuel efficiency in ship operations, streamlining spare parts procurement systems.

vii Close monitoring of repairs.

viii Technology up gradation.

14. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has reasonable system of delegation at proper levels and an adequate system of internal control commensurate with its size and nature of its business. The Company has an adequate and independent internal audit department for conducting extensive audit of various important operational and financial matters. The internal audit work at Head Office and some of the projects has been outsourced to Chartered Accountant firms. The internal controls are reviewed by the Internal Audit Department. The Vigilance Department deals with vigilance and disciplinary cases with emphasis on preventive vigilance. C&AG conducts proprietary audit. The Company has constituted an Audit Committee and significant audit observations and follow up action thereon are reported to the Audit Committee. The proceedings of the Audit Committee meetings and also other Sub-Committee meeting of Directors are submitted to the Board.

15. INDUSTRIAL RELATIONS

The industrial relations in the Corporation continued to be cordial throughout the year under report.

16. CORPORATE SOCIAL RESPONSIBILITY

The Board of Directors of the Company have formulated the Corporate Social Responsibility Policy for the Company and also constituted a Sub-Committee of Directors for implementation of the same. The report of the Corporate Social Responsibilities activities of the Company is attached to the Director’s Report.

17. CAUTIONARY STATEMENT

Statements in this “Management Discussion and Analysis” describing the objectives, expectations, assumptions or predictions of the Company may be forward-looking statements within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the operations of the Company include economic conditions affecting demand/supply, price conditions in the domestic and international markets, Government policies and regulations, statutes and other incidental factors.

INDIAN DREDGING - OUTLOOK & POLICY GUIDELINES

1. India has an extensive coastline of approximately 7517 kilometers. There are 13 Major Ports under the administrative control of the MoS and approximately 187 Non-Major Ports under the administrative control of the Government of India (“GoI”) and State Governments and the private ports, strategically located on the world’s shipping routes, its long tradition of seafaring with a large pool of trained maritime personnel and its dynamic and rapidly globalizing economy with a vast potential to expand its participation in trade and development. A few such ports are natural harbors with sufficient water depth to handle vessels plying cargo to and from them. Most of the other ports require capital dredging to expand vessel size handling capability and maintenance dredging for maintenance of their existing/expanded capability to berth vessels of different shapes and sizes.

1.1 India has rich maritime history with trade and cultural contacts with multiple countries and cultures around the globe. Ports give significant economic pay offs for their city and state- they help generate jobs, add value, mobilize new investment, bring in tax revenues and support trade through reduced logistic costs. The Government of India has initiated Sagarmala National perspective plan with the concept of patrolled development. Port-led development focuses on logistics intensive industries (where transportation either represents high proportion of costs or timely logistics is a critical success factor). These industries can be structurally competitive, if developed proximate to coast or waterways. This would be supported by efficient and modern port infrastructure and seamless multi-model connectivity. The Sagarmala National Perspective Plan (NPP) has identified range of projects and enablers under four pillars - logistic intensive industries, efficient ports, seamless connectivity and requisite skill base which can unlock opportunities for port led development.

1.2. The Indian dredging market consists primarily of maintenance dredging and capital dredging in addition to a limited amount of inland dredging, beach nourishment and reclamation dredging. We are a very prominent player on account of our expertise in this highly technical and skilled sphere of business.

1.3. As per the report of the Working Group for Ports Sector for 12th Plan, a total quantity of 675.25 MCM and 429.99 MCM had been planned for capital and maintenance dredging respectively for all the ports in the country during the 11th Plan. This quantity includes the dredging to be done for fishing harbours also besides the major and non major ports. Against this targeted plan, only 278.93 MCM and 291.63 CM had been achieved under the capital and maintenance dredging respectively. This constitutes 41.31% and 67.82% against the targeted quantity. The major ports achieved 31.97% of the targeted quantity, the non-major ports achievement was 49.55% in capital dredging work. In maintenance dredging work, the figures are 68.89% and 59.92% respectively. The shortfall in achieving the set target is due to many factors. Delay or failure to takeoff number of port development projects, financial and environmental constraints, the need to carry out engineering studies to assess the quantum of dredging and the type of dredging to be performed, poor response from bidders to undertake the work are some of the reasons attributable to the shortfall. Overall, the ports had done better in achieving the target in maintenance dredging. The non major ports had done better than the major ports in capital dredging work.

2. Dredging requirement :- The capital dredging requirements for major ports stem from the various port projects planned by the major ports. Ports of Kolkata, Paradip, Visakhapatnam, Ennore, Chennai, Tuticorin, Mormugao, Jawaharlal Nehru and Kandla are planning to undertake the capital dredging of quantities more than 10 MCM. The capital dredging quantities in respect of other major ports are less than 10 MCM. The total quantity planned is 221.11 MCM of all the 12 major ports including the requirement for Navy. The projection for maintenance dredging at Major Ports is 404.25 MCM. In total the requirement is 625.36 mCm which is almost at the same level when (92.5%) compared with 676.34 MCM projected for the major ports during 11th Five Year plan. The non major ports have projected a total requirement of 543.61 MCM of which 418.03 MCM is for capital dredging and 128.58 MCM is for maintenance dredging. When compared with the projection of 368.59 MCM and 46.41 MCM respectively for capital and maintenance dredging during 11th Five year plan, there is an increase of nearly 31%. Capital dredging requirement of the State of Orissa, Andhra Pradesh and Gujarat constitute 57.8% of total capital dredging due to development of Gopalpur and Dhamra ports in Orissa, development of Machilipatnam, Krishnapatnam, Kakinada and Gangavaram ports in Andhra Pradesh, and development of Hazira port in Gujarat state.

3. The 12th plan dredging requirements, if achieved, will enable all the Major Ports (except Kolkata) and non-Major Ports to handle the vessels with 14 meters draft at the end of 12th plan period. In case translating facilities installed at sandheads by Kolkata Port, then Kolkata Port can also handle 14 m draft vessels.

4. The Ministry during the year formulated the Maritime Agenda 2020 which is the perspective plan of the Ministry for this decade. It identifies the priority areas for Government intervention and is a road map for creation and up gradation of infrastructure in the Ports and also for augmentation of Indian tonnage in the shipping sector. The document says that Shipping lines have been representing time and again that port charges at Indian Ports are very high as compared to other comparable International Ports. As a matter of fact, vessel related charges are perhaps higher than some of the International Ports whereas cargo related charges are much lower in some Indian Ports in comparison to ports abroad. The document says that if Vessel related charges alone are taken, the reasons for higher charges are mainly two: (1) higher cost of dredging in certain ports, requiring perennial dredging and (2) lack of subsidy on the part of Government. In many parts of the world, some part of dredging (at least Capital) is funded by Provincial Governments or Federal Governments. If the same approach is adopted by Central Government or State Governments, the vessel related charges also could be brought to the reasonable levels. The document says that Major Ports in India have drawn up some ambitious expansion plans during the next decade including several dredging major dredging projects by some ports, thereby intending to create substantial additional capacity. The dredging projects are mainly for deepening of channels, enhancing the available draft at berths or for construction of more berths.

5. DCI participates in the open competitive bids for dredging issued by major ports as per the dredging policy guidelines issued by Ministry of Shipping. DCI has secured the dredging project for Kandla port on open tender basis. Further, as per the dredging policy, Government of India reserves the right to assign in public interest any contract for dredging work in any of the major ports on nomination.

6. With the entry of global players either directly or through their Indian arms competing to get the contracts at competitive rates has constrained DCI to quote competitively. This has put the financials of the Company under severe strain because of increasing cost due to frequent repairs and lay-up of the ageing dredgers. The addition of the dredgers XIX and XX to the fleet in December, 2012 and July, 2013 and XXI in March, 2014 has augmented the capacity of the Company.

7. CORPORATE PERFORMANCE CAPACITY UTILISATION

The capacity utilization in number of days and quantity as against the targets during the year is as under:-

Target Actual % Utilization

No.of Days 2850 2605 91.4% Quantity (Lakh Cu.M) 72 69 96%

FINANCIAL PERFORMANCE

(Rs. Lakhs)

2015-16

2014-15

Income from Operations

66586

73496

Other income

1036

883

Total turnover

67622

74379

Profit before interest, depreciation and tax

20153

15636

Interest

2043

2566

Depreciation

9820

9214

Profit Before Tax

8290

6423

Provision for Tax

323

296

Profit after Tax

7967

6241

Proposed/Declared Dividend (30%)

840

840

Earnings Per Share (Rs.)

28.45

22.29

Book Value per share (Rs.)

551.39

526.54

8. OUR COMPETITIVE STRENGTHS

We believe that we are well -positioned to maintain and enhance our leadership position in the Indian dredging market, on account of our competitive strengths, which include the following:

Premier and the only PSU dredging company in India

We are a premier and the only PSU dredging company in India. We are also the preferred dredging company for Major Ports and the Indian Navy. We have been in this business since 1976 and have been catering to the dredging requirements of the major ports/ Indian Navy since then. Owing to the long association with the Major Ports, our Company is the most preferred company for dredging requirements of most of the Major Ports and the India Navy.

Flexible portfolio of dredging assets

Our Company operates a diverse dredging fleet which is the largest in India in terms of capacity. The size, versatility and technical capabilities of our fleet improves its competitiveness as it generally permits our Company to select the appropriate equipment for a particular maintenance dredging job. To maintain the value and effectiveness of fleet, the Company emphasizes preventive maintenance so as to reduce the downtime, increase profitability, enhance the vessel life.

Strong relationships with Customers

Our Company caters to the dredging requirements of the Major Ports and the Indian Navy right from its inception in 1976 and has a better understanding of the dredging requirements of the Indian Ports. Our Company is the leader in maintenance dredging in India through its combination of usage of advanced equipment and experience. Our Company believes that its size as the largest dredging company in India and its extensive experience significantly enhanced its ability to profitably bid for and complete the contracts awarded to it.

Experienced management team

Our Company’s senior managers have vast experience in the dredging and maritime industries. Our Company believes that this experience provides the Company with a significant advantage over its competitors. The Company’s floating personnel who manage the dredgers and the management team who give the support services are well trained professionals having vast experience in the dredging and maritime industries

9. OUR STRATEGIES

We intend to increase income from operations and strengthen our domestic and international competitive position by expanding our operations in both our traditional and new dredging services and adopting a pro-active marketing strategy for our domestic and foreign operations. We aim to achieve our mission by pursuing the following business strategies:

Enhancement of market share in maintenance dredging and more participation in capital dredging in India

With the addition of the two new dredgers in December 2012 and July 2013 respectively and third dredger in March 2014 respectively of higher capacity, our Company expects to maintain its domestic leadership position in maintenance dredging by becoming more customer-focused and tailoring marketing initiatives that differentiate between specific groups of customers. In particular, it is consolidating its relationships with the Major Ports and developing marketing efforts aimed at non-Major Ports and new private port developers in India. Also at present company is undertaking Capital dredging assignment at Mormugao Port . We plan to undertake more such assignments subject to the availability of the fleet.

Making forays in foreign dredging market

Apart from consolidation in the Indian dredging market, we have plans to make forays in the foreign dredging market. The initiatives taken for setting our foot once again in foreign waters is likely to materialize in this financial year.

Enhancement of the fleet capability

In continuation of the efforts to sustain the existing capacity for which orders were placed for three dredgers meant as replacement of existing aged dredgers, our Company plans to higher hopper capacity trailer suction hopper dredgers. The detailed Project Report for the same is under preparation. Our Company also plans to refurbish the existing aged dredgers so as to increase their effectiveness and enhance their economic life. Further, with the impetus given to inland waterways by the Government and the consequent necessity and demand for inland dredging, the company has placed order for an inland cutter suction dredger and the same its expected to join fleet very shortly.

Reducing operational costs

Further, to the capacity enhancement initiatives discussed above, your Company also has taken initiatives to reduce operational costs by focusing on fuel efficiency in ship operations and ship procurement and further streamlining the spare parts procurement systems. Your Company also proposes to have tie-ups with ship repair yards for continued maintenance of our vessels for a period of time so as to make available the dredgers for a guaranteed minimum number of days every year. In this direction a long term MOU was signed with Cochin Shipyard Limited.

Strategic alliances through long term contracts with major ports

Your Company proposes to have strategic alliances with major ports. This will ensure assured business for the Company and enable the Company to plan in advance regarding the deployment of the vessels. The Company also proposes to act as nodal agency to meet all dredging requirements for major ports in the country.

Optimize capacity utilization

Your Company intends to continue to optimize its capacity utilization by continuous project monitoring and review, reducing equipment downtime through preventive maintenance and working with repair yards to accelerate dry dock repair periods, and increasing computerization, including introducing online connectivity between dredgers, projects and the head office. Our Company also intends to continue to invest in quality pre-dredging surveys and equipment and continue to invest in repairs and maintenance. Through a renewed focus on training, your Company intends to introduce specific project planning and management initiatives to educate its staff to identify and develop new market opportunities. Your Company believes in the introduction of best practices in procurement, costing and working capital management, along with the introduction of tailored human resources practices, participatory management and new technologies, which will create new competencies in its organization and add value for its dredging customers.

10. THREATS

The Company perceives the following threats

i Increasing foreign competition.

ii Increasing competition from Indian dredging companies.

iii Frequent and expensive repairs to dredgers due to ageing.

The increased competition has in a way helped the company to tighten up and become more competitive. The company has takne steps in this regard by appointing a consultant to benchmark different parameters -both technical and operational against the best in the world as well take corrective steps to match the same..

11. INDIAN DREDGING MARKET OUTLOOK

While the consistent maintenance dredging requirements at the major ports are expected to continue, increasing private sector participation in port development and related capital dredging activity is expected. At the same time, the dynamics in the Indian market are rapidly changing. The key changes taking place include changes in customer profile for dredging companies from Government to private sector developers, changes in payment patterns for dredging work with stringent performance parameters the expansion of Indian port capacity and increasing participation of international companies in the Indian dredging market. Other developments include:

i Deeper draught requirements of Indian Ports.

ii Tourism development and increasing need for beach nourishment.

iii Land reclamation for low lying areas.

The Sagarmala initiative of the Government gives impetus to port led development and consequent increase in demand for dredging.

DCI’s customers include Major Ports under the administrative control of the Ministry of Shipping, Non-Major Ports under the administrative control of the GoI and State Governments, private ports, the Indian Navy and shipyards. The Indian dredging market is primarily maintenance dredging-oriented. However, some capital dredging projects are also in the offing. DCI has already secured the Ennore Capital dredging project on tender basis.

12. RISKS AND CONCERNS

The foreign exchange variations may cause a dent in the cash flows apart from effecting the results of the Company due the debt service obligations in foreign exchange.

13. INITIATIVES TAKEN/FUTURE PLANS OF THE COMPANY

Keeping the various developments in the dredging industry in view, your Company has initiated action in several areas, including:

i Appointment of marketing consultants for promoting DCI business abroad.

ii Appointment of strategic consultants for preparation of documents for growth and diversification into new business and to increase revenue and profits.

iii Consolidation of share in maintenance dredging in India

iv More participation in capital dredging - acquiring necessary skills, training company personnel, acquiring/chartering dredgers.

v Acquisition of dredgers with fuel efficient design and advanced technology, fitted with sophisticated and state-of-the-art technology.

vi Reducing operational costs - Focusing on fuel efficiency in ship operations, streamlining spare parts procurement systems.

vii Close monitoring of repairs.

viii Technology up gradation.

14. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has reasonable system of delegation at proper levels and an adequate system of internal control commensurate with its size and nature of its business. The Company has an adequate and independent internal audit department for conducting extensive audit of various important operational and financial matters. The internal audit work at Head Office and some of the projects has been outsourced to Chartered Accountant firms. The internal controls are reviewed by the Internal Audit Department. The Vigilance Department deals with vigilance and disciplinary cases with emphasis on preventive vigilance. C&AG conducts proprietary audit. The Company has constituted an Audit Committee and significant audit observations and follow up action thereon are reported to the Audit Committee. The proceedings of the Audit Committee meetings and also other Sub-Committee meeting of Directors are submitted to the Board.

15. INDUSTRIAL RELATIONS

The industrial relations in the Corporation continued to be cordial throughout the year under report.

16. CORPORATE SOCIAL RESPONSIBILITY

The Board of Directors of the Company have formulated the Corporate Social Responsibility Policy for the Company and also constituted a Sub-Committee of Directors for implementation of the same. The report of the Corporate Social Responsibilities activities of the Company is attached to the Director’s Report.

17. CAUTIONARY STATEMENT

Statements in this “Management Discussion and Analysis” describing the objectives, expectations, assumptions or predictions of the Company may be forward-looking statements within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the operations of the Company include economic conditions affecting demand/supply, price conditions in the domestic and international markets, Government policies and regulations, statutes and other incidental factors.