A couple of corporate governance issues to be aware of in Seamec

1. Payment of hefty advisory fees to a related party company owned by Directors (Amounting to 4% of revenue or 10% of cash PAT whichever is lower). Management says this is a way of compensating corporate for shared services.

2. Heavy investments in UK subsidiary, supposedly for setting up an office to tap into North Sea markets (55Cr via equity and 145Cr+ via loans). Management has said that in response to investor concerns they are seeing how to liquidate part of these investments and bring them back to the standalone entity.

A few other thoughts about Seamec

• The OSV/DSV industry seems interestingly poised with no new supply of vessels expected in the next few years. Contract rates for these vessels should keep going up as and when contracts expire. This should result in operating leverage. An industry article which talks about the situation for OSVs – https://www.rivieramm.com/news-content-hub/news-content-hub/many-happy-returns-for-osv-owners-in-2024-and-beyond-79086

• At the same time, buying a 2nd hand vessel from the market may not deliver desired ROCEs because 2nd hand vessels prices are also very high. Here, Seamec has an advantage, as its parent company HAL Offshore is going to transfer a couple of vessels to Seamec over the next few years. One DSV, NPP Nusantara, will get transferred to Seamec in Sep 2025 for a purchase price of INR 200Cr. At this purchase price and the prevailing charter rates, Seamec should be able to make good ROCEs.

• 3 of its existing DSVs are nearing end of life and will need replacement in the next couple of years. Remains to be seen how these get replaced. Any delays may impact revenues temporarily. Management has hinted that there is an outside chance for extension of life by Govt of India considering the criticality of these vessels and the prevailing market conditions.

• While Seamec gets almost all of its revenues from ONGC, even ONGC is heavily dependent on Seamec and HAL Offshore for its DSV needs. So the dependency is mutual.

Disc: Not invested yet, tracking. Invested in another O&G ancillary play, Deep Industries.

Sharing the latest results and investor presentation

https://www.bseindia.com/xml-data/corpfiling/AttachLive/ab86bada-4eee-4812-b171-b357471ffd96.pdf

Also sharing a tweet by Vineet Jain
https://x.com/vineetjain1101/status/1823956832550879413

I am just tracking. No investment.

dr.vikas

@kalpesh4430 it wasnt removed. Even in quarter ending June 4.5 Cr was paid to the promoter(s)

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