In an interaction with Vikas Jain, Chairman cum Managing Director, South West Pinnacle Exploration Ltd
With the present global uncertainty, the need for reliance on our natural resources has gone up substantially making the outlook of the exploration and mining industry more attractive, asserts Vikas Jain, Chairman cum Managing Director, South West Pinnacle Exploration Ltd
Can you tell us about the business activities of South West Pinnacle Exploration? What are the company's mission and vision?
South West Pinnacle Exploration Limited (SWPE) is a 360-degree integrated service provider, providing end-to-end exploration, drilling, and allied services. The services include Exploration of Coal and minerals, Unconventional Oil and Gas (CBM, Shale, and Geothermal) exploration and Production, Aquifer Mapping, 2D and 3D Seismic Data Acquisition, Mining and Processing, Passive Seismic Tomography, and providing all kinds of Geological and Geophysical services, Geo-Thermal project, Underground core Drilling for Copper and Gold Exploration, etc. The company has a joint venture in Oman through which it is currently providing long-term mining services in Oman. Besides, SWPE has recently been allocated a coal block in the state of Jharkhand.
Since its inception, the company has completed more than 110 projects. In addition, the company has served prominent Government and private organizations like Reliance Industries Limited, Tata Steels Ltd., ONGC Energy Centre Trust, Oil India Ltd, HINDALCO Industries Ltd, Hindustan Zinc Ltd, Arcelor Mittal Group, Ultratech Cement Ltd, JSW Steels Ltd., Hindustan Copper Ltd, Geological Survey of India, CMPDI (a 100 per cent subsidiary of Coal India), Atomic Mineral Directorate for Exploration and Research(AMD), Central Ground Water Board (CGWB), Vedanta Ltd, NMDC Ltd and MECL etc. to name a few. Being One of India's fastest-growing private exploration services firms in the field of mineral & unconventional energy resources, the company is listed on NSE, and has a market capitalisation of around Rs. 37,849 lakh.
The company’s Vision statement reads as “MINING OUR DREAM and EXPLORATION AN OPPPORTUNITY, WE ARE MAKING BOTH OF THEM A REALITY”.
SWPE started as an exploration company with one or two domains initially and gradually added on more and domains including 2D/ 3D seismic Data Acquisition and has now become a full-fledged exploration company coving around ten domains which is a rare phenomenon in India.
Spotting the opportunity in Middle East Asia, the company started its exploration and mining service operations in Oman through a JV with an Australian Company Alara. Oman is a mineral-rich nation having huge reserves of Copper, Gold, Silver, Chromite, Lead, Nickel, Manganese and Zinc. However, due to more focus on Oil and Gas exploration, these natural resources remained largely unexplored. But now Omani Government has realised the fact and is throwing open many opportunities for the exploration of these mineral resources. SWPE has accordingly won a USD 125 Million Copper Mining long-term contract recently; the operations are presently underway for the same.
What is your outlook on the Indian energy and mining industry? What are the opportunities you are focusing on?
The demand for drilling services plays a crucial role in the mining industry. An increase in the demand for mining activities across various regions could positively impact the market. The years of pandemic proved to be a remarkable year for the mining & drilling industry. Despite disrupting other businesses, the Mining industry continued to flourish due to a rapid increase in the iron-steel demand in the post-cooperative shutdown period, which propelled the need for mining drilling services. The new expansions and projects took place in the industry leading to the increased market share of the overall mining & drilling industry.
The global mining market is being driven by various factors. Significant growth is expected to be witnessed by the industry across the globe, along with an increase in off-shore and on-shore oil exploration activities, which has been boosting the market. Factors such as the implementation of favourable government policies are anticipated to drive the market toward growth. Additionally, numerous investments to explore and produce more metals and minerals to satisfy the growing needs of metals are projected as one of the leading factors, in propelling the growth of the market size of the Mining industry. Not just that, but also the continuous Launch of new products for sustainable mining process, have proved to be the driving force for the growth.
The outlook for the sector has also shifted due to a significant upheaval in the Indian electricity sector. According to India Ratings and Research (Ind-Ra), the overall plant load factor (PLF) of thermal power plants would continue to rise and go closer to 60per cent in FY23, maintaining its neutral view for the power industry for that year. The country’s need for power is still being driven by sustained economic expansion. The Indian government's emphasis on achieving "Power for All" has sped up the country's capacity expansion.
The Government has taken various initiatives to enhance the energy resources domestically to give a boost to ‘Atmanirbhar Bharat’ and also to save precious FX outgo.
With the present global uncertainty mainly due to Russia - Ukraine conflict, the need for reliance on our natural resources has gone up substantially thus making the outlook of the exploration and mining industry even more attractive.
Can you throw some colour on your financial performance for FY22 and Q1FY23?
The company has been growing consistently and has been registering a growth of around 15 per cent in the top and bottom lines both year after year. During FY 2021-22 the company clocked a revenue of Rs 120.65 crore and a PAT of Rs 12.16 crore on a standalone basis. Q1 results of 2022-23 were in line with our estimates registering a growth of 8 per cent in revenue and 10 per cent in PAT.
The order book of the company presently stood at Rs 245 crore which is good enough to give desired impetus to the top line of 2022-23. We expect a growth of around 20 per cent in our top line and corresponding growth in the bottom line as well. It is to be mentioned here that we have participated in a sizable number of tenders in the recent past and expect to bag a few of them which will further strengthen our order thus book making the yearend financial outlook even brighter.
What is your segment-wise revenue mix and how do you expect it to evolve over the next 2-3 years?
South West Pinnacle has successfully clocked revenues of Rs 120.65 crore and PAT of Rs 12.16 crore on a standalone basis during FY 2021-22, registering a growth of around 15per cent in both the top and bottom line. With the ongoing new projects, and acquisitions are expecting to achieve a growth of 20 per cent (CAGR) over the next 3 years.
Can you shed some light on your ongoing as well as future capex plans?
For the exploration business, South West Pinnacle Exploration will need Rs 20-25 crore in the near term for the purchase of need-based rigs and other equipment. This Capex is proposed to be funded by a mix of debt and internal accruals of the company.
SWPE has recently acquired a partially explored coal block in the state of Jharkhand by participating in a forward auction done by the Ministry of Coal and Mines, Government of India which is a natural progression of the business. The company would require to incur a total Capex of Rs 240 crore up to the commencement of coal production mainly towards payment to Government Agencies (upfront fee etc., PBG etc.,) land acquisition and equipment and other infra development.
With the current balance sheet strength, the company is entering into the mining business to achieve the next phase of growth that will lead to more than 2-3x growth over current revenues and significant margin improvement. Post commencement of coal production, any further Capex requirement for the coal business will generally be met from internal accruals of the coal business itself.
Can you highlight your key growth triggers for the next 3-5 years?
The Government of India has recently made an announcement regarding the opening up of coal blocks for commercial coal mining by private payers. Being a natural extension to what we had been doing, participated in and won such coal blocks namely Jogeshwar and Khas Jogeshwar located in the state of Jharkhand through a forward auction for the said coal block. The process of mine development is underway. We strongly believe that this has great potential and throws an open immense opportunity for the growth of the company.
With so much focus of the Government to enhance the share of mining in our GDP and to rely more on domestic natural resources, the exploration industry will continue to grow at a good pace giving us desired opportunities from the exploration business.
As the Omani Government looks forward to diversify and move away from dependence on oil revenue and to create jobs for Omani nationals, growth is anticipated in the exploration and mining sector following the discovery of significant reserves of minerals including gold and copper.