DEEPINDS - Deep Industries Limited Share Price

During the earnings call for Q1 FY '26, management expressed a strong outlook for Deep Industries Limited, highlighting the promising landscape of India's oil and gas support services sector. The company expects to benefit from increased upstream activity and a national push for energy self-reliance. Specific forward-looking points mentioned include:

1. Operational Developments: The company has successfully taken over operations in the Rajahmundry field, with baseline production expected to lead to significant output boosts in upcoming quarters.

2. Contract Wins: Deep Industries secured a Letter of Award from Oil India Limited for workover rigs valued at Rs.45 crores and a Rs.96.72 crore contract for a 7-year charter for workover rigs in Assam and Arunachal Pradesh.

3. Revenue Generation: The Prabha barge started generating revenue in May 2025. Management expects Dolphin's operations to generate approximately Rs.100 crores annually under its contract at $30,000 per day.

4. Growth Expectations: The company anticipates sustained growth of over 30% year-on-year based on a robust order book of Rs.3,051 crores, which reflects a 152.15% increase year-on-year.

5. Financial Performance: Revenue for Q1 FY '26 reached Rs.199.5 crores, marking a 61.6% increase from the previous year, with a net profit of Rs.61.7 crores (up 59.3% year-on-year). EBITDA for the quarter stood at Rs.95 crores, representing an EBITDA margin of 44.6%.

6. Key Strategic Priorities: For FY '26, the company aims to maximize asset utilization, expand its presence in enhanced oil recovery (EOR) and unconventional segments, develop gas processing plants, and consider value-accretive mergers and acquisitions (M&A) to enhance service capabilities.

Management remains confident in their strategy and operational execution amidst rising energy demand, positioning Deep Industries to deliver sustainable growth and long-term value.

Q&A Summary from Earnings Call (August 05, 2025)

1. Raman: "Is our 60+% revenue growth a one-off due to Kandla Energy acquisition?"

   • Rohan Shah: "The growth results from executing contracts awarded last year, with no contribution from Kandla Energy yet. We expect Kandla to contribute from the next financial year."

2. Raman: "Can we expect growth to slow down in the following quarters?"

   • Rohan Shah: "We anticipate year-on-year growth of over 30% based on our existing order book, expecting consistent growth for the next 2-3 years."

3. Raman: "What about the margins post-acquisition?"

   • Rohan Shah: "Margins will improve as Dolphin's revenue contribution increases, enhancing our operating margins too."

4. Rohan: "What revenue can we expect from Dolphin in FY '26?"

   • Rohan Shah: "Dolphin's revenue should be around INR 100 crores this financial year at the current contract rate of $30,000 a day."

5. Raman: "Will we add more fleet given the rising demand?"

   • Rohan Shah: "Yes, we plan to add new rigs based on opportunity. We've already secured two new rig contracts."

6. Nirvana Laha: "Is Dolphin's quarterly revenue run rate in line with expectations?"

   • Rohan Shah: "The quarter's revenue was lower due to contract commencement in May; expect better alignment in future quarters."

7. Nirvana Laha: "Any revenue from the PEC contract yet?"

   • Rohan Shah: "Yes, we've recognized a minimum fixed fee of around INR 1 crore a month from PEC."

8. Nirvana Laha: "When do you expect CAPEX for the PEC contract to start?"

   • Rohan Shah: "CAPEX should commence later this financial year, concluding next financial year."

9. Nirvana Laha: "What's our total receivable pool looking like?"

   • Rohan Shah: "Total receivables are over INR 350 crores, mostly old receivables, which we anticipate recovering without needing write-offs this fiscal year."

10. Sudeep Anand: "What about rig charter hire rates?"

• Rohan Shah: "Rates for new workover rigs are in rupees, while drilling rigs have dollar rates for five of our six rigs."

11. Deepak Poddar: "What kind of top line contribution are we expecting from Kandla?"

• Rohan Shah: "It's too early to specify, but we expect some efficiency improvements leading to a potential operating cost reduction of 1.5-2%."

12. Rajesh Jain: "What's the expected collection timeline for old receivables?"

• Rohan Shah: "We've given ourselves a timeline of two years, actively pursuing recovery efforts during this period."

This summary captures the essential questions and answers from the earnings call, providing perspective on the company's financial outlook and operations moving forward.