Deep Industries Limited (DEEPINDS.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Deep Industries Q2 and H1 FY '26 Earnings Conference Call hosted Adfactors PR. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Paras Savla, Chairman and MD of Deep Industries for their opening remarks. Thank you, and over to you, sir.

Good morning, everyone. Thank you for joining us today. It's a pleasure to connect with all of you as we discuss our performance for the second quarter and first half of FY '26. I trust you had a chance to go through our results, press release and investor presentation available on the company's website and stock exchanges. I'm joined by our Director of Finance and CFO, Mr. Rohan Shah, who will share a detailed financial overview after my address. The quarter 2 and first half of FY '26 has been another period of outstanding performance and strong execution for Deep Industries. India's oil and gas sector continues to witness a renewed momentum backed by the government's strong push for domestic exploration, production growth and the long-term energy security. This ongoing activity has created a positive business environment, and we continue to benefit from it as one of the key integrated services provider in the country. Deep Industries has maintained its growth trajectory by enhancing operational efficiency, deploying assets effectively and deepening engagement with marquee clients in both PSUs and private segments. We at Deep Industries have always believed in providing value-added services to our clients. Value-added services can give one-stop solution to the client, and it reduces cost and save time for them with efficient output. A value-added service for us has become margin assertive opportunity and gives us flexibility to perform in one more efficient manner. Our production enhancement contract at Rajahmundry field is progressing well, with stable production achieved and further optimization measures underway. We expect this project to deliver incremental contributions to our output in the coming quarters. In the midstream segment, we continue to operate one of the India's largest fleet of gas compression units while also expanding our footprint in modular gas processing systems under the lease, operate, maintain model. We are seeing increasing interest in these solutions from PSU clients operating in challenging gas fields where reliability and cost efficiencies are critical. As of now, our order book stands strong at around INR 3,050-odd crores, providing long-term revenue visibility and reaffirming our healthy business pipeline. Looking ahead, our focus for the remainder of FY '26 will be on: one, achieving the highest levels of operational efficiency and safety across all our sites; two, strengthening our participation in production enhancement and unconventional resource development; three, scaling up the deployment of charter hiring of entire gas processing facilities; and four, pursuing selective value-accretive opportunities that enhance our service offerings and profitability. The first half has laid a solid foundation for the remainder for the year. With a robust project pipeline, a favorable policy environment and strong execution capabilities, we are well positioned to capitalize on emerging opportunities in India's energy sector. We remain committed to sustainable growth and long-term value creation for all our stakeholders. With that, I now invite Mr. Rohan Shah to present the financial highlights for quarter 2 and half year FY '26. Thank you.

Thank you, Paras [Foreign Language]. Investor friends, thank you for joining the call today. I am pleased to share with you another strong quarterly and half yearly performance of Deep Industries Limited. All comparisons are on a year-on-year basis, which would provide a fair evaluation. For the quarter ended September 30, 2025, revenue for Q2 FY '26 stood at INR 221 crores, up by 69.2% year-on-year. Good control over operating costs and enhanced utilization of key assets helped us post EBITDA of INR 112.9 crores in Q2 FY '26, reflecting 74.7% Y-o-Y growth with an EBITDA margin of 46.6%. We continue to maintain healthy EBITDA margins in the range of 45% to 46%, ensuring strong operating cash generation to support our future growth trajectory. Net profit for the quarter was INR 71.2 crores, up by 71.4% Y-o-Y. Now on half year ended September 30, 2025, revenue for H1 FY '26 stood at INR 420.5 crores, registering 65.5% Y-o-Y growth. EBITDA for H1 FY '26 was INR 207.9 crores, up by 64.9% Y-o-Y with an average EBITDA margin of 45.7%. PAT for H1 FY '26 was INR 132.9 crores, showing 65.6% Y-o-Y growth. As on date, our order book stood at INR 3,050 crores, providing strong revenue visibility for coming quarters. With this, I now open the forum for question and answer. Thank you.

[Operator Instructions] The first question comes from the line of Sudeep Anand from Systematix.

Many congratulations for a very good set of numbers. Sir, a few questions. We'll start with the rig business. What's the current status of the couple of rigs which is likely to join the fleet in H2? And how do we see the tendering process and any guidance on rig addition for H2 and FY '27?

So, our couple of rigs are on the way from China to our site, and we are expecting them to get it deployed one in December and one in Q4. With regards to new opportunities, we have bidded quite a few tenders for rigs and we are waiting for their…

Okay. Sir, in terms of PEC, what was the gas price realization during the quarter? And what was the average production level?

Sorry, I just missed that.

Sir, under the production enhancement contract, what was the gas price volume and the realization?

So gas price realized was around $7.5 MMBtu. And average volume would be somewhere around 170,000 cubic meter a day. Yes.

The next question comes from the line of [ Akhilesh Rawat ] from [ Vedanta Vision Private Limited ].

First of all, sir, I want to congratulate on a good set of numbers. So, I have only one question. So as your -- as an investor presentation, you have mentioned that your order book has crossed INR 3,050 crores as of November 2025, so growing at a 53% CAGR since financial year 2022. So, what proportion of this order book is expected to convert into revenue over the next 12 to 24 months? And how should we think about the mix between high-margin segments and like charter higher gas processing facilities versus drilling and offshore services?

So out of this total order book of more than INR 3,050 crores, almost INR 1,300-plus crores is for production enhancement contract, which is for 15 years. So, if we remove that, more than INR 1,650 crores of order book is executable over 2.5 years.

One question, please. Sir, this ONGC production enhancement contract, as you mentioned in PPT is INR 1,402 crores for 15 years. And as you mentioned that majority of the revenue will come in first 10 years. So, can you please quantify like expected EBITDA margin range for this project and explain like how the revenue ramp-up will occur over financial '26 to financial '28?

So, we are expecting on a full year basis revenue from this particular contract to the tune of INR 140 crores to INR 150 crores from next financial year onwards. And the margins we are expecting out of this contract in range of around 50% kind of EBITDA.

The next question is from the line of Dhaval Popat from Choice International Limited.

Congratulations on a very good set of numbers. A follow-up on the question that was just asked regarding the Rajahmundry field operations ramp-up, how these are panning out? And what should we expect in the rest half of the year for this field, as in, should the revenues be in the line of about INR 35 crores or so? That is my first question. And second question I have is around if the oil prices dip from here on for the next year, what is the impact on the rig charter rates that we could see? And how much EBITDA margins could be impacted on the back of this?

Yes. So, from production enhancement contracts since we have now started crossing over baseline, so, revenue from H2, we can expect to the tune of around INR 35-plus crores and maybe even more. And from next year onwards on a full year basis, it should be more than INR 140 crores kind of revenue on a full year basis. To answer to your second question of crude oil price, I believe our majority of contracts are fixed price contract and they are long-term contracts of 3 years. So largely, movement in crude oil price is not affecting our services business because even if crude oil price is higher or lower, the activity of production is continuously going on in India being energy deficient country. And so, we have seen in last 20, 25 years, this crude oil price movement generally not affecting us much.

The next question is from the line of Sudhir Bheda from [ Bheda Family Office ].

Hearty congratulations to entire Deep team for delivering the exceptional results quarter after quarter. So, my hearty congratulation to entire Deep team. Sir, my 2 questions. Just wanted to understand about the other income part. So, is this kind of sustainable income or how we should look into it going forward to second half and next year?

Yes. The other income largely consists of interest and mutual fund M2M growth. And to a certain extent, it is a revaluation on foreign currency valuation on your overseas receivables. So more or less, we believe this kind of other income would continue in next half as well.

And sir, just wanted to understand the -- see, we have all-time high order book. And then just wanted to understand the order pipeline for next 12 months. How much we will bid and what is the winning ratio over there so we can have a fair idea about the next year's growth?

So, we have a bidding pipeline close to INR 700-odd crores. How much of that would get converted, it is only the matter of time. But out of our experience, we believe it would be a good substantial numbers that can get converted. But having said that, that is not only the bidding pipeline, there is a constant bidding happening. So, every month-on-month, we keep on bidding new projects. And therefore, these numbers are a little dynamic. They keep on increasing. So, as we speak, it's INR 700 crores, but it has a high potential to grow these numbers in the next quarters.

And lastly, sir, just wanted to understand, see, we will employ 2 rigs in next 2 quarters. And then next year also, we'll get the full revenue from Dolphin also. So, what is the next year outlook in terms of growth, if you can throw some light on that?

Yes. So, as you rightly mentioned, these rigs, which are being deployed in current year and...

Sorry, and also production enhancement. So, these 3 growth drivers would be there : production enhancement, additional rigs and then Dolphin. So then on these 3 accounts, what would be the growth outlook for next year?

Correct. So, production enhancement contract and new addition of rigs which have not contributed on full year basis in current financial year, they would start contributing revenue on a full year basis from next financial year onwards. And of course, Dolphin will also have full year revenue from next financial year onwards. So, all put together, we are expecting growth of another 35% to 38% kind of growth on year-on-year basis in next financial year as well.

The next question is from the line of [ Aryan Doshi ] from [ Davite Investments ].

Congrats on very good results. I just wanted to ask one question. So, the margins have been stable around 43% to 45% over the last few quarters. Given the PEC contracts and the Dolphin Offshore, the margins improvement, like the 45% number will increase or the number would be same in the next quarter? And also, the revenue growth rate, the numbers would be same or the number would be increased?

Yes. So, margin, we believe it should improve a bit going forward. And we are expecting our EBITDA margins to grow upwards beyond 45% in coming quarters. With regards to revenue, yes, it would be a little higher than the current quarters because the new assets would start adding revenue in coming quarters, and it will give a growth over previous quarters.

The next question is from the line of [ Siddhartha ] from [ KP Globalizing Finance ].

Congratulations for the good set of results. So, the only question is in the last con call, you have indicated going for some fundraise. So any -- can you give some color on that?

Yes. So, we have taken all required approvals for fundraise. And we are -- we have done some non-deal roadshows as well. So, we are waiting for just a perfect time to get into it.

So, what's the quantum of the fundraise you are looking at?

So yes, it is around INR 300-plus crores kind of quantum, which we are looking at it.

Okay. So, can we expect this to be closed by the end of financial year, I mean calendar year or financial year?

Yes, looking forward to it.

The next question comes from the line of Nirvana Laha from Badrinath Holdings.

Congrats on a great set of results. Sir, you commented on the other income. I missed that. Can you please repeat that?

Yes. So other income consists of interest income, then mutual fund income and mark-to-market of funds as well as some overseas receivables on foreign currency fluctuation.

Okay. So, none of that pertains to recovery of receivables, right? It's just the amount of receivables because of ForEx gain?

Yes, ForEx gain, fluctuation, correct.

And you said this is expected to continue for the next 2 quarters. Did I hear you right? Like why would you expect so? Because we have never been at these levels of other income in the past. It's been less than [ INR 1 ] crores.

Yes. So, interest and mutual fund income would definitely be continue to go [Audio Gap] as well. Of course, I cannot comment on revaluation gain on foreign currency.

Sure. Okay, sir. And if you can give some comment on the stand-alone growth? So actually, before this, we were also growing quite fast like by 30%, 40%. But for the last 2 quarters, we have now started showing 60% to 70% Y-o-Y growth in stand-alone. So what projects are actually contributing to this? Like why has the growth gone up to 50%, 60% now, which new projects are contributing? Because I don't think the production enhancement has started.

No, the production enhancement has, of course, started, but with a lower amount because it is just an initial phase. In addition to that, we have added quite a few assets in this year. Like in last 8 months, we have added 6 more rigs. So, I think those assets when it comes on operation, it will start adding into your top line. And in this entire gas processing services also, we have added one project. So, I think in last 2 quarters, there are sizable project which has been added into our operating fleet, and that has given growth on revenue.

Got it, sir. And so you expect for H2 also this kind of Y-o-Y stand-alone to continue 60% kind of growth?

Yes, yes. So H2 would continue the momentum, and we are expecting H2 would have a growth over H1.

Okay. That's great to hear. Sir, final question on Prabha. Is the full depreciation run rate in for the barge from this quarter? There's been a sharp jump in Dolphin depreciation. So, is the full amount -- quarterly run rate, is it [indiscernible] or can it increase further from here?

So the estimated life for depreciation, we have considered as 15 years. And so based on that, this depreciation would start kicking in. So, in last quarter, it was -- for some part, it was under capital work in progress. And so last quarter, depreciation would have been lower than the current quarter.

Right. So, INR 4 crores of depreciation you expect to continue? Or will it increase to like INR 5 crores, INR 6 crores in the coming quarters?

Yes, it would be more or less in that range. If we'll add further some addition to that asset, then it can increase. Otherwise, it would be in the same line. Congratulations on great execution.

The next question is from the line of [ Ankur Sawariya ], an Individual Investor.

I congratulate you on a very good set of numbers that you have given again and again. My first question is regarding the court case with ONGC. What is the status of that case, sir?

The arbitration one you are referring to?

Yes, yes. About you were expecting that to end in 2, 3 months. But I think for last 6 months, there is no update regarding the same.

Yes. So that is going on. And so we cannot comment on time line when particularly it is a court matter, but we are quite hopeful it should complete it soon.

And sir, regarding the receivables of Kandla, is there any positive update on that?

So currently, we are still under an evaluation stage. So as of now, there is no recovery from last quarter till now. But yes, we are hopeful, and we have started following up with them. So, we believe some good news should come in coming quarters.

Okay. And sir, production enhancement contracts since it has been about 2 quarters, so do you think that it is going on well and we can get more such contracts from ONGC?

Yes, we expect it. So there would be various bidding rounds coming up. And if that happens so, definitely, we would be bidding for it. And hopefully, we should win those -- some of those projects.

Congratulations on [indiscernible].

The next question is from the line of [ Rahil ] from [ Sapphire Capital ].

So firstly, you've given this consolidated basis guidance for next year. For FY '26, what can we pencil in in terms of growth? The 35% run rate should continue?

Yes. It should be -- I believe it should be higher than 35%...

For FY '26, you're saying, correct?

Correct.

Okay. But then given the PEC to kick in more revenue from next year and the new assets to contribute, then next year should also be 40% plus, correct, on a consolidated level?

Yes. So, we are expecting next year also more than 35%. How much over and above 35% we can -- we'll be able to achieve, I think that time will definitely give us the idea. But for sure, minimum 35%.

Okay. And we have seen the last 2 quarters with a positive bottom line. Will this continue for the rest of the year and ahead?

Yes, yes, of course.

Okay. So expecting this year to be profitable.

Yes. So, in fact, last year also, it was just a noncash entry, which has resulted into loss. Otherwise, that it was in profit only.

The next question is from the line of [ Gaurav Sachdeva ] from [ Sajak Securities ].

Sir, we were looking to add some more assets in the Dolphin offshore like vessels and other assets. So, when we’ll add that vessels…

Yes. So, we have identified and shortlisted few assets, and we are working on it. Once we'll be able to tied up those assets for contracts, we'll go for acquisition. So yes, we are on a quite advanced stage of that part.

Okay. And sir, for how many years we can look such 30% to 40% growth on a consol...

See, based on existing order book, we believe for next 2 years, this kind of growth is clearly visible. Depending on further addition to this order book, we can continue the momentum beyond 2 years as well.

And sir, regarding production enhancement these contracts, when do you think that ONGC will give such -- I mean, give such more contracts?

So their internal back office work is going on. So, we cannot comment on the exact time line when they will come up with such more tenders, but it is very much expected in coming quarters.

The next question is from the line of [ Deepak Kumar ] from [ IG Family Office ].

So, my question is to the tune of production enhancement contract. Have they started the execution?

Yes, yes. It has started execution. I think we have taken over that block in the month of April only. And we have started our work operations from April onwards, and it is now up and producing as per our expectation.

Got it. So, I think our share has to come when we produce more than 1.5 ppm a day. So how has been the experience till now?

Yes. So, we have crossed the baseline and this production is increasing above baseline. which is progressing as per our expectation. And we believe from next financial year on full year basis, we would be earning as per our expectation.

Got it. And how is the price realization now?

So, price realization, yes, so currently, it is in line with what ONGC used to sell. And with higher quantity coming up, we may take a call to sell at spot as well with higher price. But that these decisions are dynamic and depending on the volume and availability of clients. So yes, but we are quite bullish on that part as well.

[Operator Instructions] The next question comes from the line of [ Nishi ], an Individual Investor.