Deep Industries Limited (DEEPINDS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Conference Call of Deep Industries Limited. From the management, we have Mr. Paras Savla, Chairman and MD; and Mr. Rohan Shah, CFO. We also have our Investor Relations teams from Adfactors. [Operator Instructions] Before we begin the earnings call, I would like to mention that some of the statements made during today's call may be forward-looking in nature, and hence, it may involve risks and uncertainties including those related to the future financial and operating performance. Please bear with us if there is a call drop during the course of the conference call. We would ensure the call is reconnected the soonest. I now hand the conference over to Mr. Paras Savla for his opening remarks. Thank you, and over to you.

Good morning, everyone. It gives me immense pleasure to speak to you all today as we present our first quarter performance. Thank you very much for joining this call. I hope you all would have gone through Quarter 1 results and investor presentation that are available on our website and on exchanges. I'm also joined by Mr. Rohan Shah, Director-Finance and CFO, who will assist in answering your queries. After my brief, he will share financial performance of the company in detail, and we will then take questions. Building on last year's performance, India remains the fastest-growing economy in the world with GDP growth expected to be between 7% to 7.5% this year as well. The new government's agenda centered around Viksit Bharat emphasizes infrastructure development and energy transition. As the nation continues its rapid growth, the need for accessible energy for all has become increasingly urgent. While efforts to transition to renewable energy have intensified, the government is also focusing on enhancing the efficiency of conventional energy assets. We at Deep Industries are aligned with this mission of government and committed to leverage on these opportunities. Today the vision of contributing to nation building, we are continuously working on increasing our portfolio with value-added services, now occupying center point. Our new services of providing entire gas processing facilities on charter basis is receiving encouraging response from the key industry players. With robust bidding pipeline and consistent order flow in existing as well as new service offerings, we are committed to capitalize on these opportunities for maximizing shareholder value and achieve long-term success. The Government of India is focusing on a gas-based economy to increase the share of gas in primary energy mix to 15%. This is likely to attract huge investments in the gas sector, which would create many opportunities for our various service offerings in natural gas processing vertical. Over the next few years, India is aiming to significantly scale up investments in the exploration and production sector, eyeing opportunities worth up to $100 billion by 2030. The winners of the ninth round of central acreage licensing policy are likely to be announced in the next couple of months. There have been news reports that to accelerate the exploration and production, the government is also planning to announce 10 rounds of OALP. Both these rounds put together would bring in around 50 blocks under exploration, thereby providing immense opportunities for the company for oil and gas support services. As you might be aware, prior to OALP under hydrocarbon exploration and licensing policy, separate rounds of New Exploration and Licensing Policy that is NELP, CBM and discovered small fields were also held by government. Under NELP 32 blocks out of 250 blocks awarded are operational, additionally 33 blocks, CBM blocks and 2 DSF blocks recently announced are also potential opportunities for the company. Now coming to the quarterly performance. The first quarter has been robust growth with strong order flow and bidding pipeline. During the quarter, we received 2 major orders among a few others from ONGC worth approximately INR 140 crores. Among these two, one is hiring of DPDU for gas processing. And second one is Charter hiring of 2 workover rigs for Tripura and Rajahmundry assets for the period of 3 years. The update on barge asset Prabha is that the refurbishment is now in the final stage of completion, and we expect it to contribute to revenue from next quarter onwards. There are a few opportunities available for diving support vessel, platform supply vessel and anchor handling tugs in both local and international markets, and we are evaluating the same in terms of their margins and paybacks. We [Technical Difficulty] generated out of the acquisition of Dolphin Offshore would be ROE accretive for the company as a whole and would help company emerge as a prominent one-stop solution provider for both onshore and offshore oil and gas support services. We are highly optimistic about the robust bidding pipeline, which will add further to our strong order book over the next few years. This optimism is bolstered by the promising and favorable macroeconomic scenario. With a solid foundation and strategic positioning, we are well prepared to capitalize on the opportunities presented by this favorable environment. Our confidence is further reinforced by the positive economic indicators and market trends, which suggest sustained growth and profitability. As we look ahead, we are committed to capitalize on these opportunities for maximizing the shareholder value and achieve long-term success. With this, I would now hand over to Mr. Rohan Shah, who will share financials in detail. Thank you for joining and patient listening.

Thank you, Parasbhai. Investor friends, thank you for joining the call today. Happy to share with you another stellar quarterly performance of Deep Industries. All the comparisons are on year-on-year basis, which would provide fair evaluation. Consolidated revenue from operations rose by 22% to INR 123.45 crores. The strong growth momentum in top line comes from execution of our orders as well as consistent new order flows. Tight control over costing and operational efficiencies have helped us post 26.4% growth in EBITDA to INR 61.50 crores in Q1 FY '25 with EBITDA margin of 45%. We have been maintaining margins in the range of 42% to 45%, providing us a decent cash flow to strategize our future growth trajectory. Net profit for the first quarter stood at INR 38.74 crores, up by 25% compared to corresponding period of last quarter with PAT margin of 28.8% pretty much in line with EBITDA growth. Our order book has grown to INR 1,246 crores, 12% higher than Q1 FY '24. The financial year '24 was a landmark year for us as we reported highest-ever revenue, EBITDA and net profit. Continuing with last year's performance, Q1 has built on that momentum, strengthening our base for this financial year as well. With infrastructure and exploration and production sector spending likely to get boost by new government, we expect our northward trajectory to be intact this fiscal too. With this, I now open the forum for question and answer. Thank you.

[Operator Instructions] The first question is from the line of Nirvana Laha from Badrinath Holdings.

Sir, when you said that Prabha will be operational from next quarter, you meant Q2 or Q3, sir?

So it would be from Q3, yes.

From Q3, okay. And just to understand more about Prabha, if you can tell us a little bit about like what kind of client is it going to get contracted to? And whether the contract will be for 365 days? Or will it be only for non-monsoon or for part of the year? Because one of your peers in India has recently, I think, contracted with ONGC for a similar barge. And the rates I believe there are the daily rates of $75,000 a day for about 220 days of the year. If you can give some color on this, that will be very useful.

So primarily, this asset, Prabha, would be deployed in the markets of Mexican region. So we would be planning to deploy this in those regions only. And there, they do not have breakup monsoon. So optimistically, their operating day rates are more than 320 in a year. And so the rates, what we are getting expression are in range of $50,000 a day. So this particular asset would be deployed on those regions with similar kind of day rates.

Okay. So 320 days and $50,000 a day is indicative what you are trying to deploy it for. Got it. And sir, regarding the other assets that Dolphin possesses, if you can tell us a little bit because in your presentation, you've mentioned PSV and anchor tug handling both. So is there any asset which is available which can be restored? Or are you -- when you mentioned this, are you talking about your plans to buy the tug?

So DSV and [ PSCs ] are not available as of now with Dolphin. So we are evaluating opportunities on getting some good contract, we may buy those assets.

Okay, sir, and what about anchor tug handling both?

They have tugs available, but they are in not in class condition. So we'll have to do a refurbishment in that tug as well. So we would be taking that in task based on the award of contract, yes.

Got it. Sir, last question from my side. Right now, as I understand, rates for OSV, DSV in the market are very high due to no supplies. So if you plan to buy what kind of ROCE do you think you can generate at the contracted rates? And where do you think you are exploring contracts? Is it in Indian waters or again similar to the barge, Mexican water?

We are exploring the opportunities in Indian waters as well as international. But there is a huge demand of all the vessels, the barges across the globe. So the returns would be pretty much in line to what the standards are, and we would be maintaining the ROCs to the levels that what we have indicated.

Sir, what is that? Sorry, I might have missed it. Is it the company ROCs or...

Yes. So the margins are pretty good. As you rightly say, demand and rates are quite decent as of now. And we are exploring opportunity of buying old assets as well because lead time of delivery is little less if we are buying old assets. So there, we can optimize our margins way beyond.

Sir, do you think you can do 15% ROCE by buying an asset from the secondary market and Deep prices?

Yes, maybe more.

The next question is from the line of Manan Shah from Moneybee Investment Advisors.

Congratulations for a good set of numbers. I wanted to understand in the Q1 for Dolphin, we've reported a revenue of roughly INR 8.34 crores. So what is the nature of this revenue? And is this likely to be sustained going forward?

Yes. Thank you. Yes, we have reported revenue of around INR 8-or-some crores. So this is particularly for a project, which we have taken for execution for one of the DSV which we would be executing for our client where in our scope, it is sourcing, preparing and getting that asset is in class. So with our experience of getting Prabha in class, we have taken parallel project for some small project. The revenue from which may be spread over 3 or 4 quarters. Yes.

What is the absolute value of this project?

So we are expecting total for us would be in the range of around INR 40 crores to INR 50 crores over a period of project.

Okay. And this is likely to be executed this year itself?

Yes.

Okay. So are there more opportunities of similar type available in the market, which we are exploring?

Yes. So as of now, we have kept ourselves open for evaluating all type of opportunities, which are coming in our way. So along with Prabha getting in class, we are also evaluating a similar type of opportunities.

Okay. And the order book of Deep of INR 1,246 crores, this does not include this project order in Dolphin or it includes that?

No, it is not.

Okay. Understood. On this barge, how much CapEx have we done till now? And how much are we projected to do further before we commission the same?

Yes. So we have invested around almost $11 million to $11.5 million till now. And probably it is in last leg -- few legs dollar is just pending, yes.

Okay. Understood. And you mentioned that we would be looking to acquire a secondhand equipment or vessel in terms of Dolphin, but given the demand scenario, are there any such assets that are available in the market? And if at all, they are, what sort of capital investment will that entail? And how do we plan to then fund the same?

The markets are very, very dynamic. So opportunities always comes -- they keep coming. To answer that what kind of margins and at what cost would be available, that will depend only on when the deal is put on the table. But I can be sure of that looking to the market today, whatever rate that we are going to buy, we are going to source or we are going to refurbish the equipment. We will have a very good market to deploy the same equipment into the market, which would definitely yield a very, very good numbers. So the market is very dynamic. So to come out with the absolute numbers would be difficult at this point.

The next question is from the line of Raghu from Travest Capital.

Yes. My question is regarding the drilling rig and workover rig, I think we are putting. What is the capacity utilization in this particular line of business?

So currently, we have all our assets in this business completely deployed. And that is why we have ordered few more rigs and we have the firm orders for those rigs as well. So we don't have any idle capacity in this vertical.

Okay. Just one small addition to this. What is the around the -- revenue contribution from this particular segment in our total revenue?

It is around 34% to 35% in total revenue.

Okay. And I have one last question, it is a bit long term. Excuse me, if I'm a bit naive in this. But because we are in the compression, dehydration business, what is the -- do we have any idea of going into hydrogen and that kind of business? Do we have any expertise in that? If suppose it materializes over the next 3, 4 years. Do you have any value add, which we can do in that?

Hydrogen is something that is going to be the future, and we have started working on various opportunities on hydrogen. It would be premature for us to comment on what and how we are going to shape on that. But being in this industry we are very sure that we will -- we would try to venture in this segment because this is something that is going to add a lot of value for the company as we get into the future.

The next question from the line of [ Astha ] from [indiscernible].

First I wanted to understand, is it possible for you to reveal what is the bid pipeline in terms of value that is currently that you're bidding for?

So to see about value is a little difficult because at the end of day, it's an L1-based award. So whatever we have bidded is quite, I would say, quite hefty. We'll not be able to quantify in numbers.

Okay. So -- okay, fair enough. I appreciate your point. So essentially what I am trying to understand is that your order book with the tailwinds that we have spoken about extensively. Your order book does not seem to be growing at the same speed at which the industry should be growing according to the macro commentary? Or is that an unfair statement?

So I would not agree to that to the extent because see, in our case, order book is always revolving, and it's a continuous supply of services for us. So the amount we add into order book, equally, it would be reduced by execution of those part of contracts. And so it would always be like adding to an order book with new contract and then realizing revenue out of existing running. So yes. To the extent, I would say that in our business, some of orders are having some good amount and some are in regular nature. So probably differentiation between new orders and execution would be little less appearing in recent 1 or 2 quarters, but it can any time bump up with big orders.

That's exactly what I was trying to understand, sir, is that are there upcoming big orders that we are hoping are going to close in the next quarter or 2 quarters. So that one way or the other way, we will find out whether we won those?

I'll just give you an idea about it. So last year, in middle of last year or third quarter of the last financial year, our order book was close to around INR 1,200-odd crores or something. Today, while we are speaking, we are saying that even that order book is today, as we speak, it is INR 1,246 crores. So there has been an incremental -- there has been certain amount, which we had already executed. And despite that execution, the order book stood exactly where it was last year. And today, the bidding pipeline is having a substantial number. So with those awards coming up, those numbers would definitely -- they're bound to go up. Then the bidding pipeline is also dramatically high. So the award would depend purely on how the outcome of the tender is going to happen in. And that is very clearly reflected. And if you see the last 2 years, the numbers, the same have also been reflected in the top line of the company. So that is only because of the fact that the order book is increasing. It is in the increasing mode, and that is how the numbers are increasing.

Absolutely makes sense. I was just wondering whether we are expecting a lot of big orders to close and be awarded over the next quarter or 2 quarters? Or is it still a few quarters away?

Yes, that is -- we are clearly expecting some awards to get awarded in 1 to 2 quarters. So that would increase the order book going forward. And in this, again, sorry, let me complete. And we have not taken any order book coming in from Dolphin. So this is stand-alone, we are talking of Deep Industries. So if you are trying to add anything coming in with the Dolphin and all those things, they would be definitely very, very high.

Right, sir. Can I follow up?

Sorry?

Yes. Can I have a follow-up in Dolphin. We are basically talking about that barge, right, Vikrant, Prabha barge, that's what we're talking about in Dolphin or is there anything else also?

For now that and the one that won't explain about the order that we are executing for our clients. So for now, we have those 2 things, and we have other equipment and assets also but we are trying to evaluate and trying to get them refurbished so that they can also add to the revenue stream.

Got it. But I'm assuming these other assets that we are evaluating, that is some time away. That's not already...

That is right.

Got it. So last question I had was that one of the ideas for -- especially for the gas, the gas business -- the gas processing business, was that not only are the new orders being more prone to outsourcing, but existing operations could also be outsourced because people are just tired of managing the business themselves. Are we seeing that in actuality? Are some of the bids that we're bidding from the business that we're winning, is it coming from captive processes now being outsourced?

Yes, yes, we got awarded some tender only last quarter. I think it was in this quarter or last quarter, I'm not very sure about it. So we got a gas processing, gas compression facility, which our client had and they outsource the facility for smooth operation and maintenance, and that was also the one of the contracts that we got awarded. So likewise, we are assured that this concept is now getting very popular. And going forward, those would also be adding to our stream of business.

The next question is from the line of [ Gaurav Sachdeva ] From Sajag Fund House.

Sir, there was news from your side regarding the interest and the acquisition of some Kandla Energy and Chemicals. Could you throw some light on this?

Yes. So this particular company was involved in manufacturing of chemicals, where we are seeing synergy for manufacturing some chemicals, which are used in drilling of wells. And since it was under liquidation, it was available at a very cheap price. So we decided to get that company.

So what kind of investments we are doing in it?

Currently, it's a very small investment of around INR 2 crores. INR 2 crores is the current investment, yes.

Okay. And sir, what was the total acquisition cost for the Dolphin Offshore? Could you please, tell?

The resolution plan value was INR 27 crores.

Okay. And sir, what is the current total cash available on books and investments as on date for the Deep Industries?

It would be more than INR 150 crores.

This is cash?

Cash and liquid investments.

The next question is from the line of [ Harsh T ] from Kubera Investments.

Congratulations on a very good set of numbers. I have a question. You mentioned that Prabha is undergoing refurbishment at this point of time. But do we have a contract in hand for Prabha?

Yes, we already are in advanced talks with a few clients, and we are deliberately not closing the -- because we are trying -- since it is under refurbishment, we are of the view that we have a good amount of time to explore and get the better rates. So contracts and expressions are already available with us. We are just looking for the opportunity, and we are going to time the -- we are going to time it in such a way that on one hand, we have equipment ready and on the other hand, we have an order to be executed ready for signing.

Understood. Fair enough. Could you also talk a little bit about what is the deal pipeline for our gas compression business, given that there are multiple pipelines that will be commissioned in the current year across the country?

So our gas compression services are not only used in those pipelines, but they are being used in various different applications as well. So overall, gas compression bidding pipeline is quite good, and we expect good conversion out of it.

Okay. Fair enough. Can you talk a little bit about the planned CapEx that we have for the current year?

So current year, we have planned around INR 150 crores for CapEx, of which currently, we are already in process of doing CapEx of around INR 100 crores. We are buying 3 new rigs against firm order.

And this is only for -- this would not include anything that might come for Dolphin against some of the tugs which you mentioned don't necessarily have an order against them at this point of time?

No, this is for Deep, yes.

This is for Deep only. Okay. Got it. And going forward, would we report the Dolphin order book separately? Or would it be consolidated in the Deep order book as well?

Yes. Going forward, we can report separately for Dolphin and will include also in consolidated order book as well.

Okay. And my final question is that how many assets apart from the barge do we have in Dolphin and what is the different kinds of assets? You mentioned tugs as one. If you could throw light on what else do we have there?

We have [ SBS ] as well, which is diving support system. So in addition to talk, we have SBS as well. Those assets are also not in working conditions. So we will have to get them in class.

The next question is from the line of Bhuvan MG from Tiger Assets.

Congratulations. I'd like to know how much time will it take to execute your present order book?

Can you say a little louder. I think it's -- voice is a little low.

How much time will it take to execute your present order book?

Sorry, your question is not heard properly. Can you please repeat?

How much time will it take to execute your present order book?

Yes. So the existing order book can be executed over a period of 2.5 to 3 years.

Okay. And if I see past 5 quarters, your margins have been quite volatile. Can you throw some color on that?

In our business, margins are more or less in the range of 40% to 45% in range. Since we are dealing with mechanical equipment, sometimes it happens that some repair maintenance job can have some higher expenses. So it would be in a range of that, and I believe it should continue to be improving only.

Okay. So on an average, can we expect 40% to 45% margins?

EBITDA margin?

Yes.

Yes.

The next question is from the line of [ Anand Shenoy ] from [ AS Capital. ]

Firstly on the Dolphin side, you mentioned we have got INR 40 crore, INR 50 crore order book for the DSV. Is it executable -- completely executable this year only?

Yes. So we are expecting to execute this by March of this financial year.

Okay. And along with the barge, along with the INR 40 crores, INR 50 crores, like what kind of sales do we expect in Dolphin and EBITDA margin there?

So there, along with this project and barge, we are expecting somewhere around INR 70 crores to INR 80 crores to be put in on board with margins of more than 50% EBITDA.

And what is the visibility for next year. Next year, we will have the barge available with us for the full year, right? How does it happen? Like do we expect further refurbishment of the tugs and all to add to the revenue on the Dolphin side?

Yes, yes. So we believe that on a full year basis, a single barge can earn revenue of INR 90 crores to INR 100 crores. So next year INR 90 crores to INR 100 crores from barge and further revenue from other projects, which we are evaluating.

Okay. That is great. And second question is on the subsidiaries that we have. One is RAAS that we manufacture booster compressor packages. Can you tell about how much sales we did in Q1 and like what is the outlook there?

So in manufacturing of booster compressor, the demand is not coming up as per our anticipation. And so there, we are going slow.

Okay. So this year, like what is the order book outlook? And what kind of sales we will do in the RAAS side?

RAAS we would be doing around INR 18 crores to INR 20 crores this year. That is what our expectation is.

Okay. And on the other JV that we had with Euro Gas, you had told that you were like bidding for some contracts. Can you talk about that?

So yes, it is still under evaluation. That contract is not yet awarded.

Okay. And in the stand-alone base now that we have done around INR 112 crores, like this year, given that we have one further contract, what kind of sales you will do at the stand-alone level?

Yes. So we are expecting growth of almost more than 20% to 25% year-on-year even on stand-alone basis.

The next question from the line of [ Avinash ] who is an individual Investor.

Yes. Paras-ji and Rohan bhai, excellent numbers. In fact, most of the questions have been answered, but I've got just one question. Normally, when we have a contract signed for the OSV that is for the Dolphin business. How long are these contracts typically Paras-ji? Is it a year or 2? Or is it like on a 6-monthly or 12-monthly basis? How are the contract periods designed?

So these contracts are very dynamic. They could -- so the lesser the contract, you have a higher visibility of getting higher the margins. So we keep this position flexible keeping the market conditions in mind. So if we find that we now need to get into a long-term contract, normally, these contracts ranges for about 2 to 3 years. And -- but that depends. Today, the market the way they are, the shorter the contract, definitely better the margin. So that is something that we keep it flexible for the markets to determinate at appropriate time.

Okay. Next question, Rohan bhai, to you is we have seen a very large other income in the Quarter 1, that is almost INR 10.84 crores. So can you give us a breakup, what is this other income consisting of?

So this income primarily consists of interest and the returns from liquid funds. Exact breakup, I am not having as of now. I can share you separately, yes.

Yes. But typically, I mean, can we expect that this momentum of INR 10 crores, this is like a onetime accrual, which we have accounted. So for the full year, what we earned last year, can we assume that a similar other income will come? Or we are looking at a slightly higher other income as far as the year FY '25 is concerned. That's what I just wanted to know on a very rough cut basis?

Yes. So see, other income and interest in all is all depending on your available liquidity invested. So more or less, it would be in line with what last year we had recorded.

And just one last question, Rohan, on the financial part. We were seeing interest cost has jumped quite significantly, INR 2.5 crores from INR 1.63 crores. Now company having INR 100 crores cash on the books, typically one would have assumed that some sort of better cash management is done now because after all, money saved is money earned. So any specific reason why the interest cost has gone up almost significantly for this quarter?

See, the reason why this interest cost has gone up because the fact that we got some debt. But to answer your question about the cash management and effectiveness of that, we are trying to staying on the more of the liquid position for the fact that we feel that there would be enormous opportunities for acquisition. As we got an opportunity to buy Dolphin, we got an opportunity to buy Kandla Energy. And going forward, there could be a number of opportunities coming in our way. So we are being cautious to make sure that when these opportunities come, we would be having enough cash with us to acquire those companies. And that is the reason we are trying to manage liquidity in a way for the acquisition of better assets at an appropriate time.

Next question is from the line of Nirvana Laha from Badrinath Holdings.

So if I look at the receivables from Dolphin, in your -- in the Deep Industries' annual report INR 142 crore has moved from greater than 3 years to not due. So can you tell us, has there been a renegotiation? When are they due? And who is the counterparty here?

For Dolphin, there are several customers, including domestic and international of which we are in constant discussion with about recovery of those dues. So in 1 or 2 cases, we have got success also, and we would be recovering some good amount out of those old dues in current and next quarter.

Okay, sir. But are we looking at any potential write-offs there? And why are they should be [indiscernible] not due? Like is there a new date that has been agreed with them?

So these are old receivables, which on acquisition, wherever we felt that we can recover those receivables, we had kept them as outstanding. And those we felt that it would not be recoverable. We had written-off on first year of acquisition itself. So from current outstanding in current financial year, we are not looking for any write-off as of now.

Okay. And what is the INR 142 crore number right now?

So exact number, I'll have to check. I am not having it. We'll get back to you on that.

Sure. And questions on Prabha. So you said to the earlier participant that in the full year, you can do INR 90 crores to INR 100 crores. So the rate that you discussed with me $50,000 and 300-plus days of deployment. That should be higher, right? Revenue should be closer to INR 130 crores, INR 140 crores?

Yes. So you will have to always be conservative while competing in any top line.

Sure, sir. And regarding Prabha, you spent around, say, $11 million to $13 million, $14 million by the time it's fully refurbished. So how was the debt? Was this completely from the capital need? Or did we take on any debt further?

Yes. So we have taken some debt and balance we have contributed from internal accruals.

Okay. So for depreciation and interest right now in Dolphin, it's almost 0. We don't see any figures. So now the debt has been taken...

That is because currently, it is under capital work in progress. So once it is put to use, those expenses will start appearing.

Sure. So can you guide us a little bit what kind of yearly depreciation, what kind of yearly interest will we gain on Dolphin?

Numbers, sorry, I'm not having those numbers. We can have a separate call on this.

Sure. Okay. I will write to you. Just trying to understand like if INR 100 crore top line, you say 50%, 55% EBITDA, INR 55 crores EBITDA, so what kind of PAT can it look like? That's what I was trying to understand.

Yes. So I'll ask Adfactors to arrange a separate follow-up for this.

The next question is from the line of Alisha Mahawla from Envision Capital.

Just 1 question with regard to...

Can you speak a little more louder.

Just 1 question with respect to Prabha. This was earlier expected to commercialize, start generating revenue in Q4 or H2 of last year. And obviously it will be Q3 of this year. So one, what is the reason for the delay? And I believe at that time, you were saying that the refurbishment would cost about INR 30 crores, INR 35 crores and the number that you're seeing right now is sounding slightly higher. So have there been cost overrun, just some clarification will be useful.

Yes. So since that asset was idle for more than 3 years, the expected refurbishment cost has increased because our initial estimate was a little lower as you rightly said. So we had to do entire bottom overhauling, which was not envisaged before. And so refurbishment cost has increased and so the time.

Okay. But now we're confident that by Q3 we should start leasing of the asset?

Yes.

Sure. And we were also mentioning a few calls earlier, that Dolphin has some real estate assets that we were looking at selling. What is the update on that?

Yes. So we have already sold their one of office in Nariman Point and one of the warehouse in Mahape. So that we have already sold. And one of another warehouse is we are looking for some opportunity to sell that as well. So we would be going asset-light only in initial period, yes.

So have we [indiscernible] one office that we sold and one warehouse that we sold, what were the cost for it and what has been -- at what price have we managed to liquid this asset?

I think these 2 assets were sold in last financial year itself both put together we had realized around INR 10 crores.

The next question is from the line of Pradeep Rawat from Yogya Capital.

So I have some basic questions. So what would be the segment-wise revenue for our company?

For us, all services are part of oil and gas support services. So we generally do not separate those services in 2 segments. But if we'll talk about major 2 verticals of, let's say, gas compression and rig services, out of this, almost, I would say, 45% types was coming from gas processing and almost 34% to 35% is coming from rigs business.

Yes. Okay. And what would be the peak revenue potential from our current assets?

The peak revenue potential is something that whatever my existing order book is there in hand. So it will have to multiply like INR 1,240 crores of order to be realized over a period of 2.5 years. You'll have to just do a simple math by dividing it by 2.5.

Yes. So our assets are fully occupied right now, right?

Yes. Our rigs are 100% occupied. Our gas processing equipment are more than 85% occupied.

Okay. And my other question is regarding Dolphin Offshore. So what is the refurbishment and other expenses in this acquisition to make them operational?

I think I have already answered this question. But again, it would be in the range of $11.5 million to $12.5 million refurbishment costs. And acquisition was around INR 27 crores.

And do we expect more expenses in this particular segment?

Not for refurbishment of the asset, which we are currently refurbishing. Yes, of course, once we will get into acquisition of some other assets and getting them ready, there might be some other expenses but that depends on acquisition and getting contracts.

And how much of revenue can we generate from Dolphin Offshore?

This year, we are expecting to put somewhere around INR 70 crores to INR 80 crores. And next year onwards, it would be quite big.

It would be somewhere around like INR 100 crores, INR 120 crores?

100-plus, yes.

And we have an ROCE of something around 8% to 10%. So what is our long-term target for this particular metric? And why are we trending so much lower in ROCE?

So for us, ROCE you need to calculate a little differently because there are 2, 3 reasons. One, there is 1 item of goodwill appearing in my balance sheet, which is noncash, so ideally that should be excluded. And second, since we are in continuous growth phase, my CapEx is always going on. So the assets or the money or capital I'm employing is not necessarily be earning immediately. So it has a lead time of almost 6 months. So CWIP assets needs to be excluded. I think then it would be correct ROCE. And going forward, we would be looking to improve the current ROCE as well.

What should be the target for ROCE when we are doing new acquisitions or something like that?

Around 14% to 16%.

The next question is from the line of Manan Shah from Moneybee Investment.

My question have already been answered.

The next question will be from the line of [ Srikar Sai ] who is an individual investor.

Sir, it's regarding Kandla Energy and Chemicals. So if I look at their filings with the NCLT, we can see that they have said that the plant has been shut down in 2013, 2014 if I am not wrong. And by 2019, the consortium of banks have sold most of their assets like the property, plant, the equipment within the plant. And also from 2019, they said that almost most of the movable and immovables have been sold off. So -- and also, if we look at the order recently like in 2024 from the NCLT, the liquidation costs are also even the fair value cost is around INR 1.6 crores to INR 1.3 crores. So what is it that we are actually looking for, sir? Like the asset wise, if there's no plant or if there's no factory at all. So what are we actually like looking to acquire in this particular company, sir?

No, I agree with you. But still, they are owning one office in Ahmedabad and one land in Kutch, which is very much idle land for setting up factory. So a few assets are still left and since the value was not that much. And the manufacturing, which they used to be in can be helpful in our synergy of drilling. So we decided to go for it.

So we are going to set up a new plant over there sir?

So as of now, we are just evaluating various opportunities, what we can do out of that particular land and their original capacity of manufacturing those chemicals. So as of now, it is a little early to say what exactly we'll be going to do. .

Okay. Sir, the next question is regarding Dolphin Shipping, sir. So is it -- I mean, if I'm not wrong, it's an associate or a sister company of Dolphin Offshore Enterprises, no, sir? So is there any other assets within this Dolphin Shipping, which after the acquisition, if you come and add to the Dolphin Enterprises consolidated figure, sir?

Yes. So they also have one office in Mumbai and one or two tugs are also there with some receivables are also there.

Okay, sir. Sir, the next question is regarding the Euro Gas like JV, sir. So what about the order like companies...

The order which -- the bid which we have submitted is not yet out -- not yet came for award or something. So it is still under evaluation.

The next question is from the line of Alisha Mahawla from Envision Capital.

Just a clarification. You said that we're looking at buying 3 new rigs during the year, which is against firm orders. When are we looking at commercializing these rigs?

In the next 4, 6 months.

Sorry?

In next 4 to 6 months.

In 4 to 6 months.

The next question is from the line of [ MN Kumar ] who is an individual investor.

Do you have any plan to write down the goodwill that is there on the books, sir?

Yes. So we are evaluating the options. See, as per Ind AS, you will have to go for impairment testing of goodwill at every year based on that impairment testing report, you can take decision on that particular goodwill. So as of now, we are checking options whether and what we can do with that.

So the top line growth is good. Margin seems to be very good. But ROE and ROCE numbers are -- do not give a very good impression about the company. While you do a fantastic job of acquiring the Dolphin and turning around and making a very good asset. So and there is a cash on the books. So the ROCE numbers does not reflect the status of the business. So I think if you can do something about it, it would make the whole business and book segment look very good. Sir, please do something on that.

I appreciate. And I also believe that, yes, what you are seeing is right to the extent. We are working on it, what can be done, yes. Thank you.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Rohan Shah for closing comments.

Thank you, everyone, for joining this call today. I hope we have answered all your queries. And if you still have any doubts or further questions, you can approach us through Adfactors. We would be happy to answer your questions. Thank you.

On behalf of Deep Industries Limited, that concludes this conference. For any questions, you can connect with Adfactors IR, PR team. Thank you for joining us, and you may now disconnect your lines.