Jindal Drilling & Industries Limited (JINDRILL.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Jindal Drilling discuss Q2 FY '26 Results Conference Call hosted by Antique Stockbroking Limited. [Operator Instructions] Please note, this conference is being recorded. I now hand the conference over to Mr. Varatharajan. Thank you, and over to you, sir.

Thanks, Mark. A very good afternoon, everyone. I would like to extend a very warm welcome to all the participants as well as the management of Jindal Drilling. We have with us Mr. Raghav Jindal, Managing Director; and Mr. Kaushal Bengani, Deputy General Manager, Investor Relations and Finance. I'd like to hand over the call to Mr. Kaushal Bengani and Mr. Raghav Jindal for their initial remarks. The floor is yours, sir.

Thank you, Mr. Varatharajan. Good afternoon, shareholders, and thank you for joining our earnings call. We have had another good quarter as was expected. Total revenue increased sharply in Q2 FY '26 on account of favorable outcome of a very old litigation. Operating revenue and EBITDA were broadly constant with previous quarter, the slight dip, which is visible was on account of dehire of 2 rigs, Jindal Explorer and Jindal Pioneer and impact of foreign exchange fluctuation. Jindal Explorer is currently in its final stages of post refurbishment approval and will be redeployed in another 1 week to 10 days. Jindal Pioneer has also commenced its refurbishment exercise, which is expected to conclude in the fourth quarter of this financial year. I will now briefly summarize key financial indicators. On comparison of Q2 FY '26 with previous quarter Q1 FY '26, total revenue increased by 32%; however, EBITDA decreased by 13% from INR 107 crores to INR 93 crores. PAT increased by 116% from INR 56 to INR 121 crores and EPS in the second quarter of FY '26 was INR 42. The sharp increase in profitability was on account of income from the favorable outcome of a very old litigation. I would now like to take you through our earnings presentation. The first slide talks about the company. We remain a leading offshore drilling services contractor in India's oil and gas sector. We have more than 35 years of experience in the sector of offshore drilling and are supported by an efficient and experienced operational and management team who ensure that our efficiency is not compromised, and we achieve highest levels of safety. We've been supporting ONGC for the past 30, 32 years in their drilling programs and have always explored opportunities with them. Apart from 5 offshore jack-up rigs that are on contract with ONGC, we also provide mud logging and directional drilling services to the oil and gas sector. Slides 5 and 6 of the earnings presentation detail the order book rig-wise and year-wise, and the amortization of the said order book is also mentioned. This will give interested shareholders an idea of how the revenue of the company will shape up going forward. I've already spoken about the financial highlights, which are detailed in the next 4 slides. Slide 11 refers to the net cash position of the company, which has improved rapidly to INR 295 crores from the net cash position of INR 111 crores in March 2025. It is important to note that the net cash position continues to improve despite the recent acquisition of Jindal Pioneer and is a leading indicator of the strong cash flows that we will earn. That concludes the presentation, and I would now request Mr. Varatharajan to kindly open for questions.

[Operator Instructions] The first question is from the line of Raman K.V. from Sequent Investments.

Sir, my first question is with respect to Jindal Drill -- Jindal Explorer, if I'm looking at your presentation -- when I'm looking at your presentation, I'm seeing its operating cost -- operating day rate is comparatively lower to Jindal Supreme and Virtue-I. So when can we expect its operating day rate to increase to $80,000 per...

Yes, we've heard your question, sir. Jindal Explorer has been recontracted at $35,606 per day, and the new contract is from November 2025 onwards. This is the period that will be in place for the next 3 years.

Okay. So can we expect the contract to be renegotiated? Or this is the fixed contract?

This is a fixed contract.

Okay. And what about the new Jindal Pioneer, which is going to -- as you mentioned, which is expected to be commissioned by the end of Q4?

Raghav sir?

Yes. So we have a contract, which ONGC has floated for -- the due date is December first week and we expect to bid in that contract and, hopefully, save the contract.

Hopefully? Sorry, I didn't get the last part of it.

I mean, we will be bidding for that contract and, hopefully, get it. Obviously, we will aim at higher prices because the Explorer rates are very low, which we had to match the competition that time.

Yes. I think the industry at -- currently at the industry level, if my estimate is right, operating day rate is around $80,000. And we see that Jindal Star and Explorer are very -- and even the Discovery-I is expected -- is very low in terms of this than the medium. So with -- at least with respect to Discovery-I, which is near to the expiry, can we expect a renegotiation at a much higher rate?

I mean, rates will all depend upon the contracts that we get. These are all fixed rate contracts, you have the duration of the contracts. We will only be able to comment once we get a contract.

The next question is from the line of Faisal Zubair Hawa from H. G. Hawa & Company.

Sir, given that now all the rigs are owned by us only. So what would be the cost at which they could be hypothetically sold as second hand rigs? And what is the cost of these rigs in our balance sheet as on date?

Sir, the rigs were acquired at different rates at different points in time. So rig, Discovery-I, was acquired in March 2019 for $75 million. Rig, Jindal Supreme, was acquired for, I think, approximately $17 million in November 2021. And Rig Jindal Pioneer was again acquired for $75 million in March of 2025. That is the rate at which they were acquired. And then depreciation is charged on these rigs as per the guidelines of the Companies Act, in which rigs are depreciated over a remaining period of useful life. So since Discovery was around 11 years old when it was acquired, so it was depreciated over a balance period of 19 years and similar mechanisms were followed for the other 2 rigs as well. And if you refer to the gross block in our balance sheet, then you will realize the total value of these 3 rigs in our balance sheet.

And what would be the approximate cost if they would be sold -- approximate selling price if you were to sell these rigs? Actually, I'm trying to gauge the NAV of the company as actual and NAV of the company in the balance sheet?

Sir, the most recent transaction that is available in public domain is the transaction that we have done, which is that of Jindal Pioneer. And we have acquired that rig for $75 million. The rig, Jindal Pioneer, is similar to the specifications of Discovery-I. So I think rigs, which were manufactured after 2007, 2008 period, most of them have similar specifications. Therefore, current valuation...

So we have 3 rigs...

Yes, we have 3 rigs, sir.

Okay. So what you're saying, you should assume that $75 million x 3 would be NAV?

Sir, not for Jindal Supreme because that is an old rig, so maybe a lower valuation for Jindal Supreme. But again, these are not numbers which have been verified anywhere. It is just a general discussion, which we are having.

Okay. Okay. I appreciate that, yes.

And sir, I would request Mr. Raghav, our Managing Director, sir, to also give insights on this because he is in touch with a lot of industry players.

I would appreciate that, too.

So no, in general, I would say the rig market is -- there are no new rigs being built in the world. And obviously, the old rigs are getting dated and getting shelved out. So the value of the current rigs that we have should increase with increased production over the world. And if the demand is more than the supply is limited; hence, we expect the rigs to have more demand in the future. Prices remain as what we are talking about in mid-70s to the 90s depending upon, again, the supply and demand.

[Operator Instructions] The next question is from the line of Dinesh Kulkarni from Finsight Ventures.

Sir, good set of numbers. My question is slightly on the macro front. Right now, we know a lot of discussion is happening around dedollarization and it's very likely that the value of whatever is not going well with U.S.A. will impact the value of dollar. Any -- I just want to understand since all these prices are in dollar price, right? So say, if there is a drastic devaluation of the dollar, will that impact our revenue or the financials in any way? If you could explain something like on that?

The value of the dollar -- our income is all in dollars, so we hedged the dollars as well. So for us, gaining in dollars is a good thing since we are -- it's depreciating towards the rupee.

So you're saying depreciation of dollar is helpful, rather? Sorry, I didn't get it, sir. Can you...

I mean, most of our -- all our income is also in dollars.

Yes, that's the question, right? Say, if income is in dollars and the dollar devalued significantly, say from, say, INR 90 to INR 70 or INR 75, just assume. So how that will impact the financials?

So part of it is already hedged. And otherwise...

Okay. By what percentage?

Percentage is not so relevant here. The question, which I think you're asking is whether the impact of ForEx fluctuation is negative or positive to the company. So if dollar appreciates, then it is negative for the company in rupee terms, but a lot of our rigs, 3 of our rigs are rented. Therefore, the rental is also in dollars. So there is a natural hedge and generally rupee has depreciated. So sorry, I'll correct myself, if dollar appreciates and rupee depreciates, then it is positive for the company and vice versa in the shorter term, but over a longer duration, it is beneficial for the company.

Okay. Okay. So my question was exactly opposite, sir. Say, in the longer term, assume the dollar devalues from the current level with respect to rupee, how that will impact the financials? In terms of percentages or in terms of revenue or both, income as well as expenses? That is my question.

We don't have that sensitivity analysis with us right now. If you can email us, we will get back to you.

Surely, I will get back to it. Okay. My second question was, sir, as -- and I mean it's really good that you have won that court cases against ONGC. And I think it's approximately INR 100 crores or something we're expecting. So has the cash flown in the company's balance sheet? Or it is just approved by the court and like what is the outcome there or status there?

Sir, we cannot hear you very well. Your line is not clear. I will request you to please disconnect and rejoin again because we're not able to understand what you're saying.

Okay. Okay. I'll join back.

The next question is from the line of Manikanth from Investment Wealth.

Okay. Sir, one thing, I joined late. Maybe these questions might have been covered internally, but if I'm repeating, please let me know. This time, we have received INR 100 crores arbitration award from ONGC. So the net profit was seen high because of that. But if not, our net profit for this quarter is INR 33 crores. Is that correct?

Yes. The award that we have received was on account of a favorable high court decision. That was a receivable from ONGC denominated in U.S. dollars, which was at INR 66 crores in our books. Over the period of past 14, 15 years, that INR 66 crores became INR 166 crores. So the outcome of that was, when we won the case, then INR 66 crores was booked as the receivable and the additional INR 100 crores on account of ForEx fluctuation and interest was booked as other income. We have mentioned that in the note.

Yes. So that means if we -- because this is a onetime payment even if we ignore that...

It is one time.

Yes. So because it's a onetime, if we don't consider that, our net profit for this quarter is INR 33 crores. Am I correct? Is my understanding correct?

You'll have to adjust for tax.

Okay. Maybe yes, that adjustment is needed. But one thing that we see is like the declining of operating margins compared to last quarter. So last quarter, it is around somewhere around 42%, and this time, it is 39%. So coming to the next quarters, what do we expect the operating margins? Any stabilization in margins or do we expect...

We expect operating margins to be in the range of 35%. We have given that guidance earlier, and the reason for the slight decline in operating margins was twofold in the current quarter. The first was that one of our rigs, Jindal Explorer, it was not deployed for the entire quarter. And the second reason was that there was some effect of ForEx fluctuation, which was booked in other expenses. Hence, the slight decline in EBITDA is visible.

Okay. And coming to the Jindal Pioneer. So currently, which is under refurbishment in UAE. So I didn't recollect like what exactly the time frame it is going to deployed? And do you see any interest in -- from any of the parties for deployment?

Could you please repeat the question?