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

Ladies and gentlemen, good afternoon, and welcome to the Jindal Drilling & Industries Limited Q3 FY '26 Earnings Conference Call hosted by Antique Stock Broking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Varatharajan Sivasankaran from Antique Stock Broking Limited. Thank you, and over to you, sir.

Thank you, Swapnali. Good afternoon to everyone. It's my pleasure to welcome all the participants and the management of Jindal Drilling to this results conference call. We have with us Mr. Raghav Jindal, Managing Director; and Mr. Kaushal Bengani, Deputy GM, Investor Relations and Finance. I'd like to hand over the call to Mr. [ Raghav Jindal ] for the initial comments. The floor is yours, sir.

Good afternoon, shareholders. Thank you for joining our earnings call. The results in the third quarter of FY '26 on an operational level were broadly in line with what we had communicated earlier. And there has been no major change in the performance on a quarter-to-quarter basis. The key variation which has happened in the second and third quarters is on account of other income. In the previous call, we had highlighted that there was an old litigation with ONGC, which had favorably concluded and we had made a gain of around INR 100 crores on the original receivable of INR 66 crores. This gain was on account of interest and ForEx and was suitably accounted in the other income line item. However, since that point in time, the favorable award of the Bombay High Court was appealed in the Supreme Court and the matter has again become subjudice. Due to this development, our auditors and Board were of the view that till this matter is concluded in finality, we should reverse the income, which has already been booked in the earlier quarter. And therefore, the other income line item is negative in the third quarter. I would like to stress that there has been no change in the operational performance of the company, but the bottom line looks to be much affected only on account of the other income and no other line item. I think that is the key development which shareholders would want clarity on. And therefore, I would request Mr. Varatharajan to open for questions.

[Operator Instructions] We have the first question from the line of Siddharth Chauhan from Batlivala & Karani Securities.

I have 2 questions. The first is that you have 3 rigs whose contracts will be ending in FY '27. So what is the expected dry dock expense for FY '27?

The expenditure for refurbishment is not booked when it is incurred, but it is amortized over the duration of the contract. Normally, depending on the condition of the rig, the expenditure can be between INR 50 crores to INR 100 crores.

Per rig?

Per rig.

Understood. And the second question was that even GE Shipping's 2 rigs are due for repricing in FY '27. So just wanted to understand in this scenario, will there again be a squeeze in rig rates? Or do you see ample demand, let's say, from ONGC in the fields? How do you see the environment panning out?

So ONGC should be taking out a couple of tenders. We are concluding one today, and they are expected to come out with another tender very soon for 4 rigs. They have been in shortfall of rigs in the past, but hopefully, in the coming times, they should build up on their rig count. So we don't see any major challenge coming up.

Understood. And just a follow-up, any developments in the Andaman basin? Are you seeing more tenders which they would want for the Andaman side of things? Or do you not see the demand as of now today?

Not for the current year. At least [indiscernible]

[Operator Instructions] We have the next question from the line of Saket Kapoor from Kapoor Co.

Sir, firstly, Jindal sir, if you could just give us the global landscape in terms of the rig counts and with the current uptrend that we have seen in the crude oil prices as well as the natural gas pricing, how -- what would be its implication in the short-term and going ahead, the type of geopolitical scenario, what should be its impact on the rig rates, your expectations and the global landscape?

Rig rates really got a hit when Saudi Aramco had terminated a few contracts. Now it has resumed those contracts back and most of them are back into drilling in Saudi Aramco, which is a very, very positive global trend, I would say. The prices are still in excess of 100,000 globally. But the rates in India were affected due to competition in the last tender. Hopefully, in the coming tenders, we should be aiming at a higher level because obviously, those rates were something which were not feasible. And globally, the demand of rigs are also going up since Saudi Aramco has taken back its rigs. And the rigs suited to the Indian market are very less. So we don't see much international competition entering the market for ONGC.

Okay. And sir, currently, as the earlier participant also mentioned about the dry dock rigs of your competitor, GE Shipping also now available for the current tender process. So what is -- in the bid for how much -- how many rigs have ONGC bid requirement is and the availability in the Indian waters?

So currently, they have come out with a 4 rigs tender, out of which we are getting Jindal Pioneer back into India, and we will be bidding that. That's happening today. And in the coming few weeks or months, we expect a few more tenders coming out from ONGC, where we will bid the other rigs that will be dehiring this year. I can't really talk about the competition as to what they will be doing. But our aim is to get the rigs as and when they get dehired and get a contract for them.

When we look in your presentation, Kaushal ji, you have mentioned order book for Q4. So this is what the trajectory -- revenue trajectory is likely to be. That is what is being alluded by mentioning order book for Q4 of [ 237, ] I think.

Yes.

Okay. And a small point, sir, in the presentation also, we have alluded to the fact of rented and owned rigs by the company. And in your earlier conversation also, you people have expressed your views about getting more rigs, more assets into -- directly into the company, thereby improving the profitability. So in that aspect, where are we, sir, in terms of adding more rigs, which are still rented or are owned by your group companies? Because it was earlier also mentioned that a thought process was given to buy out or to get some arrangement with -- for the rigs with MSL also, Maharashtra Seamless. So are we again in the process since now the demand and the dynamics have also changed and we have cash on books also? What should we expect, sir, going ahead?

There is no update on that, and we have not received any communication from Maharashtra Seamless.

[Operator Instructions] We have the next question from the line of Apurva, an individual investor.

Sir, I just want to know the rig rates, what all factors does it depends on? I think it is, one would be the crude oil and the rest you can tell us.

So crude oil is one factor which is there. Crew rates, the drilling costs, everything is increasing by the day. So all that really matters and more so matters what the competition is and what the worldwide scenario is. Like I said, with Aramco taking back its rigs and not expecting too much of international competition into the Indian tenders, we should be able to increase rates gradually, not substantially because obviously, ONGC will not be ready for a big jump. So hopefully, in the coming few tenders, step by step, we should be able to increase the rates like how it's seen in the future -- in the past.

Sure. Also, sir, for the FY '28 and '29, still we have to go for the tenders, right? So like by how much time before will be tenders? Like is it by FY '27 and we would be going for the FY 2029 tenders or maybe in next...

We -- ONGC has a schedule wherein it requires a minimum of 3 months before the rigs. If a rig is getting dehired in the next 3 months, we can bid for it. And so there are different calculations for that. So we will aim to bid the rigs as and when the tender comes out for ONGC and hopefully secure its position. After a rig gets dehired, it takes about 3 to 4 months for refurbishment as well. So we have to take everything into consideration before we bid those rigs.

Got it. And also, sir, one last question. So I was [ following ] some other companies as well, there is something called tonnage tax where the government pushes the company to pay tax less and reserve that money to acquire more vessels. It's generally in the shipping sector. So just wanted to know like is there something in this industry as well.

We pay tonnage tax as well, but it is a very nominal amount. It is maybe less than few lakh rupees. It is not a significant thing per rig.

[Operator Instructions] We have the next question from the line of Amit Agicha from H.G. Hawa & Company.

Sir, my question is related to the industrial cycle view. Like where do we stand in the offshore drilling cycle like early, mid or peak? And like how should investors think about cycle length and sustainability this time versus the previous cycle?

No one can predict oil cycles. So it will not be appropriate for us to comment. We are a strong company. We are debt free. We have cash on the books. We have rigs available with us. All of our rigs are deployed, and we are working on getting rigs redeployed as and when they get dehired. We do not think in terms of oil cycles because then it leads to speculative ideas, which we do not want to engage in.