Deep Industries Limited Q2 FY ’24 Earnings Conference Call, the company provided detailed insights into its financial and operational performance. Here’s a comprehensive summary of the call:

Introduction:

• The conference call was hosted by S-Ancial Technologies Private Limited and featured Mr. Paras Savla, Chairman and Managing Director, and Mr. Rohan Shah, Director of Finance and Group CFO of Deep Industries Limited.
• The call began with a reminder that participant lines were in listen-only mode, followed by an opportunity for questions.

Key Highlights:

Order Book and Revenue Growth:

• The company explained that there is a lag of about six months between order book growth and realizing revenue.
• The order book stood at INR 1,195 crores, reflecting a 47% year-on-year increase.
• Deep Industries was confident about exceeding INR 500 crores for FY ’25, driven by the order book and Dolphin Offshore revenue.
• They anticipated revenue growth in Q3 and Q4, expecting to achieve their growth targets.

Funding and Capital:

• Deep Industries reassured that they were financially well-equipped to handle the expected growth in the business. They had minimal debt and were net debt-free.

Dolphin Offshore:

• The company discussed their plans for Dolphin Offshore, including refurbishing a barge and shifting its jurisdiction for potential tax benefits.
• Revenue from Dolphin Offshore was expected to commence in Q4, with strong margins in the range of 60-70%.

Capex Plans:

• Deep Industries had capex plans for acquiring drilling rigs and gas processing packages.

Joint Ventures:

• They discussed two joint ventures, with the first JV failing to qualify for a specific drilling rig requirement.
• The second JV with Euro Gas was still under evaluation, and they expected results in the coming months.

RAAS Segment:

• Deep Industries reported that the order book for RAAS was around INR 50 crores.
• Execution had faced delays due to customers seeking extensions for their projects, but demand was expected to pick up in FY ’25.

Order Inflows:

• The company had a substantial bidding pipeline of around INR 800 crores, with high expectations of conversion in the coming months.
• While the percentage of successful conversions could vary, they remained confident in securing significant orders.

Client Contribution:

• ONGC was the largest client, accounting for around 65% of the order book, followed by Vedanta and Oil India.

Cash Flow and Investments:

• The INR 100 crores listed under the “sale of investments” in the cash flow statement represented the transfer of funds from investments to fixed deposits.

Conclusion:

• Deep Industries expressed optimism about future revenue growth and order book conversion, particularly in the second half of FY ’24 and FY ’25.
• They emphasized a strong focus on margin maintenance and improvement, along with preparedness for business growth.

Overall, the call provided a comprehensive overview of Deep Industries’ financial and operational performance, order book growth, and plans for the future, including the expected contributions from Dolphin Offshore and joint ventures.

Growth Strategies

1. Increasing penetration and contiguous expansion: The company aims to expand its reach in existing markets while simultaneously entering new markets like Odisha and Maharashtra.
2. Focus on productivity, credit cost, and operating expenses: The company is committed to improving operational efficiency and reducing credit costs, with a specific emphasis on enhancing credit ratings and lowering the cost of funds.
3. Target ticket sizes in the range of INR 0.5 to 1.5 million for home loans (HL) and small and medium-sized enterprises (SME). This approach provides a broader customer base, with ample room for growth in new-to-credit customers within the retail segment.
4. Utilizing various customer profiles and templates to increase business while effectively managing risks. This strategy allows for diversification and flexibility in reaching a wider range of customers.

Q2 FY24 Concall Notes

1. OCF Is negative as Quarter end had many holidays, the cheque and payment got cleared on the very First week of this quarter
2. Will Explore the debt financing to Increase stake in Creative Subsidiary
3. 30 Crores Will be alone from Air Purifiers, They are more of a life style product rather than the Need product, Price point generally comfortable between 12-14k Buck
   Lifestyle product example can be many real estate company that intends right now to accompany Air conditioner with Property Might also Accompany Air purifier Considering the new Pollution Problems
   The Air purifier Sales is around 40% Online, 14%-15% Offline and Rest through Branded Show rooms such As reliance Retail
   There is shift in Behaviors’ of Big showrooms too, Earlier the norm was to Buy back the remaining Air-purifier left After December or Winter Per say. from last 2 Years No particular demand like that as such
4. Also type of razor blade business model i.e. Air purifier filter for corporates after every 6 months for retail after every year or so
5. generally For Honeywell they are trying many SKU and from this many SKU, 2 product has to turn out big and Air purifier seems to be the very first one
6. 2030 they intended to generate more than 2500-3000 Crores from Honeywell products only (Ofc many licencing brand will also be onboarded)
7. Current Position of Ckart is just for cross selling purpose but they also intend to Commercialize the same in medium term where the transaction fee will be charged
8. the above Can be in 2 Ways 1) Creative finances out of 10% bottom line or 2) On boards the investor who can finance the same take over the co. operation since the matrix of Creative is very different than that of market place
9. Generally Op. leverage not available right now as product development cost is Not capitalized. After the line of products are complete the same will not be incurred and likely the same will be completed by the time company Reaches 2,000 Crore of Revenue (Probably by next Year) and then the fireworks will Start
10. H1 Honeywell Sales can be around 70 Crores odd. They can easily achieve around 180 Crores of sales this year since the December Quarter can be generally Heavy for them
11. Current Stake stands at 70% in Hong Kong Subsidiary Plans to increase up-to 77%. There is No tax nor Interest payment in Hongkong so 15% EBITDA Margin is safe to assume for Hongkong Business

As for the Notes given-
The company is planning to acquire a NCLT company having similar line of business.
This will lead to expansion of production capacity – beneficial for the company.