Deep Industries (DIL)

DEEP Q1FY25:
• Order book for Deep Industries - INR 1246 crores, reflecting a 12% year-over-year growth. Company is witnessing highest ever bidding pipeline which could further enhance the order book going forward.

• Industry news: The winners of the ninth round of Centre’s Open acreage licensing policy (OALP) are likely to be announced in next couple of months. There have been news reports that to accelerate the exploration and production, the government is also planning to announce 10th round 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 all might be aware, prior to OALP under hydrocarbon exploration and licensing policy (HELP), separate rounds of new exploration and licensing policy (NELP), Coal – Bed Methane (CBM) and Discovered Small Fields (DSF) were also held by Government. Under NELP, 32 blocks out of total 254 blocks awarded are operational. Additionally, 33 CBM blocks and 2 DSF blocks recently announced are also potential opportunities for the Company.

• Dolphin offshore:

o PRABHA BARGE: 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 (Q3) onwards.

Prabha would be deployed in the markets of Mexican region. So optimistically there 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.

We already are in advanced talks with few clients and we are deliberately not closing 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 in for the opportunity and we are going to time it in such a way that on one hand and we have equipment ready and on the other hand we have an order to be executed ready for signing.

So, we believe that on full year basis, a single barge can earn revenue of 90-100 crore. Could be 130-140crs if deployed on 300+ days and 50K$ rates.

o We have few opportunities available for Diving Support Vessel (DSV), Platform Supply Vessel (PSV) and Anchor Handling Tugs (AHT) in both local and international market and we are evaluating the same in terms of their margins and payback.

DSV and PSVs are not available as of now with Dolphin, so we are evaluating opportunities on getting some good contract. We may buy those assets. Targeting more than 15% ROCE from those assets. (Currently market is tight for these assets)

We have tugs (Tug Handling Boat) available, but they a not in class condition, so we’ll have to do refurbishment in that tug as well. So, we would be taking that in task based on the award of contract. We have SDS as well which is diving support system. So, in addition to tugs we have SDS as well. Those assets are also not in working condition, so we’ll have to get them in class.

o We have reported revenue of around 8 or some crore. 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 for which may be spread over three or four quarters, yeah. We are expecting total for us would be in range of around 40 to 50 crores over a period of projects.

We have kept ourself open for evaluating similar and other type of opportunities which are coming in our way.

o Dolphin shipping: it’s an associate or a sister company of Dolphin Offshore Enterprises. They also have one office in Mumbai and one or two tugs are also there with some receivables are also there.

• We are clearly expecting some awards to get awarded in one to 2 quarters.

• INCREASED OUTSOURCING OF INHOUSE OPERATIONS: One of the ideas was especially for the gas business or 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 or some of the business that we’re winning, is it coming from captive processes now being outsourced?

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

• Kandla Energy and Chemicals: It’s a very small investment of around 2 cr. They are owning one office in Ahmedabad and one land in Kutch, which is very much ideal land for setting up factory. So, 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? We 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 little early to say what exactly we will be going to do.

• In booster compressor, the demand is not coming up as per our anticipation and so there we are going slow. RAAS, we would be doing around 18 to 20 crore this year, that is what our expectation is.

• Euro Gas JV contract is still under evaluation.

• We’re looking at buying 3 new rigs during the year, which is again firm orders. In next four to six months, we’ll commercialize them.