Metrics raised 1
- FY28 PAT guidance raised to ~₹500 crores (from ~₹400 crores previously)
Event Participants
Executives
2 Paras Shantilal Savla, Rohan Shah
Analysts
10 Bala Subramanian, Bhavya Gandhi, Chirag Satya, Hemant Sony, Manan Shah, Naman Keri, Pankaj Motwani, Parth Sodha, Sanjay Shah, Saurav Mondel, Seekar Sai, Sudhir Beda, Yash
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | ₹278.92 crores | Up 40% YoY, driven by gas processing, subsidiaries (Dolphin ~₹43 crores, Dubai + Indian subsidiaries >₹50 crores combined) |
| EBITDA | ₹131.8 crores | Up 38.7% YoY; margin of 43.6%, maintained within 43%-45% guided range |
| Net Profit | ₹89.14 crores | Up 44.5% YoY; strong operational leverage and subsidiary contributions |
| Order Book | ₹3,047 crores | ~60% to be executed over next 2-2.5 years; ~₹800 crores expected in FY27; includes long-tenure PEC contract (15 years) |
| Fleet - Gas Compressors | 80+ units | Highest fleet in India; ~85% of outsourced gas compression market executed by Deep |
| Fleet - Rigs | 20 rigs (14 workover, 6 drilling) | 100% fleet utilization in drilling/workover segment as of date; exploring higher capacity (2,000-3,000 HP) rigs |
| EBITDA to Cash Conversion | ~75%-80% | Q1 FY27 in line with historical conversion levels |
Geographic & Segment Commentary
Gas Processing & Compression: Company operates gas processing facilities across 3 fields (2 ONGC, 1 Cairn), providing design, supply, installation, commissioning and O&M of production systems. Gas compression remains the foundational business since 1996 with 80+ compressor units, capturing ~85% of outsourced market. New gas compression and processing contracts (4-5) commenced from late Q1/Q2 FY27, expected to drive standalone growth.
Production Enhancement Contract: Secured ₹1,402 crores contract from ONGC for 15 years to enhance production from a mature field (taken over April 2025). Baseline production slightly exceeded with all wells producing except Mori 5 (incident delayed incremental production by 5-6 months). Incremental production to begin contributing from October 2026; ~₹150 crores CapEx planned by March 2027; FY28 revenue expected at ₹150+ crores (2.5-3 lakh cubic meters/day output).
Offshore Services (Dolphin Offshore): Acquired via NCLT in 2022; DP2 barge (Prabha) operational under 3-year contract contributing ₹150+ crores annually. Second asset (AHTS) deployed but without long-term contract - contribution not significant. Pursuing disciplined contract-backed fleet expansion; no CapEx without firm orders. Government's deepwater exploration mission (Samudra Manthan) seen as growth trigger for offshore support services.
Kandla (Backward Integration): Acquired for in-house manufacturing of hydrocarbon fluids (critical drilling chemical). Revival of manufacturing facilities underway with minimal CapEx (₹10-15 crores, no debt). Expected to improve EBITDA margin by ~1.5%, with contribution starting later in FY27.
Company-Specific & Strategic Commentary
Green Hydrogen & Geothermal: MoU signed in FY26 for green hydrogen; already bid one tender for balance-of-plant EPC work (electrolyzer provided by JV partner), outcome pending. Geothermal energy exploration leveraging onshore drilling capabilities - core competencies in drilling rigs, drill strings, drill bits translate directly. Gas processing expertise provides technical foundation for hydrogen purification and handling.
Higher Capacity Drilling Rigs: Company evaluating entry into 2,000-3,000 HP drilling rigs, driven by growing demand for deeper wells. Currently operating 1,000 HP rigs suitable for 3,000-meter well depths. Rig tenders from Vedanta (Northeast), Rajasthan, ONGC, Oil India reflect robust inquiry pipeline (~₹700-800 crores), boosted by Iran crisis-driven energy security focus.
Leadership Addition: Rajiv Sina appointed Head of Operations, bringing 20+ years of oil and gas experience (previously at Vedanta) with strong onshore operations expertise; role spans compressors, rigs, and PEC contracts.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| FY27 PAT | ~₹350+ crores | Based on current run rate, incremental PEC contribution from H2, and new contracts in gas compression/processing |
| FY28 PAT | ~₹500 crores | Management confident, driven by full-year PEC contribution (₹150+ crores revenue), offshore fleet expansion, and margin improvement from Kandla |
| FY27 Revenue Growth (Standalone) | ~18%-20% | Q1 standalone revenue (₹175 crores) to improve from Q2 onwards as new gas compression/processing contracts contribute |
| FY27 Revenue Growth (Consolidated) | >25% | Driven by all verticals including offshore and subsidiaries |
| FY27 CapEx | ₹250-300 crores | Includes PEC field development (~₹150 crores by March 2027), Kandla revival (₹10-15 crores), higher capacity rigs pending contract awards; funded via internal accruals + debt (net debt-free balance sheet) |
| Order Book Execution FY27 | ~₹800 crores | From total order book of ₹3,047 crores |
Risks & Constraints
| Risk | Context |
|---|---|
| Mori 5 Well Incident | Unexpected high-pressure gas encountered; well currently not operating. Delayed incremental PEC production by 5-6 months. Mitigation: exploring other wells around Mori 5 area; incremental production expected from September-October 2026 |
| Gas Price Volatility | PEC block operates under free pricing mechanism (spot-linked). Management does not foresee prices falling below $8/MMBtu, but market-driven pricing exposes revenue to gas price fluctuations |
| Offshore Fleet Expansion Execution | Contract-backed CapEx policy means growth is contingent on winning tenders; no committed offshore pipeline yet, only upcoming tenders being evaluated - timing of fleet additions uncertain |
| Geopolitical Supply Chain Disruptions | Strait of Hormuz operating under restricted capacity; geopolitical bottlenecks keep global markets on edge, though this has also increased demand for domestic E&P services |
| Competition in PEC Tenders | Two new PEC tenders from ONGC (₹1,500+ crores each) being evaluated; bidding strategies not disclosed; no assurance of award |
Q&A Highlights
Offshore Business Growth
- Question: How do you see offshore business evolving over next 2-3 years - adding assets or improving utilization of existing ones? (Parth Sodha)
- Answer: Both existing assets (DP2 barge Prabha, AHTS) are fully deployed. Growth must come from adding new assets to the fleet. Very bullish on offshore segment given government's deepwater exploration initiatives; expect significant growth over next 2-3 years. (Paras Savla)
New Adjacencies - Green Hydrogen & Geothermal
- Question: How do green hydrogen and geothermal fit into priority list? Internal capability or partnerships? (Bala Subramanian)
- Answer: Existing gas compression and drilling capabilities directly complement these segments. Open to collaborations/JVs as ventures develop. Gas processing expertise in unit operations (purification, handling) translates to hydrogen. Geothermal drilling uses nearly identical techniques to oil and gas drilling. (Paras Savla)
FY28 PAT Guidance
- Question: Annualizing Q1 PAT (~₹90 crores) implies ₹360 crores FY27; you earlier guided ₹400 crores for FY28 - should we increase guidance? (Manan Shah)
- Answer: FY27 PAT expected above ₹350 crores; FY28 target is ~₹500 crores, not ₹400 crores. PEC incremental production from H2 FY27 will drive consolidated growth. (Paras Savla)
Kandla Margin Impact
- Question: Can you quantify margin expansion from Kandla and CapEx needed? (Manan Shah)
- Answer: In-house manufacturing of critical drilling chemical can improve EBITDA margin by ~1.5%. CapEx of only ₹10-15 crores needed (facilities exist, needing repair/modification). No debt required for this. (Paras Savla)
Higher Capacity Drilling Rigs
- Question: Are we bidding for 2,000 HP rigs and what is the bid pipeline? (Manan Shah)
- Answer: 1,000 HP rigs serve most Indian requirements (3,000-meter well depth), but demand for 2,000-3,000 HP rigs is growing. Evaluating and bidding will happen in next few months. Bid pipeline currently ₹700-800 crores excluding these priorities. (Paras Savla)
Working Capital & Cash Conversion
- Question: Historically 75-80% EBITDA to cash conversion - is Q1 similar? (Pankaj Motwani)
- Answer: Yes, Q1 conversion is on similar lines. (Paras Savla)
Margins Outlook
- Question: How do blended EBITDA margins trend in FY27/FY28 given offshore focus? (Pankaj Motwani)
- Answer: Blended EBITDA should improve in FY28 and beyond as offshore and PEC (higher margin) contributions increase. Offshore margins are better than onshore. (Paras Savla)
Related Party Loan Recovery
- Question: Progress on loan to Prabha Energy? (Yash)
- Answer: Received back ~₹86 crores; expect entire loan repaid by end of Q2 FY27. (Paras Savla)
Standalone Growth vs. Order Book
- Question: Standalone revenue flat at ₹175 crores last 5 quarters; ex-PEC order book suggests ~₹600 crores vs current ₹700 crores run rate - what's the standalone growth outlook? (Pankaj Motwani)
- Answer: Standalone will improve from Q2 with 4-5 new gas compression/processing contracts starting. Standalone growth expected ~18-20% in FY27; consolidated >25%. This includes expected tender conversions. (Paras Savla)
PEC Revenue Visibility
- Question: What revenue does PEC contribute to FY28 ₹500 crores PAT target? (Sanjay Shah)
- Answer: Expected ₹150+ crores revenue from single PEC field in FY28, potentially higher depending on FY27 performance. Volume implies 2.5-3 lakh cubic meters/day; baseline is ~1.44 lakh cubic meters/day. No equity raise planned - net debt-free balance sheet supports debt funding for CapEx. (Paras Savla)
Key Takeaway
Deep Industries delivered Q1 FY27 revenue of ₹278.92 crores (+40% YoY), EBITDA of ₹131.8 crores (43.6% margin), and PAT of ₹89.14 crores (+44.5% YoY), driven by strong gas processing, 100% rig utilization, and subsidiary contributions (Dolphin ₹43 crores, Dubai + Indian subsidiaries ~₹50 crores). Management guided FY27 PAT above ₹350 crores and FY28 at ~₹500 crores, with standalone growth of 18-20% and consolidated growth >25%. Strategic priorities center on PEC expansion (₹1,402 crores ONGC contract; incremental production from October 2026, FY28 revenue ₹150+ crores), entry into higher capacity drilling rigs (2,000-3,000 HP), offshore fleet additions (contract-backed CapEx of ₹250-300 crores FY27), and Kandla-driven EBITDA margin improvement (1.5%). Government tailwinds - Samudra Manthan deepwater mission (₹80,000 crore package), unified pipeline tariff, and energy security drive post-Hormuz crisis - support sustained demand. Watch items include Mori 5 well recovery, PEC tender awards for new fields, and timing of offshore fleet expansion.