Deep Industries Limited (DEEPINDS) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Deep Industries Limited Q2 FY27 Earnings Conference Call, hosted by Ariane Capital Markets Limited. As a reminder, all participants' line will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star and zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Khushish Solanki from Harihan Capital Markets Limited. Thank you, and over to you, ma'am.

Thank you. Good morning, everyone. On behalf of Harihan Capital, I will send you all to the earnings call of Deep Industries Limited for a 2587 conference call. From the management side, today we have Mr. Paras Savla, Chairman and Managing Director. Mr. Rohan Shah, Director of Finance and Chief Finance Officer. We welcome the management of Deep Innersis Limited on this call. Now, without any further delay, I invite Mr. Paras Savla to give the opening remarks, following which we will open the floor for Q&A now. Over to you, sir.

Good morning, everyone. It gives me immense pleasure to speak to you all today as we discuss our performance for the second quarter and first half of FY27. We sincerely appreciate your continued interest and confidence in Deep Industries Limited. I trust you had a chance To review our financial results, press release, and investor presentation. These have been made available on the company website and the stock exchanges. I am joined today by our Director of Finance and CFO, Mr. Rohan Shah, who will share a detailed financial overview for the second quarter and half year ended on 30th September 2026 after my address. Let me briefly take you through the macroeconomic environment and evolving dynamics of the energy sector. If you look at the global energy situation, I think it is fair to say that uncertainty is likely to stay with us for some time. Despite some efforts towards a diplomatic resolution, there is still no clear visibility on when normalcy will return to global energy supply routes and markets. While global supply chains are gradually finding way to adapt to the situation, alternative routes and supply arrangements are helping keep energy flowing. But this is coming at a higher cost. Shipping, logistics and insurance costs continue to remain elevated and the risks around supply disruptions are far from over. So while the world is adjusting to the new reality, it is doing so at a higher cost. For our country, given our dependence on imported energy, this means we are likely to continue facing pressure from elevated crude prices. Supply uncertainties, and volatility in the energy market over the coming months. So while the situation may improve gradually, we believe it would be prudent to prepare for the challenging operating environment for some time. This also makes the case for strengthening India's domestic energy production and energy security even more important. On the demand side, IEA expects some softness in the near term. But the longer-term outlook, particularly for Asia and emerging economies like India, remain encouraging. I think the larger point here is that energy security is becoming a much bigger priority than simply sourcing energy at the lowest possible cost. Countries are increasingly looking at reliable, diversified and domestic sources of energy. And we believe this shift will create important opportunities for India's energy sector over the coming years. The government strategy has fundamentally pivoted from a revenue-sharing mindset to an aggressive exploration-first agenda. The urgency is evident. Domestic crude production fell to 28 MMT in 2025-26, while import dependence touched at a record of 88.7%. The cost of that dependence is now visible. India's crude import bill rose from 48.4% year-on-year to $74.8 billion in April to August, driven by higher prices on broadly unchanged volumes. The policy response has moved from the intent on execution. On 31st July, the Union Cabinet, chaired by Honorable Prime Minister Sri Narendra Modi ji, approved Samudra Mansan, the National Offshore Exploration Scheme. With an outlay of Rs. 84,000 and 84 crore through F5 2030 to 31. The policy shift is now visible on how blocks are avoided. The DGH announced on 26th October that companies can file expression of interest for deep water and ultra-deep water blocks every month under a special OLAP round. So bidders no longer have to wait for an annual round. Bidders will now compete on the work program they commit to, which replaces revenue share bids. Bidding for onshore and shallow water blocks under OLAP 10 and 11 closed on 19 June 2026. Awards of onshore and shallow water blocks should translate into exploration and work programs over the coming quarter. Extreme discovery is only half the battle. Bringing molecules to the market is what yields cash flows. Under the unified pipeline tariff, a manufacturing unit in a remote district pays essentially the same transportation tariff as one bedside, beside, and input terminal. India's operational gas pipeline network has crossed 25,000 kilometers. With over 10,000 km more under construction, and the government launched National PNG Drive 3.0 on 1st October, running through March 2027 to deepen consumption. Guided by the vision of Atman Nisbar Bharat, India is positioning itself to attract global capital into E&P sector. As a leader covering 70% of the post-exploration services, value chain. Spanning gas compression, dehydration, gas processing facilities, workover and drilling rig services, integrated project management, production enhancement contracts, and offshore support, deep industries is directly aligned with these structural dealings. Higher crude prices, a nation's mandate to reverse production decline, and a fully funded offshore exploration mission together create a multi-year demand runway for our services. We run through the various verticals of our sector that we do. On the gas processing side is where DEEP has mostly clearly redefined a business model. Operators traditionally build surface production facilities as a capital-intensive EPC project. DEEP offers them a charter hire service. We design, supply, install, commission, operate, and maintain the complete system, taking raw hydrocarbons from the well-eared and delivering on-spec gas to the custody transfer point with no upfront capital from the operator. Starting from Vedanta's Jaya site, we have since added several ONGC facilities. As the national grid expands and domestic gas becomes a strategic priority, demand for fast capital light. Gas monetization is rising, which is exactly what the model delivers. Gas compression, where deep began in 1996, remains the backbone of our business. Our fleet of over 80 compressors, the largest in India, is matched to each field's volume and pressure profile. Roughly 30% of India's compression requirement is outsourced, and deep executes close to 85% of it. The government... Government's 23,731 crore Goberdan scheme, which targets a nearly 10-fold rise in compressed biogas output and mandates CBG blending of 3% this year, rising to 5% from FY28 to FY29, opens a new avenue for us. Every CBG plant needs purification and compression before grid injection or fuel dispensing, and our charter hire model suits producers. Seeking reliable operations without heavy upfront capital. We are actively evaluating opportunities in this segment. So before gas enters the national grid, it must be stripped off moisture and heavy hydrocarbons to protect the pipeline integrity and safety. Gas dehydration is essential across processing plant, pipeline, and storage facilities. Deep was among the first companies in India to qualify for gas dehydration services. As the grid expands, the need of reliable grid quality gas grows with it. Through IPM, we take complete responsibility for drilling and completing a well under a single contract. Bringing these specialized services under one roof leads client tighter coordination, better cost control, and faster timeline. Deep is one of the first Indian company to offer this integrated model, and we are Indian incorporated companies serving both upstream and midstream. This is a strong position in charter-hire drilling and work-over rig services in India. Companies currently managing fleet of 20 onshore rigs comprising of 14 work-over and 6 drilling rigs. These rigs have operation across deserts, eco-sensitive zones, and mountainous terrain. As of today, the fleet is fully utilized. On the production enhancement services. Production enhancement is where our capabilities come together to deliver measurable output. Under a 15-year, 1,402 crore contract with ONGC Deep is responsible for raising hydrocarbon production and extending the life of mature field. We do this through advanced techniques, specialized equipment, and disciplined field operations. We took over the field in April 2025 and began with baseline production. The MoriFi incident delayed our incremental production program by 5-6 months. We have now deployed our rig, resumed work-over jobs, and will soon start drilling the new wells. We expect incremental production to begin contributing from Quarter 3 FI27, supported by planned capex of about 150 crore in next 12 months. On the offshore services, after more than 3 decades onshore, Decades also deep expanded offshore by acquiring Dolphin offshore through NCLD process. We gained control in January 2023. Dolphin is now a step-down subsidiary. We are reviving the business in a phased manner, and our DP2 barge is already in operation. Our expansion is discipline and contract-backed. We commit capex only once a firm deployment contract is in hand. We are actively evaluating both domestic and international tenders. On the new initiatives, we are positioning deep for energy transition by building on what we already do well. On green hydrogen, in F526, we signed an MOL to bid for and execute green hydrogen projects, and we are actively evaluating opportunities. On geothermal, our onshore drilling expertise transfers directly. Rig operation, drill string management, bit selection, and circulation systems are fundamentally the same in geothermal wells. The main difference are higher temperatures and harder, more abrasive rocks. Hydrogen production. Hydrogen production, purification, and handling rely on unique operations that are standard in gas processing. That gives us a strong technical foundation to scale in this space. We will continue to look for adjacent segments where our core competencies gives us a natural edge. On the business momentum, during the quarter and half-year ended 30th September 2026, asset utilization stayed healthy across our core services line, onshore drilling, work-over services, gas processing, and production enhancements. This was despite a volatile external environment. Demand for integrated oil field services remain well supported by the policy push to expand exploration acreage, strengthen gas infrastructure, and raise domestic production. The approval of Samudaram Manthan and the sharp rise in India's import bill for this year made the push stronger, not weaker. With the first half behind us, our priorities for H2FY27 are clearly defined. On the fleet performance, maximize utilization and maintain our safety record across the drilling and workover plates. On the production enhancement, grow our presence in EOR and unconventional segments by securing new production enhancement contracts. Charter-hire growth. Expand charter-hire deployment of gas processing plant modules and accommodation units as operators look to monetize domestic gas faster. Inorganic growth. Pursue selective value-accreative mandate that broadens our services capabilities. From the business outlook of FY27 and FY28, the oil and gas industry in India is at an inflection point. It is moving decisively towards reduced dependence on overseas supply. The sector is transitioning from a period of crisis management to one of the structural rebalancing. The closure of state of Hormuz and the sharp rise in crude oil prices have caused significant supply-side disruptions. In response to the government of India has fast-tracked its resolve to reduce import dependence. Guided by our Honorable Crime Minister Sri Narendra Modi Ji, vision of Atmanirbhar Bharat, the country is actively pursuing investment in its exploration and production sector. This forms part of a broader USD 500 billion opportunity in energy infrastructure by 2030. This intent is backed by a concrete policy action. The government has shifted its focus from revenue sharing to an exploration-first approach. On the offshore side, the global scenario is opening up substantial opportunities for offshore oil and gas support services. Through Dolphin, we are confident of securing a few more long-term charter hire contracts in the coming period. Onshore demand for drilling rigs remains very strong. Under our integrated project management, we are exploring opportunities to enter the higher capacity drilling rig segments, which we believe can add a further leg to our growth. Finally, on our order book and pipeline, Deep Industries Limited is India's only integrated onshore and offshore oil and gas services provider with more than 30 years in the business. That positions are strongly to benefit from the current industry outlook. We maintain a constantly revolving order book of over Rs.3000 crore, supported by a healthy bidding pipeline. Taken together, we believe the outlook for the business is very promising. Bidding pipeline for 27-28. The bidding pipeline continues to be in the range of Rs.700 to Rs.800 crore. Now on the guidance. Based on existing order book of approximately Rs. 3,089 crore, operating revenue is expected to grow in the range of 30 to 35% in FY27. With existing order book and bidding pipeline, operating revenue is expected to grow by 30 to 35% in FY28 over FY27. Back to be expected in the ranges of around 350 to 370 crore in FY27. And rupees 470 to 500 crore in FY28. As we head in the second half of the year, two principles will continue to anchor everything we do, sound governance and a zero-compromise approach to safety. In a period of heightened uncertainty, these are not just obligations, they are foundation of our trust, our stakeholders place in us. We want to take a moment to thank our people in the field and at our offices. Thank you for delivering consistently in a demanding environment. To our clients and partners, thank you for working alongside us as a genuine collaborator. And to our shareholders, thank you for your continued belief in these industries and its long-term journey. With this, I now invite Mr. Rowan Shah to provide a detailed overview of the financial performance for Quarter 2 H1 FY27. Following his remarks, we will be happy to address any questions you may have. Thank you.

Thank you, Parazwai. Investor friends, thank you for joining the call today. It gives me immense pleasure to inform that we have reported highest growth across all key financial parameters for our reporting period ended on 30th September, 2026. At the first instance, due to nature of our business, it would be prudent for all analysts and This is our performance on year-on-year basis. Coming to key financial numbers of second quarter and half-year ended on September 30th. Consolidated revenue from operation for the quarter ended September 26th was Rs.295.43. September 26th was Rs. 574.34 crore, which translates into an impressive growth of 33.7% and 36.6% respectively on year-on-year basis. Our H1 FY27 total income of Rs. 616 crore is higher than our full year FY25 total income of Rs. 608 crore, which demonstrates our accelerated growth in the year. Consolidated EBITDA for the second quarter of FY27 stood at Rs.124 crore and for the half-year stood at Rs.255.83 crore, with EBITDA margin of 39.6% and 41.6% respectively. This indicates increase of 10% and 23% respectively on year-on-year basis. The estimated net profit for the second quarter of the current financial year was Rs.81.22 crore and for the half year stands at Rs.170.37 crore with pat margin of 26% and 28% respectively. This indicates increase of 14% and 28% respectively on year-on-year basis. The cash profit for the quarter stood at Rs.106.53 crores and for the half-year stood at Rs.219.93 crores with cash-back margin of 34% and 36% respectively. Increased by 35% to Rs.155 crore in HYFY27. This demonstrates full transmission of our revenue growth of 35% into cash generation. Screwed by 230 BIP from 19.3 to 21.6 in H1 F527. On date, our order book stood at Rs.3089 crores, which provides strong revenue visibility for FY27 and FY28, as guided by Parazwai. Under the margins, we would like to clarify that given the project-based nature of our business, because of operational cadence of transitioning equipment between completed projects and newly awarded projects, some quarters can see 300 to 400. However, our EBITDA margins on yearly basis would expect it to be in range of 42-43% as per our guidance. We encourage the investor and analyst community to evaluate our EBITDA margins and overall operational performance on year-on-year basis rather than quarterly basis. As we enter into the next phase of growth, our capital allocation framework remains disciplined. We are focused on turning scale into strong free cash flows. And maximizing return on deployed capital. With a clear operational roadmap and resilient balance sheet, our team is committed to delivering compound

Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sudhir Beda from Beda Family Office. Please go ahead.

Hi, good morning. Am I audible? Yes, sir. So, hearty congratulations to Paraj Bhai and the entire league team for giving the good number, outstanding number, and the improvement in the balance sheet as well, and the various ratios like ROE, ROE. So, all-round improvement is seen. And everything is like the top line of FY23 will become the bottom line in FY27 as per your guidance. So, very hearty congratulations. Thank you. Yes, I have a question. There is some disappointment in Q2 because the way you are growing quarter after quarter, like your CAGR is almost top line is 35 to 38 percent and bottom line is almost 50 percent for last four years. So, as per your guidance, you will be able to pick up this subdued growth in Q2. So, from where this growth will come in Q3 and Q4, if you can throw some life on that.

Sure, so with the incremental projects we have added in... We will start appearing with their revenue contribution. Secondly, with incremental production and revenue contribution from production enhancement contract, which has started from Q3, we would see a good amount of growth coming in play in our numbers.

And, sir, you have given very strong guidance for FR-28. So, what means that kind of company that you will be able to grow at 30-35% in the revenue and 475 to 500 crore impact over a very high base of 527.

So, as we have said before, our CAGR growth for last four years is more than 36-37%, and we expect similar amount of growth for coming two years as well. So, with the same growth guidance, along with full year contribution from production enhancement contract and additional projects and asset inclusion in Dolphin Offshore, we are quite... We are sure that we will be able to achieve this growth in FY28 as well.

Great, great. And what is the capex outlay for FY28? This year, six months, and next one year, so one and a half year, the capex outlay.

So currently, we are gunning towards capex of around 150 crores for production enhancement contract, which can spill over in next financial year to some extent. We might incur a CAPEX of around 100 to 200 crores in Dolphin offshore, depending on the contract awarded.

So any plan to raise equity to fund this CAPEX or it will be met through internal accruals and debt?

So in these, the CAPEX would be met through internal accruals and debt only. In Dolphin, we may think of, but as of now, no such idea.

Okay, sir. Thank you very much for giving me the opportunity and all the best.

Thank you. Thank you.

Thank you. The next question is from the line of Krish Salot from Veer Growth AIF. Please go ahead.

Good morning, sir, and congratulations on both side of numbers. I have a few questions to understand. The PEC contracts recently had tender in September. What is the status of that? And are we looking in Q3, Q4, and we might get some awards? And besides, are there any other PEC bids under the pipeline that you may see?

So the tender that was due in September has been extended. Probability it should happen by end of this month, that is in November. Getting an award is something that a company can always try, but we are confident that we should be able to get some awards. There are other companies also looking to come out with such contracts. And they are already working on it. So there were some expressions already coming in. I believe in next quarter or so, we should have an idea about what kind of new species should be coming up.

Okay, so so any private players will also be looking like Vedanta, Intel of course, are they also looking for some other kind of PC contracts?

Yeah, yeah, they are also. So we had some idea before six months there was an opportunity they were looking at, but I think it is still under discussion. At an appropriate time, maybe they will also come out with such projects.

Understood. And so, on the industry front as well, especially in many ways, carrying health, they are a 3C reverse for like 7-8 years, OLF and DSF that were awarded to them. Still, after 7-8 years, it has not been able to materialize. And as you were talking about the industry outlook, can you see that it would get certain of those would get materialized in the near future, like in three to five years, and you can see a healthy opportunity in the overall industry and which then benefit deep industries overall.

Whenever these kind of contracts are awarded, there is a lot of procedural aspects associated with it. One is to go for an environment clearance. The formalities which any operator has to undergo. We are now with active involvement of the government of India. So I believe now that is definitely a point where And with active involvement coming in from government of India, they are not leaving any operators. Thank you.

Understood, sir. And, sir, are we looking for some export opportunities from gas processing in other countries, like how we have some presence in UAE here set up on subsidiary as well to any tax on that?

Yes, we have. There is a lot of. In African countries, there is a lot of traction also in Venezuela and all, and we are trying to evaluate all these opportunities while keeping in touch the growth story of India, because it is too exciting to cater to the Indian markets and as well as the global economy.

On our Dolphin offshore receivables, are we going to get some collections or are we planning write-offs in that as well?

No, we have been getting some positive response on those receivables. So, we have already started. But write-offs, as of now, we have not completed.

So, are we seeing positive workload to recover at least some part of both of the tables as well? This is because a healthy chunk from the doctor of sheep. And sorry, sir, just one last question I was given is our status of the chemical facility that we have developed, which was going to support at least one to two percentage in our EBITDA contribution, and also the RAS equipment subsidiary where we have developed new good products and which have a good outlook currently based on the CJD development that are taking place. So, what is the utilization in the RAS equipment business as well and our kind of activities?

Thank you.

Okay. So, sir, any utilization level there from number of units might have sold in the RAS equipment?

Yeah. So, the units we have already sold, we are doing O&M for them, and we are currently working on other opportunities as well under RAS equipment.

Okay. Thank you so much, sir. Thank you. And congratulations once again on your good side of the line.

Thank you.

Thank you. The next question is from the line of Manan Vandur from Walford Fund Management, LLP. Please go ahead.

Hello. Thank you so much for the opportunity. Am I audible?

Yes. Yes, sir.

Okay, okay. Congratulations, sir. I've been following you for more than a year. Great success in the business. Sir, I have most of the answers to my questions. I just have one thing. So, what would be few actionable points that we as analysts should hold you by in the coming quarters and in the coming few years?

This is something that you should evaluate on year-on-year basis. Since we are dealing with mechanical equipment, there can be And maintenance costs higher. Thank you.

I understand that you have not told us the margins in the PEC, but you said that they are going to be very high. So, just getting an understanding that you said our margins on the yearly basis revolve around 40 to 42 percent. So, do we think that after the PEC comes in, our margins can go higher than that?

Yes. So, I think according to us, this margin should be...

Margins should increase. And so just one last thing would be, going forward, one of the things we need to look out for is PEC, right? What else is something that, you know, we as a company are looking forward to and are in constant talks with to get something new that will help us as a business?

Protected drilling rigs as well.

Understood. Sir, we have been talking about the higher capacity since, I think, two to three quarters. So, are we getting anything on that front? Any updates?

Thank you.

Okay, so who are we looking to have this?

Yeah, yeah, so I think there was some question going on and the line is disconnected.

Yes, Manan, please proceed.

So, the follow-up last one is that who is the partner we are trying to go for for this drilling rigs, and why is it that we are not capable? Just these two things.

No, no. So, it's not about the capability. It is about the qualifications that is being asked by the oil companies. So, we are actively looking in for getting a JV. We have already done, to a certain extent, we have got these procedures done. And now, at an appropriate time, when the tender comes in, we would be able to bid for this contract. So, it's not about the capability. Operating philosophy always remains the same.

Okay. And who is this JV with?

It is an overseas company, so we are working towards it, yes.

Okay, thank you so much, sir. All the best. Congratulations.

Thank you.

Thank you. The next question is from the line of Bhavya Gandhi from Bajaj Alternate Investment Management Limited. Please go ahead.

Yeah, thanks for the opportunity, and thank you. My first question is regarding the EBITDA margin. I just wanted to understand because now PEC and the Dolphin offshore, if you win one more contract, that will contribute, Dolphin will be contributing almost 60% to the EBITDA margin and almost 50% from PEC. So, that will elevate your overall EBITDA margin. So, can we assume that FY28, we could inch upwards towards 48% sort of console level EBITDA margin because the overall EBITDA margin pie share from new projects is going to increase. Is that the right understanding?

Yes. So, as I said earlier, going forward, this EBITDA tends to improve only. And as you rightly said, with higher margin revenue contribution from production enhancement and Dolphin. These EBITDA margins on overall.

Dolphin Offshore, the 100 crore asset that we wanted to acquire, 100 to 200 crore. Where are we in the process, and any reasons for a slight delay in this project?

So, we have identified the assets. The philosophy which we follow for doing CAPEX is, with the POM award, we try to do CAPEX. And so... We are just counting for good project, which we can take for that. And once we can finalize the project, we can do it immediately. So the asset identification part is already done. I think the second part is on which we are working.

Fair enough. And another question is to Paraswai. Paraswai just wanted to understand how big this hydrogen compression opportunity can be on a longer term basis, on a three to four year basis, not immediately. I believe you've done a JV with Advait Energy on that front. So if you can throw some light on a very longer term, because you are seeing at Kandla port, Dindal port, you are seeing a lot of hydrogen projects, green hydrogen projects coming up. So, are we also trying to bid for those projects? What is the ecosystem like and what could be the opportunity size on a three to four year because we are a leader in gas compression market on the oil and gas front. So, can we be a leader on that hydrogen gas compression front as well?

The requirements, if you talk about the philosophy, the requirement of gas compression, what we are doing, and the... And the opportunities that can come up in hydrogen as well as the biogas remains the same. We are actively looking into it. It is very difficult for us to give some guidance on what kind of an opportunities would that be because we are also trying to build this project and we are trying to evaluate how these markets are going to take shape. are coming close by for bidding for the EPC project or as well as looking. So, biogas is also going to pick up in a big way. I have already been looking to set up these biogas plants. So, the moment this CBG plant comes in, the immediate thing would be, of course, the gas compressors, which are definitely required to boost the low-pressure gas into a high-pressure pipeline. So, the philosophy would still continue, but now the sources for getting this business are keeping on increasing.

The next question is from the line of Sanjay Shah, an individual investor. Please go ahead.

Hi, can you hear me?

Yes, please proceed.

Hi, Rohan Bhai, Paras Bhai, congratulations on the strong cash flows. That's pertinent. I just wanted to ask you a couple of things. One, on the existing product and enhancement contract, how do we expect the product to shape up in the balanced part of the year and next year, and what have you assumed for your guidance for the next year? That's one. And second, we have a lot of opportunities that we are working on that you've spoken about, including the CBG and some of the other initiatives, including moving into the higher-end RIGs in a joint venture. So what have you taken or not taken into consideration when we talk about fiscal 28? If it's possible to just give some more granular sense on each of these tools.

The guidance for FY28, we have not considered the opportunity of higher capacity drilling rigs, so it will be able to enter into it. Uh, but...

And then if I would just ask one more question, I mean, there's just so many optionalities which are building up. Is it fair to just give us some kind of a sense on how do you expect the company to evolve in the next two, three years beyond fiscal 28? Not necessarily quantitatively, though it would be great if you can just provide some numbers, but just in terms of how the company will shape up and how the different business streams will probably gain prominence.

Yeah, so looking to the current landscape of what the business is, we are currently, we have considered for at least for 27-28, for the next financial year, we have considered the ongoing activities. But if someone has to look at objectively coming in, what kind of business could be generated from the other verticals, that is something definitely could be far beyond to what we are currently doing. And these markets are all dynamic. So, which sector would be evolving at what particular time is something very difficult to comment on. But, looking to all the opportunities of what the DSF or OLAP plans are going on, looking to what the new PCs are going to come up, looking to everything that is coming to come up with the green hydrogen or coming in with the CBG opportunities, I am very sure that all these opportunities will bundle up and keep adding to our kitty of business and opportunities we get as time and again. So my outlook, it would be difficult to put that in perspective and give some numbers over it, but looking to the opportunities we are currently working on, we are very, very optimistic and very, very confident that companies should be able to retain the kind of growth that we are currently doing.

No, that's great. Thank you very much. It's very useful, and thank you once again.

Thank you. The next question is from the line of Anubhav Goyal from Cosma Ventures. Please go ahead.

Sir, congratulations on a good set of numbers. Sir, wanted to understand our core business of gas compressors. Like you mentioned, 30% of India's compression is outsourced and we own 85% share in it. So, how much is this outsourced market growing? And I think we are near to full utilization. I think about 12-15% is left. So, how many compressors do we plan to add this year and next year from our current number of 80? Like, will this also grow at 30% or what number should we model in?

So, if you have to see the overall growth of the particular division, it would be almost ranges in the, about 30%, but it could happen that in a particular year, it would be below 30%, say 20%, in there could be a year where it could be reaching 40%, but if someone has to see a view of what it could happen in next. Average, I believe, it could be in the ranges of 25 to 35 percent per sec. So, that definitely depends. Now, 30 percent outsourcing is done because they are having their own set of, I mean, all the clients have their own set of equipments. And slowly they are deteriorating with passage of time. So many of the facilities they have been using it over 25, 30 years or 35 years. So all those facilities and technologies are getting redundant. So slowly and steadily these are getting replaced. So that numbers of that 30 percent outsourcing according to us. Could grow dramatically. There could be a year where 10% of their facilities could be converted, and that could bring a super abnormal kind of growth to our compression business. And there could be a year where these facilities would be, you know, they would be prolonging it to come in. But net-net, if I have to assume it, see, there is not only the 30% outsourcing game that has been useful. This is also the play of artificial gas lift, which is increasing the gas compression needs. So even if they have to outsource, assuming, not I am saying that it is 30%, but assuming that even if they are not going to exceed beyond 30% for a moment, then still the gas compression requirement will grow because the gas compression requirement will grow. The price of the drop in bell pressures, even if they have to outsource 30%, the need of gas compression will keep on increasing. So that is going to be a driver. So there are two kinds of drives that will be coming in from this division. One, naturally the need of gas compression would go up with the same percentage what they are outsourced. And secondly, if they keep outsourcing from say 30 to 40%, that would also be another added opportunity.

Got it, sir. No, sir, this was very useful. So, sir, given, I am assuming that given the developments and targets we have for gas output in India over the next two years, this business is poised to grow, and as you said, the growth would be more chunky. Like, it won't be very steady. Sir, if you can also just comment on the current global market trends here, because I read that it's a very tight market globally, with very high lead times. So, on one hand, does it lead to better renewal rates for us whenever contracts close, and on the other hand, does it also affect us sourcing compressors and supplying to clients?

When we are talking of the global situation, it is honestly very uncertain, as I had already mentioned in my earlier remarks. So, all the countries, so it would not be true for India, all the countries across the globe are looking for energy security. So, the requirement, if someone has to look at how the markets are going to be, so I think every country in the world is looking to explore in one way or other to be self-reliant. So that, you know, that drive in itself is going to create a humongous opportunity across the globe. As I had already mentioned in a question before, there are already requirements coming in from Middle East, coming in from Africa, and a lot of things coming in from Venezuela too. And that is only because that everyone wants to either explore or ramp up their oil and gas production. So these requirements, the number of suppliers there would be, but the kind of demand that is coming up would be definitely over and above what the supply would be. So definitely going forward, the scenario would be, you know, the requirements surging up from every corner of the world. But again, as we had mentioned, these things are something a little more dynamic. So, if someone has to track every quarter and try to see that what was being given as a guidance and if that has been achieved, that would be really very, very difficult, because there could be an opportunity, as Rohan mentioned, that there would be some, you know, maintenance cost in a particular quarter, and there could be an opportunity of overlapping contracts. So, there could be some slippage of days, but if someone has to see it objectively at the end of the year, that will give a clear guidance on what the growth looks like. And that is what we mentioned that 30 to 35% growth is something that we are quite hopeful on.

No, sir. Understood, sir. So, sir, this, as you're saying, the market is very dynamic. So, we also don't want to maybe procure a compressor at a dynamically high rate and end up, you know, facing a downside for it down the road. Is that like a fair thought?

No, so we have a very clear policy as a governance into our company that we don't want to over trade on anything. We are providing services. So even if we have to pay a few percentage more on preparing the compressors, if the demand has gone up, it is good with us. We always factor that. But we won't do an over trading of buying the compressors or rigs even before getting a contract. Because that is the financial discipline we are maintaining all these years. And as a policy, we continue to maintain that.

Understood, sir. And so the pricing, the compressor can be deployed at the site for a long time, so the pricing is fixed at the initial stage only, when we sign the contract.

Yeah, yeah. Pricing would be fixed from day one.

And so, just my last question, sir, total CAPEX for this year, you mentioned 150 crore CAPEX for the PEC contract, and the remaining 150 crore CAPEX for procuring rigs and compressors that we are doing?

So, 150 crores of procuring leaks and compressors. We get award of contract. I think some amount of it we have already incurred in H1.

Thank you so much, sir. Thank you.

Thank you. The next question is from the line of Chandan Kumar from Narnolia Financial Services Limited. Please go ahead.

Hello, I'm on Audubon. Yes, sir. Congratulations, sir. A good set of numbers. And most questions have been answered. There are some follow-up questions. Like, you have guided 30 to 35% range of revenue growth for F28 and F27. So, how much of the F28 growth is secured by the existing order book and dependent on the fresh order book?

I think more than 90% is secured by existing order book itself.

Okay, and next question is, when we can expect meaningful cash flow and return on the 0.50% of CAPEX that you have made?

So, that contract is for 15 years, and we believe that on full year basis, revenue would start showing up from next financial year itself. So, you can say those KPEX start getting return from next financial year on full year basis.

Okay. That's all. That's my question. Thank you.

Thank you.

Thank you. Ladies and gentlemen, we'll take this as the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.

Thank you, everyone, for joining this call. It was a pleasure interaction with you all. We want to close this call by reiterating the fact that we are extremely confident of delivering steady growth as guided during this call. Please don't hesitate to reach out to us for any further queries. Thank you and wish you all a prosperous and joyful Diwali.

Thank you. On behalf of Arihan Capital Markets Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.