Jindal Drilling And Industries Limited (JINDRILL) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Jindal Drilling and Industries Limited Q1FI27 Earnings Conference Call hosted by Antique Stockbroking Limited. As a reminder, all participant lines 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, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference call over to Mr. Varadharanjan from Antics Talk. Thank you and I'm with you, sir.

Thank you, Ukra. Very good afternoon, ladies and gentlemen. It's my pleasure to welcome you all to this first quarter 527 earnings call of General Ruling and Industries Limited. I request such a caution from general management to deliver this opening remarks. Thank you.

Thank you, Mr. Varasa Rajan. Good afternoon, shareholders, and thank you for joining our earnings call. The first quarter of FY27 was fairly good for the company. The key development, apart from financial results, has been the receipt of a contract from ONGC for one of the rigs owned by Jindal Trilling. That rig is currently under refurbishment in UAE, and we expect to deploy it as early as October of 2026. Apart from that, results were broadly in line with expectations. We remain the largest offshore jack-up drilling contractor based in India with ONGC. We have five rigs on long-term contracts, which are currently deployed with ONGC, with the sixth rig having recently received a new contract. In the presentation, we've put out the order book and bifurcated it rig-wise and day-rate-wise. One is able to assess how the revenue will shape up going forward. The order book stands at 1,310 floors, and we've also bifurcated the order book year-wise. A key point to note here would be that three of our REICs are expected to be de-hired within the current financial year. of the four rings which were Getting the hire in the current calendar year, more or less. One has recently received a contract, and we are hopeful that we will get contracts for the remaining three rigs as well. For Discovery 1 and Jindal Star, there has been a slight extension in the duration of the contract, which we have also put out in the presentation. On the financial highlights, revenue is broadly constant with the previous couple of quarters. The dip, which is visible in the third quarter of FY26, was on account of reversal of another income, which we had booked in the second quarter of FY26. EBITDA remains in line. The variation in EBITDA is primarily on account of the variation in other expenses, which is caused by the forex fluctuation, which was more prevalent in the last quarter of the previous financial year and less prevalent in the first quarter of the current financial year. On the next slide, we put out the Profit and Loss comparison and followed it up with the annual financial highlights. EBITDA mix is given on the subsequent slide with most of the EBITDA coming from the RIG segment. Thank you. Thank you very much. Thank you.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone 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 Pankaj from Avis Capital. Please go ahead.

Yeah, hi. Very good morning. I have two quick questions. One is regarding, I think we have three weeks which are due for expiry in 2026. So, I just wanted to understand what is the likelihood of these contracts getting renewed. Are we expecting any idle time for the renewal, and what are the rates we are expecting for renewal of these rates? That's question one. Question two is regarding what kind of CAPEX we have actually spent on refurbishment of Pioneer. I believe this is done in UAE. And a related question is that are we on track to meet the Q3 deadline, which we have kind of worked with ONGC?

On the first question regarding the hire of the three rigs which is expected in the later part of this year, there will be a refurbishment period of four to six months once the... In that four to six months period, there wouldn't be any revenue which would accrue to us because the rig would be under refurbishment. The likelihood of the rig getting redeployed is fairly good, subject to whatever... Nuances that our customer keeps coming up at various points in time in various tenders. Despite that challenge, we remain fairly confident that we'll be able to redeploy. Something on which I cannot comment because if you look at our order book on You will see the massive fluctuation in the day rates despite these rigs getting redeployed in a similar time period. Refurbishment of General Pioneer, we've spent I would not like to comment on. We expect the refurbishment exercise to be completed by first week of September and deployment of this week to take place in the year.

Thank you. Thank you for this. So, related outcome possibly could be that our H2 revenue will be severely impacted because 3 out of 6 rigs would be kind of out of revenue in H2. Is my understanding right?

Yes, absolutely right. Because these 3 rigs will get rehired, they will go into refurbishment, no revenue will accrue. Discovery 1, which is a rig which we own. We will have a de-hiring of Virtue 1, which is a rig which is rented, but on a good rate. And we will have a de-hiring of Jindal Star, which is a rig which we have rented, but it is not on a good rate. So although there will be a decline in revenue from three rigs, The decline in earnings would primarily be from two rigs. Therefore, earnings will not decline in proportion, and you might even see an increase in the EBITDA margin, although absolute earnings would see a decline. In the second half of the... Got it, got it.

So, will it be possible for you to give some number in terms of the revenue loss, which we are going to, I am not sure whether we should be calling it a revenue loss or not, whatever the deficit is going to be, and the corresponding beta deficit, which we might see.

We can do that calculation because the order book has been bifurcated year-wise in slide 6 of the presentation. So that will broadly be the... for the relevant financial year, still a new contract is received, and we've guided earlier that you should target a blended EBITDA of 35%. I think you will be able to make a fairly accurate statement of the way the revenue will shape up in the second half of the current financial year.

Gosh, got it. Thank you for this, and I have some more questions. I will rejoin the queue.

Okay.

Thank you. Ladies and gentlemen, before we take the next question, a reminder to all the participants, if you wish to ask a question, please press star and 1. We will take our next question from the line of Gaurak Ashok Bhansali from Augment Enterprises. Please go ahead.

Yeah, good morning, sir. I just wanted to ask you about the recent award we've got. It's at a day rate of 45.83 lakhs. So, will we be able to enjoy the dollar depreciation? It's at a fixed day rate of 45.83 lakhs.

It's at a fixed day rate of 45 lakhs approximately. This contract was denominated in INR.

Yeah, okay. Thank you for that. And sir, also wanted to ask you, like, how many risks in the market are available for hire other than our portfolio? Because that would help us in assessing. Because Indian rates are way below the global rates. So, just outlook on the market for the next six months, one year from here.

Generally speaking, what has been the trend in the period, apart from the last two financial years, has been that whenever a rig goes off hire, ONGC comes up with a new contract, and the rig which has been rehired gets deployed on the new contract. However, that has not been the case in the past two years. All drilling contractors have had We have problems in redeployment of the rigs because of various reasons, which is known to all industry participants. However, going forward, we believe that... Three rigs which are getting rehired, they should be rehired because of the Samudra Manthan exercise the government of India has announced in the recent... Specifically, you want the number of rings which are getting declared. That number is not available with you. But if you send an email...

Okay, sir, that helps. Thank you so much.

Thank you. Ladies and gentlemen, a reminder to all the participants, you may please press star and want to ask a question. We will take our next question from the line of Pankaj from Avis Capital. Please go ahead.

Yeah, thank you. I'm back. Two quick more questions. One is, I think we saw a loss coming from one of our JVs, some 5 odd crore rupees. In this particular quarter, which is different from what we have been seeing in the past. So is there a reason, and are we expecting that to kind of come back to profits in coming times? That's question one. Question two is, I think our cash position has improved meaningfully, and also I believe the debt has gone down, which obviously allows us for flexibility to kind of raise more funds. So, my question related to this is that are we planning for any acquisitions, any rigs, or anything on that front? And last question on this is, I think we have an ONGC dispute which is going on. Any update, if you can get on that, that would be great. And a related question is that, is there any potential?

I should just interrupt you. If you can just ask questions one by one rather than... Seven questions into one question, because it just makes it difficult for me to address each of these points.

No problem, sir. You may like to address that question on that JVP.

So the first question was the loss in the joint venture. The joint venture, which has been the reason for the loss in the current quarter, is currently doing the refurbishment exercise for RIG General Pioneer. That joint venture was the seller of the RIG, and as per our self-achieve agreement, they had to provide the RIG in a certain condition. The loss in that entity is on account of the refurbishment expenses that are being incurred by that entity, so as to bring the RIG into a certain condition before general drilling takes delivery of the RIG. That is the first response. The next question was the reference to the cash balance. As of now, we are not looking at any acquisitions right now. We are only looking at the ability to redeploy the three risks which are going to get de-hired in the later part of this financial year. The reason why that is the case is because we want to minimize risk. So, instead of having more assets which we have to deploy with ONGC, we are focusing on getting those assets deployed which… Further, you should also bear in mind that because these three rigs are getting rehired, they will go into refurbishment. For refurbishment, we need to conserve cash because it's the nature of this industry that refurbishment exercise has to be undertaken after every...

Generally, sir, what is the refurbishment cost on an average for a week once it goes for refurbishment?

Considering the recent inflationary trend and the increase in labor cost and the transit cost of materials, I think a figure between 90 to 110 crores would be a fair estimate per rig.

Okay. Okay. So that's quite significant. Yeah. Got it, sir. Got it, sir. Can you ask my last question, sir?

Yes, please.

Okay, if you can just give us a quick update on the ONGC dispute, which I believe Supreme Court is pending in Supreme Court. So if you can give us some status. And second, best of my understanding, other than legal cost, there is no potential exposure which can flow on to us.

Is my understanding right on that? has been continuing for the past 14-15 years. We can only hope that it gets concluded sooner rather than later because of the legal cost that the company has been bearing for the past 14-15 years. On the impact that it can have, right now we have received funds. which is remote, then we'll have to repay. That's how we have received the funds. The possibility of that happening is... And the assessment of our lawyers, because we've been winning that case at every stage over the past 14-15 years, till it reached the Supreme Court for the second time. It was earlier in the Supreme Court, and it was referred back to arbitration. We won in arbitration again, and then again it went to Supreme Court on account of an appeal from ONGC. We don't expect any material negative impact.

Got it. I was not aware that we have received the funds. So, if we lose the case, then we will have to refund. And the quantum is around 100 crores. Is that right, sir?

So, there are two aspects to it. There is a receivable of 63 crores, the original receivable of 63 crores. And then there is interest and forex appreciation. On the said amount, the original receivable was denominated in USD.

Okay.

So the total amount is close to 160, 163 crores.

Oh, that's quite many. Thank you.

Thanks for all these answers, sir.

The question is from the line of CA Akash Dhanuka, an individual investor. Please go ahead.

Good afternoon, sir, and congratulations on the recent set of numbers. Sir, I have just one question. You referred to Samundra Mantan, and please correct me if I'm wrong. My understanding is all our six rigs are with respect to the shallow water. And Samundra Mantan is basically with respect to deep waters and ultra deep waters. So do we really stand a chance to gain anything from Samundra Mantan?

Not directly from Samudra Manthan, but when there is a general trend in the industry of an increase in drilling activity, when that transpires, then everyone benefits. It is not restricted to the specific scheme.

No, sir, I just wanted to understand if it is just with respect to deep and ultra-deep water, do we really stand indirectly also?

If there is a general increase in drilling activity, whether in deep water or ultra-deep water, then shallow water also will get the relevant benefits because it cannot happen that the capacities which the country already has, those capacities the government will not use and straightaway will start exploring and developing newer capacities. That is an unlikely outcome.

Okay, okay. Thank you, sir.

Thank you. Next question is from the line of Adar Shinduja, an individual investor. Please go ahead.

Hi, am I audible? Yes.

Yes, you are.

Hello. Hi, I just wanted to understand how come this latest big contract was in INR and not USP?

You should ask ONGC that.

Okay, and my second question for you, sir, is for the three rigs that will be available for new contracts after refurbishment, are we looking at domestic or are we targeting international as well?

We are looking at domestic primarily. However, if an international opportunity comes up, then we are okay to consider that.

Okay, given the higher rates internationally, I'm just curious for the reasoning behind this.

It is not easy to deploy in international waters because the existing participants in that geography will get first preference. It is only when they are... Then we'll get an opportunity. So, these are having different criteria for the kind of rigs that they want in their waters. Plus, then there is the counterparty risk. In addition to that, there is the country risk. So, we'll have to be mindful of all of this before we go ahead with.

Underserved. Thank you so much.

Thank you. A reminder to all the participants, anyone who wishes to ask a question, please press star N1.

Participants, you may please press star and want to ask a question.

I will take our next question from the line of Mohan, an individual investor. Please go ahead.

Yes. Thank you for taking the call. Congratulations on the good set of numbers. Do you expect the day rates to improve from what we currently are getting for the pre-regs that are due for redeployment?

We expect day rates to improve, but then again, we were also expecting day rates to improve in the... The current contract that we received. Unfortunately, that has not been the case in this contract. We had participated with a rate of $62,000 and we were pushed down to $47,600 approximately. More than our expectations, it is the willingness of our customers to pay the correct rate for the kind of service that they are getting compared to the international day rates, which are prevalent.

One more question is around the tender, sir. Did we participate in a tender for Pioneer, or is it part of the ongoing engagement with the customer, the three weeks that you are referring to for redeployment? Do you need to participate in a retender, or do they automatically qualify for extension?

We have to participate in a tender. For each of the rigs, we have to participate in a tender. The tender can be for one rig, two rig, or three rigs. In that case, if it is a multi-rig tender, then more than one rig can participate in the same tender. But a specific tender submission has to be made for each asset that the company owns.

Okay. Thank you, sir.

Thank you. Next question is from the line of Gauravashog Bhansali from Augmented Entrepreneurship. Please go ahead.

Sir, I just wanted the update on outlook if the market is going to be flooded with plague or not, or there will be a shortage due to the Samundra mountain. And going forward, will the data bring INR, or was this a special case?

On the outlook, it is very difficult to say with reasonable authority. We remain optimistic, considering what we hear in the media and from industry insider. There has also been an improvement in oil and gas sector expenditure in other sectors. So we believe that in our sector also. The improved expenditure will commence and we will be one of our beneficiaries. That is the only thing that I can tell you right now. Regarding the tender denomination, whether it will be USD or whether it will be INR, I will be able to update you in the earnings call for the next quarter because then we will have more.

Okay, sir. Thank you so much.

Thank you. A reminder to all the participants that you may press star and 1 to ask a question. As there are no further questions from the participants, I now hand the conference back to the management for closing comments.

Thank you, shareholders, for joining the earnings call. We will update you as and when we have any development. Thank you to Mr. Varasarajan for organizing the call.

Thank you very much, sir. On behalf of Antic Stop Broking Limited, that concludes Wisconsin. Thank you all for joining us today, and you may not miss Canikia Line.