Detailed Narrative
Q1 FY26 Performance Overview
Deep Industries reported a robust Q1 FY26, with revenue increasing by 61.6% year-on-year to ₹199.5 crores. This growth was attributed to the efficient execution of various service contracts. EBITDA for the quarter stood at ₹95 crores, marking a 54.7% YoY increase, with a healthy EBITDA margin of 44.6%. Net profit also saw significant growth, rising by 59.3% YoY to ₹61.7 crores, reflecting strong operational efficiencies.
Order Book and Growth Outlook
The company's order book reached ₹3,051 crores as of June 30, 2025, representing a substantial 152.15% year-on-year growth. This provides strong revenue visibility, with management expecting a sustained year-on-year revenue growth of over 30% for the next 2-3 years. The bidding pipeline is also healthy, valued at approximately ₹700 crores, from which the company anticipates good conversion into new contracts.
Strategic Acquisitions and Investments
Deep Industries completed the acquisitions of Kandla Energy for ₹2 crores and Dolphin Shipping for ₹7 crores. While Kandla Energy is expected to contribute to revenue from the next financial year, Dolphin is already contributing, with an annual revenue target of ₹100 crores and operating margins exceeding 60%. The company also invested $2.2 million in a joint venture for HF Hunter, which started operations in the current financial year, projecting daily revenues of $17,000-$20,000 with 50% margins for its 37% stake.
Capital Expenditure Plans
The company has significant capex plans, including an envisaged ₹160 crores for production enhancement related to the PEC contract, which will span FY26 and FY27. Additionally, Deep Industries is eyeing a capex of ₹350-400 crores for acquiring vessels for its Dolphin fleet, with a plan to add at least two vessels or tugs in the current financial year. These investments are strategically aligned with securing new orders and expanding service capabilities.
Receivables and Asset Quality
A key area of focus is the recovery of old receivables, primarily from the Kandla and Dolphin acquisitions, which amount to over ₹350 crores. Management is actively pursuing these recoveries and expects to collect a significant portion within a 2-year timeline. While a write-off in March was related to inventory, the company remains optimistic about the collectability of these receivables, which were acquired at a minimal cost.
Subsidiary Performance: RAAS Equipment
The RAAS Equipment subsidiary, which focuses on gas compressors for city gas distribution, has faced challenges. Management noted a slowdown in the city gas distribution market over the past 1.5-2 years, leading to reduced activity and loss-making operations for the subsidiary. The company continues to monitor opportunities in this segment but acknowledges the market's fluctuating nature.