Deep Industries Limited

Deep Industries delivered robust financial results for Q2 FY26, with revenue growing 69.2% YoY to ₹221 crores and EBITDA increasing 74.7% YoY to ₹112.9 crores, achieving a 46.6% margin. For the first half of FY26, revenue stood at ₹420.5 crores (up 65.5% YoY) and PAT at ₹132.9 crores (up 65.6% YoY). This performance reflects strong operational efficiency and enhanced utilization of key assets, maintaining EBITDA margins in the 45-46% range.

The company's order book is strong at ₹3,050 crores, providing significant long-term revenue visibility for the coming quarters. A substantial portion, over ₹1,300 crores, is attributed to a 15-year production enhancement contract, with the remaining ₹1,650 crores executable over the next 2.5 years. Management indicated that this existing order book provides clear visibility for 30-40% growth over the next two years.

The ONGC production enhancement contract, valued at ₹1,402 crores over 15 years, commenced execution in April 2025 and is progressing well. It is expected to contribute ₹140-150 crores in revenue annually from the next financial year, with an anticipated EBITDA margin of approximately 50%. The Rajahmundry field operations, also a PEC, are expected to contribute over ₹35 crores in H2 FY26 and more than ₹140 crores annually from next year, having already crossed the baseline production.

Deep Industries is focusing on several growth drivers, including the deployment of two new rigs (one in December, one in Q4 FY26), scaling up gas processing facilities, and expanding its footprint in modular gas processing systems. The company anticipates 35-38% YoY growth in FY27 and expects its EBITDA margins to improve beyond 45% in the coming quarters^⏳, driven by new asset contributions and the ramp-up of PECs. Total CAPEX for FY26 is projected at ₹600 crores, with ₹100 crores already spent.

To support its growth trajectory and potential acquisitions, Deep Industries plans to raise approximately ₹300 crores through a Qualified Institutional Placement (QIP), expected to close by the end of the financial year. The funds will be utilized for expansion, acquisition of new assets, and CAPEX for production enhancement contracts. The company has identified and shortlisted assets for its Dolphin Offshore segment and is in advanced stages of negotiations, aiming for Dolphin Offshore to achieve a top line of ₹100 crores in FY26 with an EBITDA margin of around 80%.

While ONGC remains the largest client, contributing approximately 60% of revenue, this represents a reduction from 75-80% in earlier years due to diversification efforts. Management stated that most contracts are fixed-price and long-term (3 years), mitigating the impact of crude oil price volatility. They expressed confidence in their three decades of industry experience and technical edge to navigate increasing competition in the growing oil and gas sector.

Standalone EBITDA margins, which have been around 37% in recent quarters (excluding other income), are projected to improve to 40% in coming quarters. This improvement is expected as the production enhancement contract's volume increases. Other income, comprising interest, mutual fund mark-to-market gains, and foreign currency revaluation on overseas receivables, is expected to continue contributing positively for the next two quarters.