Jindal Drilling And Industries Limited — Q3 FY25 earnings call

Call held 29 Jan 2025

Management summary

Jindal Drilling & Industries Ltd. reported a strong Q3 FY25, with significant growth across key financial metrics, primarily driven by the deployment of the Jindal Supreme rig. The company's net cash position strengthened to INR101 crores. Management is actively pursuing the acquisition of Jindal Pioneer, which is expected to further boost earnings, while also addressing the upcoming contract decision for Jindal Explorer and navigating regulatory hurdles for the Pioneer acquisition.

Highlights

  • Revenue improved by 39% to INR254 crores in Q3 FY25, driven by Jindal Supreme deployment.

  • EBITDA increased by 161.29% from INR31 crores to INR81 crores in Q3 FY25.

  • PAT increased by 206.25% from INR16 crores to INR49 crores in Q3 FY25.

  • EPS increased by 240% from INR5 per share to INR17 per share in Q3 FY25.

  • Net cash position doubled in last 9 months from INR51 crores to INR101 crores, indicating strong liquidity.

  • Jindal Supreme rig successfully deployed with ONGC on October 15, 2024, contributing to improved earnings.

Concerns

  • Potential de-hiring of Jindal Explorer in May or September 2025, with a decision expected by March 2025.

  • Delay in the finalization of Jindal Pioneer acquisition due to regulatory approvals and customer consent, despite shareholder approval in March 2024.

Key financials

  1. Revenue ₹254 Cr +39%QoQ
  2. EBITDA ₹81 Cr +161.3%QoQ
  3. PAT ₹49 Cr +206.3%QoQ
  4. EPS ₹17 +240%QoQ
  5. JV Profit ₹17 Cr
  6. Depreciation ₹26 Cr

What they filed

Q1 FY27: revenue up 8.3%, net profit down 7.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue172 239 245 254 238 +38%242 +1%263 +7%275 +8%
EBITDA31 81 87 107 93 +200%72 −11%78 −10%104 −3%
Net profit16 49 53 56 121 +656%-37 −176%32 −40%52 −7%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex Capex disclosed
    • Acquisition of Jindal Pioneer rig $75 Mn
    The only capex which we are doing is acquisition of Jindal Pioneer, which is expected in this quarter.
  • Debt Gross ₹156 Cr · Net ₹101 Cr
    If you refer to Slide 11 of our earnings presentation, gross debt on 31st December '24 is INR156 crores. Cash available with the company is INR257 crores, giving a net cash position of INR101 crores.
  • M&A Jindal Pioneer Acquisition · Pending regulatory · Consideration ₹[object Object] (cash)

    Consolidating rigs into Jindal Drilling to improve earnings and margins.

    Earnings will improve additionally on acquisition of the said rig; margins will increase further.

    Further, we are in the final stage of acquisition of Jindal Pioneer. Our earnings will improve additionally on acquisition of the said rig... The purchase price is $75 million.
  • Liquidity Cash ₹257 Cr Net cash position doubled in last 9 months from INR51 crores to INR101 crores.
    Our net cash position has doubled in last 9 months from INR51 crores to INR101 crores. Cash available with the company is INR257 crores, giving a net cash position of INR101 crores.

Guidance & targets

Profitability

  • Stand-alone EBITDA run rate Profitability · next 4-5 quarters · High confidence December '24 quarter level
    But EBITDA -- stand-alone EBITDA run rate, which we have achieved in December '24 quarter should be taken as a base for the next 4, 5 quarters, because all additional developments that will happen will only add further to the earnings of Jindal Drilling.

    — Kaushal Bengani

  • Margins Profitability · Post Jindal Pioneer acquisition · High confidence Increase
    Yes, definitely. And margins will increase further once the acquisition of Jindal Pioneer goes through.

    — Kaushal Bengani

Revenue

  • Q4 FY25 Revenue Revenue · Q4 FY25 · High confidence Higher than INR239 crores
    Revenue for Q4 will be higher than INR239 crores, because Jindal Supreme will be working for 90 days.

    — Kaushal Bengani

M&A

  • Jindal Pioneer Acquisition Completion M&A · this quarter · Medium confidence Completed
    We are in the final stage. It is also in our best interest to ensure that this transaction gets concluded within this quarter.

    — Kaushal Bengani

Industry Outlook

  • Oil & Gas Industry Cycle Duration Industry Outlook · Future · Medium confidence Longer than before
    It will be a longer cycle, especially because of the political change that has taken place in the US with the new government wanting to improve drilling operations. We believe the cycle will be longer than before.

    — Kaushal Bengani

What to watch in Q4 FY25

Jindal Pioneer Acquisition Completion

this quarter
Current In final stage, pending regulatory opinion and customer consent
Target Acquisition completed

Why it matters

This acquisition is a key growth driver, expected to significantly boost earnings and margins upon completion.

We are in the final stage. It is also in our best interest to ensure that this transaction gets concluded within this quarter.

Risks & concerns

  • Securing contracts from ONGC

    high

    The ability to secure new contracts from ONGC is identified as the primary business risk, as all other operational aspects are manageable once a contract is secured.

    Management acknowledged

  • Potential de-hiring of Jindal Explorer

    medium

    The contract for Jindal Explorer is set to conclude in May 2025, with a decision on its extension or de-hiring expected by March 2025, posing uncertainty for its future deployment.

    Management acknowledged

  • Delay in Jindal Pioneer acquisition

    medium

    The acquisition of Jindal Pioneer is facing delays due to regulatory navigation and the need for customer consent for the change of ownership, despite shareholder approval obtained almost a year ago.

    Management acknowledged

Q&A highlights

5 direct, 1 evasive
Jindal Pioneer acquisition timeline and impact on PAT Partial
We are in the final stage. It is also in our best interest to ensure that this transaction gets concluded within this quarter.

Analyst sought confirmation on the acquisition timeline and its specific financial impact, which management confirmed for timeline but not specific PAT numbers.

Asked by Nirvana Laha

Jindal Explorer contract extension decision timeline Direct
Usually, it gets communicated a couple of months before the conclusion of 3 years of the contract. So if it was deployed in May 2022, then by middle to end of March 2025, we should have definite confirmation as to whether it will get de-hired in May or whether it will get de-hired in September.

Provides a clear timeline for a decision on the future of a key rig's contract, impacting future revenue.

Asked by Nirvana Laha

Impact of ONGC's contract with BP Exploration on Jindal Drilling Direct
This is a clear indication that ONGC wants to increase exploration activities. And the fact that they have issued a press release means that further capital expenditure in the oil and gas sector is expected. This is a strong tailwind indicator for all oil and gas players.

Highlights a significant positive macro development that could drive future demand for drilling services.

Asked by Nirvana Laha

Breakdown of JV profit from Jindal Pioneer Evasive
We are not giving that out specifically. There are only two joint venture companies that are consolidated within Jindal Drilling. One of them owns Jindal Pioneer. That rate is known. And the other one owns Virtue-I, that rate is also known. I think, you can do the calculation. The consolidation is at 49%, which is the equity ownership of Jindal Drilling in each of these joint ventures.

Management declined to provide specific segment-wise JV profit, making it harder for analysts to model the individual impact of Jindal Pioneer.

Asked by Diwakar Rana

Strategy for acquiring rented rigs and future growth drivers Direct
Most likely, we will go ahead with the consolidation exercise that we started in 2019 and try to acquire the rigs which are on rent to Jindal Drilling, because we know those rigs. We know their technical capabilities. The other reason is that creation of value only happens when assets are brought into the company, and we are mindful of that.

Clarifies the long-term strategic intent to consolidate assets for value creation and operational control.

Asked by Udit Sehgal

Reason for delay in Jindal Pioneer acquisition Direct
There is no problem as such. It is only the gamut of regulations that we have to navigate... However, since almost a year has elapsed now we don't require the approval, the application for approval has become infructuous. That is our reading of the matter. We are taking an opinion on it.

Provides detailed insight into the specific regulatory and procedural hurdles causing the delay, and the company's current approach to resolve it.

Asked by Manikant

Outlook on the current oil and gas industry cycle Direct
The up cycle in the oil and gas industry started after the Russia-Ukraine war, in February 2022... It will be a longer cycle, especially because of the political change that has taken place in the US with the new government wanting to improve drilling operations. We believe the cycle will be longer than before.

Offers management's perspective on the macro environment, suggesting a sustained positive cycle for the industry.

Asked by Dikshant

3 min read 7 chapters

Detailed narrative

Q3 FY25 Performance Overview

Jindal Drilling & Industries Ltd. reported a robust Q3 FY25, with revenue improving by 39% to INR254 crores compared to Q2 FY25. EBITDA saw a significant increase from INR31 crores to INR81 crores, while PAT surged from INR16 crores to INR49 crores. Consequently, EPS rose from INR5 per share to INR17 per share. This strong performance was primarily attributed to the deployment of the Jindal Supreme rig, and the standalone EBITDA run rate from December '24 is expected to serve as a base for the next 4-5 quarters.

Jindal Supreme Deployment & Impact

A key driver for the Q3 FY25 results was the deployment of the Jindal Supreme rig with ONGC, which commenced operations on October 15, 2024. The rig operated for 75 days in the quarter, contributing materially to the improved financials. Management expects the full impact of Jindal Supreme's 90-day operation to be reflected in Q4 FY25, projecting higher revenue than the INR239 crores reported in Q3 FY25, further enhancing the company's earnings.

Jindal Pioneer Acquisition Update

The company is in the final stages of acquiring Jindal Pioneer, a rig currently owned by a joint venture, for a purchase price of $75 million. This acquisition, for which shareholder approval was obtained in March 2024, is targeted for completion within the current quarter (Q4 FY25). The delay has been attributed to navigating regulatory requirements and obtaining customer consent for the change of ownership, with the company currently seeking legal opinion on the matter.

ONGC Strategic Initiatives & Industry Outlook

ONGC's recent press release on January 9, 2025, announcing the hiring of BP Exploration (Alpha) Limited to enhance production from Bombay High, was highlighted as a strong positive tailwind. Management views this as a clear indication of ONGC's intent to increase exploration activities and capital expenditure in the oil and gas sector. The broader oil and gas industry is perceived to be in a prolonged up-cycle, potentially longer than previous cycles, driven by global political shifts favoring increased drilling operations.

Rig Fleet Management & Consolidation Strategy

Jindal Drilling currently operates five offshore jack-up rigs with ONGC and provides mud logging and directional drilling services. The company's long-term strategy involves gradually consolidating rented rigs into Jindal Drilling's ownership, having successfully acquired two rigs in 2019 and 2021. This approach aims to create value by bringing technically known and efficient assets under direct control, while also being open to acquiring suitable rigs at competitive rates from other markets, provided it makes economic sense.

Capital Structure & Liquidity

The company's net cash position significantly improved, doubling from INR51 crores to INR101 crores over the last nine months. As of December 31, 2024, gross debt stood at INR156 crores, with cash available at INR257 crores. This strong liquidity position is being conserved to fund the acquisition of Jindal Pioneer, which is expected to be a cash transaction. Management confirmed that the Jindal Pioneer rig itself carries no debt.

Jindal Explorer Contract & Refurbishment

The contract for Jindal Explorer is set to conclude in May 2025, with a decision on its extension or de-hiring expected by late March 2025. Tendering for a new contract has been submitted, and management noted that even if de-hired, a 6-month gap would be needed for refurbishment. Refurbishment, a major overhaul required for safety and contract compliance, typically takes 4-6 months and is necessary to meet certifying agency criteria for continuous 24/7 operation over a three-year period.

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