Jindal Drilling

Jindal Drilling's Q3 FY26 financial performance was significantly affected by the reversal of an approximately INR 100 crores income. This income, related to an old litigation with ONGC, was previously booked after a favorable Bombay High Court award. However, the matter has since been appealed to the Supreme Court and is now sub-judice. Consequently, the company's auditors and Board decided to reverse the income, leading to a negative 'Other Income' line item in Q3 FY26 and impacting the bottom line, despite operational performance remaining broadly in line with expectations.

The company reported that its operational performance for Q3 FY26 was consistent with prior communications. Management reiterated its expectation to achieve an EBITDA of approximately INR 350 crores for both the current fiscal year (FY26) and the next (FY27). All rigs are currently deployed except one, and the company is actively working to secure new contracts for rigs that will be dehired, including Jindal Pioneer which is currently undergoing refurbishment.

ONGC is expected to release another tender for 4 rigs soon, and Jindal Drilling is actively participating in current tenders, including one for Jindal Pioneer. Management noted a past shortfall of rigs and anticipates aiming for higher rig rates in upcoming tenders, as previous rates were deemed unfeasible. The company believes it faces limited international competition for ONGC tenders due to the specific technical requirements for rigs in the Indian market, which would be costly for international players to meet.

Jindal Drilling maintains a debt-free and cash-rich balance sheet. However, the company is conserving cash for significant upcoming expenditures. These include refurbishment costs for 3 rigs scheduled for dehiring in calendar year 2026, with each refurbishment estimated to cost between INR 50 crores to INR 100 crores. Additionally, an approximate $35 million payment is due to the vendor from whom Jindal Pioneer was acquired. Despite being cash-rich, the company is prioritizing these operational needs over immediate buybacks, though it did double its dividend in the previous financial year.

The Jindal Pioneer rig, acquired in March 2025, generated revenue until October 2025 before entering refurbishment. This refurbishment process typically takes 3 to 4 months after a rig is dehired and is undertaken to prepare the rig for subsequent contracts. The expenditure for refurbishment is amortized over the duration of the new contract rather than being booked upfront. Management emphasized that all considerations, including refurbishment timelines, are factored into their bidding strategy for new contracts.

Management indicated a focus on securing longer-term contracts (3 to 5 years) within India, although they are also exploring international opportunities. They are not currently pursuing new services businesses like boats or other offshore activities, instead concentrating on re-contracting the existing rig fleet. The company acknowledged the volatility of rig rates, which can fluctuate rapidly, but expressed optimism for gradual rate increases in the Indian market given the specific demand and limited competition for ONGC's requirements.