My sincere apologies for the delay in updates as was a little unwell.
First of all QUIPPO case is closed. After that only ONGC order was issued. - This was a major concern for many, so there are no legal hurdles going forward.
1. As per management interview on CNBC the total capex needed is 100Cr to execute the large ONGC order. How is the funding being planned and how much of it is tied up?
Ans: 70Cr will be debt and 30cr will be promoter funding (Promoter brought in money by preferential allotment late last year). Please note that this loan will be cleared by the time ONGC order execution is over.
2.How much additional working capital requirement do we have for such larger execution?
Ans: They are negotiating with banks for a term loan of 70cr plus some additional limits. Interest rates still being discussed. It can be roughly around 13%.
3.Equity Dilution: Do we still have plans to issue additional equity or it’s going to be debt only?
Ans: No immediate plans for QIP. However, if new orders do come then this option may be looked at.
4.ONGC order is a huge game changing order for the company. Did we compromise significantly on the margins to win this order or it’s around our historical margins only?
Ans: The historical EBIDTA margins for the company have been 30-35%. However, due to the size of the order company has decided to reduce it. It will be of the order of 25-27%.
1.As per AR of FY14 company owned 5 crews. Now he there is a need to have 10 crews. How is
the ramp up proceeding? How difficult it is to double the scale so quickly?
Ans: Equipment has been ordered already. Crew is also being added including foreign crew.
2.AR of FY16 mentions that foreign crews will be added to execute the ONGC project. Is it going smooth as planned or there are some challenges? Also, will there be a significant rise in expenses due to foreign crew?
Ans: There is an availability of global crew at much cheaper rates due to subdued condition in global seismic markets. The crew is available at even slightly lower cost that was factored in.
- I understand OIL tender (NSP) is expected to open up in October. It seems there are four bidders. Do you see the competitive intensity increasing for future orders?
Ans: They will not be bidding for new orders till Dec ’16.They wish to stabilize the execution of the large order first. They would review the situation later and then decide when to bid for new orders.
2.Any new order overseas?
Ans: Currently Myanmar is the only country for global. However, after this ONGC order execution, company will be in a position to bid for global orders.
3.Do we have any plans to foray in offshore seismic survey?
Ans: There are no plans to enter into offshore but there are plans to enter into shallow water area.
Related Party Orders:
- Aquila Drilling Private Limited - Company owned by A Rajesh (Non Executive Director) has been getting a significant part of order for drilling and survey for last several years. Any reason?
Ans: This Company is specialized in mountain drilling. Most of the times they were the single vendor for such a specialized job.
Some other sound bytes:
Company is very lean. There are only 119 permanent employees. They will scale it up to 140.
Alphageo got 27000LKM while a Russian company got 9000LKM order out of the ONGC order.
ONGC contract revenues to be linear over next 3 yrs.
OALP(Open Acreage Licensing Policy) is coming in 2019 and will allow companies to bid anytime during the year.
Overall I was very impressed by the management. Mr. Dinesh Alla was very open and patient in answering all the question. it seems he is very pragmatic person and is well aware of challenges of such a larger order. Overall my confidence has moved few notches after talking to him.
@bandlab1 please do add if I have missed anything.
Disc: Alphageo forms more than 10% of my portfolio. No buy/sell in last 90 days.