Q&A the Deep Management:
1.What is the current order book? What is the quantum of order for which we have bid and are L1?
Ans: 845Cr as on 1st July. No tender has been opened since then.
2.Can we get a split of first time orders and repeat orders?
Ans: We don’t have a split. Recent GDS (Gas Dehydration Services) and Drilling Rig Services are first time orders. In case of Gas Compression and Work Over Rig it is a mix of both.
3.Deep has grown 70% in FY16. You have already guided for a similar growth in FY17. What is the projected growth rate from FY18 and beyond based on the current order scenario?
Ans: The high growth is due to the big orders won in GDS and Drilling Rig Business. This is primarily an order book driven business. However, FY18 growth can be 20-25% if we assume no new order.
4.According to their AR16, they had LT unsecured loans worth 42cr, which was not there last year. Going ahead, will they need to increase their unsecured borrowings? And will they be forced to pledge shares
for incremental borrowings?
Ans: LT unsecured loans worth 42cr has been infused as quasi equity as margin towards capex of new projects. If there is no additional capex in FY17, this loan will be reduced. We do not see any situation going forward where we need to pledge our shares.
5.Being in growth phase do you wish to maintain a low dividend payout ratio?
Ans: Not necessary. We increased the payout to 15% from 10% last year. In future we may look to increase it further.
6.How much of the capex is funded by internal cash vs the dilution? When is this trend going up in favour of more cash as business is generating cash?
Ans: Future capex depends on award of contracts. Our entire capex plan is based on confirmed order. Hence it’s difficult to say the exact proportion at this point of time.
7.Coming to the QIP, when do they plan to do it and how much equity will we be raising?
Ans: Last year we attempted QIP but couldn’t get through because of valuation. This year we do not have any plans for QIP, as majority of capex has been managed with bank debt and internal accruals.
8.Keeping the current market environment in mind, do they not want to do it at the earliest?
Ans: We believe still we aren’t getting correct valuation of our stock, hence as of now we are not keen to go for QIP.
9.In the last conference call it was told by management that gas dehydration, rigs services asset turns at 0.8 while for gas compression it is 0.6. But as per balance sheet numbers its 0.3. Can you please
do let us know how it is being calculated?
Ans: We need to check this because as per our understanding Receipt of almost 100Cr from Gas Compression Services in FY16 on a fixed asset of 183Cr comes to asset turn of 0.55
1.What is the progress made at the Prabha Energy CBM block and how much revenue/profit will it be adding to the firm? What is the margin in this business? Also, just to understand the business better, how much capital has been deployed into this business over the years and what is the IRR? CBM clearly seems to be next vertical that we are focusing on.
Ans: We are in active discussion with one of the PE fund for investment up to $20 Million in PEPL and till the time of signing the term sheet, we will not be able to share any more details.
2.When can we expect the divestment of 40% on one CBM block in Prabha Energy to complete? What is the expected value? What is reason for divestment and do we have any more divestment plans?
Ans: As above.
3.In the last concall, it was mentioned that the company is expecting to do capex worth Rs350 odd crore in the next two years. Could we have a rough break down of this expected capex by vertical? How much would be used for the Prabha CBM block?
Ans: As above.
4.We understand that there are plans to relinquish the remaining 2/3 blocks? Are they unviable?
Ans: Not exactly. We have surrendered one of the CBM blocks of Godavari North, as PEL was not through due to overlapping issue in between MOPNG & Coal ministry in the said block.
5.In the AR, it is mention that going ahead, they will be looking to acquire oil and gas acreages. Any colour on that front?
Ans: It’s a general statement where we may look for better opportunities like CBM North Karanpoura in our subsidiary PEPL.
1.As of now how much % of total gas going through the national grid is being dehydrated? By when the rest of the gas is expected to be dehydrated? Is there any statutory deadline for the same?
Ans: No such data is available in public domain. There are number of tenders are expected to come out for various assets.
2.Besides ONGC who are the other prospective customers for dehydration and how much is the opportunity size?
Ans: Besides ONGC, Oil India and Cairn Energy are prospective customers for dehydration. Opportunity size is difficult to spell out as of now.
3.Are there any private players (eg. Crain energy), who can be a prospective customer? What is the size of opportunity and by when we can expect movement in this direction?
Ans: As above.
4.Who are other players in dehydration business? What is our market share in onshore dehydration?
Ans: DIL is the only company who has successfully mobilised GDU plants at 9 different locations. DIL has been awarded 3 contracts out of total 5 awarded so far.
Thanks to @bandlab1, @VB1 and @Meetesh for getting a decent list of questions.