Deep Industries (DIL)

(Pankaj_Ag) #163

I recently sold all my holdings in Deep Industries because of the following reasons

  1. ONGC has put Deep industries in ban for 2 years (Source:- as per data on ONGC’s website)
  2. Deep is not co-operating with CRISIL in providing the required data. Is this due to fear of possible downgrade? (Source:- Latest note released by CRISIL)
  3. Balance sheet is missing from the Q3 FY18 results.I am not sure if this is a regular practice but this has invoked scepticism in my mind as to why would a company not present it’s balance sheet along with the earning statement. I feel an earning statement which is not accompanied with a proper balance sheet is meaning less.

Request members here to clarify my doubts if they have any information that I might have missed.

(Alok Bhola) #164

You seem to be mixing up between Deep Industries Ltd (the Oil & Gas Company) and Deep Industries (a partnership firm into Industrial Paints business) - two altogether different entities. The CRISIL Notes dated 22-Jan & 30-Jan refer to Deep Industries (the partnership firm). The following is clearly mentioned in the note:

“Established in 2002 as a partnership firm by Mr. Dinkar Thakkar and his family members, DI manufactures industrial paints at its facility in Kutch.”

Deep Industries Ltd (the Oil & Gas Company) continues to have A- rating.

The relevant regulation requires Companies to provide balance sheet only for Q2. Hence most Companies do not provide balance sheet for Q1 and Q3 (though a few, mostly large Companies do provide the same voluntarily).

That’s old news. The matter is sub-judice. In any case this concern is already reflected in the price - it seems to be the main reason why it’s available at a P/E of 8, having fallen 40% over the past few months.

(Jagan Mohan) #165

Oh that’s great clarification. Hope the business is recognized for what it
Wonder how easy it is for any company to replace it!

(Pankaj_Ag) #166

@AlokBhola Thanks for the clarification. Do you think one should enter at current levels?

(Vanshik Gupta) #167

I mailed to company secretary and he sent me after one week.

(ASG) #168

Stock’s only moving down. Management was pretty confident on future outlook in the latest earnings call. Any negative news or fundamental change causing this slide?

Disclosure: Invested

(vikrantmehta888) #169

Stock is trading at almost book value of Rs 140. Can one see a value in the stock at this price?

(kauban) #170

looks like ONGC lost a similar case in the past where it arbitrarily blacklisted another contractor.

(harshb232) #171

Book value want count much here because assets owned by deep are specific assets.

(Vanshik Gupta) #172

Assets whether held specifically or not will be owned and shown as assets of the company. Assets have their own value even thought high depreciation will be charged because of the nature of the industry.

(harshb232) #173

What I mean by specific assets is that if you liquidate such assets you will fetch very less value as compared to there book value because this assets cant be used for any other purpose .

(harshb232) #174

Further, from What I can see from the list of Blacklisted companies on ONGC website, I could find that there are 2 Bans imposed. I could not figure out the reason. Does anyone has a idea about this?

(kauban) #176

I think one of the bans is specifically by the Rajahmundry Asset (Sl No 319 in the list), while the more recent one seems to be ONGC wide (Sl No 324).

What is confusing is that although the first ban (319) was invoked on 03.08.2017, the same Rajahmundry asset went ahead and awarded them another contract for gas compression in Sep, although they have removed the ban on their website due to court stay order dated 22.01.2018.

they also won another gas compression contract from Ankleshwar asset in Sep 2017 after the ban was imposed.

From this it seems this ban originally imposed by Rajahmundry asset on Deep relates to Gas Dehydration only.

Also seems that after the court order revoking the above ban, ONGC has found other ways to impose a 2 year ban. I have not yet been able to find out any details on what this is about. Looks like there is now a “deep” prejudice at senior levels within ONGC against Deep! Since this 2 yr ban in Oct 2017, I cannot recall Deep winning any tender from ONGC.

(kauban) #177

I did a bit more digging and found some background related to the dispute.

Deep sources their Gas dehydration equipment from a company in US named Croft Production Systems (CPS).

In addition to sourcing, as is typical when you buy industrial machinery, Deep’s contract would also involve CPS providing installation, commissioning and initial stabilising services. In their tender docs they claimed that M/s Croft Production Systems had the necessary expertise in this field (which certainly seems to be the case from their website at least but I am no O&G professional, maybe someone who is could opine). 2 years after Deep started executing the contract, ONGC vigilance department raised an objection claiming that CPS did not in fact have the read expertise based on which Deep was awarded the contract. Hence they terminated the contract. In addition, they also placed a claim to reduce the billing for those contracts and asked Deep to pay a sum of 67 Cr on account of excess payments recd so far on these contracts. This was contested by Deep and their petition has been accepted by the court.

(harshb232) #178

I also haven’t heard of deep winning any order in gas dehydration from ONGC. Further for the rig business order sizes are very small. Further long term relationship with ONGC is completely tarnished. Until deep wins a order from ONGC in gas dehydration and also gets delisted from blacklisted firm, it would be very risky to put money.

(paresh.sarjani1) #179

Guys… ONGC disputes keep on going and coming.
Moreover company is banned only for certain period.
Court resolution is due in month or so according to last Concall. So then it would be clear.

Interesting part is opening of international branch. I am eagerly waiting on international orders. One international order and this. company will be in other league all together.

(harshb232) #180

The problem is that there majority of orderbook is from ONGC and if ONGC blacklists them along with court ruling that they need to pay 67 crores back to ONGC then company is badly screwed. Further the mangement in there Q3 concall had told that decision will come in 1 to 2 weeks which has yet not happened. So it is better to wait and invest once there is a clarity.

(paresh.sarjani1) #181

These orders are only for next 2-3 years. And they have started looking for international assignments as well… management has been trustworthy till date…
i am just betting on new clients here… and not ONGC.
Crude is also moving higher which can improve order books…

and Concall mentioned 2-3 months and not weeks for the judgement i believe.
so let’s keep fingers crossed :slight_smile:

(harshb232) #182

In the last concall someone had asked “Our hearing has not taken place since decemeber,so when can we expect the hearing” to which the management replied that we expect it in next 1 to 2 week (Page 6 of concall transcript). Now its narly 2 months and still there is no progress. Further no contracts have been awarded by ONGC in gas dehydartion after the implication of Ban.

(harshb232) #183

Promoters have been found guilty of Insider Trading. Linked Attached