Jindal Drilling - Beneficiary of a sustained offshore upcycle?

Stock Opportunities
21

hello everyone.

While going through annual report for FY 24 i came across below

image
image781×442 61.7 KB

I have below queries. requesting members to please help in understanding these details.

  1. The net asset mentioned are only 49% asset of JV.(Attributable to Companies shareholding?
  2. If so, it means 49% of rigs is valued around 200Cr . hence complete RIG book value may be around 400Cr. This seems pretty low. (Jindal is paying 650Cr for 51% of Rig. How come its own share is only worth 200Cr). What am i missing?
  3. Profit from Virtue Joint venture for FY24 is only 5.4Cr (I understand its only for 2 Quarter). Still it seems pretty low (2.7Cr/Q). So if Jindal will buyout Virtue, it may only add 10Cr annually?
    4)Is there any source to go through reports of JV in more details?
    Disclosure: Invested
23

Jindal Drilling is not purchasing the 51% remaining stake in the JV. It is purchasing the asset owned by the JV outright for USD 75mn (Jindal Pioneer). So Jindal Pioneer as a whole is valued at 75mn USD (INR 630 Cr). Considering that this is a rig built in 2013, a 75mn USD valuation sounds very fair (Considering new build rigs are costing 250-275mn USD).

Once JV is paid this 75mn USD by Jindal Drilling, it will pay back 30mn USD loans that it owes to Jindal Drilling. So the net cash outflow for this purchase for the company will only be USD 45mn (INR 380Cr)

image
image615×666 70.1 KB

Also, once purchased, Jindal Pioneer will add INR 100Cr EBITDA and cash flows to Jindal Drilling’s P&L and balance sheet as per the current contract in Mexico.

image

Currently, since the Discovery JV is not consolidated in Jindal Drilling’s financials, the Jindal Pioneer asset does not contribute any EBITDA to Jindal Drilling. At a PAT level it contributes between 8-10Cr INR per quarter right now. Post asset purchase, this should double to 16-20Cr INR per quarter.

This purchase is financed completely by internal cash flows. For a net cash payout of INR 380 Cr, the company recovers ~INR 100 Cr cash each year from the asset’s operations. These terms for purchase seem to be as good as minority shareholders could have hoped for.

9 Likes
24

Thanks a lot for the response.
If JV is paid 75 mil for Rig, wouldn’t Jindal receive half of sale proceed being 49% owner?
I thought 75M is for the 51% ownership of rig.
Sorry if these seems immature questions

25

Post the transaction, the JV’s books will likely have 400Cr equity and 400Cr assets (of which 340Cr approx should be cash).

Jindal will have 49% share of the balance sheet of the JV. I don’t think the JV owns any assets apart from Pioneer. If the JV is wound up, then Jindal’s share of cash will come back to it.

7 Likes
26

great understanding.

27