Offshore drilling support solutions provider Deep Industries Ltd. is confident of executing the latest order it received from state-owned Oil and Natural Gas Corp. in 10 years. The company had informed the bourses on Sept. 7 that this has been the biggest order that it has received so far.
The Rs 1,402-crore order entails undertaking production enhancement operations in the mature oil fields of ONGC.'s Rajahmundry asset for a period of 15 years.
The company is confident of completing the project in up to 10 years. It will get service revenue as a share of incremental production from the project, according to Rohan Shah, chief financial officer of Deep Industries.
"This particular contract is for production enhancement of their (ONGC) mature fields. With this contract, ONGC wishes to increase their hydrocarbon production to further develop their reserves," Shah told NDTV Profit.
"In that, we can get our service revenue as a share of incremental production. Our expectation is to complete this contract in the range of 10 years itself," he said.
The CFO is confident that ONGC will also award the company other production enhancement contracts in the future. He added that the company will be awarded similar contracts from other public sector undertakings also.
"This is the first round with which ONGC has started production enhancement and we are expecting a few more rounds coming from ONGC itself. Other PSU clients are also coming up with such production enhancement contracts," the top executive said.
According to Shah, the company’s production enhancement business is also likely to have a good Ebitda margin. He added that such contracts are also likely to increase the company’s top line and bottom line.
"Margins will be excellent in the production enhancement contracts. We are operating on a more than 40% Ebitda margin in other verticals. From this particular vertical, we are expecting a good Ebitda margin as well going further. We believe such contracts will help us in improving not only our top line but also our bottom line," Shah said.
According to the company's internal estimates, the revenue from the ONGC contract is likely to accrue in the next financial year or in the next nine to 10 months, he added.
Shah projected that the company’s revenue will grow around 35–39% in the current fiscal and he expects a similar kind of growth in the next two fiscals as well. He said if the company bags more such orders, the percentage of revenue growth could rise.
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