JINDRILL Q1 FY27 earnings call.
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Revenue
₹275 Cr
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EBITDA
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What the record says.
Jindal Drilling reported a "fairly good" Q1 FY27 with results broadly in line with expectations. The key development is the receipt of a new ONGC contract for one rig (Jindal Pioneer) at INR 45.83 lakhs per day, denominated in rupees rather than dollars. The company maintains a robust order book of INR 1,310 crore, with deployment expected in October 2026. However, significant headwinds loom for H2 FY27: three rigs (Discovery One, Jindal Star, and Virtue One) are due for dehiring and will enter 4-6 month refurbishment cycles, causing revenue decline as no income accrues during this period. Management acknowledged that day rates remain under pressure, with the latest competitive bid pushed down from $62,000 to $47,600. Despite refurbishment costs of INR 90-110 crore per rig, the company remains cash-rich and targets a 35% blended EBITDA margin. The ONGC dispute continues in the Supreme Court, carrying potential exposure of INR 160-163 crore if the company loses after 14-15 years of favorable rulings. No acquisitions are planned as management prioritizes redeploying existing assets and conserving cash for refurbishment requirements.
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Guidance to track
- Management reiterated the previously guided target of 35% blended EBITDA margin, which investors can use to model H2 earnings despite revenue decline from three rigs going into refurbishment.
- The rig is currently under refurbishment in UAE through a joint venture and is expected to be completed by the first week of September, with deployment targeted for October 2026.
- Discovery One, Jindal Star, and Virtue One are expected to be rehired within the current financial year following refurbishment, though subject to tender outcomes and customer requirements.
- Management explicitly stated they are not looking at any rig acquisitions and are focused solely on redeploying the three rigs due for dehiring, prioritizing risk minimization.
Risks flagged
- Three out of six rigs will be out of revenue for 4-6 months each in H2 FY27 during refurbishment. Management confirmed absolute earnings will decline in the second half, though EBITDA margins may hold due to higher-margin rigs remaining deployed.
- Despite industry talk of improving conditions, the latest competitive tender pushed day rates down to $47,600 from the company's bid of $62,000. This suggests pricing power remains weak regardless of government exercises like Samudra Mangal.
- Analyst specifically questioned management about a 14-15 year dispute with ONGC now in the Supreme Court. While management assesses the probability of loss as remote, the quantum of INR 160-163 crore (including interest and forex) represents meaningful exposure if the ruling goes against the company.
- A joint venture entity reported a loss in Q1 FY27 due to refurbishment expenses being incurred to bring Jindal Pioneer into the agreed condition per the sale-purchase agreement. This creates volatility in consolidated earnings beyond the core drilling operations.
Key quotes
- H2 revenue will be severely impacted because three out of six rigs would be out of revenue in H2... However, I do not believe that EBITDA will decline in proportion to the decline in revenue... you might even see an increase in the EBITDA margin
- We participated with a rate of $62,000 and we were pushed down to $47,600 approximately... it is the willingness of our customers to pay the correct rate for the kind of service that they are getting compared to the international day rates which are prevalent as of now
- We are not looking at any acquisitions... we want to minimize risk... because these three rigs are getting dehired, they will go into refurbishment. For refurbishment, we need to conserve cash because it's the nature of this industry that refurbishment exercise has to be undertaken after every contract
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