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Apollo Pipes Ltd

| Q3 FY26 Earnings Conference Call

NEUTRAL SENTIMENT

Report Source

⬤2nd Feb 26

Summary : Jindal Drilling maintains stable operations, anticipates future demand and higher rig rates, but faces uncertainty from ongoing litigation and significant refurbishment expenses.

Management Perspective neutral : Operational performance was broadly in line with what we had communicated earlier.There has been no major change in the performance.We are conserving cash for the refurbishment exercise.No timeline on legal cases.We don't see any major challenge coming up.

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY26 operational performance was broadly stable.
  2. Other Income was negative due to reversal of a litigation gain.
  3. The ONGC litigation award was appealed to the Supreme Court.
  4. Company is debt-free with cash on books.
  5. All rigs are deployed except one, with efforts to redeploy.

Future Growth Prospects

  1. ONGC is expected to release tenders for multiple rigs soon.
  2. Global demand for rigs is increasing, especially after Saudi Aramco resumed contracts.
  3. Management anticipates higher rig rates in upcoming tenders.
  4. Company is actively exploring international contracts for rig deployment.
  5. Expects around INR350 crores EBITDA in current and next fiscal year.

Management Insights

  1. Operational performance remains consistent quarter-on-quarter.
  2. Reversed previously booked income due to ongoing ONGC litigation appeal.
  3. Conserving cash for upcoming rig refurbishment expenses.
  4. Doubled the dividend paid in the previous financial year.
  5. Aims to secure contracts for dehired rigs as tenders emerge.

Signs of Skepticism

  1. Management provided no specific timeline for the Supreme Court litigation verdict.
  2. No update on acquiring more rigs from group companies like Maharashtra Seamless.
  3. Vague on scaling non-rig services without large capital deployment.
  4. Did not provide specific details on future rig rates, citing market flux.

Risk Factors

  1. Favorable ONGC litigation award appealed to Supreme Court, making income sub-judice.
  2. Three rigs are due for dehiring and refurbishment in FY27.
  3. Rig rates are highly volatile and can change quickly.
  4. A significant $35 million payment is due to the Jindal Pioneer vendor.
  5. No clear timeline for Supreme Court legal cases.

Good To Know

  1. Dry dock refurbishment costs range from INR50-100 crores per rig.
  2. ONGC tenders require a minimum of 3 months notice before rig deployment.
  3. Refurbishment takes approximately 3-4 months after a rig is dehired.
  4. Jindal Pioneer was acquired in March 2025 and is currently undergoing refurbishment.
  5. The company pays a nominal tonnage tax.

Key Drivers

  1. New ONGC tenders expected soon.
  2. Global rig demand is increasing.
  3. Higher rig rates are anticipated.
  4. Limited international competition in India.

Key Analyst Discussions

Competitive Environment

  1. Rig rates depend on crude oil prices, crew rates, and competition.
  2. Saudi Aramco resuming contracts is a positive global trend.
  3. Limited international competition is expected for ONGC tenders due to specific rig requirements.
  4. Company prefers longer 3-5 year contracts in India over shorter international ones.

Market Trends & Consumer Behavior

  1. Management stated they cannot predict oil cycles.
  2. Global demand for rigs is increasing, supporting potential rate increases.
  3. Rates in India were affected by competition in the last tender.

Financial Highlights

  1. Dry dock expenses are INR50-100 crores per rig, amortized over contract duration.
  2. Cash is conserved for FY27 rig refurbishments and a $35 million vendor payment.
  3. Company expects around INR350 crores EBITDA for current and next year.
  4. Dividend was doubled in the previous financial year.

Product Composition

  1. Non-rig services (mud logging, directional drilling) EBITDA bifurcation is available in the presentation.
  2. No concrete plans for expanding services business this year.

Strategic Considerations

  1. Company is bidding for a 4-rig ONGC tender, including Jindal Pioneer.
  2. Actively working on deploying rigs internationally, but Indian contracts are priority.
  3. Refurbishment is necessary after dehiring rigs before new contracts.
Apollo Pipes Ltd (APOLLOPIPE) Concall Report Analysis & Insights | Dhanarthi