Expect 40% rise in consolidated income in FY17: Jindal Drilling

Jindal Drilling, which has had a weak March 2016 quarter with total income falling 32 percent to Rs 79.2 crore from Rs 116.5 crore (YoY), expects its performance to be much better in the first three months of FY17, according to Chairman DP Jindal.He told CNBC-TV18 that the company expects to clock a 40 percent growth in consolidated income to Rs 600 crore in FY17 from its drilling and rigs businesses. The company had a consolidated income of Rs 430 crore in FY16. He expects margins to increase from 52 percent in FY16 and said margins in rigs business may vary by 10 percent on account of repairs.Below is the verbatim transcript of DP Jindal’s interview with CNBC-TV18's Sonia Shenoy and Latha Venkatesh.Sonia: Can you start by telling us how the operational activities are expected in FY17 and what could the growth look like compared to what you have done in FY16?A: Jindal Drilling is in this year doing good. We had other than directional drilling we had one rig which was operated by Jindal Drilling offshore. Recently we had put another rig deployed with ONGC. So, our performance will be much better.Latha: Our research team had a question to you on your numbers. You report quarterly numbers standalone and at the end of the year you give us consolidated numbers. But there is a lot of difference between standalone and consolidated. For instance sales of standalone is Rs 320 crore, consolidated is Rs 433 crore. In terms of profit your standalone is Rs 30 crore, your consolidated is Rs 127 crore, that is a goodish bit. What is in the consolidated that is not in the standalone?A: Jindal Drilling is in the services with ONGC. It does not own the rigs. The rigs are owned by Singapore company where Jindal Drilling is 49 percent stakeholder. So, the profit in Singapore is consolidated. It is the first time we are consolidating the Singapore profit.Latha: But you are 49 percent, you still consolidated?A: We have taken only 49 percent of the share of the Singapore company.Sonia: So, how many rigs does the Singapore company own currently and how many of them are deployed?A: Singapore company has got two rigs which is already deployed with ONGC. But Jindal Drilling is the operator. I mean, is charter hired from Singapore and operating with ONGC. So, Jindal Drilling will get only the service charge.Latha: So, can you tell us what are the day rates for the rigs and what are the service charges that you make?A: Say, around last contract was around 1,20,000 dollars per day.Latha: That is for the rigs?A: That is the total contract. So, Jindal Drilling keeps 20,000 dollars for services and around USD 1 lakh is paid to Singapore for repayment of the assets with the bank and others.Sonia: Your short term borrowings have gone up this time to around Rs 250 crore this year versus Rs 160 crore in FY15. Any pressure that you are facing there?A: Yes, because the second rig which we have deployed that Jindal Drilling has financed that rig partly. So, we have borrowed the funds.Sonia: So, how much is the total debt on the books now?A: Maybe around Rs 40-50 crore, exact figure I don't know.Latha: But you all have given long term loans, it has risen from around Rs 212 crore to Rs 365 crore?A: Those are to the joint venture companies in Singapore.Latha: The ones that own the rigs?A: Right.Sonia: Also can you tell us a little bit about non-current investments? They have gone up to about Rs 730 crore from Rs 503 crore. What are these non-current investments exactly?A: We had surplus funds, so we have put in mutual funds.Latha: You have debt and you have given loans and you have money in mutual funds. Why wouldn't you retire your debt?A: Because it was just a temporary debt when the rig was coming. So, the Singapore company will be financed by the bank and returning this loan.Latha: But it is hurting your profit. In the fourth quarter your profit has fallen to Rs 4 crore.A: Temporarily, but we have deployed another rigs. So, more income will be coming.Sonia: So, tell us what the income will be in FY17. In FY16 your total income was about Rs 430 crore. What are we looking at in FY17?A: Around Rs 600 crore.Latha: This is for drilling?A: Drilling has got 2-3 segments.Latha: Rs 600 crore is for Jindal Drilling?A: Yes, company.Latha: And the rig company will get how much?A: Actually the total income is going to the rig company. 20 percent remains here, balance is going there. This is the total turnover. Whatever we get from ONGC we get in Jindal Drilling.Sonia: So, you are saying from Rs 430 crore the revenues will grow to Rs 600 crore. That is a 40 percent jump that you are looking at in FY17. What could be the trigger for that?A: The net profit?Sonia: No, what would lead to that 40 percent jump?A: Another Rs 200 crore turnover means Rs 20 crore additional profit.Sonia: What about the margins. Your margins too have gone up to 52 percent in this year gone by. What kind of growth are we looking at there?A: The rig business there is a variation. Sometimes the rig goes for repair. So, there will be a fluctuation. If you say annual based, there will be 10 percent increase on the past.