Shares of Deep Industries Ltd., a leader in providing oil and gas support services, have been in the spotlight after the company received a significant order from Oil and Natural Gas Corporation Ltd. (ONGC). The company was awarded a ₹90.7 Crore contract for the charter hiring of a 100MT Workover Rig, a deal that is expected to bolster Deep Industries’ position in the highly competitive oil and gas sector. The contract with ONGC, one of the largest state-owned oil and gas companies in India, marks a major milestone for Deep Industries and presents a major opportunity for growth and financial stability in the long run.

Price Action

Deep Industries Ltd. recently experienced notable price movement in the stock market. On Monday, the shares closed at ₹562.50, a 4.69% drop from the previous trading session’s close of ₹590.15. This price action came after the company had experienced an impressive bull run, rising approximately 14% over the last four trading sessions. The stock reached a peak of ₹599 on January 3, 2025, reflecting positive investor sentiment and the anticipation surrounding the company’s recent contract wins.

However, after the announcement of the ONGC deal, the stock experienced a 5% drop in the subsequent trading session, likely due to profit booking. This is a common occurrence when a stock sees an initial surge in price following good news, as investors who expected the news may sell off their shares to lock in profits. While such volatility can be unnerving, it’s important to keep in mind that this is a temporary dip, and the long-term outlook for Deep Industries remains strong, with the company’s solid order book and financials supporting its growth trajectory.

What Happened?

The major news driving attention to Deep Industries is the awarding of a ₹90.7 Crore contract from ONGC. The contract is for the charter hiring of a 100MT Workover Rig, which will be used at ONGC’s Assam Asset for a duration of seven years. This long-term contract highlights the growing demand for Deep Industries’ expertise in oil and gas services and the trust ONGC places in the company to handle critical operations.

For Deep Industries, this order represents a strategic win and strengthens its long-term relationship with ONGC, which has been a loyal customer for years. The seven-year contract duration provides the company with stability and a reliable revenue stream over an extended period. Moreover, the size and value of the contract demonstrate the growing need for oil and gas service providers that specialize in high-quality, efficient field maintenance, and well-servicing operations.

Although the stock witnessed volatility in the short term, with a drop of 5% following the news, the future prospects of Deep Industries remain solid. The contract win and the significant order book value indicate a positive growth outlook for the company.

About Deep Industries Ltd.

Deep Industries Ltd. is an established leader in providing a wide range of oil and gas field operations and services. The company has a strong market presence and is known for offering well-servicing operations, field maintenance, and other key services that support the post-exploration value chain in the oil and gas sector. The company’s ability to provide end-to-end solutions to its clients has helped it build long-term relationships with industry giants like ONGC, OIL, GAIL, ESSAR, GSPL, and Reliance Infrastructure.

One of Deep Industries’ distinguishing features is its expertise in well-servicing and field maintenance operations, which enables it to cover more than 70% of the post-exploration value chain. The company’s experienced workforce, domain expertise, and global presence give it a competitive edge in an increasingly globalized market. With such an extensive range of services, Deep Industries is well-positioned to expand its footprint and capture more opportunities within the energy sector.

Financial Performance

Deep Industries has posted consistent financial growth in recent years, supported by long-term contracts with major clients. In Q2 FY24-25, the company reported an impressive 29% increase in revenue, rising from ₹101 Crores to ₹131 Crores. The company also saw a significant increase in profits, with a rise from ₹30 Crores to ₹42 Crores, reflecting strong operational efficiency and cost management.

Moreover, the company has maintained a solid financial position with a debt-to-equity ratio of 0.2, which ensures that it has a manageable level of debt relative to its equity. This low debt ratio is indicative of the company’s strong financial health and its ability to weather market fluctuations. Deep Industries’ operating margin, ranging between 25-30%, further highlights its ability to generate sustainable profits, and the company’s strong EBITDA margin ensures that it remains well-capitalized for future growth opportunities.

Deep Industries’ strong financial performance and steady revenue growth position it as a reliable player in the oil and gas services sector. The company’s ability to secure high-value, long-term contracts ensures that its financial stability remains intact, even as the market experiences short-term volatility.

Recent Orders and Growth Prospects

As of Q2 FY25, Deep Industries boasts a total order book value of ₹2,622 Crores. This large order book reflects the trust major clients place in the company and signifies the strong demand for Deep Industries’ services. Among the notable contracts the company has won recently is a ₹1,402 Crore contract from ONGC for Production Enhancement over a 15-year period. This contract focuses on enhancing production from ONGC’s mature oil fields in Rajahmundry, further cementing Deep Industries’ reputation as a go-to service provider in the oil and gas sector.

In addition to this, the company also secured a ₹63 Crore contract from ONGC for the provision of skid-mounted modular gas separation systems and gas compression units for the Rokhia GCS Tripura Asset. These contracts demonstrate the versatility of Deep Industries’ service offerings and its ability to secure diverse and valuable projects from key industry players. The company’s growing order book and ability to win major contracts highlight its strong prospects for long-term growth.

Conclusion

While the stock experienced short-term volatility after the announcement of the ₹90.7 Crore ONGC order, the long-term outlook for Deep Industries remains strong. The company’s solid financial performance, impressive order book, and strong relationships with key customers such as ONGC position it for sustained growth in the oil and gas services sector.

For investors, Deep Industries offers a compelling investment opportunity due to its solid foundation in the industry, its diverse client base, and its consistent ability to win high-value, long-term contracts. Although the stock may experience periodic volatility, particularly in response to news announcements and profit-booking, the company’s strong financials and growth prospects make it an attractive option for investors looking to tap into the growing energy sector.

With its strong market position, experienced workforce, and robust financial health, Deep Industries is a stock to watch closely for those seeking long-term investment opportunities in the oil and gas support services sector. As the company continues to secure more contracts and expand its order book, its growth potential in the coming years remains substantial.