| Jindal Drilling and Industries Limited | ||||||
| Rating outlook revised to 'Stable'; Ratings reaffirmed | ||||||
| Rating Action | ||||||
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| 1 crore = 10 million | ||||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale CRISIL Ratings has revised its outlook on the long-term bank loan facilities of Jindal Drilling and Industries Ltd (JDIL) to ‘Stable’ from ‘Negative’ while reaffirming the rating at ‘CRISIL A-‘. The short-term rating has been reaffirmed at 'CRSIL A2+'.
The revision in outlook reflects improvement in the company’s credit risk profile with all five rigs being contracted and deployed. Its rig, Jindal Supreme, was deployed in October 2020 after delay last year. JDIL had taken the necessary approvals from Oil and Natural Gas Corporation Ltd (ONGC) for late deployment of the rig. The Jindal Explorer rig, whose contract was expiring in May 2021, has also been re-contracted at a charter rate of USD 38,700 per day (significantly higher than the earlier rate of USD 24,912 per day).
The company is also in the process of purchasing the rig, Jindal Supreme, from its group company, Venus Drilling Pte Ltd (VeDPL), for Rs 150 crore. The purchase of the rig is expected to benefit the operating profitability as the rig hire charges earlier paid to VeDPL will no longer be required to be paid. The transaction will be funded through proceeds from repayment of loans earlier extended to group companies, and therefore, no net cash outflow is expected from JDIL. The timely completion of purchase and funding thereof (as expected above) would be key rating sensitivity factors.
During fiscal 2021, the company received Rs 160 crore from ONGC after an interim order of the Supreme Court (SC) over a previous dispute between ONGC and JDIL. The company received the amount after furnishing a bank guarantee to the SC. The company has utilised Rs 80 crore to partially repay loans from group companies and has retained the remaining amount as a fixed deposit. As the matter is still pending with the SC, Rs 160 crore will appear as other liability in the company’s financials. Any adverse final order by the SC in the matter may result in crystallisation of the liability and, thus, will remain a key monitorable.
The ratings continue to reflect the established business profile of the company in the oil rigs and drilling business on account of the longstanding relationships it has with upstream companies in India’s oil and gas space and healthy financial risk profile, driven by low gearing, strong liquidity and adequate debt protection metrics. The ratings also factor in support that JDIL receives as part of the DP Jindal group. These strengths are partially offset by high exposure to group companies, as well as the susceptibility of charter rates (at the time of signing of contracts) to crude oil prices, which are inherently volatile. |
Analytical Approach For arriving at its ratings, CRISIL Ratings has considered the standalone financials of JDIL. In the case of Virtue Drilling Pte ltd (VDPL) and Discovery Drilling Pte Ltd (DDPL), CRISIL Ratings has followed the moderate consolidation approach to account for the support extended to these entities.
Also, CRISIL Ratings has centrally factored in strong business and financial linkages with the DP Jindal group as JDIL is strategically important to the group.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation. |
Key Rating Drivers & Detailed Description Strengths:
Weakness:
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Liquidity: Adequate JDIL has healthy liquidity, driven by expected cash accrual of around Rs 100 crore in fiscal 2022, against long-term debt obligation of Rs 54 crore. The working capital facilities of Rs 23.9 crore was moderately utilised at around 76% over the six months ending March 31, 2021. Its bank lines are expected to meet the incremental working capital requirement |
Outlook: Stable CRISIL Ratings believes JDIL’s credit profile will continue to benefit from the established business model and current contracts with ONGC, which provide adequate revenue visibility over the medium term |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Company JDIL, part of the Dharam Pal Jindal Group (DP Jindal Group), is a leading Indian company in offshore drilling and allied services, including directional drilling and mud logging. JDIL takes rigs on lease from group companies or third parties and provides drilling services to upstream companies in Mumbai Offshore (Bombay High) region. The company also provides mud-logging and directional drilling services to onshore sites |
Key Financial Indicators (Standalone)
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Any other information: Not applicable |
| Note on complexity levels of the rated instrument: CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments. |
Annexure - Details of Instrument(s)
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Annexure – List of entities consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| All amounts are in Rs.Cr. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Annexure - Details of various bank facilities | ||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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