Deep Industries Ltd Management Discussions

India Oil and Gas Industry

The Indian oil and gas sector is undergoing a transformative phase driven by progressive policy and growing demand. The Oilfields Amendment Bill passed in Lok Sabha in March 2025 has redefined the sectors trajectory. By expanding the definition of mineral oils to include shale gas and unconventional hydrocarbons, streamlining dispute resolution and incentivize enhanced oil recovery techniques, this legislation is unlocking new opportunities for exploration and production.

Complementing this, the 10th round of the Open Acreage Licensing Policy launched during India Energy Week 2025 leverages AI-driven seismic data analysis to accelerate the discovery of new reserves. These reforms align with Indias goal to expand its exploration area to 1 million square kilometres by 2030, signalling a robust push towards self-reliance.

Also Energy security is critically important for Indias economic growth, national security, and social stability, especially in the current geopolitical landscape. Indias heavy reliance on imported oil and gas makes it vulnerable to price fluctuations and geopolitical instability in the Middle East. Ensuring a reliable

Industry structure and developments:

The Oil and Gas Industry is split into three major categories;

and affordable energy supply is crucial for India to maintain its economic momentum and stability, especially considering its role as the third-largest energy consumer globally.

Energy is the foundation of modern economies, driving industries, transportation, and everyday life. A stable and affordable energy supply allows businesses to operate efficiently, consumers to afford essential goods and services, and the government to invest in infrastructure and development.

With the Governments focus on improving energy security by reducing dependency on imports and promoting domestic production, there is a need to increase exploration, develop the discovered fields and enhance production activities in the country. This has opened up opportunities for small oil and gas independents to explore, develop small and marginal fields, develop CBM blocks and use proven technologies to enhance production both offshore and onshore in India According to IEA (India Energy Outlook 2021), primary energy demand is expected to nearly double to 1,123 million tonnes of oil equivalent, as the countrys gross domestic product (GDP) is expected to increase to US$ 8.6 trillion by 2040.

Upstream segment

- Locating new fields for exploration: 78% of the countrys sedimentary area is yet to be explored.

- Increasing the share of natural gas: The government is working towards increasing the share of gas from

6.3% (July 2022) to 15% of the energy mix by 2030.

- Development of unconventional resources: CBM fields in the deep sea.

- Opportunities for secondary/tertiary oil-producing techniques.

- Higher demand for skilled labour and oilfield services and equipment.

Midstream segment

- Expansion in the transmission network of gas pipelines.

- As of March 2022, the Petroleum and Natural Gas Regulatory Board (PNGRB) authorised the 34,135-km natural gas pipeline network to develop a national gas grid and boost the availability of natural gas in India.

- L NG imports have increased significantly, which provides an opportunity to boost production capacity.

- In light of mounting LNG production, huge opportunity lies for LNG terminal operation, engineering, procurement, and construction services.

Downstream segment

- India is already a refining hub with 23 refineries, and expansion is planned for tapping foreign investment in export-oriented infrastructure, including product pipelines and export terminals.

- Development of City Gas Distribution (CGD) networks similar to Delhi and Mumbais CGDs.

- Indian companies are expected to spend 100 billion (US$ 1.35 billion) over three years on 1,000 liquefied natural gas (LNG) stations along main roads and industrial corridors and in mining areas to cut diesel consumption.

- India currently plans to expand its natural gas pipeline network by about 10,805 km, increasing from ~24,945 km operational to nearly 35,750 km—a 43% expansion by 2025—to complete the national gas grid and ensure uniform gas availability across regions

Deep Industries Limited is specialized in providing various Oil & Gas support services since more than 30 years. Deep is also one of the pioneers in introducing services such as charter hiring of Gas Compression and Gas Dehydration. Recently it has introduced unique business model of providing entire Gas processing facility on charter hire basis thereby converting EPC project in to Charter Hire. This is a unique proposition by Deep and is gaining popularity among the Industry.

Deeps other value added service like Integrated Project Management is also one of its kind services in the industry. No other Indian company is been providing these services in domestic markets except Deep.

Deep has recently been awarded with an Production Enhancement Contract, worth INR 1402 Crores, from ONGC for for a period of 15 years. With this contract, ONGC is allocating one of their producing field to Deep for increasing the production of natural gas from their mature fields. Deep would be getting service charges equivalent to 64% share of incremental production revenue. This is one of a kind of production enhancement contract from ONGC and more rounds of such kind of contracts are expected. The company has taken over the field in April 25 and has started with the baseline production.

With its diversified oil & gas services portfolio, Deep Industries Limited now covers more than 70% of Post Exploration Value chain Services in k the entire value chain of Oil & Gas Services Industry.

Deep Industries Limited with pool of service offerings, is catering all three segments with presence

in Drilling, Gas gathering, Gas Processing, Gas transmission and distribution.

Verticals of the company:

After a record FY24, FY25 has been a pivotal year with the company on track to achieve its highest-ever revenue, EBITDA and net profit, supported by favourable government initiatives in energy sector. As we look ahead, our focus remains on enhancing operational efficiency, leveraging technology and pursuing opportunities that align with Indias evolving energy needs. Deep continue to explore opportunities in production enhancement contracts, charter hiring of entire gas processing facilities and integrated project management services, the 3 segments that are expected to drive our growth over the next few years. Deep believe the ongoing policy support, coupled with favourable market dynamics, provides a strong foundation for sustained growth in the sector. By maintaining a disciplined focus on cost optimization and operational efficiency, we remain committed to delivering consistent value to our stakeholders.

Companys Services:

> Natural Gas

Charter Hire of Gas Processing facility

The Company has started providing Design, Supply, Installation, Commissioning and regular Operation and Maintenance of Production system to receive, process and deliver Hydrocarbons at custody transfer point which are produced from the wells.

The development of Facility signifies the continuous efforts of the Company to offer various value added services to the clients as a key player in Oil and Gas Service Industry.

The idea and the project is one of its kind, the project Jaya is distinguished from the all other projects executed by the Company, as under this project the Entire Surface Facility and produced fluid processing network from wellhead to the transportation point was delivered by the Company on Charter Hire basis.

This will create entire new opportunities in the Industry.

Natural Gas Compression Services:

Deep Industries Limited is the largest Natural Gas Compression service provider in India on chartered hire basis. The Company has executed various natural gas compression projects with various Public and Private sector Companies in India during last Three Decades. The Company executes compression contracts on turnkey basis, which includes supply of Equipment, Installation, Commissioning and Operation & Maintenance of gas engine driven compressor packages.

The Company is able to provide the right solution to accommodate clients time-frame and budget. The Company has built its equipment fleet to offer a wide range of compression requirements. Deep International DMCC, subsidiary of the Company has acquired number of Gas Compression packages in USA to cater business opportunities in Middle East countries. The Company has started executing various projects in International Market.

Natural Gas Dehydration

Gas Dehydration is a process which ensures to remove water moisture and heavy hydrocarbons out of natural gas before putting the same in pipeline so to ensure safety of National Grid.

Deep Industries Limited is the pioneer in providing Gas Dehydration Systems on Build, Own and Operate basis in India on charter hire basis. The Company is also one of the largest Gas Dehydration Service providers in the country.

The process of Gas Dehydration is accomplished in five basic steps through which Deep sequentially lower the Water Dew Point and Hydrocarbon Dew Point to less than 0 DegC by removing water and heavier hydrocarbons from the source gas to meet PNGRB norms. The Company has efficiently commissioned Gas Dehydration Units of capacities upto 10 LSCMD in a record time and designs packages to meet a wide range of applications with minimal changes required. The Company also maintains an intensive stock of spares to prevent any shutdowns as Deep understand the criticality of the process and its impact on clients.

> Integrated Project Management Services Integrated Project Management

Deep Industries Limited has adopted the Integrated Project Management (IPM) as a turnkey solution to drill and complete a well or a number of wells under single contract. We have capabilities to provide pool of niche services involving highly technical jobs and services under one roof improves coordination, Time & Cost Management. Deep is the first Indian company to offer integrated solutions. The Company

has adopted various services of Oil & Gas exploration since 2016 considering the opportunity in the space and unconventional energy being the future.

Deep is one of the Indian incorporated company who has the unique combination of providing services to Upstream and midstream. Deeps experience, expertise and quality equipment helps to deliver results to the challenging projects and meet stringent client demands.

The Companys IPM services include:

- Surface Hole Drilling

- Air Drilling

- Cementing

- Geophysical Logging, wire line service

- Hydro Fracturing & Coiled tubing

- Well Completion Services-Workover operations to Production

Drilling and Workover Services

DEEP commands a healthy market position in the area of providing the Drilling and Workover Rig services on charter hire basis in India. Since last 16 years, DEEP has served long term contracts for Drilling rig and Workover services to variety of clients including PSUs and Private E&P companies, and having the excellent track records in India. DEEP is having vision to expand the Rig business in overseas Market as well. DEEP is also approved Drilling Contractor in Kuwait Oil Company for providing the Rigs.

DEEP owns total 17 Nos. of Drilling and Work over Rig where in it own 11 workover rigs with capacity ranging from 30T to 150T and 6 Drilling Rigs with capacity of 1000Hp. The Company has remarkably carried out and successfully completed various contracts for different operators and in diverse areas spreading from the Deserts of India, Ecosensitive Areas, and difficult Terrain of Mountain Range Areas.

DEEP is Capable to provide all Oilfield equipment pertaining to Drilling, Workover, Completion & Production on Charter, Rental & Dry Lease Hire basis. Our professional staff and fully operable fleet of drilling rigs and Workover rigs and technologies delivers for any operational need and helpful to quickly and safely deploy them at well site.

> Production Enhancement Contract

Deep Industries Limited has secured a INR 1402 crore contract from ONGC for 15 years. The said contract offers comprehensive services to boost production from one of the Matured Fields of ONGC. The Company is backed by 3 decades of experience.

Service Revenue under the said contract is equivalent to 64% of incremental production revenue.

> Offshore Services

Deep Industries has been engaged in the Onshore Services segment for more than 3 decades and with an intention to expand its service portfolio in the offshore segment Deep

acquired Dolphin Offshore Enterprises (India) Limited through NCLT in 2022 step down subsidiary Company. Under Offshore Oil and Gas services, the operations are performed in deep sea.

The Offshore Services business has following target market / industries

o Offshore oil & gas industry - Energy producers with shallow water and deep water platforms. o Offshore renewable energy industry - Offshore wind platforms.

o Communication Industry - Trans-country and Transcontinental networks with undersea data cables.

o Transmission & Transportation - under sea gas transportation pipelines and undersea power cables.

o Additionally offshore services can be provided to domestic and international offshore Oil & Gas producers

o Dolphin has recently entered into a 3 year contract for its DP-2 Prabha Barge with an estimated contract value is US$ 32.85 million (~ Rs. 281 Cr)

Strength and Opportunities

- Offering a wide range of services in various sectors, catering to a diverse client base, and ensuring stability through different market fluctuations and demands.

- Leveraging the flexibility of fully mobile units, the company can expediently transport its resources to any corner of the country within a matter of months.

- The companys subsidiary is actively pursuing sustainable offshore opportunities, with promising prospects that are expected to unlock significant value in the foreseeable future.

- The companys liquidity and robust resource base position it favorably to meet expansion requirements seamlessly. The company has mirrored its financial moats from its core principles, maintaining a judicious balance between liquidity and debt on its books, consequently fostering a strong balance sheet.

- As the market demand for gas compression services continues to rise, the company is poised for an expansion, capitalizing on the increasing trend of outsourcing this specialized service.

- Deep Industries has supreme Expertise in providing Value added services for our clients which in turn improves their revenue generating ability as well as profitability at large and provides a diversified service mix for their product portfolio.

Outlook

Deep Industries Limited is in business of Oil and Gas field services and is specialized in providing Gas Compression Services, Drilling and Workover Services, Gas Dehydration, and also having expertise in Integrated Project management Services. In addition, the Company has been expanding its business through organic routes like entering into new services markets as well as inorganic routes like strategic tie-

ups and acquisitions. The Company is also in the process of spreading its wings through venturing in to offshore services.

The Company has been building up and growing steadily since, primarily through:

• Conveniently & strategically located to Service Oil & Gas markets in India and globally

• Owns Fuel Efficient, latest Equipments to cater the need of Oil & Gas Industry

• Recruiting highly skilled technical staff

• Providing services at high quality of standards with peak performance

The Company has grown up to be a "One Stop Solution" provider for every need in Oil and Gas field operations by catering various equipment and services under rental and chartered-hire basis.

Risks and Concerns

Risks and uncertainties are an inherent part of every business, and yet it is important to identify the risks and take proactive steps to measure, minimize and mitigate them. The Company sees concerns in relation to the Scarcity of skilled personnel in market, Procurement Risk as not being able to procure rightly configured equipments in a timely manner and dependency on few clients. The Company understands these risks can adversely impact fruition of both short-term operational and long-term strategic goals. Hence Risk management process is closely aligned with Companys business planning process and control function whereby the Company identifies and evaluates risks as early as possible, applies strategies and tools to mitigate those risks and attempts to limit its overall impact on the business by adopting suitable measures and continuously revaluating those measures with a prime focus to mitigate those risks that pose a threat to its sustainable growth.

Green Initiative

Your Companys all gas processing equipments are running on gas based engines which uses natural gas as fuel. Natural gas is a green form of gas which enables in less carbon emission.

Internal control systems and their adequacy

The Company has put in a place an adequate and effective Internal Control Mechanism to ensure efficient conduct of its operations, security of assets, prevention and detection of frauds/errors, preserving accuracy and completeness of the accounting and business records and timely preparation of financial statements and related information. These internal control systems are then further supplemented by Internal Audit carried out by the Internal Auditor of the Company and periodical review by the management. The Company has put in place Proper and adequate controls, which are reviewed at regular intervals to ensure that the business decisions and transactions are properly authorized, correctly and timely reported and the assets are safeguarded from loss , damage and misuse.

In addition to above, the Company has formulated a Vigil Mechanism and Whistle Blower Policy for its Directors and employees of the Company for reporting genuine concern about unethical practices and suspected mal-practices.

Discussion on financial performance Revenue from Operations

Nature of Services	FY 2024-25	FY 2023-24	Change	Change%
Natural Gas Compression Services/Processing services and Workover and Drilling Rig & Services	47,747.86	38,190.99	9,556.87	25.02
Total Business Income	47,747.86	38,190.99	9,556.87	25.02

 

Particulars	For 2024-25	For 2023-24
Revenue From Operation	47,747.86	38,190.99
Earnings Before Interest, Taxes Depreciation & Amortization (EBITDA)	22,857.33	17,621.33
Earnings before Depreciation, Taxes and Amortization (EBTDA)	21,370.96	16,940.06
Profit before tax (PBT)	17,388.20	13,719.13
Profit after tax (PAT)	13,033.70	10,425.23

Further, the Companys Other Income increased from Rs.2,596.07 Lakhs to Rs.3,790.50 lakhs whereby Other Expenses has increased from Rs.2,337.60 Lakhs to Rs. 2,811.20 lakhs.

Employees Remuneration & Benefits has increased from Rs.3,959.60 Lakhs to Rs.5,492.77 lakhs with increase in manpower for new projects and this also includes Directors Remuneration.

Interest & Financial Cost has increased from Rs.681.27 Lakhs to Rs.1,486.37 lakhs as compared to previous year. The Companys Operating Expenses have rose from Rs.16,868.53 Lakhs to Rs.20,377.06 lakhs which commensurate with the increase in Revenue from Operations.

Material developments in Human Resources / Industrial Relations

The Company believes that the quality of the employees is the key to its success and is committed to equip them with skills. The Company provides to the employees a fair and equitable work environment and support from their peers with a view to develop their capabilities leaving them with the freedom to act and to take responsibilities for the task assigned. The Company has strongly embedded core values and all employees are trained and encouraged to use these values in their daily operations and the bases for making decisions. The Companys management has always carried out systematic appraisal of performance and

imparted training at periodic intervals. The Company has always recognized talent and has judiciously followed the principle of rewarding performance. This has helped to ensure all employees are aligned and focused on key objectives and key performance indicators critical for the Companys performance. In order to meet steady flow of talent, Company has appointed experienced professionals in Technical as well as Commercial Departments. Apart from that, as a strategic policy, every year, Company hires new pool of talent from reputed technical / petroleum institutes through campus selection process.

In adding up, the Company is committed to nurturing, enhancing and retaining top talent through superior Learning and Organizational Management. The Industrial relation of the Company with various suppliers, customers, financial lenders and employees is cordial. Total employees on the payroll of the Company as on March 31,2025 are 1,140.

Health, Safety & Environment

Being a service provider to high risk industry, safety of employees is utmost priority of Company. While providing services, Company ensures compliance to all Rules and Regulations regarding Health, Safety and Environment protection. Imparting essential health and safety training such as MVT, Firefighting etc is being followed on regular basis.

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ^

ratios and any change in Return on Net Worth, along with detailed explanations thereof.

Sr. Financial Ratios No	Key Financial Ratios		Changes	Explanation
	2024-25	2023-24
1. Debtors Turnover Ratio	3.27	3.30	-0.94	Trade receivable turnover ratios are mostly inline with previous year.
2. Inventory Turnover	10.81	10.11	6.94	Inventory Turnover Ratio has improved due to better sales revenues achieved vis-a-vis average inventory levels.
3. Interest Coverage Ratio	12.70	21.14	-39.92	Reduction is Interest Coverage Ratio is primarily due to increased finance cost led by increased borrowings.
4. Current Ratio	1.81	2.46	-26.34	There is a decrease in current assets in FY 2024-25 especially the loan assets. Simultaneously, the current liabilities have increased in FY 2024-25 leading to overall reduction in current ratio.
5. Debt Equity Ratio	0.15	0.11	31.54	The Debt Equity ratio has slightly increased due to increase in gross borrowings during the year.
6. Operating Profit Margin	34.53	33.97	1,67	Operating Profit Margin is improved by 56 bps mainly due to cost control measures and better revenue mix.
7. Net Profit Margin (%)	25.29	25.56	-1.06	Net Profit Ratio is mostly in line with previous year.
8. *Return on Net worth	13.78	13.28	3.77	Improvement in RoNW by 126 bps is primarily due to better utilisation of assets and increased profitability on projects.

*Net worth is Adjusted for Goodwill and Capital Work In Progress

Disclosure of Accounting Treatment

Standard Accounting procedure has been followed.

Cautionary Statement

Statements made in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations and predictions may be forward looking statements within the meaning of applicable laws and regulations. The Companys actual results, achievements may differ materially from those projected in any such forward looking Statements. The Company assumes no responsibility to publicly amend or revive any forward looking statements on the basis of subsequent developments, information or events.