Global Vectra Helicorp Ltd: Buy
CMP: Rs.49.45
Book Value: Rs.34.21
Sector P/E: 49.04
Market Cap: Rs.69 crore.
Introduction: Global Vectra Helicorp Limited (GVHL) is India's largest private helicopter company, with over two decades of experience providing professional, safe, and accident-free helicopter services.
Shareholding Pattern: The promoters hold 75% while the general public holds 25%. Among the general public the NRIs hold 0.39% l, while the corporate bodies own 1.17% shares of the company. It is a zero pledged share company.
Financials: The Net Sales of the company came at Rs.88.96 crore in December 2021 up 12.73% from Rs.78.91 crore in December 2020.
Quarterly Net Loss came at Rs. 3.47 crore in December 2021 as against Rs. 0.83 crore in December 2020. But the loss is mainly due to a tax component of Rs.4.84 Cr. Otherwise, PAT for Q3FY22 came at Rs.1.37 Cr showing an improvement in performance.
EBITDA stood at Rs. 26.22 crore in December 2021 up 34.32% from Rs. 19.52 crore in December 2020.
The financials are going to move up further as the country wide lockdowns following the Covid - 19 pandemic has now ebbed. The company is also about to start its (Religious) Heli - Tourism soon.
Triggers:
⚙️Due to the Covid 19 pandemic, the operations of the Company were materially impacted, even though the services of the company provided to the Oil & Gas sector and State Governments are classified under essential services. But with nationwide lockdowns coming to an end we could see a sharp lift up of the sagging fundamentals.
⚙️Services provided to religious tourism which got affected during the year 2021, will now end with the commencement of services.
⚙️Global Vectra Helicorp Ltd (GVHL) has enough working capital facilities and liquidity as of March 31, 2021, to meet all its regular expenses and other financial obligations.
Despite the unprecedented nature of the pandemic, the situation is improving gradually and Management is hopeful of showing improved performance in the coming quarters.
⚙️The Helicopters fleet and insurable interest of your Company like Building, Hangar, Plant and Machinery, Furniture and Fixture, Stocks, Computers, Vehicles etc, are properly insured. This gives a cushion of safety in case of a mishap.
⚙️The company is striving to be the Leader in Offshore Oil & Gas operations. The company management is extremely positive with regard to the continued growth in the helicopter sector in India and abroad. To capitalise on this, GVHL will continue to expand its fleet and adapt its services to meet the dynamic needs of these markets.
⚙️Being the largest private sector helicopter operator in India, GVHL has always ensured that safety is paramount in its operations and has recorded over 2,73,000 accident free hours to date and has also been commended for is safety initiatives, with awards such as: “Operator of the Year ”in 2016 and 2017 by the India Business Aircraft Operators Association.
⚙️GVHL is a huge company having a total staff strength of over 400 (employees), which includes: pilots, engineers and support staffs.
⚙️Global Vectra Helicorp Limited has a wide range of capability to provide essential onshore and offshore services to strategic sectors:
• Oil and Gas
• Geophysical Survey
• Corporate and VVIP flights
• Aerial Photography
• Religious Tourism
• Emergency services
• Underslung operations
• Power Grid Construction and Maintenance
⚙️Its unblemished safety track record also makes it preferred supplier for the top rung of the country for corporate, religious and leisure travel.
⚙️It has world class maintenance facilities having highly skilled engineers and experienced pilots. It is the only service provider that is capable of providing a replacement helicopter at short notice thus, ensuring unhindered operations for its clients.
⚙️It is dedicated to providing Air logistics services to the Oil & Gas industry majors like Oil and Natural Gas Corporation (ONGC), Cairn India, Reliance Industries Limited (RIL), Transocean (TSF), Shelf Drilling, British Petroleum, Schlumberger Asia Services Limited, Baker Hughes and many more, under long term contracts with an outstanding market share in the offshore helicopter market in India.
⚙️Dolphin Geo, Shearwater, Polarcus, Fugro, CGG Veritas, Results Marine & Western Geco, etc are its major Seismic partners for whom it has flown on the East and West Coast of India in the recent past and is hopeful for the same in the near future as well.
⚙️GVHL provides services to its clients under long-term contracts. These contracts range from one to five years with renewal options. Companies involved in offshore E&P activities have to use helicopter services extensively for Crew Change, Production, Cargo and Medevac. Hence, there is a stability of revenue generation.
⚙️GVHL has its main maintenance base at Juhu Airport, Mumbai with sub-bases in various parts of India including: Juhu (Mumbai, S. Yanam, Rajahmundry, Suvali, Gadimoga, Imphal, Porbandar, Hyderabad, Patna, Itanagar, Katra, Behala, Neel Grath, and Vizag.
⚙️GVHL is the first choice for helicopter services in India. Moreover, it provides cost effective and reliable high quality of service.
⚙️GVIL's relationship with Oil and Gas sector of India: The oil and gas sector is among the eight core industries in India and plays a major role in influencing decision making for all the other important sections of the economy.
India’s economic growth is closely related to energy demand; therefore, the need for oil and gas is projected to grow more in the coming years, thereby making the sector quite conducive for investment.
The Government of India has adopted several policies to fulfil the increasing demand. The government has allowed 100% Foreign Direct Investment (FDI) in many segments of the sector, including natural gas, petroleum products, and refineries, among others. Today, it attracts both domestic and foreign investment, as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India.
India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally as oil imports continue to rise every year making the country as the 3rd largest consumer of oil in the world.
Rapid economic growth is leading to greater outputs, which in turn is increasing the demand of oil for production and transportation.
In February 2021, the NDA government announced that the Government of India plans to invest
~Rs. 7.5 trillion (US$ 102.49 billion) on oil and gas infrastructure in the next five years.
The industry is expected to attract US$ 25 billion investment in exploration and production by 2022. Refining capacity in the country is expected to increase to 667 MTPA by 2040.
The government has allowed 100% Foreign Direct Investment (FDI) in upstream and private sector refining projects.
The FDI limit for public sector refining projects has been raised to 49% without any disinvestment or dilution of domestic equity in the existing PSUs. Demand is not likely to simmer down anytime soon, given strong economic growth and rising urbanization.
• Gas consumption is projected to reach 143.08 bcm by 2040. The Government is planning to invest US$ 2.86 billion in the upstream oil and gas production.
Energy demand of India is anticipated to grow faster than energy demand of all major economies on the back of continuous robust economic growth. India’s energy demand is expected to double to 1,516 Mtoe by 2035 from 753.7 Mtoe in 2017. Moreover, the country’s share in global primary energy consumption is projected to increase by two-fold by 2035.
Crude oil consumption is expected to grow at a CAGR of 3.60% to 500 million tonnes by 2040 from 221.56 million tonnes in 2017. India’s oil demand is projected to rise at the fastest pace in the world to reach 10 million barrels per day by 2030, from 5.05 million barrel per day in 2020. Natural gas consumption is forecast to increase at a CAGR of 4.18% to 143.08 million tonnes by 2040 from 58.10 million tonnes in 2018.
Diesel demand in India is expected to double to 163 million tonnes (MT) by 2029-30.
India is set to expand India’s natural gas grid to 34,500 kms by adding another 17,000 km gas pipeline. The regasification capacity of the existing 42 MMT per annum will be expanded to 61 MMTper year by the year 2022.
Catch Point:
The downturn in the oil and gas industry had led to severe cuts in expenditure over exploration, production and maintenance activities across the globe, thereby adversely affecting the offshore helicopters market. In addition, the global helicopter fleet utilization hit a low of 54% in 2021 due to falling demand and increased supply from orders placed pre-downturn. As a result, oil companies required fewer journeys offshore which led to many airframes to be put into storage. However, with the recovery of oil prices to sustainable levels coupled with n icreased spending for offshore project development and maintenance activities, especially in the deep-water exploration and production (E and P) operations, the offshore helicopter services are expected to grow substantially in the coming quarters
The global oil glut has led the offshore helicopters industry to look for diversification of its business base to sustain in the market. As a result, the market players have started upgrading their global fleet to capture emerging markets, such as the offshore wind market, search, and rescue (SAR) operations and emergency medical services (EMS) markets, for new sources of revenue.
Covid-19 put another big strain on oil and gas aviation, which was already experiencing a decrease in utilization, oversupply and intense competition. Companies had to ration fleets and were forced to accept contracts with lower margins, which drove some out of the market. This effect severely pushed down both the top and bottom line of GVHL. However, with the rising demand for cost optimization among the end-users, the need for large helicopters with an ability to transport further and with increased passenger capacity is also set to increase. In the long term, the industry is projected to grow at a marginal pace with the influx of a more advanced helicopter fleet, increase in the production acreage of the end users and the rise in the drilling of offshore oil and gas fields.
With the operations and maintenance in the offshore segment of the oil and gas industry increasing in complexity, especially on ultra-deep-water and deep-water drilling operations, there exists a need for frequently transporting large helicopters at regular intervals. Moreover, the government regulations have become stringent on the number of people transported at a time and the type of helicopters that can fly in particular airspace. Thus, the demand for the medium and heavy type of helicopters is expected to grow significantly.
With the oil prices stabilizing over USD 50 per barrel mark, similar trends are also expected to rise in other areas; especially in Western Europe, throughout Asia-Pacific, and most of Africa. ,
Therefore, the above developments in the offshore oil and gas industry are expected to have a positive impact on the offshore helicopter services market.
GVHL is taking continuous efforts to help the business sustain and grow during the COVID-19 pandemic.
Conclusion: The Indian Helicopter Emergency Medical Services (HEMS) sector is in its infancy with only a handful of helicopters configured for this role. The global HEMS sector is a key market for helicopter manufacturers, along with Search and Rescue (SAR), and will remain a driver for future growth as markets like China and India begin to acquire more such helicopters. An estimated 30% of the helicopters currently flying worldwide are outfitted for medical and other similar roles. Post 2020, the demand for air-medical Helicopter market is slowly picking up
The Company leases helicopters, hangar and administrative building and office premises. The lease agreements do not impose any covenants, but leased assets can not be used as security for borrowing purposes. Few of the office premises and helicopter leases are leases of short term tenure less than 12 months.
The Company sub - leases most of these helicopters under operating and finance leases.
The stock can be bought near the CMP of Rs.49.45 for Short to Medium term targets of Rs.120/180. I reiterate, the rise in crude oil price in the international markets is positive for the company.
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