The Hindu Business Line : SAAG-RR turns active as it eyes oil segment

SAAG-RR Infra Ltd has been attracting considerable interest on the Bombay Stock Exchange. On Tuesday, 1.80 lakh shares changed hands and the share price hit the upper ceiling at Rs 47.07. Today, the stock shed Rs 2.10 at close (after hitting a high of Rs 49.25 intra-day) in sympathy with the market's plummet, but there was sustained buying interest — over 1.18 lakh shares were traded against 2-week average of 72,319 shares.

The market attributes this to the results announced on Tuesday by the company for the third quarter, as well as the announcement of the formal agreement for technology transfer from the Malaysian parent to SAAG-RR. The tech-transfer will enable the Chennai-based company to enter the lucrative market for work over rig services for the oil and gas industry.

SAAG-RR has reported a net profit of Rs 83.20 lakh for the quarter ended December 2005, compared with Rs 55,000 for the same period last year. For the nine-month period ended December, the company has reported a net profit of Rs 1.40 crore, against Rs 5 lakh for the same period last year. EPS has rise from nil to Rs 1.34.

Net profit rose because of an increase in order bookings — the company has on hand orders over Rs 45 crore. This is reflected in the company's turnover. For the nine-month period, turnover amounted to Rs 18.5 crore compared with Rs 16 crore for the full year 2004-05.

SAAG-RR Infra is into construction of industrial buildings, but the company has been trying to get a break into the oil and gas sector, with the support of its Malaysian parent, SAAG Consolidated.

At a press conference here today, SAAG-RR announced the signing of a formal agreement with its parent company for technology transfer for work over rig services. These services are required by oil companies and basically relate to repair of oil wells, using specialised equipment called work over rigs.

Mr Anand Subramanian, Executive Director, SAAG Consolidated (M) Berhard of Malaysia, observed that with the oil prices ruling firm oil companies such as ONGC would like to produce more and one of the ways of doing so was by repairing wells.

According to Mr Subramanian the global market is for offshore workover services for 150-200 work over rigs with annual contract values exceeding $ 1 billion. "Currently, most of the rig manufacturers are booked through 2008," he said. SAAG, however, has a facility to produce rigs and put together a custom-built equipment in about six months. This, he believes, will be a cost-saving aspect for Indian oil companies.

Indian oil platforms are over 25 years old and require restoration, Mr Subramanian said, adding that the Indian contract values could be around Rs 300 crore a year. With the backing of the Malaysian parent, SAAG-RR expects be able to seize a piece of the pie.

SAAG-RR has gone public with its intention to raise about Rs 30 crore, through a mix of debt and equity. Mr Subramanian said SAAG, Malaysia "is not shy of diluting its stake" in the Indian subsidiary.