Ladies and gentlemen, good day and welcome to the TD Power Systems Limited Q3 FY 2025 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your touchtone phone. I now hand the conference over to Mr. Nikhil Kumar, Managing Director for TD Power Systems Limited. Thank you and over to you, sir.
Thank you, everybody. Good afternoon. Thank you once again for joining us on our earnings call. I trust all of you would have received our results and investor presentation. Moving on to the financial performance for nine months ended 31st December 2024. Consolidated. Our total income on consolidated was INR 9.43 billion versus INR 7.48 billion same period in the previous year, an increase of 26%. Profit after tax and other comprehensive income for the first half of the year is INR 1.21 billion, versus the profit of INR 0.88 billion, an increase of 37%. We continue to maintain a strong cash position of INR 2 billion. Standalone. Our total income on standalone basis for nine months was INR 9.02 billion versus INR 7.32 billion for the same period in the previous year, an increase of 23%.
EBITDA for nine months is 17.45%, including other income excluding treasury income. Profit after tax and comprehensive income for nine months is INR 1.09 billion versus profit of INR 0.88 billion the same period previous year, an increase of 24%. Order book and manufacturing segment is INR 13.09 billion, which consists of INR 9.6 billion manufacturing business and INR 3.33 billion railway business. Spare and aftermarket is INR 0.13 billion and INR 0.03 billion is Turkey business. Exports and deemed exports excluding railways orders is 66%. The order inflow for the quarter is INR 4.07 billion, highest ever since the inception of the company. Order inflow has increased 52% quarter-over-quarter and 40% in the nine-month-over-nine-month comparison basis. 71% of our quarterly order inflow is exports while 39% is domestic.
We have seen some traction in the domestic order inflow during the quarter. Domestic order inflow for the last three quarters has been percentage-wise 28%, 27% and 32%, with INR 81 crores, INR 96 crores and INR 120 crores respectively. Order book, market situation and guidance. The order inflow continues to be very strong from export in our generator and motor business compared to the previous year. The order inflow is still mainly dominated by exports, but over the past three months we are also seeing the domestic order inflow increase. The increasing trend of domestic order inflow is also part of Q4 which augurs well for steady growth in the domestic market. The domestic market order inflow in absolute numbers has been increasing gradually as mentioned before, INR 0.81 billion in Q1, INR 0.96 billion in Q2 and INR 1.36 billion in Q3.
On a nine-month-to-nine-month basis, the order inflow of domestic is still down 10% compared to last year, showing the overall situation is relatively weaker. One should look at the increasing trend, and we see the increasing trend continuing in Q4. We are confident of domestic demand holding up for FY 2026, although for TDPS its exports that is the main backbone of the business. In the international market, a nine-month-to-nine-month basis, the export order inflow has increased by INR 3.5 billion from INR 4.01 billion to INR 7.52 billion, which is an 88% growth. We have extremely strong growth in the order book and export business from gas turbines, gas engines and motors. Exports and deemed exports inflow is 70% of the total order.
This shows the overall strength of the company in all geographies over the world present in multiple sectors like gas, hydro, traction, clean energy like biomass, heat recovery, et cetera. Most importantly, we are cutting deeper into the market and winning greater market share due to greater acceptance of our products. The gas engine and gas turbine business continues to be driven by demand from CHP, that is combined heat and power power plants, AI, server farms and data centers, grid stabilization units and Ukraine. Demand is extremely high. Future forecasts are extremely high for the next 18-24 months. This is important. We have received renewed commitments from all our customers that the investments for AI in the next 18-24 months are intact and there'll be no changes in the trajectory of power capacity addition in the U.S.
In fact, with the hold on all wind projects in the U.S., more capacity addition is forecast to come from gas turbines, which will be positive for TDPS. We are working around the clock at the moment and once the new plant comes in, we will have some relief on capacity. We have received orders from the Turkish market recently in Q4 for EUR 0.46 billion for execution in FY 2026. This is the first large order after a long time. There are more inquiries in the pipeline and we can expect steady business to come from Turkey in the quarters to come. All orders from Turkey are denominated in euros. We stay immune to high inflation from the local market. Motors. We have given some highlights of our motor orders in the investor presentation.
These examples show that we are continuing to make inroads in the market with references in establishing our brand name and credentials. These references will trigger larger orders in the future. We are at the foundation laying stage and increasing our footprint in India and worldwide. The motors business growth is going as per plan. Once again, we would like to mention the approximately INR 0.5 billion order we got from Nuclear Power Corporation in Q4, which is a big breakthrough order for TDPS. In general, the export business is the key driver for our growth for generators and motors, with demand coming in from multiple markets and multiple verticals. In particular, the gas segment, both gas turbines and gas engines are exceptionally high and will continue to be so for the next six to eight quarters.
The future growth will be enhanced by traction motors and other new products as and when they are introduced. The guidance for this year, FY 2025, will continue to be INR 12.75 billion and initial guidance for FY 2026 will be INR 15 billion with an upside potential based on the current order inflow rates. In conclusion, we are poised for another round of growth. We see exciting opportunities in front of us, and we are gearing up to meet the demand with our new and existing factories. We have just a small fraction of the world market share and our growth potential is huge. On top of this, we are still bullish in the domestic market, and we strongly believe that there will be growth coming after a short pause. India is a severely power deficit country, and the macro situation on power has not changed.
All large industries need captive power plants. This brings me to the end of my initial remarks. I'll be now happy to address all the questions that you may have. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Bobby Jay from Falcon. Please go ahead.
Yeah. Hello. I wanted to know what would be the impact of high storage.
I'm sorry to interrupt you.
You are not audible, sir.
Hello, can you hear me?
Can you speak a bit louder, maybe?
Yeah.
I can hear you. You can continue.
Yeah. My question is, what would be the impact of high storage battery systems on your generators? Because right now some of your generators are used as backup supply, but if batteries do this job, then what would the impact be?
Batteries are forming a part of the overall power installation. The overall demand for power is still so high that power batteries are still a very small % of this mix. Batteries also tend to be more expensive. We don't see the battery business, at least for the next six to eight quarters, impacting our business at all.
Okay, I understand. Thank you.
Just to continue that, batteries can only store power and deliver power for short periods of time as backup. Whereas if you want to have backup power for longer periods of time, or you anticipate that there could be a peaking demand and things like that, the batteries is not the ideal solution. You need to have a regular power generation from gas. There are increasing number of critical applications where you cannot risk having limited capacity from a battery. You need to have the backup from gas. We are seeing that the demand for our products is not really impacted at all from this battery solution. Battery, yes. The battery to some extent of the market is going over there, but it's not coming into the large scale power generation that we are involved in.
Thank you. Ladies and gentlemen, to ask a question, you may press stars and one. The next question is from the line of Ganeshram from Unifi Capital. Please go ahead.
Congratulations on your performance. Great set of results. I have two questions please. The first one is broadly on the guidance that you provided to us, right? Typically, Q4 tends to be a stronger quarter than Q3. If I extrapolate it, then I think, that INR 1,275 crore number sort of, we can easily achieve it or we can slightly exceed that. Is there something that I'm missing? That's the first part. The same on the guidance that you've given for FY 2026, right? If my understanding is right, the new capacity can churn about INR 400 crore in revenue. If it comes in second half next year, that's INR 200, just from the new facility and about INR 1,300 from the existing facility.
Basically, the execution needs to be on spot, so it's able to run at 100% capacity from the day it's commissioned, or you have to build in inventory, right? How are you going to basically ensure that you'll be able to achieve the guidance that you sort of set out?
Yeah, thanks a lot, Jigar, and thanks. Good point. We hold on to this year's guidance of INR 1,275. We're running flat out, we have certain limitations on how much more we can produce, we're holding onto the guidance for this year. For next year, the INR 15 billion is an initial guidance we are looking at the way things are going, we're definitely going to do much, much better than that we will upgrade the guidance in the upcoming quarters. Looking at the way the order inflow is continuing to be, looking at the demand for the products, it's going to be a most likely scenario. We will start commissioning our new plant stage-wise around middle of Q1, then it will be fully in line in Q2. We'll start seeing increases in our production in Q1.
We'll see increases in our numbers in Q1. We'll see the further increases taking place in Q2. Execution is critical. We have to complete everything on time. The orders are there. Customers are demanding the products that will be delivered on time, so we are under pressure. We are working around the clock, not only in our factory right now, but also working around the clock to make sure the new plant will be commissioned on time. We have to make things happen.
Okay, Nikhil. Maybe I'll connect offline just with a few more details on that. Just broadly, a second question, if you don't mind, is the order book inflow. I read in the presentation you mentioned the current inflow about INR 400 per quarter would be sufficient for us to deliver on guidance, which I'm on the same page as you. What I'm trying to understand is, would I be right in saying that you continue to expect a larger part of this INR 1,600 crores annualized would come from exports, some moderate growth from domestic? You have the railway, some portion of it running out, but I can see you won something in Germany, right? How should we think about it as a whole? If you had to sort of mentally break down the INR 1,600 crores, where would you see that split land actually?
Right now, INR 400 is the current order inflow. If you annualize it, we are at INR 1,600. Let's say we are talking about INR 1,500, which is the current guidance. From that, our current guidance, the railway business will still be only INR 100 crore, INR 120 crore, which is the current Alstom order or current order for the e-Loco project in India.
The export jobs, although they will start by Q3 FY 2026. I mean, the volume production will start. We will not see significant numbers coming in from this business in the next financial year. We are not factoring that in. We have to start, but it will not be in full swing. The full swing will start early in FY 2026, both for the German market as well as for the U.S. market. Those numbers will then go into 2026. The other products, that means the motor and generator business, will then have to deliver something like INR 1,400 crore to achieve the initial guidance of INR 1,500. Looking at the current inflow rate of INR 400 crore per quarter, which is excluding traction, I think you are right. I also said we will definitely upgrade the guidance.
All right. Thank you. I'll come back in the queue for more questions.
We have a lot of margin. We don't have a problem. We're not going to have a problem with numbers. We have to get our plant in place and start producing more.
Understood, Nikhil. Understood. Thank you. I'll come back in the queue for questions.
Thank you. Participants who wishes to ask a question may press star and one. Next question is from the line of Anand Trivedi from Nepean Capital. Please go ahead.
Yeah. Hi. Congratulations. Good set of numbers. First question I had is, are you all at all exposed to the U.S., and if so, are these Trump tariffs, do you expect them to impact you?
Our exposure to the U.S. will be something like 8% of our overall turnover. The products that we are exporting to the U.S. to our OE, to the gas turbine manufacturers over there, it's a two-year qualification which is required for any other generator manufacturer to, let's say, replace us in the event that duties do come in. We've been talking to our customers about this, and right now, we're all waiting to see whether the Trump tariff will also apply to India or not. It may or may not, we don't know. If there is a tariff coming in, then for the short term, that will have to be passed on to the market. It will have to get passed on to the market. In the longer term, we will have to see where we can manufacture, where the duties will not apply.
Essentially, our customers with us and we don't expect the disruption of the business to take place. They're with us, okay? They also cannot afford to re-qualify a new product. It takes a lot of time. They made a huge investment for it. For the machines, for the turbines, which we are qualified for the moment, I think that customers will run with us. Short term, if they have to pay duties, they'll pay duties. Medium-term, we will have to be with the customer, and TDPS will have to find solutions.
Got it. You also mentioned that 70% of the order book is export and domestic has been relatively slow. Can you just talk about why that is the case, given there's so much opportunity for power in India?
The demand for power in India is extremely high, it depends on the investment climate. Everything depends on the investment climate. If investments are taking place, the power capacity addition will take place. Our business in India is relatively narrowly focused to the steam turbine business, the steam turbine business is mainly for captive power plants for large industries. It is, in that sense, it is dependent on investment. If that investment slows down for whatever reasons, this business in India for us also will slow down. What I said is, we're not seeing this business has collapsed as such. We're just seeing the business is tapering off from a higher level of growth to more moderate levels of growth. Nevertheless, it is growing.
We're seeing that in our order inflow, quarter-on-quarter from Q1 to Q3, the absolute numbers have been increasing. We're not worried about the domestic market. We're just factoring in the lower growth level, and I think that having a steady eight, 10% growth level for a longer period of time is actually healthy for the market.
Got it. Last question on my side. As the exports mix in your business grows, do you see margins also going up from the current 17%, or you think margins are healthy where they are?
The export business, of course, its margins will be where they are. One of the things which we are very heavily exposed to the EUR. We have a lot of sales in euros. Currently the euro is relatively weak against the dollar. It's like at $ 1.03, $ 1.04. It was $ 1.1, $ 1.12, just six months ago. Although we have hedged currency forward, the relative weakness of the euro does affect margins. With the forward cover and everything, we are going to be in line with whatever margin projections we have made. We have the third plant coming up. We have been already hiring for the third plant. You will see that some of the costs associated with that are now already being booked by the company. We've been hiring, we've been training people.
Some of the things, I want to put a cap on the EBITDA margin. I would say factoring something like 17.5% or taking two states between 17%-18%, I think would be where they're going to be for this financial year. Next financial year, of course, once things are running at full pace and we absorb all these costs and we're going at full capacity, I think the margins will once again improve. Let's talk about that towards the end of 2026 and 2027. For now, I think 17.5% is a realistic margin.
Thank you.
Thank you. Participants who wish to ask a question may press star and one. The next question is from the line of Piyush Sevaldasani from Sundaram Alternates. Please go ahead.
Yeah. Hi, [Seth]. Thank you for the opportunity and congrats for a great set of numbers. My first question is on the gross margins. They have slightly come off this quarter to, I think, 33%. Can you help me understand, is this because of the forex which you were mentioning?
No. I think there are a number of reasons. There's a small shift in the gross contribution level. I feel that it is not possible to, when we have a varying product mix and some quarters we may have more aftermarket business, some quarters a little bit less. Quarter on quarter to be delivering exactly the same gross contribution is difficult. Overall, we look at our performance for over a six-month period or a 12-month period, there we have given the guidance for gross contribution. It will be what it is. Please, quarter on quarter is due to these fluctuations in product mix currencies or et cetera.
Got it. Sir, also, we had talked about in the last con call that we will be hiring a lot of junior-level employees in the first quarter, the ramp-up of the capacity will happen in first quarter. Would the margin be impacted for the next year? Can you please look at and help us understand?
No, not as I said, I just spoke to Anand and said that you can please expect something between 17%-18% EBITDA margin. 17.5% would be realistic to put in for next year, considering all the costs that we're going to have, considering the ramp up, considering the product mix and everything. It should not be just on a quarter-on-quarter basis. I think looking at the first snapshot at the end of H1 would give a good idea. We do have top line.
Yeah.
We have strong order inflows from all sides. We have big pending orders. We have top line, we have to execute. With the top line will come operating leverage and growth. I am not at all worried at this point. We have to execute. That's number one. We have to deliver to our customers, and we have to put our plans in place, get our quality right. There's a lot that we have on our plate right now. Margins will follow.
Sure, sir. My last question is on the domestic orders. I think it has been good recovery this quarter. If you can help me understand, what are the sectors you think are driving the recovery, and what do you think about domestic orders for the next year?
I just said, the sectors are steel, cement. The normal steel particularly continues to be strong with lot of ordering taking place in steel still for waste heat recovery, also for basic power generation. 8%-10% domestic growth, domestic market growth is what we have factored into the plan. If it accelerates, well and good, we'll be happy.
Okay. Thank you, sir.
Thank you. The next question is from the line of Rahul Shah, an individual investor. Please go ahead.
Thanks for the opportunity and congratulations, sir, for the great set of numbers.
Thank you.
I have three questions. One, starting with, for last past few quarters, we have been reporting a strong order inflows. Can we assume that the existing run rate of this 400 per quarter is the new base for the next four to six quarters?
We can certainly say that would be the new normal of the average order inflow for the next few quarters. In some quarters, we could have greater than 400. In some quarters, it could be little bit less because we are present in multiple sectors, multiple geographies, multiple products. We win some large orders, then in those quarters, you would see a spike. Yeah, it's going to be the new normal. 400 could be taken as the new normal. We do expect this to be the average order booking considering, let's say, three, four quarter average.
Understood, sir. Understood. My second question is around given the rate of the order flows that we have, it is very much possible that the upcoming third factory will get fully utilized by mid FY 2027 levels. Are we planning to add the fourth facility in FY 2027 itself? What will be the amount of CapEx involved if we do so?
No, we're not going to be putting a fourth facility. In fact, we have identified a huge potential for us to use our existing facilities in a more efficient way using Japanese methods like Kaizen and lean manufacturing, single piece flow. There's a lot that we can do further automation. There's a lot that we can do to get more out of these existing assets after we finish this investment this year, this calendar year. I personally believe that at least up to maybe 2,300 or so, we will not need a fourth plant. Any decisions which have to be taken will have to be taken only after 2028, which is quite a way from now. After we've put in this investment, the focus immediately is going to be on getting this investment up and running.
Parallelly, the plans are already going on on how do we improve throughput, how do we reduce cycle time, how do we reduce inventories, how do we implement lean manufacturing, how do we increase automation. Manufacturing excellence is going to be the theme on how to get more output from the existing assets. That obviously will lead to better EBITDA margins, operational leverage, better financial performance. That's the direction we're going to be taking after this investment is over. We're not going to rush into the fourth plant until we completely flog these assets.
Understood. My last question is, the company has recently announced new orders in traction motors. How big can the traction motor business become for TDPS in next three to four years? Can we expect the traction motor segment make a big inroads in the international markets similar to what we have achieved in gas engine turbines and hydro segment?
Short term, yes, we have an upcoming order from the European market. We have an order from the U.S. market, and we're also supplying to CIS countries. We would like to stabilize this production. The moment we stabilize this production and we're delivering high quality, within these two these customers itself will increase. We have a good scope to even up to even talking about, let's say, doubling this what we have projected to the market. We have that scope potentially if we do a good job. The focus of the company is going to be to deliver high quality products to these existing, to the new customers, and then we have the potential to ramp up the business even further. Look, it's around INR 1 billion, INR 1.2 billion right now. It could be potentially three times this size.
Understood, sir. I'll get into the queue for the next set of questions.
Thank you. The next question is from the line of Kuber Chauhan from Anand Rathi. Please go ahead.
Yeah. Congratulations on good set of numbers. Appreciated on the good numbers as well. My question is regarding you told regarding the Turkey order inflows, as you mentioned. I just wanted to know that, is it more sustainable and how the demand is looking from Turkey.
It started once again. The business has started once again from Turkey. After a long time, we have picked up this one order. It is around EUR 3 million , somewhere around INR 0.26, INR 0.27 billion . There are a number of other inquiries in the pipeline. I feel that the market is going to slowly revive and slowly come back to what is new normal. It is, I think, early days for me to give a strong prediction. There is action once again in the market. We will be happy to report more order inflows. We are active once again in the market. We are well established. We are still the only manufacturer in that country making large generators. Whatever business comes from that country where they need made in Turkey machines will come to us. Let us wait. I hope the market recovers further.
It looks like looking at the inquiry level, that the pipeline is again filling up.
Understood. With the new capacity coming in line. When can we expect the full utilization? In which quarter we can expect?
Sorry, could you repeat the question?
I said capacity is coming online in next year financial year.
The new capacity will be partly in Q1, and the rest will happen in Q2 next financial year.
Okay. Peak utilization would be in Q2 of next financial year, right?
The plant will be fully ready by end of Q2, and we will see the full impact of the capacities in H2 next year.
H2 next year. Okay, understood. Thank you.
We partially commission one part of the plant in Q1 and the rest in Q2, and then the ramp-up will take place, and you can say the full impact will be felt in H2.
Okay. Got it. Thank you.
Thank you. The next question is on the line of Ankit Soni from Sharekhan. Please go ahead.
Sir, good evening. Congratulations on the set of numbers. Just wanted to understand, on the one thing, do we have any further update on the domestic traction motors order, which we were expecting?
No updates.
Sorry?
No updates.
No updates.
Yeah, sorry. No updates.
Okay, fine.
We have been asking, unfortunately, we have nothing new to report.
Okay.
Also, conversely, we're not depending on that for our any growth or any replacement or what might happen after 28 when the existing order runs out. We're not waiting for that to happen. We have made alternative plans when that stops, something else will, all the things we're doing right now will take over that. We have three businesses, one to Europe, one to U.S., one to CIS. If the Indian repeat order comes, great. If it doesn't come, it's okay.
Okay, understood. Sir, just wanted another question onto this nuclear plant. What would be the strategy domestically with recent announcement in the budget for nuclear plants and all? What would be our strategy? What would be the target addressable market, what would be the total TAM for that particular plant?
Okay. I think that announcement, nuclear power plants have a long gestation time, it could take even one decade to build a new nuclear power plant. The only thing what we can say is that it will be a long, sustainable cycle for nuclear in India for maybe decades to come. For us, right now, we are focusing more on the existing nuclear power plants. That means the machines which need to be replaced. There's a lot of old Russian equipment in the existing nuclear power plants, the business that we're getting right now are basically replacing existing equipment, there's a lot that can be done in this part of the market. Gradually, we are moving from out of dome, now the attempt is to get into inside the dome.
Once we get qualified, now we're fully qualified outside dome and getting into the qualification for inside dome, then we get automatically approved for the new power plant also. All I can say is that nuclear power plant business for India motor business will be a steady business that we're going to get year-on-year. It's going to be part of our overall portfolio, but it's going to be a long cycle and for us, it's important to be one of the key suppliers, motor suppliers to NPCIL.
Sure. Thank you, sir. That answers my questions. All the best.
Thank you. The next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead.
Yeah. Thanks for giving the opportunity. Congratulations on a good set of numbers. Sir, lastly, wanted to understand the motor side, again, INR 320 crores of order book, which is there on the regular side. How should one see the execution from this piece over the next three years? What could be the incremental order flow that can come from this division from this one standard?
I think I just answered that. We have an order from the European market, we have an order from the U.S. market, we have an order from the CIS market for traction motors. These three are going to be the main focus of our production and sales for the next two years at least, there's a scope, as I said, for us to, if everything goes well and we achieve the full potential, to be around INR 2.5 billion-INR 3 billion. That's the goal of the company, to take it to that level.
Sure. Understood. Second question was on slightly a long-stretch question. When we see the advancement which is happening on the generative AI, given this now DeepSeek, I think it comes at different rates. Do you see any impact on your data center side of the demand which you are meeting?
No. Actually, there is no change. In fact, just this morning, there's a headline article from the Financial Times newspaper, where all the big tech companies have reaffirmed their CapEx commitments for AI, notwithstanding the fact that DeepSeek is there. They feel that as the costs keep coming down for AI, there's going to be a wider and larger implementation base. It becomes more accessible as it becomes cheaper. The overall power demand as forecasted and the investments which they forecasted, no one is backing off. That's from the end user side, the actual IT companies, the tech companies. Our customers, the gas engine, gas turbine guys, they have clearly told us that there's no change in the demand situation for the next 18-24 months.
Whatever forecasts that are there are in place to have the capacities ready. The thing is that most of them have got long-term commitments. They have advances, non-refundable advances. They have these contracts locked in. Since there's no letup of the investment from the tech company side, which is confirmed from the newspaper article today from the Financial Times, we believe that there's going to be no change in the situation for us also going forward.
Understood. Sure. That's it from my side. Thank you very much.
Thank you. The next question is from the line of Himanshu Upadhyay from BugleRock PMS . Please go ahead.
Yeah. Hi, good afternoon. The order which we got in Turkey is after the quarter end. Is that the right understanding?
Yeah. It's going to come under Q4, Himanshu.
We had to restart that plant at Turkey. Have you started the process?
Yeah.
Will it start working?
We have an order now we need to deliver. Yeah, we have an order we need to deliver. We have got to restart the process.
Okay.
It's not difficult, Himanshu.
Okay. Just a color, besides railway business, in terms of hydro, gas, and steam, how balanced is the portfolio in terms of product profile-wise? Is that the right metrics you would like to look at the business? It could be more of a customers or OEMs whom you look at as that a better mix of understanding the diversity of business? Some thoughts on that or geography. How are you looking at that thing?
How do you want me to answer this?
No, how balanced would be on the fuel side? At one point of time, steam was a predominant business. Okay. Will it be that equal share of these three businesses, hydro, gas and steam?
Vinay, you are there on this call, right? Can you please answer this question?
Yeah.
How do you see the balancing of these segments?
In the coming years, I think steam and gas segment are going to be the dominating segments, followed by hydro segment.
We had a very high hopes of hydro.
Yeah.
We had a very high hope.
This year.
Yeah.
This year we'll be doing the highest turnover in hydro. Hydro is a longer cycle project because from the DPR to implementation, it takes much longer time than the other segments like steam or gas. It's also a cyclic business. We are not seeing a big growth in the next year, but definitely we are going to grow in double digits in hydro. There are also many refurbishment jobs we have bid for, and in a couple of jobs we have already become L1. As I said, these hydro jobs take much, much longer time as compared to the steam or gas segments.
Just to add, the hydro business, as Vinay said, is a long cycle business. Growth is there, but it's not at the same rate as what we're seeing in the gas business. If you're talking about growth, number 1, growth is coming from the gas side. Number two, growth is coming from the steam turbine side. Number three, growth coming from the hydro side. Okay. Of course, the traction businesses and motor businesses are relatively new businesses for us, coming from a small base. There, of course, the growth is for the company percentage-wise is at the highest levels, percentage-wise. In terms of growth, I think hydro would be towards, for a company portfolio, it will be towards the lower end.
When Vinay talks about double digits, say 10%-15% growth, that will be at the lower end compared to all the other product categories where of course the growth is much, much higher.
In domestic market, it would be still majorly steam only or there also you are seeing some traction on gas side generators? I'm talking about domestic market.
Domestic is mainly steam as of now. We have some small jobs in gas engine generators, but gas business is almost negligible. There are many hydro power plants coming in India, small hydro below 25 MW. We have already received three projects and these are good value projects, and there are a number of projects in the pipeline. All the northeastern states, now they are opening up for the hydro. Otherwise, as on today, the main dominating segment for us in the domestic market is the steam turbine market.
Okay. Thank you so much, sir.
Thank you.
Thank you. The next question is from the line of Ganeshram from Unifi Capital. Please go ahead.
Thank you. I just want to follow up on what I was sort of going with. On the margins front, my understanding was at some point that procuring steel was getting a bit difficult and you were building up the inventory. As things stand right now, how much of our top line would sort of be secured in terms of inventory? That's the first part. The second part is on the staff cost. We have about INR 32 crore in this quarter. As in FY 2026 Q1 you start adding more staff and gradually ramp up that plant, how will the staff costs sort of evolve and what would be the associated depreciation impact we should expect? When would the depreciation on the new plant sort of start hitting our financial statements?
That's just the first part of the question. I'll come back for the second.
Okay. I don't have the project specific details at tip of my fingers. I think we will take this conversation, we can have another call. Here basically the investment we can, up to now we have spent around INR 0.4 billion on the project, and we still have the majority of the money is going to be spent, another, say, INR 1 billion is going to be spent starting from, let's say, part of it is going to be this year, let's say 0.2 or 0.8 is going to go to next year. We'll see the full depreciation. It's going to be, you can say, 30% of the depreciation will start taking place this year. I'm not even sure we can do that because we're not commissioning anything.
Yeah.
Most of the depreciation will start kicking in next year.
Okay.
Once we get a commission before we can claim depreciation. The investment taking place so far, even this INR 0.4 billion is mainly land investment taking place already in construction. Those you cannot take depreciation immediately. We will see the full depreciation impact coming next year. The manpower hiring has already started. We already have some costs associated with that in our existing balance sheet and existing P&L. I don't have the exact numbers on how the ramp-up is going to take place right now in front of me.
Okay. No problem. I'll take that question offline where it probably would be better.
Yeah.
Just one more, if you don't mind. This is more of a clarification. My understanding is our existing plant can go up to INR 1,300 crores. The new plant can take us to INR 400 crores. With efficiency improvements, you're saying you can bridge the gap from INR 1,700 crores-INR 2,300 crores. Would that be the right interpretation or have I.
Yeah. 1,250 is the existing capacity, 1,800 is the planned capacity. Say we are expecting something like another 20% output more from the 20%-25% more approximately from efficiency improvements.
All right. Very clear. Thank you, Nikhil.
Thank you. The next question is from the line of Kiran D. from TableTree Capital. Please go ahead.
Thank you for the opportunity. Very heartening tone though, Nikhil, because it's sort of four years back, I still remember the con call where you said we don't have nine months visibility, now we have 24. Fantastic progress. Thank you so much. Nikhil, I have a more strategic question. In terms of synchronous motors and induction motors, right? Now that we've cracked the gas engine and steam and hydro and various other segments, the next big focus, at least in my mind, is induction and synchronous motors, which is multiples of this gas engine opportunity in terms of market size. How do you see us scaling? I know we won some marquee orders.
I did read the investor presentation. How do you see in your own mind, can this be a INR 500 crore, INR 700 crore revenue business in the next two, three years, or will it take much longer to reach that kind of scale? How does the business stack up from now to then, essentially?
The plan is to take it to that level in not two, three years, but three, four years. For sure.
Got it. Are these orders the marquee orders that you put in the investor presentation? Are these like the base orders on which we're going to win major business?
You see, when you want to get into a large compressor market or large pump market or something like that, first question customer will say, or business in the oil and gas industry where you supply motors to API qualification, API standard, hazardous locations. We're going after a lot of these very specialized applications. We're going after motors where there's a lot of engineering involved and where the specification is hard. Obviously, prices are also better because we want to go after that higher margin business. Question people always ask is, where's your reference? Although we may have a lot of references in generators, people want to see actual motors also working. When you look at our list of orders that we have got, and we are delivering some of these machines, then we'll have the references.
Once we have the references, it opens up the order book. For all the new inquiries that come, new plants, replacement, et cetera, it opens up the whole business potential for that particular segment, for that particular application. We will see manyfold increase in the motor business once these are commissioned, once they're successfully commissioned, and we have those references. All the sites that we're putting in these motors are all really high-profile marquee customers, high-profile customers. We can use this, and we will use this reference list extensively to get more business. What we have done, the orders that we have got in the motor business are really exciting, and it's going to have a big potential.
Got it. I'm presuming these are slightly higher margin than our existing business, Nikhil?
Yeah. It's good margin business, I would say. I know that once we crack this market and get larger volumes, it will overall improve the margin profile of the company because these are highly specialized products.
Got it. Last question from my side, Nikhil. We are hearing all the other manufacturing companies who are in the exports business, especially to the U.S. exports, that they need to set up something in Mexico, something in the U.S., some facility in the U.S. A, out of the INR 1,500 crore revenue we'll eventually reach in FY 2026, what percentage of revenue would be from the U.S.? Point number B question is, have you heard any of our clients talk about us setting up that facility in the U.S. so that they can procure it easier, better, make in U.S., and all that stuff?
No. I mentioned earlier in the call that for FY 2026, something like 8% of exposure will be U.S., 8%-10%. We are in close contact with our turbine customers in the U.S. about any potential duties that may come. They're also fully aware of it. If it is 10%, I don't think there's going to be any change. If it is 20%, we may look at options. We also have a plant in Turkey. There are ways that we can. We have options. I think putting a plant in the U.S. will be the last option. How long will the tariffs last? Putting a plant in the U.S. or making things in the U.S. is really expensive. Maybe it's 20%.
Even if there's a duty of 20%, maybe even still more expensive to make in the U.S., even though you have a 20% duty. It will be cheaper to make in India and pay the 20% duty. Let's see how it works out. Let's see what comes. We are in close contact with our customers. We are watching the situation very carefully. We're not going to lose the business even if the duties come. As I said earlier, short term, customers will pay, and they will pass through that.
Makes sense, Nikhil. Thank you so much.
Thank you. Participants are requested to kindly limit their questions to two per participant. The next question is from the line of Rohit from iThought PMS. Please go ahead.
Good afternoon, Nikhil. Congrats on really good numbers. Nikhil, just one question. I just wanted to hear your views on the geothermal market that you are going after, especially in that context, U.S. Anything happening there? That is something that I wanted to understand.
There's no progress in terms of new orders. We are actively bidding for new projects in the U.S. They are under finalization stages. We are in the race. We are in that final list of approved vendors. We are hoping that we will win. We're very well-placed. We're hoping we will be able to probably announce something in Q1, hopefully.
Okay. Got it.
Yeah, big projects coming up in the U.S.
In the gigawatt category kind of projects coming up in the U.S.
When you're saying 8% for next year, what you have in your mind?
I'm not factoring anything, not factoring any new projects in geothermal.
Understood. Okay, that's it from my side.
If those orders come, we will revise our guidance for that.
Understood, Nikhil Thank you very much. Again, congrats on phenomenal numbers.
Thank you.
Thank you. The next question is on the line of Anand Trivedi from Nepean Capital. Please go ahead.
Nikhil, as a follow-up, just wanted to see if the data center space you spoke about that. Is there any sense to how big that opportunity could be the next three to four years?
There is a sense. We know that the overall power demand up to 2030 for the U.S. market is going to be around 100 GW. That's the number which is in the market. The current share of gas business in the U.S. is something like 48% to 50%. This new 100 MW, there's a lot of discussion as to which fuel is going to take the primary role or primary amount of business from this. There are the different scenarios being worked out. Now that wind projects have been more or less put on hold by the Trump administration, there is the thought that the gas business is going to dominate this 100 GW.
To what extent, we don't know, but it will be at least, in my opinion, more than the existing share that gas has in the overall power mix for the U.S., which is more than 50%. That's a lot of additional business only from the U.S. market. This will keep everybody busy for a long time.
Okay. Clearly a big opportunity for you all.
It's a big opportunity. It's a very big opportunity. Not just for us. You could look at all the large power companies like Siemens Energy. They all booked out for the next three, four years on this A4AE business.
GE Vernova, Siemens Energy, they are really doing well.
Got it. The last question from my side, you talked about using these Japanese techniques to sweat your assets more and become more efficient. Your current inventory days are around 140, 159. Do you see that coming down?
The part of it is due to the large stocking of your steel and copper, not due to manufacturing efficiency. We will bring it down even if we are going to stock. We will look at cycle time reduction, it will come down. The goal is to bring it down. Whether we can do without stocking of inventory of steel and copper, that will again, once again, depend on the supply situation. If there's stability in the supply situation, then I would love to stop buying and holding the material because that will free up so much cash for us.
Sure. Okay. That's it. Thank you.
Thank you. The next question is from the line of Rahul Shah, an individual investor. Please go ahead.
Hi. Thanks for the opportunity again. My first question is, what is the update on the existing supplies of traction motors to Alstom for the 12,000 HP locomotives? Would this order get renewed after FY 2029? Similarly Hello?
Yeah. Sorry, I thought you were going to ask me something else.
No, no.
As of now, we have no information on any renewals.
My next question is, you have been getting the regular orders in the motor segment. How big is the global market for customized motors? What are indicative global market share and which geographies are we supplying? Can the motor business exceed the generator business in next five to six years?
I gave a number. I said that we're going to grow it to six, seven billion in the next three, four years' time. Potentially, the market is very large. It's 10x to 15x size of the generator market, potentially we can make it as large as a generator business for us. That is the goal of the company. Highest growth is going to come from the motor business for us compared to the generator business over a period of time. Right now our market share is just not even in the percentage, sorry, decimal point percentage in the world, in our world scale. We are nobody in the motor business right now. We have a lot of scope to grow.
Understood, sir. My last question is, we haven't spoken about the wind turbine generators for the last few years. Is there any possibility of getting large orders in the near future, or we have completely given up the segment?
We've not completely given up. Now and then we get certain inquiries, and we follow up on that, and we come to the stages for negotiation, contract negotiation. Unfortunately, we've not been able to close those contracts because once again, we come to the liability clauses, which makes me uncomfortable and puts the company under a big risk. If we are able to get a customer who's willing to sign something which is better for us, then we will close those contracts. Looking at the nature of the wind business and the nature of the contracts which are over there, it's unlikely that we will make big inroads into that business. I'm not banking on the wind business for our growth, although now and then we have inquiries.
We're talking to big people in the market. I don't see this in my plan for the near future.
Understood, sir. In the data centers and AI, are we supplying gas engine generators or gas turbine generators to them? To which OEMs we are supplying this?
We are currently supplying to a large U.S.-based OEM, I don't want to mention the name, but it's a large U.S. based OEM, and it's a gas turbine. Because the large data centers, large AI, they require large-scale power generation, their machines tend to be 15-20 MW. We're in the process of getting our machines qualified for a 45, 50 MW size machine, which we're delivering by the end of, let's say towards Q3. Once we qualify for that 50 MW, our business will again, I would say there's a big potential for us to even double our business in the AI sector in 2026 and 2027. We are putting a lot of effort in to see how we can advance the qualification of the 50 megawatt product. We have good forecast from this customer once we're qualified.
There's a lot of things in the pipeline, 100 MW that I talked about earlier is a huge market. We want to grab a larger portion of it, and we will.
Understood, sir. Just last question. What's our role in geothermal generators in the data centers?
Earlier there was a question about geothermal. As I said, large geothermal plants are coming up in the U.S., gigawatt size, 1,000, 2,000 MW size. They have PPAs mainly with large IT companies. We expect that the geothermal business will continue for us and will be a large part of our As I said, we have to win that business, right? We have to win that business, it's not right now at the point where I can say, "Okay, we have won this business." The market is there.
I understand. Thanks a lot for the opportunity.
Thank you. The next question is from the line of Viraj Jain, an individual investor. Please go ahead.
Hi. Thanks for the opportunity, sir, and congratulations on the great set of numbers. I just had one question. That of late we have been hearing a lot about small and medium-sized gas turbines that are being run on a mix of hydrogen and LNG gases. I mean, are we capable and approved to supply generators for hydrogen-based turbines?
Yeah. Our gas turbine customers are progressively making turbines with hydrogen mixed with natural gas. We have our products in the pipeline which will run with this fuel mix. They are all getting ready for the hydrogen future, and we are also getting ready for the hydrogen future if and when hydrogen becomes cheap enough to be used as a fuel for power generation.
Understood, sir. Thank you so much.
Thank you. The next question is from the line of Ajit Sethi from Eiko Quantum Solutions. Please go ahead.
Thanks for the opportunity. Sir, can we assume we can do INR 2,400 crore revenue in FY 2027?
No.
Any sort of revenue guidance for FY 2027?
We have projected something like a compounded 20% growth. We will upgrade the performance as and when we see and once we come closer to those dates. Right now, we will commit that we can do a definite 30% compounded growth year-on-year.
Okay. My last question is, what will be our capacity after the expansion?
INR 18 billion.
INR 18 billion, okay. EBITDA margin, what we can do?
Around 18%.
Okay. Thank you.
Thank you. The next question is from the line of Bobby Jay from Falcon. Please go ahead.
Hi. Could you talk a bit about what is driving the growth for European gas turbines? Is it lack of supply or is it demand? Because the economies aren't growing really, so what's really driving that?
In the European market, the demand is for grid stabilization units, the CHP, combined heat and power plants. Also there is a data center market also in smaller sizes where you need, because it's not gas turbines, but it's gas engines in the European market. Especially Ireland is a big center for data centers, and we have been getting steady business and increasing our business in Ireland for data centers. The dynamics of the market are quite different from the U.S. market. Demand is high based on these factors and grid stabilization units have a big requirement. For example, this year we're supplying 100 machines of 5 MW to the U.K. market only for grid stabilization. As more and more countries have larger proportion of their power mix coming from renewables, they will need more and more of these grid stabilization units.
This is a fundamental change taking place in the market. The irony is that the more renewables you have, the more grid stabilization power you need to have. When the sun doesn't shine or the wind doesn't blow, you'll have hundreds of megawatts coming off the grid instantly, you need to start these engines within five, 10 seconds and pump in these hundreds of megawatts into the grid, run them for a few hours, switch them off, and the production of wind or solar picks up once again. This demand is structural. It's going to keep changing. It's going to keep improving. This is a long-term requirement. The factors driving the European market are quite different from the U.S. market. The U.S. market, the power demand is coming out of AI.
I understand, in Europe, don't they have their own local suppliers for these generators?
They do.
How are you able to compete with them?
They do, we compete against them, and we win business.
It's all tender-based. You don't get repeat orders from the same customers. You have to win each tender for each business.
No. Our business is to the prime mover companies, like engines or turbines, and they in turn bid with the generator for projects. Let's say it's a large utility or it's a large data center company. Those will be repeat orders. A utility may, say, buy, let's say, 100 machines, grid stabilization units this year. It may not buy it again next year, but it may buy it the following year. That's how the business runs.
Right. You have a direct relationship with the prime movers. You don't have to bid for tenders for them.
Ladies and gentlemen, please stay connected.
It's really a global market for us. We were not dependent on a single country as some of our peers. Different countries have their economies coming up at different points of time. We have a global reach.
I know. What I specifically wanted to know was, do you have to bid through tenders with the prime movers, or do you just continually get repeat business?
We get repeat business.
Right. The prime movers have to bid for tenders, right with the utilities?
Correct.
Understood. Okay, great. That's great. Thank you.
Thank you.
Thank you. The next question is from the line of [Vimox Shah] from Goyamlabdhi Fintech Private Limited. Please go ahead.
Yeah. Thank you for the opportunity. Regarding the international market, can you provide more specific details about the types of project driving the increased demand for the gas turbine and the gas engine? What is the growth attribute to tracking data center or the AI?
Sorry. Can you repeat the question? I could not hear you. We have some problem with the line.
Okay. Can you provide more specific details about the types of projects which drives the increased demand for the gas turbine and the gas engine?
I don't know how to give more specific information. There could be an AI data farm, let's say, or a data center which requires 100 MW or 150 MW from one large tech company, and they need five units or 10 units of 15 MW, they will buy it from our renewable customers without a generator. Can you hear me?
Yeah.
Okay. That's all I can say in terms of specific information. There could be a utility who wants to buy grid stabilization unit, 500 MW. That's how the business goes. I don't know how to give you more specific information. I can't give you customer names and things like that right now, we're not allowed to share confidential information.
Okay. What are the typical margins for the geothermal projects compared to the hydro?
Geothermal projects have better cross-contribution. Again, project to project it varies, they have better cross-contribution compared to our regular cross-contribution.
Okay. Just last one is, what is expected revenue potential at the peak utilizations for this new facility which is coming in after Q2?
We have the capacity which is INR 1.18 billion, which we put up. It should be ready by end of H1, we have given initial guidance for 15. 15 by 18 would be the capacity utilization that we would have. Once I increase the guidance beyond 15, that could be the number that we will have to calculate. As we increase the capacity from 1,800, we said we can do the 2,300. We will see when the capacity obviously will go up. We have already experience in doing this. If you remember, we have increased our capacity from INR 700 crores, INR 800 crores to INR 1,200 crores with automation and other improvements we made in the factory. We have experience in doing this and how to push the envelope and how to push the plug, the assets. We will do it once again.
Okay. Got it. Yeah. Thank you. All the best.
Thank you. The next question is from the line of [Raj Sara] from Finvestors. Please go ahead.
Sir, congratulations on good set of numbers. The question is for the raw material prices movement, as we already know that we have stocked up our raw material for FY 2026. How is your raw material prices moving forward?
We see a stable raw material environment for us for next financial year. If the prices go up or down, then we have to then see the situation for the following year. FY 2026, we are secure.
Okay. I'm kind of liking, like a shareholder, that we are seeing already in investor presentation, the highest PAT, highest revenue, highest EBITDA, highest order inflow. Are we on track to post another highest quarter in this quarter?
Can you just speak a little slowly because I'm not able to understand what you're saying.
Yeah. I'm asking, sir, in investor presentation from last two, three times, I'm kind of liking this commentary like highest EBITDA, highest revenue, highest PAT, highest order inflow.
Are we on track to deliver again highest quarter like Q4 FY 2025?
In Q4? Yes.
Yeah. Thank you very much, sir.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Thank you, everybody, for joining us today on the conference call and presenting us with a number of detailed questions and interesting questions. We will look forward to interacting with you at the end of next quarter, or we'll be happy to meet up with you next few months during some investor conference. Thank you very much.
Thank you.
Thank you.
That concludes this conference. Thank you for joining us. You may now disconnect your lines.