Ladies and gentlemen, good day. Welcome to the TD Power Systems Limited Q4 and FY 2024 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. 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 101 on your touchtone telephone. Please note that this conference is being recorded. Now I hand the conference over to Mr. Nikhil Kumar, Managing Director for TD Power. Thank you, and over to you, sir.
Thank you. Good morning, everybody. Thank you once again for joining us today on our earnings call. I trust all of you have received our results and investor presentation. Now I will discuss with you TDPS's financial performance for the year ending 31st March 2024. First, standalone. Our full year total income on standalone basis was INR 10.07 billion versus INR 8.43 billion over the same period the previous year, increase of 19%. EBITDA for the full year is 17.66%, including other income, but excluding exceptional and treasury income, versus 15.18% over the same period in the previous year.
The company has spent INR 32 million towards a one-time VRS scheme within the quarter, with INR 20 million towards backlog gratuity payment to contract and temporary workmen as required under the new labor code, and provided INR 17 million towards royalty payment on account of sale of two-pole generators under the license agreement. All of these resulting in a drop in EBITDA margins during Q4. Profit after tax and comprehensive income was INR 1.223 million, versus a profit of INR 8.84 million in the same period of the previous year, an increase of 38%. Order book for manufacturing segment is INR 11.89 billion, out of which INR 7.4 billion is the regular manufacturing business, INR 4.18 billion, the railway business, and now the spare and aftermarket business is now INR 0.15 billion. The TESE business is INR 0.17 billion.
Exports and deemed exports of the generator and motor business, excluding railway orders, is 64%. Order inflow statistics. Order inflow has increased by 24% over the previous year as follows. Strong order inflow momentum continues in this quarter on both domestic and international markets. The order inflow from direct and deemed exports is INR 5.9 billion compared to INR 4.44 billion the previous year. Exports and deemed exports order inflow is 57% of the total orders. Consolidated, our total consolidated income was INR 10.17 billion, versus INR 8.93 billion, an increase of 14%. Profit after tax and other comprehensive income for the year is INR 1.156 billion, versus profit of INR 994.5 million, an increase of 22%. We continue to maintain a strong cash position of INR 2.22 billion. Now I will come to the order book market situation and guidance.
Overall, the order inflow continues to be very strong for both domestic and export in the generator and motor business. The rate of order inflow will support the sales guidance that we have given for this present year of FY 2025. We continue to hold our initial guidance at minimum 17% growth with an upside potential of 3%-5% on top of 17%. Most likely, we expect the number to be around INR 1,200 crores consult for FY 2025. Margins will grow faster than sales due to operational leverage. Margin growth will be 3%-4% more than the sales growth due to operational leverage. As has been the trend, this year, we expect about 46%-47% of the revenues to be achieved in H1 and about 53%-54% in H2.
Based on delivery patterns of our customers in this year and larger machines in H2 will be stronger than H1. For Q1, we expect the sales of INR 2.5 billion-INR 2.6 billion consult, and for Q2, we expect the sales to be INR 2.9 billion-INR 3 billion consult. Market scenario. The market in all segments except railways is very strong, both internationally as well as domestically. The domestic market is limited to mainly steam turbine and motors, but in both segments, we are seeing strong orders on inflow in Q1 and a strong pipeline for orders the rest of the year. The sectors driving the growth domestically are cement, steel, paper, and sugar. In the international market, the order book is driven by bumper orders in the segments of hydro, gas turbine, and gas engines.
The gas turbine and gas engine business is strongly driven by demand in oil and gas, data centers for artificial intelligence, and grid stabilization power plants. We are seeing huge increases in orders received in these three segments, the pipeline is very strong for this year as well as for next year. In addition, all these three have big potential for sustained business in upcoming quarters and years. Hydro in Southeast Asia, Nepal, and parts of Europe continues to be booming with a strong pipeline of orders and inquiries. In the motor business, we continue to grow the business at healthy rate, this year we hope to cross the INR 1 billion target for order inflow. We're also getting a number of export orders from Middle East, and it's providing great references to build our business for the future.
We're concentrating on oil and gas, water utilities, lift irrigation, nuclear power plants, and large motors required for fans, pumps and compressors. Lastly, the sector that has disappointed us so far is the railway business, with almost no action and almost no, I would say, potential for closing any deals in the next quarter also. Perhaps things will change after the elections. This brings me to the end of my initial remarks. I'll now be happy to answer your 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 their 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 Viraj from SiMPL. Please go ahead.
Yeah. Thanks for approaching me. Am I audible?
Sir, may I request you to use your handset, sir?
Yeah. Am I audible?
Yes, sir. You're audible.
Audible. It's not so clear, but anyway, please go ahead.
The question is, largely, it ends up to be consolidated minus standalone, the subsidiaries. I think there's a swing of almost INR 10 crores in this particular quarter. Were there any one-offs in there?
Yeah. Varalakshmi, can you please take this question?
Yeah. We had a dividend income from our subsidiary Turkey office, when we are showing the consolidated numbers, we will have to eliminate this. That was around INR 42 million. That is one of the numbers. Mainly, that is the reason.
Okay. Difference is almost INR 10 crores. Were there any one-off expenses or currency-related provision or any write-offs?
No, there was also an INR 40 million loss, basically on account of depreciation of Turkish lira from 4.3 to 2.58. These two are the main reasons and attributing to almost INR 9 crores.
Yeah. The Turkish subsidiary continues to suffer from the problem of rapidly depreciating Turkish lira. When we translate, even though we're having operational profits from that subsidiary, when we translate the currency back into Indian rupees, due to 40%, 50% drop in the value of the Turkish lira compared to Indian rupee within a quarter, then we have to suffer the translation loss. This has been going on for now quarter after quarter because the Turkish currency also is depreciating at a rate of about 70% per year. We have no choice but to report it as per the accounting standards.
Okay. This is more of a notional loss other than the cash flow. Hello?
Yes.
Hello. This is more of a notional loss other than a cash loss, right?
Yeah, it's a notional loss. It's only a translation loss.
Okay, fine. In terms of the CapEx, you gave the guidance for the growth and the margins, in terms of CapEx, I think we were looking at the new facility. Given the kind of inflow you are now seeing, is there any revision in terms of the CapEx, which we'll be looking for 2025 and 2026?
We are sticking to the plan. We are putting up a third unit. Construction is going to start very quickly, and we will spend, as we have mentioned earlier, we are going to spend INR 120 crores for that plant. We have other CapEx for the existing two factories, which is approximately equal to depreciation every year. That will also continue, and we will spread this investment over two years, this financial year and next financial year. We will not be short of capacity, and we will make sure that we will deliver every single order that we receive.
Okay. Just last question. In terms of the announcement we had made in Q3 regarding the tie-up with BRUSH. By when do we expect us to kind of start commencing the orders?
We have got good orders from them already. We're delivering some machines this year, and the pipeline is building up. I'm not going to disclose the numbers, it is going well. I have no doubt that this will be a good relationship for TDPS.
Okay. I'll come back with you. Thank you.
Thank you. A reminder to all participants, ladies and gentlemen, you may press star and one to ask a question. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Pramod Dangi from Unifi Investment Management LLP. Please go ahead.
Thanks, hi, Nikhil-j i. My question is on the quarter. My quarter four, if I look at the volume of the generator supplied, it actually went down year-over-year. For full year also, it went down, for both export as well as domestic. Is there any order which got postponed to or delayed to the quarter one this year? Because I'm comparing this with the numbers of the previous turbine, which had a very good quarter as well as a full year.
Volume should not be the benchmark, Pramod. We had in Q4, we have produced four machine, larger two-pole generators. These 90 MW and 60 MW machines.
Bigger ones.
Those are very high value, but the number is much lower. I feel that it is. In other segments also, for example, in hydro, we've been producing a large number of bigger megawatt generators. That will lead to a higher value but lower volume. I feel that volume is not a good measure of what kind of mix that we're getting.
Okay. Just a follow-up. Is there any shift happening in terms of the megawatt or so that this trend will continue, and we should ignore if this happens in the future as well.
Yeah, I would recommend to ignore it because we don't use it as a measure of our internal. When we do an internal review in the company, we don't look at volume. We look at the value, we look at megawatts into number of poles. That's something that we look at internally. We are confident that when we have larger generators, our margins also tend to be better because we get better pricing for larger machines. We are seeing this year, in this financial year, we will not have so many two-pole generators as we did last year. Next year, again, we are seeing a big buildup of orders for two-pole generators already in the pipeline. We have good, healthy order book forming for two-pole next year. It's difficult for me to say that every year is going to be the same.
This year we'll have more smaller ratings compared to larger ratings compared to last year. Next year, we're going to have more larger rating and hopefully we'll have larger rating than smaller ratings next year, which can be a boom. Year-on-year, it's different. I think that is one of the strengths that we have in the sense that we are in different markets with different products, with very highly diversified product range. When something goes up and something goes down, we're able to balance out the numbers by being present in different parts of the market.
Sure. Got it. Thanks. Lastly, in the competitions, in this year, last year, did we lost market share? Did we gain market share compared to the industry growth overall, industry growth in India specifically?
India, we have maintained market share for sure, no doubt. Internationally, we are gaining market share. We are growing. Our international business is growing much faster than the growth in the international market. Particularly, I can say that in the gas turbine and gas engine segment, our growth is extraordinarily high. What we're seeing this year compared to in the previous year. Also in hydro, to be honest with you. In these three segments, all our businesses export 100% export in hydro, gas engine, and gas turbine. Growth has been extraordinary and coming from different regions. In the gas business is coming from, as I said, grid stabilization power plants, which is when countries move for more and more renewable, they need to have these grid stabilization power plants where they start up the gas engines.
Whenever there's a drop of production of solar or wind, then you need hundreds of megawatts to come onto their grid instantaneously to support the grid and to stabilize the grid. Those can only come from gas engines or gas turbines. We're seeing one big part of the market coming in that. Data centers for artificial intelligence. There's an explosion of demand coming in this area. All of them require hundreds of megawatts of backup power. This is being provided once again by gas turbines and gas engines. Then of course, hydro. One of the reasons for our increased sales is that earlier we were restricted by our relationship with Voith, where we were selling our machine only through one big German OEM. Now we are free from that relationship since 2021.
Now we are really seeing the effect of that freedom where we're able to address different parts of the market all over the world and getting orders from different parts of the world. Hydro has also grown tremendously for us last year to this year. The pipeline and the forecast for next year is also extremely strong. Very upbeat about the international business for TDPS.
Yeah. Thanks. Helpful. All the best for the next year.
Thank you.
Thank you. The next question is from the line of Mythili Balakrishnan from Alchemy Capital Management Private Limited. Please go ahead.
Thanks for the opportunity. I just had a couple of questions. One, you mentioned that some royalty had increased and therefore that had also impacted margins. It would be useful if you could sort of elaborate on the same of why has it sort of increased and on an ongoing basis, what will be the outlook on this front?
These large generators, what we call above 60 MW, we have a license agreement with Siemens. As I mentioned earlier in my response to Pramod, that we produced more two-pole generators in Q4.
That's why we have to pay. We have to pay royalty to Siemens for two-pole generators whenever we produce them. I also mentioned a little bit earlier, we don't have many. We have only one two-pole generator for this financial year. Next year, again, the volume is building up for much larger numbers. This year we won't see a big royalty outflow.
Which is FY 2025, you do not expect.
FY 2025, yeah. We have one big generator in Q2.
We don't have anything in Q3 to Q4.
Okay. In terms of margins, can we still maintain the 17.5%-18% range?
Yes. We will definitely maintain. In fact, we will do better than last year because we will have operational leverage. We don't have the third plant up and running, so we're still operating out of two plants. We're going to produce 20% more from these two plants, and we're going to have better margins for sure.
Got it. I wanted to check with you on the railways orders. If you could just comment a little bit on both the direct orders as well as what is happening on the OEM contract that we have.
The OEM contract that we have is running. It's got a life until.
They have 100 and run rate for that?
INR 100 crore for about INR 100 plus crore for about four years. It's running.
Okay.
Other than that, there's nothing happening in the Indian market for the railway business, and that is a big disappointment for us.
Okay.
We accept. We hope that things will pick up after the elections.
Got it. I just wanted to check with you that we were in the process of getting our product approved by the railways, right?
Yeah. That I have given a guidance of about INR 15 crores-INR 20 crores this year, and that we'll do.
Okay. On that, there is no.
Yeah, it's not material on a INR 1,200 crore sale. Yes, that we will do.
That will happen.
Let us see how it Yeah, that will happen. In this segment also, we are finding that there is a lot of pricing pressure coming in, and people have dropped prices dramatically in this particular segment, which is direct business with the Indian railways.
We are hesitating to take on a larger volume, because it does not make any sense for us to do so and to ruin our margins. We are also just doing the minimum amount to be alive in the business, but not going aggressively full into this business because the pricing is very bad at the moment.
Got it.
We have no idea about that.
Right. In terms of CapEx for FY 2025, we are still looking at an INR 80 crore number, right? Just for this year.
Between INR 80 crore and INR 90 crore will be the outflow for CapEx this year.
Got it. I'll come back in the line for more questions. Thank you. Thanks a lot.
Bye.
Thank you. The next question is from the line of Niteen S. Dharmawat from Aurum Capital. Please go ahead.
Yeah, thank you for the opportunity. Most of my questions are answered, so just one more additional question that I had is about the raw material price trends. Where do you see this now? Is it stable or is there any change which will impact the next couple of quarters perhaps?
A good question. We have seen a dramatic increase in the price of the copper in the past two, three weeks. It is now around the $11,000 level. Thanks to our hedging strategy, we have copper booked until about Q3 this year. We are already talking to our customers for price increases. If prices of copper hold on like this, we will demand price increases so that we don't have any margin impact coming in from Q4. How this copper prices, whether it's a speculative bubble or whether it's a sustained price level, we don't know. Yes, at the moment, copper is a big red flag for us. Other than that, other materials are pretty benign.
Okay. Thank you, and wishing you the best.
Yeah, thank you.
Thank you. The next question is on the line of Himanshu Upadhyay from BugleRock PMS. Please go ahead.
Yeah, hi. Good morning. My question was on the third plant, what we are going to do. What would be the capacity utilization required to break even? Is there any worry that what happened when we started new plant in FY 2011/2012, and the capacity utilization was low. It became difficult to utilize the plant and profitability took hit. How difficult will it be this year, or what is your thoughts on that?
Hi, Himanshu. A really good question. I think that the lessons of the past have definitely influenced the decisions of the present. There is no doubt about it, that we are going to do our very best not to be in the same situation that we were 10 years or 12 years ago. Of course, the company is also in a very different position in the market compared to where we were in 2010/2011. Back then, we were only a domestic player, largely domestic player. We did not have these different segments, different products, different reaches in different references all over the world. Now, TDPS is a very different organization, with large variety of products, different markets, different OEMs and presence and brand name all over the world. We are putting up the capacity in two phases.
We are putting in an investment this year, we are putting another investment next year. Even to that extent, we are hedging that to say that, okay, we put the first phase, the second phase will go through once we see the sustained demand taking place. As I said, the lessons of the past influence the decisions of today. Obviously, we do not want to get into the same situation that we were in 2011. At the same time, it is very important to realize that we are not the same company today as we were back then. We are a totally different organization, and I think this is the biggest change in how the outcomes will happen in the future.
Okay. Glad to hear that. One more question on the motors business. In this business of generators, we have tied up with many OEMs. Last time we stated that oil and gas, we are seeing a lot of CapEx in Middle East and many places. Some of our OEMs who are into the gas engine and buyers for generators, they are also into the compression segments. Are we also thinking of getting those OEMs or empanelment with those OEMs for their motor usage? Or motors will like to independently build, and how difficult is to get into those OEMs for motors or being a motor supplier to those large OEMs global?
We are building our business on motors fairly rapidly. As I said in the call, in my opening call speech, we are going to be in line maybe this year to reach an order booking level of about INR 1 billion. Business is coming from different segments. It is coming from oil and gas business, it is coming maybe from the Middle East, it is coming from water supply schemes, it is coming from lift irrigation schemes with synchronous motors. It is also coming from induction motors for large application, industrial use, maybe fans, compressor, pumps. We are spreading ourselves in different segments of the market. We are still very much at a stage where we are building references and building credibility. I think the growth has been extremely good and extremely positive. We will keep growing our business incrementally in all these sectors.
Is it difficult? It is difficult, but TDPS has the capability to make these larger machines, and TDPS has the references in large generators across the world. It is not difficult to convince a technical buyer that having made a 30 MW or a 40 MW generator, that we can make a 10 or 20 MW motor. It is not difficult to convince a technical buyer or a technical end user that this is the capability of the organization. That is where we are, Himanshu. As I said, we are growing the business incrementally, and we will have good results from this segment for sure. Motor business is a key part of our growth plan, and will play an increasing role in the product mix of the company in the future.
Okay. Thank you from my side, wish to see INR 1,800 crore sales in three years, or the full capacity utilization of third plant. Thanks.
Thank you. The next question is from the line of Shyam M. from Aditya Birla Mutual Fund. Please go ahead.
Yeah. Hi, sir. Congratulations on a good set of numbers. Just had a couple of questions. Firstly, on the order inflows. While they have grown very strongly over FY 2024 numbers, domestic inflows for this quarter are down by about 15%. Wanted to just get a sense check from you. Is there some sort of a slowdown you are witnessing in the domestic market? Or is it largely being finalizing the orders has been slower and probably the inquiry pipeline is there? Just a little bit of understanding around that.
Yeah. Vinay, can you take this question?
Yeah, thank you. You are very right. The inquiry pipeline is very, very strong, and it is only a matter of order finalization, which are getting a little bit postponed by couple of months. Mainly, this is the election which is going on and last two phases are there. This has, I think, going on for the last two months. That is why you are seeing a little bit lower order booking for this quarter. Definitely there's a pileup of active inquiries. I think all of them are going to get finalized in Q1 or early Q2.
Understood. Thanks a lot. My second question was on the newer segments that we are targeting with the newer products such as the synchronous and the submersible motors. While you're guiding that we probably look to get about INR 100 odd crores of inflows in this financial year. Wanted to understand which particular product is going to drive that growth, and is there any particular product you see is getting higher acceptance in the market from the new products that you have released?
This year it will be more induction motors in terms of order inflow. Compared to synchronous motors, because synchronous motors are mainly used in large irrigation projects which are state government funded. Those are patchy. One large order will come and then there could be a large gap of time, and then the next order will come, and that's how this particular market functions. It's inconsistent and lumpy. We are focusing a lot on the other part, on the industrial side of the market, oil and gas, where the demand is more consistent. This year we are focusing our order inflows mainly on the induction motor side. We're once again focusing on large induction motors, more complicated products. Nuclear Power Corporation also has a large number of tenders out there.
The INR 100 crores business, which the inflow for this year will be in areas which are not related to lift irrigation schemes, but other areas.
Understood. Just check, how much was this inflow for FY 2024, the motor business?
INR 30 crores or INR 40 crores.
All right. Understood. Those are my questions, sir. All the best, sir, for the upcoming year.
Thank you.
Thank you. Ladies and gentlemen, in the interest of time and fairness to all participants, may we request you to limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Deepesh Agarwal from UTI AMC. Please go ahead.
Yeah. Good afternoon, Nikhil. Good afternoon, ma'am. My first question is on margin. Sorry, I joined late if this is repetitive. Your other expenses and employee costs both are up. I believe your royalties increased, why the employee cost would be up significantly in this quarter?
Yeah. Varalakshmi, can you please answer the question?
Okay, sir. We had a VRS scheme for workmen, which resulted in INR 32 million of cash outflow. We also had a INR 20 million of cash outflow on account of the backlog gratuity payment to contract and temporary workmen as required under the new labor code. These are two reasons. These are one-time payment only.
Understood. Sir, how much capacity with the third plant will add to us? I guess you earlier highlighted, we typically have INR 1,300 crore-INR 1,500 crore of capacity in terms of revenue potential. When you add the third plant, what should we think about the capacity addition in terms of revenue potential?
You should think we are looking at something like INR 1,700 crore to INR 1,800 crore total capacity potential once the third plant is up and running in full steam. The third plant, as I've probably mentioned, I don't know, in earlier earnings calls or maybe in individual one-to-one meetings with all of you, that it's going to be mainly a component plant.
Sure.
It's going to be supplying components, subassemblies to the main plant. The main plant which is currently producing those components and subassemblies, that activity will be shifted to the new plant. In addition, we'll be adding more capacity for components and subassemblies in the new plant, freeing up space and capacity in the main plant for more final assembly testing and so on and so forth. That's the general structure of how we're going to be setting up our manufacturing in the next two years. Overall, the capacity will go up to around INR 1,800 crore.
Sure.
We're keeping it extremely flexible so that we can, depending whether it's motor, generator, large sizes, lower sizes, whichever way the market moves, we should have the ability to respond, and we should be able to produce whatever the market wants.
Sure. What is the status on ramp-up of that oil and gas orders execution and LM 250 gas generator?
LM 250, we had to produce one generator for the LM2500 for a U.S.-based customer. That will be delivered by the end of this year or early next year.
Okay. Oil and gas?
Oil and gas business is, for us, the gas turbine business is booming. For Solar Turbines, another U.S. based gas turbine OEM, we are producing, I don't know, now it's a big business this year. We also added through our relationship, we signed a relationship with a company called Baker Hughes last year. That's also adding on to our gas turbine business in the oil and gas segment. Overall, gas turbine business in the oil and gas segment is really, as I mentioned earlier in my opening speech, dramatic increases taking place for us in the gas turbine business. It's sustainable because it's a new market for us, and the opportunities are really huge in this segment for TDPS. Growth is taking place.
Sure. Lastly, it seems there could be some ordering in the nuclear. In terms of our PQs and all, we are completely qualified in most of our segments, or we are still having the kind of a gestation period in PQs for the nuclear?
Nuclear, we are still not qualified for inside the dome. We are only qualified for outside the dome. We are working on the PQs for getting qualified inside the dome, as far as nuclear is concerned. In other parts of the market, also, I can say that we are still in the process of building references and building credibility. We may have the pre-qualification, but pre-qualification only then allows you to bid. Still customers will want you to make machines, they should run, they should work, they should have the satisfaction. We are still in the process, I would say, of establishing credibility and trust with the customers. It will take time, but we're building up the business step by step, and I'm happy with the progress so far, and I'm also excited about the potential for the future.
Fair to say in next two, three years, possibly we can get the complete PQs out there, even inside the dome for the nuclear?
That's the goal. We need to first put these outside dome motors, they need to run, the customer needs to be satisfied, then they'll give us a chance to go inside dome.
Okay. Sure. Thank you, and all the best.
The supply of far from our side can take place to nuclear power operation, things don't move so fast over there. I can't commit to you that we'll have everything done. We'll deliver, they have to use it, once they use it and once they're happy with it, I'm sure we'll get opportunities inside dome.
Sure. Thank you, and all the best.
Thank you. The next question is from the line of Ashish Aggarwal from Sundaram AMC. Please go ahead.
Yeah, thanks. Sir, I hope I'm audible.
You are.
Yeah. Hi.
Yes.
Sir, just most of my question has been answered. Just one thing. In other expenses, excluding the royalty fees, still the other expenses seem to have increased substantially on a Q1Q basis. Even on an average basis, for last few quarters, it has been hovering around INR 15 crore, INR 16 crore a quarter. If you can just explain what is the reason for this increase? Secondly, on the gross margin front, gross margin seems to have increased substantially. Is it just the product mix which has helped us?
Varalakshmi, you take the question for the expenses.
Then I will take the question for the gross margin. First you can go, Varalakshmi.
Sure. Yeah. Apart from the royalty payment, there has been increase in the sales, which has also related in some variable selling expenses and traveling consultation charges increase. A couple of expenses all put together are leading to this volume increase.
Okay. There were no one-off apart from the royalty?
No, there were no one-off.
Okay. Got it. On the gross margin, sir?
Gross margin, we are getting into more profitable parts of the market, and that is reflecting in the pricing and also these large pole generators that we produced last year. Making the complete generator in-house, the rotor, has also been extremely profitable for the company. In general, with more and more business coming in from oil and gas and export, we are very confident that we're going to be able to hold on to the gains in the gross contribution. Also increasing service business, increasing aftermarket business and service business will also help the cause to increase the gross contribution. Earlier, what we used to hold on to 32% now is 33%, 34% is the reality. The company is going to constantly keep trying to go to even 35%. The goal to keep increasing gross contribution incrementally will be a major task for the management.
Got it.
Incrementally.
Next year, what we have indicated, it's a combination of both gross margin improvement as well as the operating leverage. Am I right?
Yes.
Okay. Thank you. Thanks, sir.
Thank you. The next question is from the line of Nilesh Doshi from Prospero Tree. Please go ahead.
Hello, am I audible?
Yes, sir. Please go ahead.
Dhruvesh here. Hi, Nikhil-ji. Just wanted to broadly understand that one year back, probably around May, we had a meeting where you had broadly indicated that we are probably gearing up towards a much larger goal rather than the intermittent 15% and 20% growth now. Can we say that now the structure is in place to probably achieve INR 1,800 crore to INR 2,000 crore revenue range over the next three to four years? Of course, plant and capacity will match, but ultimately the structure has to support us, considering the kind of markets that we are in today.
That's a very difficult question to answer. Of course, we are putting in the infrastructure to grow at a much higher rate. We're also entering into different segments of the market with different products, and we hope that we can grow What we're committing is something 17% to 18%+ every year. This was the committing. The goal is to do better, but if talking about commitment, that's the commitment.
Sure. Thank you. Second, when and if the railway orders to your customers come, how large can this opportunity become, let's say, once it stabilizes, in terms of the recurring revenues that can happen from this area? Is it like INR 100 crore, INR 200 crore thing or no, over time, it can be much larger?
Generally, if we do enter into such kind of contracts, it will not be a 10-year contract, but it could be between INR 70 crore-INR 100 crore business per year for a three year period four year period, each of those contracts.
Okay. There can be more than four or five such or no? Just to understand the size of it.
Yes, there can be, but we don't see. There was the hope that we would see that kind of thing, where we would see multiple railway contracts coming in for freight locomotives. We were all talking about another 9,000 horsepower, then we were all talking about another 12,000, then we were all talking about another 6,000, and nothing has materialized. Which way is the freight locomotive market going to move? Which is the ratings? Who are the players? We don't know at this time. Even the high-speed train, Vande Bharat and everything, we were expecting more tenders to come in the market. I think everything has come to a halt. We were, at one point in time, looking at multiple revenue streams from all these new initiatives, but nothing is happening at the moment, it is all at zero.
Last small one. When it comes to pumped hydro, because there is a lot of talk and chatter about it, is this real in India in terms of possibility of much larger
Yeah. Pumped hydro is real, right now all the action is in the very large sizes, in the 300, 400, 500 MW size power plants. Those are machines which are much beyond the capacity of TDPS. Eventually, they should come down to smaller sizes, when it comes to the level that we know we have power plants with, let's say 40, 50 MW, 60 MW type of machine, single unit, then we will definitely be a part of that action. Right now, the market has not come down to those sizes. Pumped hydro is mainly taking place in very large size power plants.
Okay. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.
Hi. Good afternoon. My first question is, if we look at last four or five years, we have traveled this journey from a single product, a single geography-focused company to multi-product, multi-geography company. Earlier, steam turbine used to form the base of the business, contributing INR 300 crore, INR 350 crore kind of a revenue. Now that we have into multiple products, synchronous motor, induction motors, and many more segments. Do you see three or four segments contributing a base business of INR 200 crore, INR 300 crore? If so, if you can name some of those segments.
The steam turbine business continues to be a very critical part of our future business. Okay? It is still a, I would say, an indispensable part of our business. India is a big driving factor, and with India, with more investment taking place in India and we're expecting the next, once the elections are over, the next cycle of CapEx investments to further accelerate, this product will continue to be a very vital part of TDPS. At the same time, we need to have other products which are going to be equally large. I see the gas business, the gas turbine, gas engines to be equally large. Hydro is already approaching the size of the steam turbine business for TDPS. I think the motor business is the next business where we also wanted to come to this level of size, where you are talking INR 200 crore, INR 300 crore.
We have a way to go. We have a road to travel on. It's not that we have already done all these things, but we're definitely on a road where these numbers are achievable.
Everything will happen incrementally step by step by step. The potential is there, the market is there, and TDPS right now is in a good position to achieve these numbers. That's all I can say. The potential for us to take each segment to that size is 100%, it is there.
Sure. Very useful. Any new products other than the synchronous and induction motors, any new thing which again you are.
We're not in a position to disclose to the market at this point of time. We are definitely working on new things, and we will, as and when they are at a point where we can announce it to you and then answer all the subsequent questions that normally come with that announcement, then we will definitely ask them.
Sure. Understood. Second question, I think one change that we are witnessing is, and you also mentioned
Sorry to interrupt. Mr. Desai, may we request you to use your handset, please?
Hello?
Yes, the voice is.
Yeah. Is it better now?
Yes, sir. Please go ahead.
Yeah. Nik, second question is, you mentioned in your commentary and even overall environment, we are seeing that the larger megawatt capacity and turbine is coming back because of the way the power environment is kind of, again, that we are moving from surplus to shortages. We had built that capability of following larger megawatt and more than 50, 60 MW. Are we seeing any uptick in that segment? Are we reorienting to cater to that demand? Because that also is a reasonably large market. Any thoughts on that?
Vinay, you can take this question since you are on the market.
Can you just once again repeat that question?
I think that overall environment, do we see the large above 60 MW market, given the power shortages, given the situation in the country and outside the country, how does the market look for these larger sizes and where do we fit into this?
Yeah, larger size inquiries are not much. If you're talking about anything above 60 MW to 200 MW, there are very few inquiries. The numbers are increasing below 60 MW.
Okay. 30 to 60 is the traction.
Yeah.
What do you think?
Yeah. 25 to 50 MW, the numbers are more. Between 60 to 200 MW, that could be four, five machines per year.
Okay.
The international market for the larger generators above 60 MW is a big market. Dominated by just a few players.
Right. The context to this question is oil and gas.
We have a licensed product, so we are not free to sell these machines all over the world. There are restrictions for us to go into this market in a very big way because we don't have our own product.
Okay.
I think we will always have our hands tied because of this particular reason, if we want to look at this large twofold market outside India.
Okay.
That's the problem of having a licensed product.
Okay. You're not thinking along the line of developing some of your own products for oil and gas rigs, which are much larger megawatt requirements.
About 250, no. If at all, right now we are in this agreement with Siemens. Anything that changes, we will keep the market informed about it, if there's any change in direction as far as this large two-pole generator market is concerned. At the moment, this is where we are. This is the limitation that we have. As Vinay said, the market in India could be four to five machines per year, and that's where we are. We are focusing our activities on our own products, our own technology, where we have complete freedom to do what we have to do. It makes no sense for us to concentrate on products where we have our hands tied behind our backs.
Understood. Thanks. Very helpful. That's it then.
Thank you.
Thank you. The next question is from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Hi, sir. Thank you so much. Thank you for the opportunity.
Hi.
Sir, at a broader level, is it possible to share out of your total revenue, how much came from generator and how was from the motor?
We will share this Mahesh, once the motor business becomes a significant part of the revenue, once it starts increasing, then we will share this number with you. I think we should be able to do it this year. But let it grow to a size where it's meaningful, then we will share it. I've already shared earlier on this call a little bit about the order inflows, I've shared about how the order inflow is growing. I think that can give a direction as to when the revenue also will then become real. It gives a sense of direction how the revenue growth is also going to take place for the motor business for us. Then once it reaches that level, then we will surely be happy to report it.
Sure. On, sir, order book side, the contribution from railway has probably from INR 800 crore to now it has come down to INR 400 crore. Will this remain? How the contribution of railway.
Yeah. Of course, we are searching for another INR 100 crore per year of business from railway because this has a life only for another four years. Of course, we have time. We have another four years, the INR 400 crore will become INR 300 crore, become INR 200 crore, INR 100 crore and zero. We need to find another INR 100 crore contract. One is to look at India and another part is to look at outside India. We're looking at all the options. We're looking at different opportunities outside India also. The pressure is on us to find another, to find the answer that we need to have to replace this INR 100 crore business per year with some other INR 100 crore business per year. We have three years, time is running fast.
Sure. Thank you so much, sir.
Yeah.
Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I would now like to hand the conference over to management for closing comments.
Thank you everybody for joining our conference call. We are always available for any further questions. Please feel free to get in touch with us. We look forward to interacting with you once again at the end of the quarter. I look forward to meeting many of you individually in some investor conference. Thank you very much.
Thank you. On behalf of TD Power Systems Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.