Ladies and gentlemen, good day, and welcome to the TD Power Systems Limited Q2 and H1 FY 2024 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions, and expectations of the company as on the 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 then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nikhil Kumar, Managing Director from 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'll move straight to the financial performance for the six months ending 30th September 2023. First, standalone. Our total income on a standalone basis for H1 was INR 4.94 billion versus INR 4.14 billion over the same period for previous year, an increase of 19%. EBITDA for H1 is 17.86%, including other income, and we will deliver the approximate same during the year versus 15.43% over the same period in the previous year. We'd like to again mention that this calculation includes foreign exchange gains but does not include sale of land or treasury income. Profit after tax and comprehensive income for H1 is INR 600 million versus profit of INR 388 million for the same period in the previous year, an increase of 55%.
Order book for the manufacturing segment is INR 13.23 billion, out of which INR 6.24 billion is our generator and motor business, INR 6.74 billion is the railway business, and the SY project business is now grouped under spares and aftermarket, which is INR 0.09 billion. The Turkey business is INR 0.16 billion. Export and deemed exports, excluding the railway business, is 48%. Over the past one year, TDPS's customers for the railway business have been focusing on indigenization of raw materials used in the motors for the pending order for the 1,200 horsepower locomotive contract. This will give big cost reductions. In consequence, the order value could significantly reduce in the region of INR 100 crore-INR 200 crore spread over the next four and a half years. But we would like to clarify that this will not impact our margins.
Price variation clauses as per the contract will be applicable over the next four and a half years, and this will mitigate the reduction of the order value to a meaningful extent. This matter is under final consideration, and we will inform the market next quarter. I would like to reiterate there'll be no loss of margins since the pass-through has been given only on the actual reduction of raw material cost. Order inflow statistics. Order inflow has increased by 28% over the previous year as follows. Currently, it is INR 4.93 billion. Last year was INR 3.84 billion. Order inflow from direct and deemed exports is INR 2.36 billion compared to INR 2.16 billion in the previous year. Strong order inflow momentum continued in October also. Exports and deemed exports was 48% of the total order inflow for H1.
For Q2, the order inflow from direct and indirect exports and deemed exports was 58% of the total order inflow. Consolidated. Our total income on a consolid basis was INR 5 billion versus INR 4.3 billion the same period previously, an increase of 16%. Profit after tax and comprehensive income for the first half of the year is INR 584 million, versus the profit of INR 385 million, an increase of 52%. We continue to maintain a strong cash position of INR 2.01 billion. Order book, market situation, and guidance. TDPS has signed an agreement with BRUSH and Baker Hughes for production of BRUSH generators for the world market, and the second agreement for sale of TDPS generators to Baker Hughes for the industrial markets worldwide.
BRUSH is one of the most famous and well-known generator companies in the world with a focus on oil and gas, especially in the area of offshore platforms and LNG. TDPS and BRUSH intend to capitalize on the expansion of new investments taking place in LNG and oil and gas, which is being carried out worldwide to replace Russian supplies. An announcement to this effect has already been given to the exchanges. I come to each segment of our generator business. Steam turbine, the domestic market continues to be very strong with robust order inflow from all segments of the market. In addition, we are also seeing strong traction from the international OEMs in the European market. This segment is providing a strong foundation for our growth for next year. Gas turbine. We have a very strong inquiry pipeline as well as orders from our U.S. based customer.
We would also like to announce the first new order for 2 to 15 MW units with Baker Hughes turbines. This is the first order in this segment with this OEM as a part of the new agreement also, and we will continue to see larger orders in this segment in the next few quarters. Hydro. The incoming order from hydro has surpassed our expectations. Large investments are taking place in renewable energy, and hydro projects are coming up in a big way in Europe, Southeast Asia, and Nepal. We expect next year to be the highest in terms of sales of hydro generators since the beginning of the company. Gas engines, there is some softness in the market being currently observed. However, both our engine customers have been optimistic and are optimistic about meeting the targets for the next year.
We expect growth to be muted for one or two quarters before picking up once again. There are some large orders under negotiation, with some luck, we should be able to get them. The numbers would be much better than what we have earlier projected. Motors, we happily announce that TDPS has delivered and commissioned a 40 MW synchronous motor, which is a big achievement for us in this segment. With this reference, we have proved that we have the ability to deliver in this market. We also recently booked large orders in this segment in the last quarter, and the pipeline for next year is very strong. This business, motor business for us will continue to grow at a rapid pace. Railway, there has been a lack of action in the private sector tenders. Everything seems to be quiet, perhaps due to the upcoming elections next year.
However, the Indian Railways has a big tender out for motors that are required for their own locomotive production, and we expect to do around 80 motors for the Indian Railways next year. After delivery of these motors, TDPS will be in the L1 category. We are currently in the L2 category, and the following year, we expect to do 200 motors. Now coming to guidance. We are on target with respect to our guidance for FY 2024, around INR 1,000 crore top line line on a consolidated basis with approximately INR 235 crore to INR 240 crore in Q3 and the balance in Q4. That will be around INR 260 crore to INR 265 crore in Q4 on a consolidated basis. Margins will be in line with our H1 performance. We would like to reiterate that margins should be looked on an H1 basis rather than a Q1 to Q2 basis.
We have reached around the halfway mark in H1, and we give guidance to hold on to our numbers in Q2. Sorry, in H2. We would like to now forecast our initial guidance for FY 2025. Looking at the order inflow and looking at the pipeline that we currently have, we can expect a minimum growth of 17%-20% for next year. As far as the legal case is concerned, there are no further updates on the ongoing legal matters other than what has been already disclosed by the company in various notifications to the exchanges. Since this matter is sub judice, I will not be able to discuss any further until the courts provide clarity on the ongoing disputes. New factory.
The company has already paid Karnataka Industrial Areas Development Board 30% of the land value based on the sanction letter, for the industrial land, and the allotment letter for the land will be obtained in about a week. Construction for the new factory will start in January 2024, and we are on track to bring the new plant into operation between the beginning of H2 FY 2025. We are planning a very modern factory with automation, digitization, Kaizen, 5S and other state-of-the-art manufacturing technologies. This brings me to the end of my initial remarks. I will now be happy to address any queries that you may have. Thank you.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question, may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is on the line of Mohit Kumar from ICICI Securities. Please go ahead.
Hi. Good morning, sir, and congratulations on a very good set of numbers. My first question is, sir, is it possible to procure the potential of the tie-up which you announced today? The second question is, how does the pricing matter for the suppliers' margin expectation, and do you need to make any investment for supplying the motor generators?
First, I'll take the last question first. We don't have to make any major investments. It's basically the generator product. We have all the manufacturing equipments for that. There are some small modifications in the way that they make their machines compared to what we do, so small investments have been made, but it's not significant. When it comes to the business potential, this is a very good question. I think this is the first question everybody will ask. I would like to broadly say that there is a potential for, on a conservative basis, there is broad potential for about EUR 20 million of business in this segment for us. It will not come overnight. It will take around three years time to fructify, but we will see our orders ramping up.
We already have the first order from them for about INR 10 crores and they're bidding with, of course, there are a number of projects in the pipeline where now they're bidding with TDPS manufactured generators. There is a large, fairly detailed approval process that we have to go through, which is quite very important for us. Actually, we'll have to get approved by all the oil majors like Exxon, British Petroleum Shell, Saudi Aramco, Qatar Gas, these are all the major oil companies in the world. The approval process also will take a little bit of time, but eventually, this business will put TDPS into a very, I would say, the top end of the market as far as tenders are concerned, and we are excited about this relationship working with BRUSH in this particular segment. The LNG market and the oil exploration markets are booming.
Investments are at an all-time high. This is expected to carry on for at least five to seven years. We are at the right time in this relationship, and the demand for products are extremely high right now. We expect a sustained increase of business over the next two, three years, and then reaching a peak say four to five years from now. This is extremely important, I would say, new line of business for TDPS, I would say new sector. The oil and gas offshore market and LNG market. That's going to add margins also. Margins are going to be in line with what we currently have. It's going to be a good business for TDPS.
Understood, sir. My second question is, you said about H2 order inflow likely can surprise us on the positive because large negotiations are happening. Is it right to assume that they are mostly in railways or is it in the fairly diversified segment?
I said that the order inflow for the railways will be limited, right? I said there's no action taking place in the private sector tenders, and as far as the Indian Railways are concerned, we're not seeing anything happening in the market right now. We're not hearing anything about these new tenders for 9,000 horsepower locomotives or 12,000 horsepower locomotive. Everything seems to have gone very quiet. The only thing which is happening in the railway market right now is whatever the Indian Railways themselves need for production of their own locomotives. We are conservatively putting a number, something like 80 to 100 motors for next year. The following year, we have a target of 200. We will do 80 to 100 for next year for sure.
As far as the other verticals are concerned, the order inflow is extremely strong and that is the reason why it gives me confidence to give the market an initial guidance for FY 2025.
Understood, sir. Thank you and all the best, sir. Thank you.
Thank you.
Thank you. A reminder to the participants, anyone wishing to ask a question, please press star and one. The next question is on the line of Himanshu Upadhyay from o3 PMS. Please go ahead.
Hi, good morning and congratulations on good set of numbers. My first.
Hello Himanshu. How are you?
I'm fine. You got the new orders of, let's say, this INR 493 crores in first half. Can we assume that the percentage of steam turbines will be less than 50% of incremental orders and it is far more diversified than what it was five years back? Do you think new orders have again started or are majorly from coal-based generators only? Some thoughts on that.
Vinay, I'll take this question and then I'll ask you to add a little comment on this.
Okay.
Look, in India, as I said, the market is highly diversified, so we're getting orders from all segments. Some of them would be, I would say, baseload captive power plants, but there's a lot of ordering taking place in steel and cement, which is all renewable in terms of heat recovery and waste to heat energy, basically. I am not able to give you the numbers breakup, but I would say there's still a large amount of business which is coming from the renewable sector, even from the Indian market, for steam turbines. Regarding the ratio and mix, I leave the question to my colleague, Vinay. Vinay, maybe you can answer what you expect to be in H2 for the mix of orders, steam, gas, hydro. Where do you see the mix to be?
For H2, it used to be mainly between the steam turbine and hydro turbine orders. Indian steam turbine market is still booming, and we are getting a lot of orders from Indian OEMs, and also for exports from the Indian OEM. We are also getting good orders from our export customers for direct export to countries like U.K., Germany, Portugal, Argentina and all these countries. Steam, sorry, hydro turbine also, two markets are really booming, mainly Vietnam and Nepal. As Nikhil told, next year is going to be the highest ever scale turnover for the hydro segment. We have very strong pipeline of orders for both hydro and steam segment. These two segments have picked the major portion of the order book for the Indian.
Sorry to interrupt. Vinay, sir, we are not able to hear you clearly.
Can you connect me to the phone if possible?
Sure. Give me a minute.
Okay, we can continue with the questions on the call.
Can I ask the second question?
Himanshu, please go ahead.
In the last quarter, we said that our railways large customer has won a Train 18 aluminium frame? The requirement of motors can be INR 275 crore, and the competition will be there. Has that order been floated by our major customer, and what percentage of business have we won from them?
Inquiries in the market right now, Himanshu, it's under discussion. We are actively participating in this negotiation. It's not yet come to a stage where we can say that we know when it's going to close. It should close soon, but probably, I would say, I can't give you an exact time frame. It's under negotiation.
The competition is between you two player only. No third player is there in the market.
As far as I know, it is this, but I can't really give you 100% information on this, because it could be some other parties also, which we don't know of. What we believe is what we have mentioned earlier.
Okay. One last thing, I'll join back in queue. Can you also give some idea on what is the level of complexity in generators which are used on large cargo ships, and how big is that market? Because we did some generators for a naval vessel, and we expected it to be a big opportunity for us, and Make in India is happening. We see a lot of ordering for naval ships is happening, our government has given orders in last few quarters. Are we getting any larger business from that segment or opportunities in that segment? Some idea on that. Again, for cargo ships, is that an opportunity or not?
Yes. The commercial marine market for generators is a large market. TDPS doesn't have a big penetration in this market. It's another big potential growth business for TDPS, right? We need to have more references, but this is another big potential growth area for TDPS. If we're talking about the commercial marine generator market. Now, when it comes to the Navy business in India, Vinay, are you back on the call?
Yeah, I'm back. Can you hear me?
Okay. Navy, yeah. Now you're loud and clear. Navy, you can explain if there are any inquiries on what the Indian Navy plans to do.
Yeah. The first set of 10 machines that we supplied to IAC for the Indian Navy, all the machines are successfully commissioned, and now it is running. All the trial runs are over. We are bidding for one more job. See, these are not a regular kind of business. This is kind of on and off. Whenever there's a tender, we have to participate. We are participating on a tender, which is fairly a good number of machines. This is going to get finalized maybe in the last quarter of this year. Whenever there is a tender, now we know all the customers, we are approved by the Indian Navy, so we can participate in all the tenders. There's one active tender we are participating currently. I think by the last quarter, we should get some news on that.
Okay, thank you. I'll join back in the queue.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is on the line of Nikhil from SIMPL. Please go ahead.
Yeah. Hi. Good afternoon. Congrats on a good set of numbers. I hope I'm audible.
Yes. Very audible. Thank you.
Just one question. See, some of the capital goods player have started talking about some caution on the domestic order book because of the upcoming elections and the things related. While we've talked about a good guidance for FY 2025, if we have to understand for the domestic piece, how do you see this election as a speed breaker in terms of order book growth? If you can just share over last 10 years, 12 years, have you seen a slowdown which happens at the sector level? Just some idea how you are looking at it.
I think there's a lot of momentum in the market right now in terms of investment. People are taking investment based on economic reasons and not political reasons. There's expansion taking place in steel, cement, paper, fertilizer, chemicals across the country. In my opinion, these things are going to carry on regardless of political outcome for the next one or two years. Of course, whichever government comes to power, their policies will guide the direction for the country as a whole for a time beyond that. For the short term, one or two years, I don't see any slowing down of the momentum.
Okay. Second was on the refurbishments. How is the pipeline growing for the refurbishment part of the business? We had a view that this business can become around 8%-10%. Are we on that journey or any change in the outlook here?
No, I never said that it's 8%-10%. I've always said around 6%-7%. I still maintain that. We will deliver on those numbers.
Okay. Fine. Thanks, I'll turn back.
Thank you. The next question is from the line of Shyam Maheshwari from Aditya Birla Mutual Fund. Please go ahead.
Yes. Hi, good afternoon, sir, and congratulations on a good set of numbers. Just had a few clarificatory questions. This new order from BRUSH, is it a EUR 20 million opportunity over a period of years or is it like an annual opportunity? By when do you expect the revenues from this to start flowing?
Sorry, I think your voice has broken up. I am not able to hear you clearly. Could you repeat your question, please?
Yeah. Am I audible now?
Yeah, partially. Please continue.
Yeah. I just wanted some clarification on the BRUSH order. Wanted to understand if this is a $20 million opportunity over a period of years, or is it like an annual kind of a number that is potentially possible?
This will be an annual business, as I said, it will take some time to reach that level. It'll keep growing, it will take, let's say, three years or so to reach that level. It's an annual business.
Understood. When do you expect this to start flowing? Is it possible that some revenues might come this year?
As I already said, we already have the first order, so it's already starting.
Understood. Sir, my next question was on the Indian Railways. As you mentioned, you're seeing some sort of slowdown on the private side.
It's really bad. I can't hear. I really can't understand what you're saying because the line is really, really bad.
Can you hear me now?
A little better.
Yeah. Is it better now?
Sir, just give me a minute. Let me get this sorted. Sir, could you now repeat your question?
Yeah. Am I audible?
Yes, sir.
Yeah, much better.
Perfect. Just wanted to understand the Indian Railways opportunity. For the next year, is our target market just the Indian Railways, the 80 motors that you're mentioning, or is there any other potential orders also that would go to the Indian Railways?
Look, there have been a lot of discussions, a lot of talks. I mean, a lot of things were in the pipeline for other tenders, for Vande Bharat trains and the freight locomotive trains. If those things do come up for ordering next year, then the pie will, the opportunity will increase for us because we have all been waiting for these things to come into the market. As of now, we don't know when anything is going to come to the market, as of now. Although all these things are there in the pipeline. I'm saying that what we can see right now is this, and what we can't see right now, we can't commit. That's where it is.
Makes sense. Could you just quantify for us maybe, what could be the quantum of these 80 motors kind of that you'll be supplying? What will be the quantum?
The values keep changing from order to order. It's not very large. It varies between around INR 25 lakh per motor. It's all public information anyway, so it's not a secret.
Got it. Just one last question was on some of the new areas that we have entered on your new products, the synchronous motors, submersible motors. Could you give us a sense of how these products have been accepted? Are you seeing increased inquiry pipelines for some of these products?
Yeah, I did talk a little bit about this in the opening speech. We have delivered and commissioned the first 40 MW synchronous motor. It's doing well. The market is now fully aware that TDPS has got the capabilities. They've proven it. We have recently taken a big order for a project in Karnataka. There are a number of synchronous motor projects in the pipeline right now. There are also new tenders being issued by Nuclear Power Corporation. We are participating in those tenders. This CapEx cycle in India also is generating these large number of inquiries for other large type induction motors. The motor market is very, very active right now. It's got big potential. We're very active. We are bidding across the board. We'll do really well next year, for sure. The exact numbers will be given a little bit later.
As a motor segment, we'll report it separately later, but it's doing really well.
Understood. That's quite encouraging, sir. All the best. That's all from my side.
Okay. Thank you.
Thank you. Ladies and gentlemen, in order to ensure that management is able to address questions from all participants in this conference, we request you to limit your questions to two per participant only. The next question is on the line of Kuber Chauhan from Anand Rathi. Please go ahead.
Yeah. Thank you for taking my question. Am I audible?
Yes, very much so.
Yeah. Congratulations for the good set of numbers. Sir, my question was on the turnkey business. Can you throw some light on our turnkey business, where are we and what sort of strategy we will be adopting? Second question was on guidance. I missed the guidance for FY 2025. Thank you.
The turnkey business, there's not much more to report. There are a few limited orders which we have taken. We have marketed still very subdued. We will still use that capacity more as a service center than for new machine production. This works for us for the moment, and we're going to continue with the strategy at least for next year, and we will again review the situation next year to see what we want to do for the following year. That way, we are taking this decision year on year. We still expect this market to come back. Let's see. Let's see how it develops. For the guidance for FY 2025, I've given the first class guidance that our consolidated numbers would have a growth of around 17%-20%.
Understood. Okay, any sort of CapEx which you are doing?
Yeah, we have started the CapEx, and it will be on stream in the beginning of H2 next year.
Okay. Any ballpark number for that CapEx?
[audio distortion] I think we've given the guidance for that, right? In the earlier stock market notification.
Yeah. Around INR 120 crore.
Okay. Got it. All the best. Thank you.
Thank you. The next question is from the line of Praveen Motwani from BOI Mutual Fund. Please go ahead.
Yeah. Hi, TDPS team, and thanks for this opportunity. Sir, my first question is if you can just share the domestic and exports revenue for this quarter and for Q2 FY 2023.
No, we don't give that split up.
Hello?
Yeah, we don't give that split up. Do we give the split up, [Varun], exports revenue and.
No.
At least some indication which market reported good growth for you in this quarter or grown at higher rate for.
No, we supply our generators all over the world, sometimes we get good orders from a particular country, or sometimes we get from a particular region. Different verticals of our business have opportunities coming from different parts of the world. For example, for hydro, we could have large orders coming from Vietnam or from Norway or from other countries in the Middle East. We could have big gas engine generator orders coming from Ireland. It's very difficult for us to say there's one country or one thing which is giving us a big growth in our business. It's very widespread, and which is good because it provides a stability for our business.
Okay. Sir, the last question is, you reported 29% growth on a year-on-year basis. How much you attribute to the price and how much you attribute to the volume?
Now it's all volume.
It's all volumes. Okay. Great.
There's been no pricing change for the past one year. It's all volumes.
Understood. Okay. Thanks and all the best.
Thank you. The next question is on the line of Dhruvesh Sanghvi from Prospero Tree. Please go ahead.
Yeah. Sorry. Yeah. First, sir, thank you for performing so well, and you have been guiding and constantly giving us surprises on the slightly positive side with order book and all. Thank you. Second is, sir, what can go wrong now considering things are so good right now, and that makes me ask this question over the next three to four years, is what are the potential risks that we face in the next three, four years for achieving a 15%-20% growth? That's the only question. Thank you.
Sir, that's a really good question, geopolitical events could be a big risk always. This is always going to be something that no one's going to be able to read so far into the future. What we can all see is something like we can see a one year, one and a half year horizon clearly. Beyond that, if you're talking about large risks which could have system effects, then I am not in a position to answer that question. I'm sorry. It's really hard to say.
Just some thoughts around it, if there's nothing which comes, maybe that will be answer. Thank you.
Yeah, as I said, geopolitical events, wars, things like that, or political change and those kinds of things are the events that drive change, which affect economies and drive changes. That is hard to predict. If those things happen, those risks will always be there. Eventually, all of us will find a way to work around everything and life will go on.
Sure. Okay. One part which comes is, in the past, a lot of people, including myself, used to worry about the potential change towards the renewable energy and the need for fossil-based ecosystem. Now, because the performance of almost all companies are coming, nobody's asking those things. Are there any thoughts which have got updated or that is not at all a worry over a five, seven-year period also, or something around that area?
Five, seven-year period, definitely, I think that the renewables business is not going to make a big dent in the traditional power market. All this talk about hydrogen and even talking about wind, looking at the way the sector manufacturers are getting into periods of getting into weakness on their own financials, that's going to affect the supply situation. Eventually, prices of equipment is going to go up, and that's going to then again lead to higher prices of power production. I think that there is no doubt that while renewables also will grow, it will not grow at the rate it used to grow earlier. I think that we will see the traditional fossil-based fuels still dominating the power industry for years to come. This is my prediction.
Thank you. Thanks a lot, sir. Thanks.
Thank you. We'll move on to the next question. That is from the line of Dhwanil Desai from Turtle Capital. Please go ahead.
Hi. Good morning, everyone. Congratulations on fantastic numbers.
Sorry to interrupt, Mr. Desai, we are not able to hear you clearly.
Okay. Is it better?
Also, can you use the handset mode and can you speak a bit louder? The line for the current participant. We have lost the line to the current participant. We'll move on to the next. That is on the line of [Kartik Ayyan] from CH Advisors. Please go ahead.
Sir, good afternoon. Congrats on this very interesting deal with BRUSH. This is my first interaction with you on that topic, if you don't mind, can I ask you a slightly detailed question?
Of course.
Yeah. Great. Sir, the way the agreement is structured is very interesting. It is a three plus two year kind of a tenure. Is the thinking from their point of view that they will top up their capacities with some additional capacity from you? Why hasn't this been structured as a perpetual arrangement? Why can't you be their, shall I say, back office? Why was this agreement structured this way?
Sir, nobody enters into perpetual agreements, it's not a top-up thing. There is a certain line of products, something like below 50 MW, where we will be the primary producer of that equipment or I would say, the predominant, maybe 90%+ producer of that particular size of machines, BRUSH will focus on the larger machines. That's the plan.
Right.
Large corporations have their own policies on how they would like to structure agreements, I think our agreement is in line with their corporate policy, I don't think it has anything to do with. We have a long-term view of this business and so do they. They have a policy on how they structure agreements, this agreement falls in line with that policy. I don't think it deviates too much into it, perpetual agreements don't exist. I'm not expecting. If we deliver good machines and we do good business, this will go on for a long time.
Great. I'm extending my luck. Are there other such agreements in the pipeline?
Not like this. These things don't come up. As much as possible, our strategy is to do the business by ourselves.
Yeah.
To get into various markets with our own brand name and to grow it by ourselves. This particular instance, this particular sector of the oil and gas market is a very large market. There's upstream, there's downstream. This particular segment of the market, which is more on the exploration side, on the drilling exploration side, that's where BRUSH is very strong. That, as I said, there's a lot of investment taking place right now in the oil and gas segment to replace Russian supplies, both on the gas side as well as the oil side. So there's a boom taking place in this segment for LNG as well as oil. Demand is very strong for the product, and we are at the right place at the right time. This is the general thinking behind this agreement.
Yes. So are you replacing another facility, sir, or is this a fresh arrangement?
We are replacing a European-based facility.
Interesting. If I may ask you, would there be a substantial cost saving to BRUSH by sourcing from you?
I think there would be some saving. I am not sure how much.
Sure. Great. Thanks very much for the answers and best wishes, sir.
Thank you.
Thank you. The next question is from the line of Ankur Kumar from Alpha Capital. Please go ahead.
Hello, sir. All right. Sorry good, thank you for taking my question. My question actually revolves around what Dhruvesh was asking. He was asking about long-term 15%-20% growth. I was trying to ask, why are we not growing faster? Because market is growing so well, and there are people like Triveni Turbine who are growing 30%-35% in this time. Why are we even guiding for 17%-20% growth only for the next year?
I can't compare myself with others in the market. I can only talk about what we can do and what growth we can deliver. As I said, I am trying to deliver realistic numbers and try to do a little bit better than what we deliver. That's where we are, and that's the track that we are on.
Got it, sir. Sir, on margin side, is there any scope for improvement for the next year, or do you think these 17%, 18% are sufficient for us?
There's going to be no price increases, largely, and no substantial price increases which are going to affect margins. The EBITDA margin improvement will take place from operational leverage. We're putting in a third plant, as we said H2 next year. We might not see huge improvements taking place on operational leverage because of the third plant also coming in, fixed costs associated with that also will contribute. It will not give us such a big upward bump in the EBITDA numbers from where we are right now. Holding it at this level is the target, can improve as a 50 basis point or something, it will be good for us.
Got it.
70% is how it will be.
Sure. Sir, last question. This quarter, we did INR 270 odd crores, you talked about Q3, Q4 being lower than this number. Was that conservative or are there any delays in between?
No, we said that we will do around INR 1,000 crores for the year. We've done around INR 494. We will do another around INR 500 crores, as I said, the breakup will be INR 235-INR 240 in Q3 and INR 260-INR 265 in Q4. That's where it's going to be. We're in November, already middle of November. We don't see any fresh order booking taking place in this financial year where we can improve the numbers significantly. More or less, the order booking is already fixed for this year, this is the performance we're going to deliver.
Got it. Thank you, sir.
Thank you. The next question is from the line of Himanshu Upadhyay from o3 PMS. Please go ahead.
It is a basic question. In capital goods, there are certain companies which get advances from customers also. What type of companies do get advances from customers, and let's say substantial 10%, 15%. How far away or what can we do to get such businesses? The question is basically that my working capital gets better and better. Obviously, our sales to gross box has been always good. Are you thinking about in those terms, and are we getting the newer businesses where my receivables and cash cycle is much better than what the historical business we were doing always? Some thoughts on that.
Vinay, you want to take this question on the advances, what kind of markets we are getting advances.
Basically, our business is not like B2C. We don't supply our machines to the end customers, but we supply our products largely to the OEMs. In our cases, in most of the cases, we take advances. In all the cases we take advances, and all our payments are secured. In case of special projects, we also have stage-wise advances, and that is called progressive payment. It mainly depends on the customer to customer and also depending on the volume of the business they give. All the payment terms differ from each customer or each segment. Definitely we also have a system of taking the advance from almost all the customers.
Can it be that we are able to reduce working capital days in double digits overall, means inventory plus receivables to that much? Or do you think working capital will?
I think we can try to reduce inventory by operational efficiency. Receivables is more of a market-driven situation. We don't see so much change taking place in the receivables side. When you say payments are secured, payments will come. We don't have a problem of bad debts. What we can try to improve is operational efficiency, reducing cycle time. Those projects are always underway in the factory, but those improvements are incremental.
Okay. Thank you. One last thing. We will be making generators and motors only for oil and gas market. The customer, which is BRUSH Group, they stated that they make turbo generators for power marine. In our press release itself, we have stated, okay, power, petrochemical and marine, et cetera. Where we will not cater to it. Is this the right understanding?
I think that we have two agreements with them. One is taking the BRUSH generator for them, and there's another agreement where we're making the TDPS generator for them. The BRUSH generator is primarily used in the oil and gas market. Of course, it's used in other areas also, but primarily it's used over there. It's more expensive than the TDPS machine. In other applications, like industrial use or marine or other applications, the idea is to use our generator wherever there is more cost efficiency required from the market side. We have both the products then in play, and this gives a chance for us to look at a wider range of markets because we have both the TDPS product and the BRUSH product in the kitty.
Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to the management for the closing comments.
Thank you for joining our conference call. If you have any further questions, please feel free to get in touch with our investor relations team. We look forward to interacting with you at the end of next quarter or meeting you personally at our investor conference in the next few months. Thank you.
Thank you, members of the management team.
Thank you.
Ladies and gentlemen, on behalf of TD Power Systems Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.