Ladies and gentlemen, good day and welcome to the TD Power Systems Limited Q1 FY 2024 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the belief, opinion, and expectations of the company as on the date of this call. These statements are not 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 a question after the presentation concludes. Should you need assistance during the conference call, please signal an operator or press star 0 on your touch-tone phone. Please note that this conference is being recorded. Now, I hand over the conference to Mr. Nikhil Kumar, Managing Director for TD Power Systems. Thank you, and over to you, sir.
Good morning, everybody. Thank you once again for joining us on our earnings call. I trust all of you would have received our recent investor presentation. Moving on to the financial performance of the company for the quarter ended 30th June 2023. Stand-alone profit after tax on consolidated basis in Q1 was INR 2.36 billion versus INR 1.06 billion over the previous year, an increase of 15%. Profit after tax and comprehensive income for the quarter is INR 291 million versus a profit of INR 104 million in the previous year, an increase of 50%. Order book of the manufacturing segment is INR 13.86 billion, INR 6.2 billion generative business, the motor business, and INR 7.65 billion railway business. The project business are classified as held for sale since we don't do any project business anymore, and the pending order in this segment is INR 0.16 billion.
We have INR 0.09 billion from the Turkey business. The order inflow has increased by 15% over last year, the numbers are as follows. Currently, system flow order inflow in the first quarter is INR 2.67 billion, the previous year was INR 2.04 billion. Order inflow from
[Foreign language] Ladies and gentlemen, we lost the connection for Mr. Nikhil. Please hold while we reconnect, sir. We have the line of Mr. Nikhil Kumar connected. Sir, please go ahead.
Okay. I will start from profit after tax. Profit after tax and comprehensive income for the quarter was INR 291 million versus a profit of INR 194 million in the previous year, an increase of 50%. The order book in the manufacturing segment is INR 13.86 billion, INR 6.2 billion in the regular manufacturing business and INR 7.65 billion railway business. The project group has now been classified as held for sale since we don't do any project business anymore, and the pending order is now INR 0.16 billion. Turkey is INR 0.09 billion. Order inflow has increased by 15% over last year, and the numbers are as follows. INR 267 million for this year in Q1 versus INR 2.04 billion in previous year Q1. Order inflow from direct and deemed exports is INR 0.37 billion compared to INR 1.09 billion previous year.
Order inflow in Q2 continued to be strong with 100 MW booked in July 2023 alone. Consolidated income on a consolidated basis was INR 2.84 billion versus INR 2.11 billion in the previous year, an increase of 30%. Profit after tax and comprehensive income for the first quarter was INR 251 million versus a profit of INR 104 million, an increase of 28%. We continue to maintain a strong cash position at INR 1.3 billion. Order book, market situation, and guidance. Market conditions and guidance overall. Order book was up 16% as mentioned earlier, domestic order inflow is higher by 13.68% due to motor orders and some large orders were generated from steel and agri in the domestic segment. Exports and deemed exports is lower than Q1 last year, this was due to some big orders that were under negotiation in Q1.
We are pleased to announce that we have won those orders in export, we'll catch up with the expected ratio of exports in power equipment both domestic at the end of Q2 or even perhaps in Q3. I can now talk briefly about each segment. In Japan, we've seen substantial increase of orders from both domestic and export in Q2. In particular, the domestic market condition is very strong and the order pipeline continues to be very healthy. Here's a list of notable orders which were done in Q1. We received an order from GE Japan for a 243-megawatt machine, for a waste-to-energy project for installation in January 2025. It will be the biggest generator that we have equipped to Japan for Japan installation in Japan.
We received an order for two units of 48 megawatts and three units of 57 megawatts from a major Sinar Mas from Indonesia for HRRL, which is the joint venture between Hindustan Petroleum and the Government of Rajasthan for a resiliency project. This is an order from Siemens, USA, for two units of 46 and 69 megawatts for installation in Guyana, South America, this is going to increase our global footprint to 105 countries. Next important order, we received an order for 110 megawatts which are suitable for a hazardous location, Zone 2, from Elliott, USA, for a project in India, which is a multi-site project in India. This will be our first installation in India for a hazardous location in this district. Next, we would like to announce an agreement signed with a major international gas turbine manufacturer for making 45 megawatt group of generators.
We have an order to make a first prototype to be delivered end of calendar 2024 or early 2025. This has a business potential of INR 700 crores per year. The business will start in calendar 2025. However, until then, we have a strong inquiry pipeline from our existing gas turbine customers. We're also happy to report another breakthrough order for 18.7 MW generator using CO2 for power generation from an Italian OEM. We spoke up on this with AENI, which is a large Italian company and a few years ago in Belgium and the Middle East. It acts like a battery storage during periods of excess power generation and discharges the power during peak demand. As proven, we expect to have a number of these plants in the European Union. We're proud to inform you that the prototype plant is with a TDPS generator. Hydro.
The order pipeline is very strong in hydro. This year we're going to be almost double last year. Next year, we expect to be more. Incoming inquiries are very strong in EU, Nepal, and Southeast Asia. Since the Indian market for hydro is also picking up and we're expecting strong orders ahead for TDPS in the hydro segment. Gas engines. Select to report that this segment is going as planned with steady growth as per the forecast. Motors. We have dispatched the first 30 MW synchronous motor to the customer in Andhra Pradesh. Now there are about INR 75 crores worth of synchronous motor packages which will be finalized this quarter. In Delhi, we should get a significant portion of this business since we are well placed for it. Railways. Our major customer has won the rail 18 aluminium body train. A 100, 400 train.
These require about INR 275 crores worth of motors. Our customer will float the inquiry around October this year, and we should get finalized by the end of Q3 or early Q4. However, there is competition in this segment from one more player who TDPS will have to beat to get these orders. Mining. We expect to get around 60 motors direct from Indian Railways for the execution this year. We will keep the market updated about this. To summarize, all segments are doing well. Our order inflow is moving up strongly. There's a full pipeline, as mentioned earlier, as of July was INR 100 crores, and the inflows for the current month and the future months are showing very healthy momentum. This order inflow will ensure that FY 2023 will go as per the guidance, and FY 2024 will also be solid and lead to further expansion of margins due to operational leverage.
Guidance. For Q2, we're giving a top-line guidance of INR 255 crores-INR 265 crores on a revenue business. At this point, we expect PAT to increase significantly in Q2 compared to Q1 due to operational leverage. At the end of H1, we will be around 47% of the guidance for FY 2023. We are on target to restrict our guidance for the current year to around INR 1,000 crores as indicated in the pre-investment call on top line as well as margins. This brings me to the end of my initial remarks, and now we'll be happy to address any queries that you may have. Thank you.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question can press star and one on their desktop 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. First question is from the line of Himanshu Patni from Otis. Please go ahead. Himanshu, your line is unmuted. Please go ahead.
Yeah. Hi. Sorry, I'm not sure. I would first like to appreciate that your company is giving quarterly balance sheet in the presentation, it's a good practice. One observation is this, that this quarter our revenue was lower than Q4 FY 2023. Our receivables are flat. It means that almost INR 40 crores of previous quarter revenue is still pending to be collected. What can we do to improve our receivable cycle? Okay. Yeah, that was the first question.
Vara Lakshmi will take your second question, please.
Miss Vara Lakshmi's line gets disconnected. We'll reconnect her
Can I proceed with the second question then?
Yeah.
Yeah. See that top 3 customers of ours contribute nearly 30% of revenue. One of it is Indian Railways, okay? The other two would be for what segment? Generally, the top 3 remain same every year or they change every year? What type of long-term agreements we have with them? Indian Railways, we understand that you have a book with your customer. For rest of the others too, what types of agreements do you have with them?
We don't have a long-term agreement with the two, but we have an extremely long-term relationship with the other two. The long-term relationship goes back all the way to 2001 when we took over the company and also both our customers started producing synchronous motors in a bigger way in India, going up the sizes, increasing the market share. Our relationship with these customers goes back all the way then. We have grown with them, and we have built up a big reference list in India and outside India with them. There's a deep relationship between our company and these two customer companies, and we continue to maintain these relationships. I think that this is how I would like to answer the question.
Okay. The top 3 remain the same only, what were there because they were.
Yeah.
Okay. Can you give an idea of how is the pricing environment and any improvement related to it? The gross margins have improved quite materially in the quarter. The number of units we sold were less in the quarter. Was this a one-off high margin mix or-
No, it's not a one-off. I think that we have been talking about the small price increases in case of gross margin. This is mainly due to the mix. We are seeing most of the business has been more aftermarket business, and we have been talking about increasing this segment of the business, and this is leading to expansion of gross contribution. There is no price increases taking place in the market at the moment. The environment for the raw material is quite stable, and there is no reason why we should go into and demand price increase. What we're seeing in terms of expansion of gross contribution is coming from mix between more aftermarket business and the improvement in gross margin taking place due to the gross contribution as well as on certain levels, which we will now see happening bigger in a bigger way in Q2.
Sir, historically, we have stayed around 32% of gross margin, 31, 32. Can it be now 35 or 32 new normal?
No, I think 35 is a stretch. We are around, I think, 34 should be in the new normal.
Just repetition. Is Varalakshmi there with the receivable question? That's all from my side.
I am there. There has been a spillover of the collections to July. That's the reason why you see that the better position continues to be the same.
What I see is almost INR 30 crores of previous quarters' revenue, which is March-ending, has not been collected till June-end of it. More than 90 days from so.
Yeah.
Is it a regular feature or this year only?
No, no, the collections have happened in July. It was in early July it happened. Sometimes there are spillovers, but this is not a regular trend.
Okay. Thank you from my side.
Actually, it relates to a large LC payment, which had a credit period, and therefore it fell into July, and we collected that money.
Okay. Thank you.
Thank you.
Next question is from the line of Ashwani Sharma from HDFC Securities. Please go ahead.
Yeah, hi, good morning. Thanks for the opportunity. My first question is on the top line. If I look at top line growth, it was just 8% in this quarter. Hello?
Yes, we hear you audible. Please go ahead.
Okay, yeah. I was seeing that our top line growth was just a single-digit % growth. Is there an execution challenge that we are facing despite the fact that we have a good order book log?
No, I think you should go back to my previous earnings call statement where I have clearly mentioned that Q1 is going to be INR 215 crores and it is INR 250 crores. That's what I have told you earlier on the standalone basis. Sorry. For the manufacturing business, I mentioned that we have a large number of big machines which have been released in Q1 which is going to be made in Q2. Therefore, this is the reason why they're seeing a slightly lumpy unequal sales taking place in Q1 and Q2, which is quite normal when you have large projects that have other billing taking place in the subsequent quarter. I have highlighted this in the last earnings call because I knew this was going to happen, and I expect that the investors are well-informed about it
Okay. My second question is on the motor side. I just want clarification. You mentioned about INR 270 crore opportunity for 100 trains. Is that right, sir?
No, I said INR 250 crores.
You said INR 75 crore.
I said a major railway customer has won the framing of a new frame, train leasing order for 100 trains. These require around INR 75 crore of the motors. The customer will float the inquiries around October this year. It should get finalized by end of Q3 or early Q4. This is what I mentioned.
In terms of value, what kind of opportunity do you see here, sir?
The value is INR 275 crore. We should get, I think either we will split 50-50 or somebody could get 60-40.
My last question is on the margin. If I look at last three, four years, they have been consistent margin improvements which has happened. Where do you think, is there a further scope for this to improve going ahead?
I have mentioned earlier to Bhady who asked me this question a little bit earlier that the margin expansion now will take place mainly from operational leverage, not so much from expansion of gross contribution. Gross contribution would be remaining at 60%-62%, which is the new normal compared to 31%-37% we had earlier. We are not in a position, the market is not conducive to price increases and we also don't intend to increase prices because we want to remain competitive and able to keep the volumes by existing customers. The expansion of margin will take place purely from operational leverage. As we do around INR 250 crore-INR 260 crore compared to what we did this last quarter at INR 250-INR 260, then we will see correspondingly the expansion of our, sorry, the expansion of margin and it will be quite significant.
Yeah. Thanks for the answers.
Thank you. Before we move to the next question, a reminder to the participant, anyone who wishes to ask a question, press star then one. Next question is from the line of Rohit from Kotak AMC. Please go ahead.
Hello, am I audible?
Yes, you are. Please go ahead.
Yeah, go ahead.
Hi, Nikhil. Congratulations on a steady quarter. Nikhil, sorry, I think I missed some part of your opening statements, so please bear with me. I just wanted two things from you. In terms of the new addition, you mentioned about a gas engine customer that we've added. Can you talk a bit about this? Hello?
This is a gas combined generator, which is being used in a CO2 storage organization plant. Basically, what they use is they take CO2, they convert it, they keep it under pressure during power when the power prices are cheap and low. They act like a battery storage, then during peak demand, that CO2 is then engaged into a turbine, and the turbine will produce electricity. Then the cycle is repeated once again, and it's a closed cycle, so it's a very efficient cycle. It's a new concept which is being tried out by this company, basically, we have very good footing and very good prospects for the future, and we are very proud to say that our generator is the first prototype plant which is under the integration.
Got it. Very good to hear that. Again, I think you mentioned this in the opening remarks, sorry. These railway orders, you mentioned that this 18 train sets, we are going to participate in that. You're mostly on the freight side, are we also going to participate on the passenger side? Is that correct?
Yes.
Okay. That's what you were mentioning, INR 275 crores worth of order would be there, you would participate depending on how much, whether 60 or 50, whatever.
We don't know if we get 60 or 50.
Right.
We have to compete. Yeah.
If you win, when will this start coming to you in terms of delivery?
It'll start from FY 2025.
25. Right. Got it. The first one, the gas combined orders, you mentioned that will be from calendar year 2025, it'll be an annual of INR 100 crore kind of an opportunity.
That's the first prototype plant. That generator will be delivered this financial year.
Okay.
This plant has to be proven. It could end up being two to three plants per year in the near future. Okay. That's it from my side. Thank you.
Thank you. The next question is from the line of Pravin Motwani from BOI Mutual Fund. Please go ahead.
Hi. Thanks for the opportunity. My first question is.
Hi, Pravin.
Oh, hi. What explains this decline in order inflow in the exports front and in Q1 FY 2024?
I have actually given an explanation for that. I said that we had some big orders which were under negotiation in Q1, and we are pleased to announce that we have won these orders. In export, we will catch up export. This is the reason.
Okay, understood. How margins are different in domestic and exports? Like, what is the spread?
Exports are slightly better than domestic.
Is there any number that you can share?
Yeah, I can say it could be 100 basis points or 200 basis points better.
Okay. Understood. How is the inquiry pipeline, like in the hydro front, in the domestic market? There are a couple of players announcing projects in the hydro. If you can just give us some sense, when can we see that orders coming in?
Vinek, can you answer this question, please?
Yeah. Definitely the hydro market in domestic segment has opened up, and we also received, in the first quarters, couple of orders, and we are also expecting some good order inflow in the second quarter as well. Definitely now, I think, this trend is going to continue and after a long time, this small hydro segment has opened up.
Understood. Thanks. Those were the questions from my end.
Thank you. Participants, anyone who wishes to ask a question, press star then one. Next question is from the line of Dhaval Desai from Tur Capital. Please go ahead.
Hi, good morning, Nikhil. Congratulations for the very good set of numbers.
Thanks.
My first question is, recently some of the major utilities announced very large MOUs for pumped storage hydro. If I understand correctly, your synchronous motors are part of the solution. You recently won INR 176 crore orders, and there is much more in the pipeline. Is this a very large opportunity unfolding, if you can talk a bit about that?
We have lost the connection for Mr. Nikhil Kumar. Please stay connected while we reconnect him. Ladies and gentlemen, thanks for patiently holding. We have Mr. Dhaval Desai in the question queue. Mr. Dhaval, you can please proceed with your question.
Sure. Nikhil, my first question is, around the synchronous motor. Recently some of the large utility groups have announced MOUs for the pumped storage hydro, and if my understanding is correct, your motors is used in those applications. Can you give us some sense as to on per megawatt basis, what is the contribution to our component, and, what are our INR 75 crore orders that we got is related to the pump hydro and, can this opportunity unfold as a recurring thing over the next three, four years?
The INR 75 crore worth of synchronous motor orders are not related to pumped storage at all. These are orders which are coming from the irrigation projects. This is not pumped storage. Pumped storage is concerned, there is a lot of noise in the market about this, but we are yet to see concrete inquiries, in the ranges that we operate, which is up to about 250 megawatts. I am unable to comment on the actual market size or demand at this point in time. It has got good potential. We are waiting for it. We are expecting it to happen. We have the products for it, and, as soon as this market picks up with actual ordering in these sizes, we will definitely play a very large role in this.
At the moment, as I said, nobody has really come to the stage of floating inquiries for equipment.
Okay, got it. Second thing, if on the railway side, you mentioned that we will be supplying traction motors. Is that going to be in FY 2025? If I am understanding that correctly.
Yes. We expect it to be this year.
Is this part of the normal railway tendering, where the testing was going on for some time?
Yes.
Given all these developments, I think even on the we have been supplying to gas engine sites for a long time. Turbine generators is something which I have not heard from you over many calls. Is this something which is a new segment opening up or something which we are doing earlier and now kind of gone into decline mode and now again reviving? Any update on that?
No, turbine has not been such a large initiative, although the market for gas turbine is large. We have been steadily increasing our presence in the gas turbine market, supplying machines to Solar, which is a big gas turbine manufacturer in the U.S. We also announced last time, the last earning call, that we have increased our trading business with Mitsubishi Heavy Industries, Japan. Those are gas turbine generators. We're getting more inquiries and more requirements from them also. Now we're going to add this one order from the COP client, which is also a gas turbine generator. Now we're also, as mentioned, we have signed an agreement with a major international company to supply 45 megawatt alternative hybrid power pack, which should deliver by the end of next year, next calendar year, early 2025.
That business also has a big potential to grow. With the gas turbine business, we have a big growth. We have a low market share, but it is a large opportunity which is going to be a big opportunity in the future, given that the world is moving more and more away from dirty sources towards clean sources.
Our product is more relevant for less than 100 MW, right? We won't be going above 100 MW. Is that the right understanding?
We are concentrating on gas turbine generators below 50 MW ourselves. Above that size, we are not really competitive. Yes, on the other side, we have to supply generators with the Fuji Electric technology, and we have restrictions on territories. We're not going to supply it ourselves. It's below 50 MW, it is just we with our own machine, and that's the business that we're doing also.
My next question, with all this thing happening, do you have any lineup date in terms of your price, your value, how that's going to turn out?
Yeah, I think if the order inflow gives a very, very good insight about what's going to happen next year. If we are going to be running at INR 160 crore-INR 270 crore for quarter order inflow on the generator side, then we should be looking at something like INR 1,000 crore plus coming from motor generators. We have the railway business on top of that. I think it gives a good indication of the direction the company is heading. We have this commitment right now, but the way the order inflow is picking up, I'm excited and I'm very positive about delivering very strong growth next year also. At the right time, probably we also could talk about once we start hitting this INR 1,200 crore level, we are also taking a decision in our board meeting yesterday to go ahead with an expansion plan.
We have taken the decision to invest INR 120 crore in a third plant. We will be starting the investment from October this year, which will be spread over two years. Because we are confident about this order inflow, we need to be capacity. We should have the first phase of this plant operational around October or November next year, and the second phase will be operational in FY 2026. This, I think, is the surest sign for the market that we are confident about the expansion of the business and getting ready for taking the company to the next stage.
Okay. Your earlier indication of current capacity serving INR 1,400 crore kind of a number remains. Is it certain about that?
Yeah, of course. We are getting ready for We have to in some way, we will reach that number and then start to be comfortable. We have to start the process right now. We have taken the decision in yesterday's board meeting that we will invest INR 120 crore spread over two years and build up the capacity of the business up to INR 1,600 crore-INR 1,700 crore.
That's clear. Thank you.
Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference, please limit your questions to one participant. Next question is from the line of Alisha Mahawla from Investment Doctor. Please go ahead.
Hi. Good afternoon. Thank you for the opportunity. My first question is, you talked about refurbishment opportunity on the wind generator side. If you have an update on that, how is this segment doing?
It is a steady business. It's steady. It's not going to be exponential, but it's exactly as per the plan. It's doing a fair amount of business. Machines have to fail before. It has to fail before we get an opportunity. We're doing quite well with a certain number of machines.
You used to say that this could be an INR 100 crore kind of opportunity compared to what this is.
No. It's not going to be INR 100 crores per year. Not in the winter.
Okay. There's still a significant.
The overall share business, we have said the overall aftermarket business of the company would be around 10, 16, or 20 times orders to date. This will be a part of it.
Okay. On the 9,000 HP locomotive side, we said that you're not sure what the OEM is trying to do. Maybe mostly in-house, maybe look for external sourcing. Is there any update on that?
No, there's no update. As I said, the inquiry will be floated in October, and we need to be competitive and have a good share. I'm confident we'll do well so I can clear this point.
No, I'm talking about the 9,000 HP locomotives. You were saying that also it will be floated in October.
Like I said, the one with themes one.
Yes.
No. We haven't asked them, but they don't seem to be interested to outsource it.
Okay. Just on the gross margin, you used to say 30%-31%, it is a competitive industry that we are in, and now we're seeing 33%-34%. Is this sustainable? What has changed? When you see the mix is changing, can you tell us or help us understand why this behavior has come?
The mix has changed into things that I said, giving more aftermarket business. Earlier it could be two, three, four% of our sales, now it's moving up to seven% of our sales. That has the rest of the high gross contribution. That's definitely helping us to improve the overall gross contribution to the company. In addition to that, we have a lot of cost reduction activities within the organization. We are optimizing our design. We're constantly working on making our machines lighter and more efficient. That also has helped in cost reduction activities on the material side and making our machines more efficient. These, I would say, are the two major factors leading to the expansion in the gross contribution.
Got it. Just a thing that on the wind side, there's no big opportunity on the domestic front that you're seeing currently?
There are. We are talking to a few players, but I don't have permission to disclose the names.
Okay. Thanks for reminding us.
Thank you. Next question is from the line of Ranjit Shivaraman from Mahindra Finance. Please go ahead.
Yeah. Hi, sir. Good morning, and congrats on this set of numbers.
Good morning.
Yeah. Hi. Just wanted to get some idea across the companies, a lot of people are talking about the Europe market has kind of slowed down. Even when you see your export revenues also, your order intake is also showing a negative margin. Is that something that you are also seeing or is just a quarterly thing, this export slowdown?
There's no slowdown on the exports. As I said, we were negotiating for large orders, which we won. When you see the Q2 numbers, you'll be rest assured that the export market is booming for us.
Okay, great. I missed out on the initial point. Is there any guidance that you had given for the revenue for this year or for next year?
We have given, we are sticking to our revenue guidance of INR 1,000 crores.
INR 1,000 crore. Okay. Order intake?
Order intake, I've not given a guidance. I don't have a number right now. I will give you on that. We can give a guidance.
Okay. Regarding our Vande Bharat plans, I think We are expecting some orders from Alstom or is that there in our overall outlook, the Vande Bharat?
I think I've mentioned this already, that I won the order. They will float the tenders in October, then we have to compete and win the project.
Okay. Sir, lastly.
Sorry to interrupt, Mr. Shivaraman. May we please request you to join the queue? We have several calls.
Yeah, yeah. Okay, I'll do that.
Thank you. Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants, please restrict your questions to two per participant. Next question is from the line of Sarika Thorat from HDFC. Please go ahead.
Thank you for the opportunity. Sir, I want to understand, there is one media article in month of July saying that Karnataka High Court has faced transfer of 2.51 crore shares in TD Power. Can you just throw some light on this particular matter, please?
I think the company has published on the exchange clarifications as to what is going on. Nature is contributed, I'm not really entitled to talk about this more than what has already been published by the company on the exchange. All I can say is that there was a hearing yesterday in the High Court. The High Court has passed some orders which they will keep all the investors in the loop. In general, the High Court has passed an order saying that the shares, except shares which are 51% owned shares, are related to a single promoter entity, which is Sapphire Finance, and not related to other promoters. This is a very welcome development as far as we are concerned.
This takes the entire case to just one promoter entity and not to the other entities which are not related to any other promoter shares. As the notification goes out on the website today or tomorrow, we will put it on the exchange. We will keep all our investors informed about the development. The next hearing of this case in the High Court has been scheduled for the 28th of August. We'll keep all of you informed about the progress.
Thank you very much for the update.
Thank you.
Next question is from the line of Keshav Agrawal from UTI AMC. Please go ahead.
Yeah. Good afternoon. Most of my questions have been answered. Just a few questions. Firstly, we were also looking to supply the traction motors for Vande Bharat to Indian Railways through one of our customer. Any update on this?
Yeah. That order, we are still in the pipeline. We're not talking about it. It will take a little bit more time. We're not mentioning it, but there is opportunities to align and once it becomes hot, we will get back to you about it.
Okay. You mentioned that there would be competition even for this.
There will be competition for all these smaller-sized motors. These larger motors which are going for the freight locomotives. Alstom has a tender source with CL. That's Alstom has a reliable tender source. For these smaller-sized motors, there is competition with a lot of competition, mainly competition from one single entity. It's a large multinational company working in India, I think, and that's where we defeat them and have to compete for these jobs.
Sure. You were looking to also scale up the business on the motor and repair. Can you give some color how the progress is happening on the motor side?
I answered this question a few minutes ago on the repair side. We're getting steady orders from the segment. We're satisfied with the overall growth. It's part of the 57% of the business. The aftermarket business is going as per plan. There's nothing extraordinary taking place. It's going as planned.
Sure. Lastly, on the pump hydro, how do you mean scale up on the pump hydro? Any color you can share?
I mean, scaling up means there should first be business, right? We should see the business before we say we're going to scale up. We have the product. We can make the synchronous motor and generators and put it with the packages. As I said earlier, there's no actual projects where people are in the ordering stage. A lot of it is very conceptual. It could be also in the first few phases, we could see very large projects coming up, maybe 200 megawatts, 300 megawatts, 15 megawatt sizes in pump hydro. Not in the sizes where we operate, which is 40, 50 megawatts. We don't know which way the market will develop. If the pump hydro is going to be mainly for the large hydro segment, in which case we will not have much business at all.
If it's going to be in the small hydro business, then we could have a large business there. Small hydro is around 15 megawatts. We have to see which way the market develops. I'm not sure.
Sure. Thank you.
Thank you. Next question is from the line of Manoj from Geomatrix. Please go ahead.
Hello, I am audible?
Yes, you are. Please go ahead.
Yes, Manoj, how are you, sir?
I'm fine, sir. Sir, power has been a permanent demand of the human being from the last very many decades. I have seen that power demand changes from like somewhere hydro, sometime gas. What do you see the trend in short-term and medium-term, how the power producers are thinking in terms of which area they are more focusing on? In general, when we see people in California, they are thinking they have so many power has to increase because of EVs and all these articles. Can you just throw some broad light what is happening on the areas where we are present or even not there, how the power producers are thinking?
Power is going to be in big demand all over the world, not just in India, but also in the developed countries where they are shifting over to more and more EV production. Therefore, demand for electricity is going to keep increasing. Plus bigger it could be when you start heating The laws that pass not to heat homes with oil or with gas, then we'll see another big spike for demand picking up in electricity there. Demand is going to keep growing, there's no doubt about it. How is demand going to be met? It has to be met from a mixture of renewables and fossil. Fossil, as far as fossil is concerned, it's going to be gas. Gas is, at least in the Western world, all developed countries, it's going to be mainly they're going to move away from coal.
It's going to be largely gas generation and renewables. Renewables in the form of wind, biomass, tidal, solar plants, waste-to-energy is a mix we can see. In India, it's still going to be dependent on coal. 80% is going to be coal and other products, you can check biomass or sugar cane generation and things like that. In the U.S., though, it's going to be a little bit different. Although we are putting a lot of emphasis on renewables, we can't escape the fact that we do need at least 60%-70% of our power generation coming from baseload capacity. Baseload can only be met by coal in India because we have no gas. Oil or gas, coal or nuclear.
How we see it in the future, in the near term, demand for our products is going to be strong for the next decade or so.
Okay. Thank you, Mr.
Thank you. The next question is from the line of Neha Agrawal from C21 Investor Managers LLC. Please go ahead.
Thank you so much. I just have two quick questions. One is relating to the OEM replacement demand that you spoke about in your presentation. Can you just highlight how much of your revenue is coming from the replacement demand side?
That's a tough question. I don't have a number, honestly speaking, at the moment.
Is it that even though it's a replacement demand journey, there is a change in product and just the process or is it more straightforward?
Vinay, do you want to take this question? Maybe you can throw some light on this in a better way.
Basically, what we are seeing is, we have around 6,000 machines in the field. As you know, we are a 23-year-old company, and a large number of machines which are more than 10 to 12 years old. We expect a good amount of business to come from this segment. Replacement of complete machine or complete rotor or stator. At the same time, there's also a big business for replacing the older machines supplied by our competitors. For example, now we are also doing a project where there are five machines which are 60 years old, and we are bidding that project with one of our customers. That's one part. Second part is replacing our own machine. That, unfortunately, this is an unpredictable market where we can't say that this year we want so many machine replacements. It is a difficult question to answer.
Certainly, the probability increases as the machine grows older. I think only this much we can tell at the moment, because we have a large fleet of older machines which are getting older and older year by year.
Sure. Even then, would it be fair to say that even in that case, whenever the replacement is done also, there is going to be a fair share of competitive intensity, and it's not that we have this 50/50 or just because the machine was ours?
In the case of our own machines, the probability of getting the order is you can say more than 90%, because it's going to be difficult for our competitors to match all the dimensions. There are so many things technically, the cutter height, the platform height, the cooler location, foundation dimensions and all those things. We are one of the masters in doing that, and we have replaced almost all our competitor's machines exactly matching all the dimensions. That is called drop-in-place replacement. There's nobody who has this kind of capability who can match all the dimensions of our machines and do the replacement job itself. There we have an edge over our competition, and that is why I said we have more than 90% chance of getting that business.
Fair enough. That is very clear. Also, on the Turkey side, I had one question pertaining to we having a manufacturing unit there. Just to throw some light as to which markets does it cater to, and given the recent disruptions in Turkey in the last two years, have you faced any difficulties?
The Turkish market is at the moment I think it's almost there.
Right.
We have decided to keep the plant open over there because we have decided to have a safety security for our increasing population of machines that we have in Europe. We want to have a service center in case we have a warranty issue, at least we have a manufacturing plant where we can offer the repairs and replacements at a very competitive price. Otherwise, we're dependent on service shops, third-party service shops, and they will be very, very expensive for the company in case we have an incident. We also have been talking to our customers in the Turkish markets, and there is a big revival taking place in the geothermal sector. I will ask my colleague, Ramya, who is on this call. She is responsible for the Turkish market.
Ramya, maybe you can shed some light on the Turkish market and geothermal for people listening. Is she on the call?
No, I don't think she's on the call, sir.
Okay. Maybe you can just throw some light on the geothermal opportunity what
Yeah. Basically, the Turkish market, we were doing really good business, of late the government reduced the incentives. Now customers are trying, but that business is gone for now. Although business what our Turkish plant used to get, those business we are getting from India plant directly. Now there is a change and we are expecting a couple of orders for geothermal business, which is now looking up again. We get a couple of orders from the Turkish plant, but not how it used to be before. All those business are coming directly to the Indian plant, made in India machines.
Geothermal market is going to pick up. That's for sure. We have spoken to our customers and even if we get five, six machines a year on the geothermal side, to a large generator and surface operation, it will be pretty profitable once there's much easier to get five, six machines a year. Everything is slowly coming in and there's a bidding. The market will definitely revive. It may take some time, I'm pretty sure.
Are we
Sorry to interrupt, Ms. Agrawal. May we please request you to rejoin, please, if you have any further queries.
No problem. This is just a follow-up on the same question.
You can rejoin with you, ma'am.
Yes, I will join.
Next question is from the line of Viya Mehta from Equitas Investments. Please go ahead.
Thank you very much for the opportunity. My first question is and can you more on that and what is the scope going forward?
Sorry, could you repeat the question? It is inaudible.
You mentioned in your that you have received some orders on wind power without any partner and you were in the trial phase and so on. What is the scope there, going forward, what are the opportunities that open up for us and what will be the size, how long?
The market is an INR 1,200 crore market, and it consists of approximately something like, let's say, 500-600 motors per year. Sorry, let me start again. It's about 3,000 motors per year, sorry. We are starting with 60, which is going to be the first order that we're getting, and we can keep increasing the size of this business slowly. We'll start with 60, then maybe 100, then 200. Ultimately, the goal is to come to about 10% of the market, which is around 300 machines, which is an INR 100 crores of business, which is the goal. So 60 is a good start, and we will keep gradually increasing our size as we get confidence producing the product, both within and with our partner Abhilash. I've always mentioned, this will take a little bit of time, but 60 is a first big step.
What sort of margins do we see here, and what is?
It's a high-margin product. So key is to get to that level 2 or that level 1 qualification grade where they will get you price. People who are in that level 1 grade are DHL, Johnson Controls, and Siemens, ABB. They are the clients we would like to subscribe to. We have faced the qualification. We should get there very soon. It will take some time for us to build up the volume between the two of us. It's completely a step-by-step process, and we will get there, but we're doing it step by step and we'll keep the market informed about this.
Got it. Thank you, Sanjay. Next question is. Hello? Were you talking? Actually, I just lost the line two. Go on, Sanjay.
Yeah. I just said we are taking the decision in the board meeting to invest INR 120 crores in third plant. We will get this plant operational within, hopefully, phase 1 within the next 12 months, 12-14 months. It will start contributing towards. We'll be able to add to capacity in the second half of next year. With this full investment, we should be able to, after we finish phase 2 and phase 3, we should be able to produce around INR 1,700-1,800 crores worth of machines. We are completely. We are seeing that the order inflow and we think the demand situation is determining us to take these decisions to go ahead with the capacity.
Right. Currently you were able to produce around INR 1,300 crores worth of revenue. Incrementally, the INR 100 crores capacity would have somewhere around INR 500 crores of incremental revenue on a full-year basis.
Yeah, we think around INR 400 crores. We have 163.5. Approximately around INR 1,700 crores or so.
Awesome. Also on the domestic orders, where do you see the orders grow mainly coming from?
Praveen?
Yeah. Yes. Mainly the commercial sector is steel and then distilleries. The agricultural agro products and chemicals and fertilizers. We got some very big orders from the agro company in northern part of India, and these are big orders for the steel segment. The distillery segment is also booming where we are getting good business, but all the small compared to the steel segment. These are the segments which are really booming currently in Indian market.
Got it. Thank you so much.
Thank you.
Next question is from the line of Raj from SiMPL. Please go ahead.
Yeah. Am I audible? Hello?
Yes, please go ahead.
Yeah. Just had one query. On the nuclear business, if we can just get some update.
We have one order for a nuclear motor, a nuclear power plant motor, which we have to deliver October or November this year. There are a number of new tenders coming up. We don't have anything to report other than this. It takes, all these things take a little bit of time. Everything in the nuclear is slow. Nothing moves fast over there. There are new tenders. There are big requirements. We have nothing to report in this quarter.
Okay. In terms of qualification, the whole certification afterward process, we have already qualified all the.
We qualified, that's why we got the order. We need to deliver the first motor into operation by November this year. Once we deliver that motor, I think we are open to business with that company for more projects.
Okay. Is the focus only on domestic market or even export is an area where you will be looking at?
Domestic.
Okay, fine. Wish you good luck. Thank you.
Thank you. Ladies and gentlemen, this was the last question for the day. I would now like to hand the conference over to the management for any closing comments.
Sorry, there was a follow-up question which was required, right? There was a lady who was first. There was a follow-up question with that. Is that going to be taken right now?
I think she's not asking the question. We got that question from Ms. Neha Agrawal. Please go ahead.
Yeah. Neha, would you like to have the follow-up question? Yeah.
Yes. Thank you so much for the opportunity. Just wanted on Turkey, when you said that it could be revival. As of now, on a planned basis standalone, are they making losses in that segment or will they be given support?
Basically, we are making profit, but there is an exchange translation loss. Abhilash can simply explain what happened in the last quarter on the educational data and why we show the-
Sure.
-translation loss.
Okay, sir. There is an operational profit from Turkey because of lira depreciation from four to three, that is almost 24% depreciation. All the reserves have got restated at the current value. This has resulted in an INR 1.5 crore of exchange loss.
Understood. That really helps. Thank you.
Thank you. Ladies and gentlemen, this was the last question for the day. I would now like to hand the conference over to the management for any closing comments.
Thank you very much for participating on this earnings call and I could answer all the questions. If you have any further queries during the day, feel free to reach out. We look forward to interacting with you in the next quarter, or we will be giving an investor conference back in between. Thank you so much.
Thank you.
Thank you.
On behalf of TD Power Systems Limited, and the host of this conference, thank you all for joining us, and you may now disconnect your lines.