Ladies and gentlemen, good day, and welcome to Q1 FY 2023 Earnings Conference Call of Triveni Turbine Limited. 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. Rishab Barar from CDR India. Thank you, and over to you, sir.
Thank you. Good day, everyone, and a warm welcome to all of you participating in the Q1 FY 2023 Earnings Conference Call of Triveni Turbine Limited. We have with us today on the call Mr. Nikhil Sawhney, Vice Chairman and Managing Director, Mr. Arun Mote, Executive Director, Mr. S.N. Prasad, President Global Sales Product, Mr. Sachin Parab, President Global Sales Aftermarket, Ms. Surabhi Chandna, Investor Relations and Value Creation, along with other members of the senior management team. Before we begin, I would like to mention that some statements made in today's discussion may be forward-looking in nature, and a statement to this effect has been included in the invite, which was mailed to everybody earlier. I would also like to emphasize that while this call is open to all invitees, it may not be broadcasted or reproduced in any form or manner.
We will start this call with opening remarks from the management, following which we will have an interactive question and answer session. I now request Mr. Nikhil Sawhney to share some perspectives with you with regard to the operations and outlook for the business. Over to you, sir.
Thank you very much, Rishab. A very good afternoon, ladies and gentlemen, and my apologies for starting this call a little bit late. We had some technical issues. I'm very pleased to report the results for your company, Triveni Turbine, for the first quarter FY 2023. We've started the year off in a very positive note. I'm happy to report that we have had another high in our order booking for a single quarter at INR 3.6 billion. This is also coupled with a very strong closing order book, as well as a performance in terms of an all-time high EBITDA as well as revenue. It places us very well for the growth that we forecast for this current year, but also forecasts for what we believe to be the growth in the next year as well.
Some of the highlights on a consolidated basis, the revenue from operations in the first quarter of FY 2023 stood at INR 2.59 billion, which is an increase of 40.7%. The EBITDA for the quarter was at INR 561 million, which is up by 35.8% with a margin of 21.7%. The profit before tax was at INR 508 million in the first quarter, which is an increase of 39.1% with flattish margins of 19.6%. The PAT for the quarter was at INR 383 million, an increase of 737.8%.
We also had the highest ever quarterly order booking of INR 3.6 billion during the first quarter, and a record outstanding carry-forward order book on the thirtieth of June of INR 10.7 billion. Coming to some of the financial metrics, during the quarter under review, revenue from operations grew by 41% as compared to the previous year, with the domestic sales showing an increase of 32% to INR 1.6 billion, while the export turnover increased by 59% to INR 966 million, reflecting both the post-pandemic macro recovery in the domestic as well as international markets, and the company's success in its international orders as well.
As a result, the mix of the domestic and export sales changed to 63% domestic and 37% export in Q1 FY 2023 as compared to 67% domestic and 33% export in Q1 FY 2022. The EBITDA increased by 36% to INR 561 million as against INR 413 million in the previous financial year of the same quarter. EBIT, while EBITDA margins declined by 70 basis points to 21.7% as against 22.4% in the previous quarter of the last financial year. The decline in EBITDA margins in the first quarter over the last year is largely attributable to higher raw material costs.
As you can see, our operating leverage, our change in product mix, and our forecasted change in product mix in the quarters to come lead us to believe that we do not have a margin problem, and we will maintain our PBT for the full year as well as our future years at above 20%. The profit after tax for this quarter grew at 38%, as I've already stated. Order booking, which is a record high for this current quarter, was stood at INR 3.6 billion as opposed to INR 2.7 billion in the first quarter of FY 2022, which is an increase of 31%. The domestic order booking during the quarter grew by 26%, while the export order booking grew by 44%.
I'm happy to share that in a short span of time of our augmenting our capacity in the South African Development Community region with our acquisition of TSE Engineering Pty. Ltd. in the last quarter. The company has bagged a significant services contract for large steam turbines in this region, which is for utility turbines.
We've accounted for this for INR 190 million in this quarter. We believe the size of this contract is far larger at approximately over INR 1 billion. This is a new area for us to enter, where we are going to be looking at expanding our servicing reach, which allows us to cater to the servicing and O&M requirements of large customers, but also allows us then to further sell on other parts and services which could be at much higher margins.
While this was not forecast in our budget, we believe that though this may be a slightly lower margin business from aftermarket perspective, this will not impact our overall margins of the company, and in fact, would give us greater impetus for future growth, not only in the current region, but by expanding this service offering to other parts of the world. We continue to see growth in our other markets of API Turbines as well as the entire range of 0 to 100 megawatts steam turbines. This, coupled with our increased focus on the aftermarket, leads us to believe that the coming quarters will continue to see growth in order booking. We are confident that by the end of this financial year that we will have a substantially higher order booking than we did starting in FY 2023.
The inquiry generation this quarter in the international side grew by 22% as further confidence in our opening up of export markets, especially in Southeast Asia as well as some parts of North America and South America. On outlook perspective, we believe that our capacity expansions, which we had started in the last quarter of the financial year and the quarter before that, would be complete by September of this year, and our augmented capacity would be sufficient to cater to the demand that our order book is creating. We believe that our expanded capacity of about 200-250 turbines per annum will be sufficient for us in the short to medium term.
This coupled with our supply chain initiatives do not lead us to believe that execution would be a worry. The pandemic has expanded and opened up different markets for us, and as you can tell from the recent war in Ukraine, that energy markets are at an all-time high, which is leading to confidence for power generation, both in upstream and downstream oil and gas markets. This, coupled with our historical push on the renewable energy markets, leads us to have increased confidence for sustaining demand throughout this current year, but also stemming into FY 2024.
The company continues to invest in technologies at the higher end of the spectrum, which not only allow us to improve our efficiency and operating conditions so that we can provide a better value proposition to our customers, but we also do longer term R&D initiatives, as I've spoken to you about in the previous quarters, such as our initiatives in both supercritical as well as transcritical carbon dioxide, which has a variety of different applications. We would be working to speed up the piloting and commercialization of these technologies in the near future. The company has a healthy treasury management system, and we have expanded the cash in our books to approximately INR 853 crores. Ladies and gentlemen, with that, I'd like to open the floor up for questions.
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 your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Anyone who would like to ask a question, please press star and one at this time. Ladies and gentlemen, we will wait for a moment for the question queue. The first question is from the line of Ravi Swaminathan from Spark Capital. Please go ahead.
Hi, sir. Congratulations on a very good set of numbers. My first question.
Sorry to interrupt you, Mr. Swaminathan. Your audio is not very clear. Requesting to perform on the handset mode.
Is it better now? I can hear you, Ravi. Thank you. Yes.
Yeah. Sir, congratulations on a very good set of numbers. My first question is with respect to the domestic demand environment. We have seen a reasonably good growth in the order flow in the domestic market. Can you throw more color on, say, what is the nature of these orders? From which sector it is coming in? Which fuel source from which it is coming in? And the sustainability of that kind of momentum over the next 12-18 months.
Before I get in, Mr. S.N. Prasad, who is our Global President for Products, I have to tell you that, Ravi, we are seeing a very robust ordering environment, both in the domestic as well as export market. Given our high market share, we play in every different market segment. As you know, from quarter to quarter it changes. We continue to see robust demand in the domestic market from the distillery segment, from other renewable based projects such as paper recycling, as well as some projects in the municipal solid waste as well. We think that the demand for waste heat recovery is there. It did not contribute significantly in this current quarter, but we believe that it will continue in the coming quarters.
Let me get Prasad in right now. Can you give some color to Ravi on the domestic market?
Yes. Yeah, our domestic market, especially distillery segment is one of the key segments for us, and the process cogeneration. These are the two segments which are leading the show. As far as the Q1 booking, as well as inquiry pipeline, where it is coming. Followed by steel and cement. These are the two segments. Even in process cogeneration, when we are seeing, it is pharmaceuticals major segment, followed by food processing and pulp and paper. That way, domestic spread is quite well spread in process cogeneration covering all the industry segments.
Got it. Got it.
I have to tell you that we see this demand sustaining. We're seeing a growth in the overall market. This is being led on a MW basis as well as on an absolute rupee basis also.
Okay. Any sense on what would be the domestic market size? Will it be 1,000 megawatts or probably even more than that?
No, you know, we'll come to the domestic market by the end of the year. The fact is that it has grown quite substantially in Q1 over Q1 of the last year also. Last year had some difficulties in terms of the pandemic, so it's not appropriate to compare. There has been a substantial growth in the market. I have to say that in general, we are still away from the highs and peaks that we have seen in the market of 2007, 2011, which were the last two peaks that we saw in the ordering cycle in the domestic market.
Got it, sir. With respect to the 30-100 MW range, basically have we started seeing orders there? Basically, is there any order sitting in the current order inflow from the 30-100 MW range, or we, or are we still in the process of getting and gaining traction? How is the traction there?
As you would imagine, Ravi, the orders in the 30-100 MW segment, because they're larger value, they've been more lumpy in terms of how they contributed to our order book. They have not been part of our Q1 order book. Having already well into Q2, we can say that we have good success already in that market segment. This is in the international market, and this will be from areas where our historical strength lies, which is in the renewable, thermal renewable segment.
Okay, sir. So, can we expect some order over the next two to three quarters, say by the end of this financial year?
Yeah. We will. Like I said, we're already in Q2 and we're already seeing success. Yeah, we look for more success in the quarters after that.
Okay, sir. Got it. With respect to South Africa, the AMC orders, basically you had mentioned about the profit margins being slightly on the lower side. Is it relative to the regular after-sales margins that generally we get? And is it above the company level, overall company level margins, or should we look at it as a below company level margin? If you can give some reference, it'll be great.
You know, as you would imagine that, parts is a much more lucrative segment. When we look at aftermarket, that is disproportionate in its contribution towards margin. When we look at servicing as it is, it's on a slightly lower end. When we go to the lower end of servicing, such as O&M, it is a slightly lower margin than that. Having said that, this is not a constraint when we look at our entire overall portfolio. We would be maintaining the overall margins as a company. I think that is what. What is more encouraging about this is that this opens up a very vast revenue field for us and much, much more rapid revenue growth.
The possibilities for us to leverage our capabilities of handling large utility turbines can be leveraged in many parts of the world. We believe that we're adequately poised to capture this market. I'd like Sachin Parab, who's our President, Global Aftermarket, to just comment a little bit about where this can go. Sachin? Okay.
Suffice to say, Ravi, that once we are with the customer, we think that we would be able to, given our quality systems and the fact that we have an increased use of digital tools in terms of being able to assess the current status and life of turbines, that we would be able to push an upgradation cycle, which could then be quite lucrative for us from the parts business. We could also leverage the credentials and capabilities of having run large utility turbines in the domestic as well as other Southeast Asian and North American markets. We believe that this opens up an entirely new revenue stream for us.
Regardless of that, we are seeing enormous growth in our order booking, which will translate to a sustained 35%+ revenue growth for the next couple of years.
Got it, sir. Thanks a lot.
Thank you. The next question from the line of Ahmed Madha , Unifi Capital. Please go ahead.
Thank you for the opportunity. I just wanted to understand the margin bit. There is some decline in the gross margin considering the increase in the raw material prices. Now, post the correction, do you see any upside in the margins from the current base?
You know, what is important I think to remember is that we operate in a duopolistic market domestically and an oligopolistic market internationally. So margins, and then when we work with our customers, we like to work with our customers for the life cycle of their product, which is 25+ years. While we have the ability to increase prices and we have the ability to expand margins, we believe that it's more important to take our customers along with us.
When you see our margin profile of the first quarter with a higher raw material as a percentage of sales at nearly 57%, firstly, we believe that when we look at our own supply chain base and that is not something that will come down over the coming quarters, both because the product mix will change increasingly towards export as well as in a higher degree of aftermarket. Secondly, we would also absorb a lot of the raw material prices, and there has been a reversion in raw material prices also. We see the longer-term contracts that we have would then get revised downwards. Secondly is to what extent will that lead to margin expansion versus us transferring that to our customers?
I think that we are happy and sufficient with having margins at least at 20%. We would be upset when margins go below that. Our attempt would be always to maintain margins at a higher level than that. When I mean margins, I'm talking about PBT. We may have possibilities to expand margins and they may go up, and they should in terms of the fact that we have a better revenue mix and declining commodity prices as well as higher aftermarket sales. I maybe a roundabout answer, but I think we do have confidence, but I wouldn't like you to project that.
Got it. No issues. Another question on what previous participant was asking about the large turbine, more than 30 MW. What is the percentage share of that segment in the current closing order book? Is it negligible?
No, it's actually upwards of 10% of the current order book, and we believe that it will increase in the coming quarters.
Did we recognize any revenue from that large turbines in the Q1 quarter?
Yes, we did.
Okay. Can you tell me what percentage, broad range?
I don't think that's necessary to go into details like that, please.
Fine. No issue. Thank you so much.
Thank you.
Thank you. The next question is the line of Ankit Babel from Subhkam Ventures. Please go ahead.
Good afternoon, sir. Two questions from my side. First is historically you have mentioned that you know in your segment there are no big inorganic opportunities. I mean big in the sense from ticket size point of view. Technology wise as you mentioned that we don't. Hello?
Yes. Yes, I'm right here.
Yeah. Technology wise, you said that you people are among the best, so though you don't need that. Just wanted to understand the reason for increasing the cash balance in the balance sheet and not paying it as a dividend. Because one more thing which you mentioned was that you'll take care of the capital allocation policy and the return ratios of the company. If you have no other options for the cash, you will distribute it.
You bring up a very good point, but I think that, as you look at our annual report, I'm sure you may have got our annual report by now already. You'd see from our annual report that a lot of the cash pile that we have is driven by a negative working capital, as well as high customer advances. These are technically liabilities that we do have to fulfill at some point in time. Now, if you take the fact that we are operationally efficient as a, as an operation, and exclude that from our cash pile, I think we are well positioned right now. Also, while I may have talked about expansion capital pile, the dividend of course currently which we had announced in, at the end of the financial year, FY 2022, has not been paid.
It will be paid only after the AGM, and so therefore the cash pile will decline post payment of that dividend. Suffice to say, your point is well understood that what will we be doing with our cash pile. I think that we think at this point in time it's really not a problem for us, that we are constraining either our return metrics or our or that we are being not complying with our dividend payout ratios, et cetera. I think that we will continue to maintain payouts to our shareholders.
At this point in time, given the fact that what our customer advances are, given the fact that we do have liabilities attached to that, we think that we are sufficiently poised in our cash balance.
I believe you people will maintain this negative working capital kind of a, you know, scenario going forward also. Every time you will have, cash flows.
That's what I meant. We try just to be prudent. It's not for any other reason.
Okay.
When we believe that it becomes a problem, then we will take appropriate action. Of course, this is something that is subject to the board's decision.
Okay. Okay, my second question was that, you know, on, you know, there is a big overhang of the supply from Triveni Engineering. I mean, the stock sale which you people had announced. You know, so just wanted to understand, can you expedite that process of, you know, selling so that there is no overhang on the stock price?
You know, you bring up a point which is not in my control or in the control of Triveni Turbine. This is Triveni Engineering selling, but I will pass the message on. I think that you bring up a point that I may not have been aware of, which is this overhang. Okay, I'll understand a little bit more from you as to what you mean by this, or I'll ask our investor relations manager to be in touch with you.
Okay. That's it from my side. Thank you so much.
Thank you.
Thank you. The next question is on the line of Mihir Manohar from Carnelian Asset Management. Please go ahead.
Hi. Just one quick, yeah. Check out the list of my question.
Sorry to interrupt you, Mr. Manohar. Your voice is breaking up.
Yes. Dr.
You're audible, but your voice is breaking. If you can move to a better reception area, maybe, we can hear you better.
Okay.
No, it can't hear you.
No, sir, it is not clear. I would request you to please check your phone line and rejoin us, please. In the meanwhile, we'll move to the next question, which is from the line of Himanshu Upadhyay from O3 Asset Management. Please go ahead.
Good afternoon. See, I had a question on API Turbines, okay? Hello. Am I audible?
Yes, absolutely.
Hello.
Go ahead. You are audible.
Hello.
Sir, you are audible. Please go ahead.
Yeah. My question was on API Turbine. You had entered that business two or three years back. What needs to happen that business becomes quite large? Let's say, where are we stuck and what is the CapEx happening in on that part of the industry, which is refinery and fertilizers and petrochemicals? Is CapEx happening, and what more do we need to do get a bigger share of that business? Okay.
No, you see, you pick up a very good point, which is, the fact that we have not historically had, any large contribution to our order book from the API market segment. As we see our product development and, our approach to market in terms of qualification in this segment, it has opened up a very large market for us. How is API Turbine catered to this? Very frankly, these turbines become a little bit more standard, so they're actually easier to make, from our perspective. And so it's less customized to the extent that we had with our regular power generating market, so it is easier to execute. They're smaller in size and capacity, so the
From an execution perspective, it's really not an issue, and we've catered to that through our expansions in terms of capacity. Now, the execution is not a capacity constraint. The issue would be more in terms of winning orders where we think we have an adequately priced solution for this market, both at a higher efficiency level, so as to provide better economics to the customer, but also benchmark versus our competition. When we see that the market is opening up quite considerably for us, we are quite hopeful that this market will contribute meaningfully for us in terms of growth. It will never replace the growth that we are seeing from the overall renewable energy market in the short term.
Okay. I take your point, but just the first thing in new product or in oil and gas space is getting product approval. That product approval we have cleared across all the continents, okay? From all the engineering companies or designers. Now, to win the orders, that is where we are working on. What type of CapEx are we seeing in that side of the business in
No, no. We are seeing extremely large CapEx in this market. This, we're seeing both from the domestic market, which is not only from downstream, but also upstream oil and gas, the domestic market, but increasingly so from the fertilizer segment. We also see very large investments internationally coming from a variety of different large utilities, be it from shale gas all the way up. There is a lot of CapEx happening in this market.
One thing. Which is our domestic market, okay, in India. See, who would you be competing with? Is there local manufacturers or the product is completely imported, the turbines, smaller turbines? Can you just give some idea?
You're right. This is an import substitution market.
Okay. One more thing. In government contracts, okay, there was this thing that below a certain price point, domestic manufacturers should be given a preference, okay? Many of the fertilizer and petrochemical companies and refineries are government companies. Do we get any preference in those businesses or there is just no preference in the ticket size where you are operating in API grade this turbines?
You know, I'm almost certain. I don't know if S.N. Prasad is back online. Are you there, S.N. Prasad? Can you answer this question as to whether we see any price preference for this market with domestic PSUs in the oil and gas segment?
Yes. Yes, correct. Yes. There is no price preference for our domestic suppliers as of now. Even our competitors who are offering, they also produce these, they also manufacture the turbine in India. Even if PSUs comes with any price preference, so that will be equal to both the parties. We are not looking forward to that. We'll be competing based on the technology merits and delivery mechanism.
No, see, earlier when it was stated that API oil and gas were import substitute, okay? When it was stated that it is import substitute, that's why this second question came.
Yes. This is. Yes, you are right for some cases. In some cases, there is a local players, our competitors, they also have some manufacturing facility. Even right now, there is no even those cases wherever the imports happening, so there is no subsidy for the domestic manufacturers as of now for this rotating equipment of turbines.
What percentage of products would be import substitute? Means, let's say a number of turbines which are used or
What percentages of these?
You know, I think as we get into this market, we'd have more information and we'll get that out to you. I think the fact is that the market is quite large, and as we are seeing, approvals from the OEMs, we see this contributing to our inquiry book substantially and will eventually form a part of our order booking in a meaningful manner going forward. As you rightly point out, that we do see demand coming from a variety of different segments, and this is just one segment.
Okay. The earlier when we entered this business, the thought was this can be a pretty large market, okay? That thought remains the same, okay? Or, the probability of this business also becoming very large is high. It may take time, but yeah, we remain confident, now also as we were earlier when we entered the business.
No, you're very right. We are confident about this business line.
Okay. Thank you for my time.
Thank you very much.
Mm-hmm.
Thank you. The next question is from the line of Tushar from Kamakhya Wealth Management. Please go ahead.
Uh,
Yes.
Tushar, your line has been unmuted. Please go ahead with your question.
Yeah. Welcome, sir. Congratulations for great set of numbers. Sir, I have a couple of questions. My first question is on the CapEx. In the last call, you said, like, you'll be investing INR 35-40 crore, expanding the facility to 200-250 turbine. So is fair to assume that considering your asset turnover of 2-3, we can get incremental revenue of INR 100-120 crore?
The asset turn may be more, but Arun, I think, can you give some visibility as to how much capacity utilization you may see of the facility and when may it be ready?
Yes. As you know, we are building one more bay in our new Sompura Facility. We already have the most of the CapEx done, and it will be complete in Q2. We'll be able to capitalize all the capital expenditure, which is required for expansion. The capacity will be flexible. It will be somewhere between 250 numbers to 350 numbers, depending on how much outsourcing we are able to do and what our subcontractors can do, because that would also determine the capacity. In whatever CapEx we have indicated to you in a previous meeting, we are not exceeding that. We are continuing with it. We expect that, by Q3 mid, even our subcontractors' expansions will be complete and will be fully operational. It would definitely mean an.
I mean additional revenue in the current year, which we have already planned for, and in the coming years also. This capacity, what we are building, is likely to be sufficient for a couple of years for us. There is not expected any main capital expenditure for this. Does it answer your question?
Sir, actually the incremental revenue I was trying to get some color on.
Look, the main thing is that I think what Arun is saying, and what I think we've said in our previous calls, is that we're not a capacity constrained company, and the fact that our capital employed may be used for capacity expansion, but our supply chain initiatives in terms of actually having a vast degree of outsourcing also does add amply to our capacity. Very frankly, if you look at what is a greater indication of our asset turns and ratios like that would be by just looking at our revenue growth, which would be the commitment that we have to fulfill the orders that are part of our order booking.
The fact that we are seeing 35%+ growth in the next couple of years can give you an indication of whatever turns you want to see in our assets.
Fair enough, sir. Sir, my second question would be, do we see the top line growing like?
Rajesh
The product is, you know, it's customized for your different clients. Any idea on, in coming two to three years, on the top line?
Yeah, I think I alluded to this already. I think that we are quite confident of our growth for the next couple of years in terms of both, being reflected tangibly by the order booking that we have. This current year's revenue is pretty much locked in the bag. We have all the products that we need to do anything, including our book-to-bill, gives us sufficient visibility towards our growth for this current financial year. Aftermarket, which will contribute all the way up to Q3, is also well planned and well forecasted. The inquiry book that we have also seems to suggest that the growth that Raj talked about would continue into FY 2024.
Our inquiry book also does suggest that our FY 2024 order booking should be quite robust, given the expansion in the markets that we already spoke about, which is above 30 megawatts as well as API, as well as a continued focus on fixed capital formation in the below 30 megawatt segment. We're quite confident. Thank you.
Fair enough. Thank you, sir.
Thank you. The next question is from the line of Mihir Manohar from Carnelian Asset Management. Please go ahead.
Hi. Thanks for giving me the opportunity. Congratulations on a good set of numbers. I mean, you did allude to some line on FY 2024 also. I just wanted to get an understanding. I mean, you know, this demand environment that we are seeing, what is the longevity of that? My second question was on the margin profile. I mean, is the 0-30 MW.
All 30 MW are the margin profile?
No, the margin profiles don't change substantially with the capacity of turbines. It depends on competitive intensity, but more than that is the specifications. The higher the specifications, the higher the margins. There are certain historical markets which give you lower margins. There are certain markets which give you higher margins. As you would imagine, markets where customers are concerned more on price give you lower margins, and markets where customers are concerned more about efficiency and robustness and other features which are important to the industrial process, those give you higher margins. This is consistent through the entire range. We don't see margins changing specifically.
For example, the API segment, which has much more focus on health and safety and other constraints on in terms of fire, et cetera, is a much higher margin business. Aftermarket, as you know, is a higher margin business for us as a entirety, but you have the entire spectrum within it. You have servicing, which is slightly lower. You have refurbishment, which can vary in terms of the scope and parts, which is a very high margin business. In all, when we calculate our growth and we look at the margin profile of the company going forward, and like I stressed a couple of times, we don't see margins as being a problem for us. We aim and are confident of maintaining a PBT margin in excess of 20%.
Sure, sure. The longevity of this growth that we are currently seeing?
Yeah. When, you know, there are certain markets which are new to us, where we have expanded the market in which we operate. One is that, our direct focus in the 30-100 MW segment, which is a market which is approximately on a global basis, 1.5 times the size of the market below 30 megawatts, seems to suggest and already are the successes that we've had, that we will have a good growth in this market, which should sustain our visibility as well as then order booking. Similarly, in the API market where we have low market share right now, as we see going forward, that we should aim to get a better market share as we increase our presence and increase our reference bases with customers.
That coupled with the fact that, in our aftermarket space as well, we see a greater presence on the ground with our customers, which should aid in getting more revenue. We think that, the order booking trajectory can be sustained for several years.
Okay.
Thank you.
Thank you.
The next question is from the line of Payal Shah from Progressive Share Brokers. Please go ahead.
Hello.
Yes.
Yeah. Hi, good afternoon, sir. I have a couple of questions, like, so these are basically a few of the extracts from the annual report. The first one being, how do you see the market in Germany in terms of, Waste-to-Energy Steam Turbine Generators that are already commissioned there?
No, I wouldn't like to speak specifically about any particular market, if that's fine. In general, Europe has a great focus on incineration of municipal solid waste. This is being driven by a variety of different impetuses. One is that regulation is not allowing for dumping of municipal waste into municipal dumps because of leachate and other carcinogens that are created in groundwater. Also, given the fact that dumps lead to emission of methane. Therefore, the fact that a municipal solid waste incineration plant would generate carbon dioxide as opposed to methane, it is deemed as clean.
Therefore, it is, it comes under the subject of the certain CDM benefits and therefore both local as well as country specific grants. We see this as a very large segment. Of course, Europe is a leader in the environmental sense, and decarbonization has taken the lead in it. We believe that the economics of this will be true globally.
The second one being, could you highlight more on these newly developed sub-3 MW products that cater to demand for your PRDS in terms of market size or growth opportunities?
Yeah. I'd like, Arun, can you speak a little bit more about this segment, which is part of our annual report?
Yeah. These are the turbines, which are standard turbines, and these are made and stocked and sold. These are not against the orders. We are developing market. This is something which will go through not only our sales force, but also through a distributor network. That's how it's coming. We are building the market. We should be able to give you more size of the market in the coming years because this is something which is developing, and we see positive increase in the inquiries in almost each quarter.
In terms of the aftermarket business making its foray into new industrial segments such as your geothermal and your compressors. Do you see any scale up in the contribution to this division along with the order wins that has come in this quarter from SADC?
Yeah. My colleague, Sachin would answer, but I would like to tell you that we have very positive references on geothermal market, not only in almost all industrial areas, which is in Southeast Asia and also in the-
Australian, New Zealand, Australian continent. Sachin, please.
In terms of the geothermal market, we have good traction, and we are seeing continued inquiries in this segment. Our efforts in the geothermal segment are paying off. Mote has mentioned about some of the geographies, and in all these geographies we are seeing consistent business and repeat inquiries. Thank you.
Okay. Have you seen any inquiries for the current quarter for this division?
Yes, very much.
I think let's not get into specific segments for inquiries and auto booking. Suffice to say that on a year-on-year basis, our penetration to this market has improved. We're seeing not only greater visibility on an inquiry basis, but also as part of our order booking.
Okay. One last thing, sir. In last conference call, you had mentioned that you had to reduce the order book of about INR 400 million on account of the Ukraine invasion. I understand you had even mentioned that the percentage contribution is not very large. Are these orders near execution or some part of it has already seen?
No, they're on hold.
The entire is on hold?
Yes. I think that to be fair, we don't see this coming back into the order book very soon. We will look to divert whatever that is part of our inventory. Arun, can you comment?
Yeah. These orders were at different levels of execution. Some in engineering, some where the raw material has been bought. They are successfully getting diverted. We don't see any major impact of this CapEx orders which are on hold, which we expect eventually to get canceled. We won't be affected in our operations at all in this.
Okay. Okay. Thank you so much.
Thank you. The next question from the line of Abhilash Hiran, an individual investor. Please go ahead.
Hello, am I audible?
Yes, you are. Thank you.
Yes, sir. Sir, so I just, can you quantitatively express the cost benefit for a company who's putting up a steam turbine versus alternative competitive products?
You see, there's a variety of different applications in the steel industry. One is power generation that they need for their own operations, and the second is capturing heat as part of from their furnace, et cetera. Now, capturing heat as part of this from their furnace is. I don't think there exists alternative technologies apart from a boiler steam basis at this current point in time. Well, of course, our solution of supercritical carbon dioxide. My apologies about that. I did say at the beginning that we were experiencing some technical difficulties, so I apologize again.
Like I said, the first application of waste heat recovery doesn't seem to have any alternate solutions. While for a steel industry in specific which doesn't use steam as part of the process, their power generation requirements could be fed through other means, be it from the grid or variety of different sources. Generally, because of the remoteness of steel plants, they do end up generating on site also because they do end up importing coke for their current furnaces. If each of the furnace moves to a hydrogen-based, the fact is it would still emit heat, and so therefore we would still need a technology like the steam turbine to capture that heat. I don't know if that answers your question.
No, sir. Could you just like, what my question basically was that, if I'm using a steam turbine versus say a DG set, or any other alternative forms of generating electricity, then what would be the per unit benefit of using a steam turbine, you know, just across various industries? In the last call you had said that you'll come up with some white paper for this, which gives us a better understanding. From that perspective, you could just share some broad numbers of the benefit of using a steam turbine.
Okay. I can give this to you because I know this from the sugar industry where you have a cost of the gas somewhere in the region of about, let's say INR 800 a tonne. The typical cost of generation of power without counting the cost of heat, because you're using steam as part of the process as well, you have a cost somewhere in the region of between INR 1.50-INR 1.80. Now, if you include a margin on the heat transfer as well, you could probably get that cost down to maybe INR 1-INR 1.10. But of course, all of this is dependent on your cost of fuel. I think you can calculate a variety of different ways.
Suffice to say, if there is a heating requirement as part of the industrial process, which would be there in industries such as chemicals, petrochemicals, agro, food, paper, sugar, rubber, textiles, et cetera, it always makes sense for you to generate on site.
Okay. For heat. Yes, sir. Sorry.
Yeah. Because your thermal efficiency is much higher.
Okay. Sir, at what scale does it make sense? Like, the industry has to reach a certain threshold or for them to install a steam turbine, from an economic standpoint?
Actually the thing is it may be. It's basically when you're a continuous process industry that it makes sense. The size and capacity would change depending on the size and capacity of the industry and its requirement. As long as it's continuous, then it makes sense for you to go into this. If it's a discontinuous or a batch process, et cetera, then it probably doesn't make sense for you to have a steam turbine, because for you to get it operating, it does take some time, and it's not the best solution.
Coming to the waste heat recovery, could you give us a sense on what is the penetration levels in for waste heat recovery in steel and cement?
Yeah. Prasad, can you give an idea as to what is the penetration?
Yes, sir. Yes. See, especially when it comes to cement industry, now majority of the cement industries are trying to tap the waste heat. Our penetration today as on today based on our statistics, almost 30% of the steel, cement industry, they have gone for waste heat recovery options, and some projects are in the pipeline. Still we feel that around 70% potential there of that. When it comes to steel industry, almost like a sponge iron kiln. 100% of the sponge iron kiln when they're installing itself, they go for a waste heat recovery option. As the new sponge iron and pig iron plants are coming, there will be opportunity for that.
Whereas in cement, whatever the installed base, running cement plant, there is 70% of the cement plant yet to tap this potential.
Sir, what would be that number for steel? You said 70% for cement, and what would be,
Uh.
The number for steel?
No, no. Steel, as they install the plant, parallelly they go with this, Waste Heat Recovery Tapping. Because the-
Okay.
Waste heat, whatever gets out of those kilns, that is a huge waste heat. They get the permissions only once, they show this, tapping of this waste heat and converting into the power.
Okay. Currently whatever steel capacity, they all have installed the waste heat recovery. Is that the correct understanding?
This sponge iron. Yeah, especially sponge iron and pig iron plants. That is the segment. Otherwise integrated steel plant, yes, everybody installed capturing this waste heat.
Okay, sir. In the annual report, under the inventory section, you have mentioned that the cost of inventory which has expensed out is around INR 54 crores. Can you explain what is it exactly?
Lalit, you're on the line. If you could just explain what this means exactly.
This INR 54 crore is nothing but the change in inventory which has happened during the year. The overall inventory has reduced by INR 54 crore during the year.
Exactly. My question was.
Arun Mote, I think you can give a better idea as to the operating, what has led to this has been a more efficient manufacture through our modular systems. That we actually had better procurement of inventory and we had better turnover of inventory.
Yes. We could manage the inventory well. We utilized the old inventory, and also through standardization we could decrease the WIP, because quite a few assemblies could be used in multiple places. The number of turns on inventory also has gone up marginally. Totally, our working capital has improved substantially, and we are once again on a negative working capital with a very good number. We hope that we will continue this.
Okay. Sir, what is your domestic market share right now?
It's in excess of 50%.
Also, sir, we've seen historically the number at 60%, so why is there a fall from 60 to 50%?
We're expanding our market as we speak. We are capturing newer markets and newer market segments. There is some competitive intensity in the market as well. I think a lot of these factors are going in. Our focus is also more on the export market. The reason that we like to maintain a majority market share is so that we are able to maintain our cost structures. That has been our real impetus rather than actually capturing more market share in India, because India is, as you know, not a lucrative market for us. It's not what drives our profitability.
Right. Okay. Sir, one last question was, so what will be our export market share?
You know, we don't have full visibility into the export market, so the fact is that's a very difficult question to answer. What we do like to look at and as a benchmark for our success in the export market is the growth of our inquiry book. The reason I say that is getting an inquiry in a sophisticated space like a steam turbine is allowing the customer to view your offer. He's ready to accept you. That is a very big win for us. Our conversion from inquiry book when they do come up is high. I wouldn't like to share that number, but we do see good conversion for our inquiry book to our order booking. Sorry?
Yes, sir. You were saying.
No, I don't. No, yeah. I think that we are increasing our penetration to the global market on an annual basis. Actually it's happening on a quarterly basis. Now that we're selling above 30 megawatts as well internationally and having good penetration in that market, you will see this number increase.
Finally, could you explain a bit on this Supercritical CO2 Turbine that you are working on? What is the progress? Where are we reached?
How is it globally panning out?
No, like I said, this is a project that we first have to pilot, and then we'll have to commercialize it. Part of it is in development, part of it is in engineering, part of the entire train is in. We have confidence in terms of the supply chain and manufacturers. Some we have to develop. It's a little way away in terms of couple of years, but we think the solution both on paper as well as its testing is something that we're working aggressively on with our partners in Ministry of Science and Technology as well as at other academic institutions. We're optimistic that this can provide a much better economics to our customers.
Of course, we have done some other work that we're doing on the transcritical side, which could show quicker results from piloting. As and when that happens, we'd be happy to let you know. I think let it first get into some commercial, some degree of piloting before we give you more data on how it's performing.
Right. This type of turbine is nowhere in application in the world currently, right?
No, we have heard of Siemens launching this with a company that they own called Echogen in somewhere in Canada. I think that Mitsubishi has also done some development on this line. I don't know how well it's commercialized yet. But very frankly, what we feel that Triveni Turbine developments in this space are being done at the same pace and at the same level that is being done by our global peers. It's also a confidence in the fact that this technology will have more people promoting it. That's also positive. We understand our cost structure, and our cost structure is good. Ultimately, it's a question of market development.
Thank you. I would request, Sanjayan to rejoin the queue for follow-up questions. The next question is from the line of Amit Mahawar from Edelweiss. Please go ahead.
Good morning.
Amit Mahajan, please go ahead with your question. The line is open.
Yeah. Hi, Nikhil. Hi, Nikhil. Can you hear me?
Yes, I can.
Hi. Congratulations on great set of numbers and the large service win in export market. I have two quick questions. First is on the hiring plan for what is the current you know strength for after-sales sales force out of India, and how should it ramp up in the next maybe one to two years? Second question is on breakup of API Turbine servicing globally. How large is the market, and what percentage of total 30-100 MW market is basically after-sales for API Turbines? Thank you.
No, no. API Turbines are all small. They're pretty much below 5 megawatts. Firstly, that's
Okay. Okay.
You do have API power generation market. Those are much more lumpy, and those are for power generation, not for drive. Nothing is driven at such a high megawatt capacity. On the recruitment, as you know, in the last financial year, we added nearly 10% increase to our workforce. Plans in this financial year are quite aggressive as well. From the aftermarket in specific, as you talked about, I wouldn't like to give you a number of our service engineers and how many we're adding because it's a little sensitive. Suffice to say, our strategy is to be closer to our customers. To that extent, what's more important is for us to have a greater degree of aftermarket personnel internationally.
Sachin, can you provide Amit some clarity, some insights into how you're seeing your recruitment?
Yes. We will be definitely increasing our field force. We have been doing that consistently. We don't just depend on our own engineers. We also have a network of trained service personnel in different markets that we have developed over the years, and these complement our own field force. There's a lot of supervision done by Triveni personnel themselves, and we are continuously looking at increasing our strength of our field force and services.
Sure. Can I have, yeah, one more question? What is the current mapped market in India only on, you know, refinery-like cogen, maybe ethanol or otherwise? What is the current market mapping that we have for the India total opportunity, maybe two to three years, total pipeline?
In the distilleries market, Prasad, can you give an insight as to how many distilleries you have in your inquiry book?
Yeah. Today from the inquiry book-wise, total permission of a distillery is over 400 distilleries got the licenses. Otherwise, today active inquiry book is closer to around 40 distilleries in our inquiry pipeline from domestic market.
Thank you. Good luck.
Thank you very much.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Thank you very much, ladies and gentlemen, for participating in our Q1 FY 2023 conference call. I apologize for our technical glitches. We will try to remedy them for our next call. Thank you. Goodbye.
Thank you. On behalf of Triveni Turbine Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.