Ladies and gentlemen, good day, and welcome to Triveni Turbine Limited Q2 and H1 FY 2022 Earnings Conference Call. As a reminder, all participant lines will be in 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 of 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 Q2 and H1 FY 2022 earnings conference call of Triveni Turbine Limited. We have with us today on the call Mr. Nikhil Sawhney, Vice Chairman and Managing Director, Mr. S N Prasad, President Global Sales Product, Mr. Lalit Agarwal, Chief Financial Officer, and Ms. Surabhi Chandna, Investor Relations and Value Creation. 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 emailed 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 to all of you, and welcome to the Q2 half year results earnings call for Triveni Turbine Limited. Before I get into the performance of the business, I'd like to talk about a significant event that the company underwent during the quarter, which is a settlement of its disputes with General Electric and Baker Hughes. There were multiple disputes over the last two years between the JV partners, and the parties have agreed to terminate the joint venture and fully and finally settle and resolve the disputes.
As part of the settlement agreement, TTL has acquired the entire shareholding by GE Power Netherlands BV in the equity share capital of GTL for a consideration of INR 8 crore, and thus GTL has become a wholly-owned subsidiary of TTL and is no longer a joint venture with any BH parties or GE parties. The name of the company has been changed from GE Triveni Limited to Triveni Energy Solutions Limited with effect from 21st October 2021, and TTL has received a settlement consideration of INR 208 crore, of which INR 190 crore was delivered during the second quarter, and INR 18 crore has also been received, but that is in Q3. The parties will now be free to compete with each other, and accordingly, TTL will now approach the market segment independently in all respects.
We are pleased with this resolution, which was done amicably with respect to TESL. Apart from the settlement consideration, there have been other impacts on the balance sheet of Triveni Turbine Limited due to a higher asset base than the price that was paid for consideration of the shares, which has led to an increase in reserves by about INR 27 crores, and you can see an impact of that in other comprehensive income of INR 19 crores in the reported P&L as well. On the operating side, we remain excited about the prospects of approaching the 30-100 MW segment independently. It enhances the addressable market of Triveni Turbines, which as you know, we already dominated the lower than 30 MW category.
We are excited by the fact that we will be able to approach this market segment independently with our entrepreneurial rigor and with focus of our personnel. Our technology levels and development have always contributed towards the technology of our joint venture, GTL, which will now be able to operate independently in this space. Now on the business of the entire company. We are witnessing a very strong momentum in the domestic market after a sluggish FY 2021. However, the international markets where the company operates are recovering slower than we anticipated. This is evident in our order booking where, as communicated earlier, we were able to achieve an order booking of INR 4.25 billion in the half year FY 2022, an increase of 86% year-over-year, which is almost equal to the FY 2021 order booking.
I must point out that we have been optimistic on our order booking for the last two quarters and had given this visibility to our investors at that point in time. We remain equally optimistic on the coming quarters, but I will come to that subsequently. We expect that progressively relaxation of travel restrictions in the international markets, especially in our key export domains of Southeast Asia, will enhance the contribution of international markets to our order bookings in the subsequent group quarters. As a company, we are also seeing an increase in the travel of our sales team in both the product and aftermarket division, which we expect to yield very good results in the coming quarters.
As you could already see, our CEO and ED, Mr. Arun Mote, as well as our President, Aftermarket, Sachin, are not on this call. We've always ensured that they were on this call. This is due to the fact that they are traveling internationally. S N Prasad, who's also our President International, is currently taking this call from Milan in Italy. During the quarter, revenue for the company grew by 11.4% year-over-year to INR 2.07 billion, driven by domestic sales, which grew by 58% year-over-year to INR 1.4 billion, while the export turnover declined by 31%. Q2 FY 2022 revenues were impacted by delays in some orders which were in transit and could not be recognized during the quarter. EBITDA was lower by 12.1% year-over-year at INR 477 million, and EBITDA margins, which declined by 6.2% year-over-year to 23.1%.
The decline in EBITDA margin is largely attributable to a higher domestic contribution in revenue, as well as a higher material cost due to inclusion of erstwhile GTL, now TESL, where the material cost as a percentage of sales were higher due to a fair valuation of interest in inventory. There has also been somewhat of an impact of higher commodity prices in the higher raw material prices that we have faced in this current quarter. Profit after tax grew by 612% year-over-year to INR 1.74 billion, which was significantly impacted by the exceptional gain, which is reported in the results that's in front of you.
The investments, including cash, at the end of the quarter stand at INR 7.32 billion, and as at the end of Q2 FY 2022, they are up INR 2.96 billion quarter-on-quarter, driven by this final settlement that I've already alluded to. The mix of domestic and export sales stands at 68%-32% in Q2 FY 2022, as compared to 48%-52% in Q2 FY 2021. The total consolidated outstanding order book stands at INR 8.28 billion as on the 30th of September 2021, which is higher by 14% when compared to the previous quarters, and 24% higher than the previous year.
This momentum, as I've already alluded to, will continue in Q3 and Q4 of this year, and we are optimistic of a very good starting order book in four-digit crores for the new financial year, FY 2023. The company has achieved a record order booking of INR 3.07 billion in Q2 FY 2022, which is the highest in the last several years as against INR 1.7 billion during Q2 FY 2021, an increase of 74% for both domestic and international orders contributed to this growth. The domestic order booking, as you could see, contributed more significantly, and this was higher than our expectations. During the quarter, INR 2.25 billion was the contribution towards the domestic order booking, which is higher by 81% as compared to the last year.
The domestic order booking now stands at INR 5.85 billion, up 27% on September 30th, as compared to INR 4.59 billion in the corresponding period of the previous year. The export order booking during the quarter was INR 817 million, which is higher by 56% as compared to last year, but it is short of our expectations for the quarter. Most of the orders were booked through virtual interactions. However, export sales continued to be impacted by COVID during this quarter, but we are optimistic in the coming quarters that we would have a greater participation of the international market in our order booking. On the product side, order booking improved significantly to INR 2.32 billion, which is higher by 120% when compared to the corresponding period of the previous year.
The product segment's turnover was INR 1.51 billion during the quarter, an increase of 9% over the previous year. The aftermarket segment has also registered an order booking of INR 753 million, which was higher by 6% when compared with the corresponding period of the previous year. Domestic interactions have increased as travel within the country is returning to normal, and international activity has also gained pace. The aftermarket turnover was INR 558 million, a growth of 19% over the previous year for the current quarter. The aftermarket segment contributed 27% of the total revenue in FY 2022, in Q2 FY 2022, up from 25% in the previous year. We expect good order booking in the aftermarket segment as well in both Q3 and Q4, as well as then good growth for the entire financial year.
In Q2 FY 2022, the domestic market under 30 MW is estimated to have increased by 98% year-over-year, while the international market has largely remained flat for us in megawatt terms. The company continues to focus on design and development and technology. We believe that this has been the mainstay of the company by which it has been able to achieve its market dominance as well as low cost position. We will continue to spend money on organic research and development, both in, within the company as well as with our partners and educational institutions, to enhance the value proposition that we bring to our clients for a better, efficient, and more cost reliable solution.
These will also include further developments in the API segment, which we'll continue to invest into from a technological perspective, but also and further investments into decarbonized solutions such as supercritical carbon dioxide. This investment will continue for the foreseeable future, and we believe that we would look at certain opportunities to acquire technologies as well, which may be able to provide us the visibility as a company to enhance revenues in the years to come. So far in H1 FY 2022, we've witnessed a heightened investment activity in many end user industries such as sugar, distilleries, food processing, chemicals, pharmaceuticals, paper, steel, cement, et cetera. With the threat of COVID-19 subsiding across the country and with vaccinations reaching the milestone 1 billion mark, we believe that we will witness improved growth trends in the quarters to come.
Our international market is significantly skewed towards the renewable side of the business, which is not so much in India. We believe in the coming years, we will find an increased participation of areas such as municipal solid waste incineration and waste to energy plants, which will capture a greater share of our inquiry and order books. Inquiries in the domestic market have increased by 40% in Q2 and 67% in the international market. We believe that this foretells a very optimistic sign for us as both markets continue to grow. Input prices have increased significantly over the past year. We've seen MS plate prices, copper, forging ingots, which are significantly based on chrome, increased by over 50%, and some even more than 70% over the past year.
There has been some pressure on margins, but the company itself is not worried because we believe that within a prudent mixture of cost rationalization as well as passing some of these costs on to customers, we will be able to weather this. There will, of course, I presume, be questions about the decline in the EBITDA levels in this current quarter. As we have talked about in the past, no one quarter should be seen for Triveni Turbines, because that is a reflection of the mix of orders that were dispatched within that quarter, as well as between different geographies of international versus domestic. We are optimistic and continue to maintain that Triveni Turbines will operate within an EBITDA margin of 23%-24% or about or maybe 25%, and we would maintain a PBT in excess of 20%-22%.
Lastly, as the company continues to maintain a high cash balance, which was increased by INR 2.96 billion in this current quarter, which is contributed significantly by an exceptional item of about INR 1.9 billion. We also had good increases in cash due to operational efficiencies as well as increased customer advances. As we go forward, the board has decided to issue a dividend for this current quarter, a 40% interim dividend and a 60% special dividend to shareholders. Given the cash in hand, the company will be looking very aggressively at areas and ways for it to diversify, but in a prudent way.
We believe and we are currently contemplating measures by which we can enhance our proximity to customers, which we had tried to do through opening international offices in the past. We believe that a more prudent method may be to acquire these customer relationships on the ground, which will impact and be part of our aftermarket business, where we would be able to be closer to our customers, get recurring revenue immediately, and be EPS accretive immediately. These are the type of principles that we would like to use in our further growth. Having said that, the board has not considered any inorganic opportunities at present, but though we believe that there may be opportunities that may arise in the coming quarters.
We of course would always maintain a return on equity and return on capital as being our primary factors by which any decisions would get made. Of course, any money that would not get spent in a prudent manner should, in our belief, get returned to shareholders over the medium term. With that, I'd like to open the floor for question and answers.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Ravi Swaminathan from Spark Capital. Please go ahead.
Thanks for taking my question, sir, and congrats on a good order inflow momentum for the second quarter of this year also. My first question is with respect to the market size for the 0-30 MW and 30-100 MW. You had mentioned about growth in that market. If you can mention the absolute size of that market, both domestic and international, clearly.
The market size for the domestic market below 30 MW is double of what it was last year. It's somewhere in the region for the first half year at 550-odd MW. International market size is a very different number because we don't have full visibility. In the domestic market, we have near full visibility of orders that come through. The international market, of course, visibility is to the extent that we have been able to garner those inquiries.
The 30-100 MW domestic market, sir, how big is it?
Globally, the 30-100 MW market is about 1.5 x the size of the below 30 MW market globally. In India, just given the size of our industry and the fact that we have a higher participation of small and medium industries, we actually have a smaller contribution of the above 30 MW segment to the entire market, which is possibly about 60% of the below 30 MW market.
Got it, sir. Usually, the largest sectors end market, end customer sectors like steel, cement, they consume more in the 30-100 MW range, right? I think in 2010, 2011, it was a pretty sizable market. Do we see that coming back? Also, there is also another question.
Yes. Yeah, that's a very good question actually. You see the different requirements from these customers, especially the large customers that you've talked about in terms of steel and cement. Within cement, the majority of demand has been coming from waste heat recovery, which is sort of greenfield or a brownfield expansion, which is in the smaller megawatt category. There have been not as many inquiries and orders that have been placed for greenfield capacity expansion, which may be of a higher capacity size. We believe that those will come about, and we are optimistic on that. On the steel front, you have large integrated steel mills which will be in the hundreds of megawatts in terms of power requirements.
You have smaller rolling mills and scrap and sponge iron mills which have requirements within our range, as well as stretching into the 30- 40 MW odd category. We as a company have the products and solutions which can adequately cater to all of these markets. We have actually seen good demand from the steel segment, both in the below 30 MW as well as above 30 MW segments, especially from East India, our eastern markets. We see actually fixed capital formation across the line. You know, very frankly, you follow the markets yourself, and you know that the distillery segment has a huge CapEx movement underway. The pharmaceutical and chemical sector has a good CapEx requirement underway. Paper has good CapEx underway. You have steel and cement, which have different varieties of capital expenditure underway.
We see a large degree of capital expenditure from our perspective in all our end user markets. Specifically on the renewable waste to energy segment and solid municipal waste incineration segment, there has been not that much of a pickup. This has always been consistent in demand in India, but we believe in the coming quarters and years, as the government pushes more towards the Swachh Bharat, that we will find municipal solid waste incineration and waste to energy picking up, much like we've seen in the international markets. We would all look with a certain degree of optimism with these COP26 discussions, which will probably provide some degree of visibility in terms of government policy on matters like this.
Got it, sir. My second question is with respect to the joint venture, given the fact that it is largely behind now. What kind of renewed efforts are we putting on the 30-100 MW range in terms of product range, marketing, across different geographies? I mean, outside India market, are we looking at gaining market share in this category now? If you can touch upon what Triveni is trying to do new in the 30-100 MW range now.
Yeah. You bring up, well. As you pointed out initially, we do have a very good order book. We have a very healthy order book going forward, and we're very optimistic on growing that order book also. From its current base of INR 828 crore. The 30-100 MW segment has always had technology development from our side, which we've done over the last seven-eight years. We've had products which have an installed base already, and we have running, ready and running references in this segment. So we are hitting the ground running. You bring up a point which we find that we have to invest in, which is manpower. Manpower from the marketing side, manpower from technical side, manpower from execution and diversification.
This is an area where that we will be investing in significantly going forward. To answer your question on reach of the 30-100 MW segment, we will ensure that in the coming year that we will have greater visibility. I have our President, Sales on the line as well. Prasad, if I could ask you to shed some light as to how exactly we will be getting greater degree of inquiries from this segment, which can then translate into orders.
In coming to 30-100 MW range, as our Nikhil Sawhney mentioned that, yes, our reach is now from 30 MW, our inquiry base is coming from over 110 countries today. In the similar way, 30-100 MW range, now we'll be using the same approach, same go-to-market strategy, same channel partners who were earlier, they were not dealing with the 30-100 MW range. Today, once this became a 100% subsidiary company of Triveni, the channel partner arrangement will be the same. We are quite optimistic the visibility of the market will substantially increase for us and our competitive advantage in our after-market support. These are the two things internationally people value for that. With these unique selling points, we'll be able to address the market requirements with a competitive product. We are very bullish on that.
Got it, sir. Thanks. Thanks a lot.
Thank you. Before we take the next question, a reminder to the participants, please limit your questions to three per participant. For any follow-up, may we request you to rejoin the queue. The next question is from the line of Ankit Babel from Shubhkam Ventures. Please go ahead.
Sir, good afternoon. My first question is on the scalability of your API business. Now, correct me if I'm wrong, we heard last time that the inquiry level was as high as 1,000 machines. Your company level current production overall it was around 110-120 machines, and your capacity is 220 machines. Even if you get a 5%-10% share from this inquiry level, you can actually double your revenue. Just wanted to understand how are things going in that area, and what kind of scalability you are seeing, say, in the couple of years from this segment?
Well, let me answer that question in slightly different way, because you see number of machines may be the capacity constraint that we have in terms of testing, but not all machines that we make need to be tested in the same way that we run for our larger machines. The typical size of machine that we sell into the market, and non-API, would be in the range of between 8-12 MW. That's the average size. The average size of API turbine is about 1 MW. That's the average size. These are significantly smaller, significantly lighter, significantly machines which can be done in a different production methodology. We have the capacity in place. There may be some incremental CapEx that we need to do.
Like you pointed out, of the market size of about 1000 MW machines that we have visibility on, Triveni has already garnered good orders from this segment, and we continue to believe that we will get good market share in this segment going forward. Our value proposition of having a cost effective machine, which is both reliable and robust for these API customers, is something that is quite consistent with what they desire. Prasad, would you like to add on this question on API?
Yes. As we're actually discussing, API is one of the key segments for us. As we mentioned in earlier calls also, today Triveni has been approved by all the international consultants and the EPCs and OEMs. The inquiry pipeline is quite strong. As our Vice Chairman mentioned that this segment of the business is a different page because these are all sub-1 MW or 1 MW average size of the machine. Since our acceptability there globally is coming years, this segment will be one of the key growing segment for us.
Sir, last time it was also mentioned that, you know, the value per machine in the API segment is higher than the existing machines. I'm slightly confused that like, from value terms, like how much would be a 12 MW compared to, I mean, a 12 MW normal machine which you are manufacturing as of now and a 1 MW API in value terms? Would it be like 1/12 the size?
In general, these all steam turbines are customized and engineered to order. There is no reference pricing for one turbine for one price because there are too many variables that go in there in terms of customer requirements. Is it extraction? Is it condensing? Is it back pressure? What is the temperature and pressure requirements that may be required by the customer, and as well as special requirements from the balance of plant, et cetera. What you find is, in general, as the megawatt comes lower, the price per megawatt is higher. This is just basic absorption of overhead as well as other factors of how the market operates.
In the API segment, given the strong push on reliability and safety, these prices are even higher given certain specific specifications such as SS316 piping, et cetera, et cetera, as well as documentation that goes along in this segment. It's not going to be 1/12, but it's not going to be one to one also. It's difficult to say. It depends from customer to customer. I would encourage you not to look at the fact that the per megawatt per machine would give the same revenue as the higher megawatt.
The profitability would be same, right? As compared, I mean, in the API segment.
Well, the profitability is higher. You are very right about that. It's very difficult to generalize because you're talking, you're asking about number of machines versus megawatts versus profit per. It will be higher. Therefore, it's better for us to just talk about the fact that that's why we reflect our order books in crores, and I think that is a better way for you to measure it as well.
Okay. My second question, sir, is the scalability of this 30-100 MW range business. Now, so far we had the GE brand, which now we won't be having it. How soon and you know we can scale this business, and what are your plans for, say, a couple of years down the line? I guess currently it is doing some INR 150-odd crore of business at the peak level.
Well, I mean, to the extent that the numbers have been disclosed in the past, that we find. The joint venture has always, in my personal opinion, underperformed its market potential. The products were marketed jointly under the GE and Triveni brand. Like I said, technology of both partners was used in applications and installations. We have running references on our technology. They have running references of their technology. So as far as the customer is concerned, we do have the viable and validated technologies available. From a perspective of market reach, as Prasad pointed out, we will be using the same market reach channels that we use for the below 30 MW segment.
I believe at least, and in the market segment from 30 to 40 to 50, maybe 60 MW even, this will be quite consistent. In the 80, 90, 100 MW segment, it might be slightly different. Let's come to that. We will also discover what are the challenges on the way. We believe that this is a very vast opportunity for us, especially in the international market, and we will look at it in a very conscious manner with dedicated personnel and with dedicated resources to take that forward.
Sir, any outlook in terms of scalability, like can you go to like INR 200 crore, INR 300 crore, INR 400 crore in, say, couple of years? Because we have no clue about the scalability of this.
Oh, yeah, of course. I mean, the fact is that our anticipation is that we would get from a negligible market share right now. We would only increase from there. Very frankly, we believe that I think let me get back to you in the next couple of quarters on what the level would be exactly. I believe that it should play a significant role in our revenue going forward and possibly equate our product revenue in a couple of years.
The potential is 20% plus kind of operating margins in this business also. Once you reach a you know, sustainable scale.
Product margins in general are dependent on geography. The aftermarket segment is what actually contributes significantly towards the overall revenue, the overall EBITDA of the company. The fact that we don't have such a large installed base in the 30-100 MW category will limit that. But having said that we anticipate good growth. For the future, once we have the installed base, we will be able to service these customers for the next 25-30 years, and therefore garner what is somewhere in the extent of 85% or 90% of the lifecycle value of a customer which comes from the aftermarket.
Okay. Sir, lastly, sir, just to conclude, I mean, last few years we have been in that INR 700 crore-INR 800 crore range of revenue and, you know, profitability also at similar levels. Now, the kind of outlook which you are giving and the opportunity size which you are looking at, is it fair to assume that now Triveni is entering into a multi-year high growth phase from here on?
I would say so, because we have a number of avenues for growth. One is the 30-100 MW segment, which we'll be entering independently, where we already have reference bases, and we will try to build a greater order book in that segment, which will build up over the course of the years. We have the API segment, which we've already talked about in terms of growth. We have an increased push in the below 30 MW segment on renewables, which we would think would add to growth, coupled with general fixed capital formation globally, which would aid. The most important from a margin perspective is our aftermarket. We will be pursuing that market very aggressively for growth in not only existing installed base for spares and service, but on the refurbishment side.
We wish to spend money on this side because it has extremely good return on capital and return on investment. We anticipate all four organic routes for growth to perform well. We of course will be investing into diversification and product new product lines such as supercritical carbon dioxide, as well as certain other areas of rotating equipment which should also aid growth. We are positioning ourselves for growth in the future. We think we have the capacity necessary. We will need to add on capability, and that is where we're positioned at right now.
Great, sir. Thank you so much.
Thank you very much.
Thank you. Next question is from the line of Bhavin Vithlani from SBI Mutual Fund. Please go ahead.
Thank you for the opportunity. A few questions. First, the litigation that we had with our JV partner, GE, is now all done and dusted, no further pending litigations?
No pending litigations, as we've said.
Thank you.
All pending litigations with our JV partner is over. We have some other litigations on income tax, et cetera, which are routine and ongoing.
Sure. Thanks. The second question is on the larger sized turbines, as you kind of highlighted. This is also in respect to some of the global competitors of yours pledging not to sell turbines when it comes to coal-based power plants. Is there any area where now Triveni could get an edge? Because in the past cycle, these orders went to your MNC counterpart.
You know, Bhavin, I think you bring up an interesting point because largely the large competitors of ours who have stated this, that they would not be selling for coal use. I think they've been talking about the utility range of turbines. The distinction between a utility range and industrial range, and in which Triveni operates in this 0-100 MW space, is that we provide not only power but also heat as a requirement for our industry. As you know, generating heat for industry through a renewable source is extremely inefficient and extremely cost uncompetitive.
You have to have on-site generation. To the extent that on-site generation uses renewable fuels, that's great. It works towards the decarbonization model that we're all expecting and all are working towards. To the extent that it has carbonaceous material, then that is what it does take. Competitively, I don't think these companies have stopped offering these turbines for the industrial space.
Yeah. Sure. Fair enough.
We still see them in the market for the industrial space. But having said that, while we said in the past that we've seen the utility range, which is above 100 MW, decline by over 80%-85% over the last seven-10 years. The market for below 100 MW, both below 30 MW and 30-100 MW, have grown at about 2%-5% annually over the last seven-10 years. There is consistent demand. There's higher capacity requirements that are coming up from industry and as well as coupled with the genuine renewable energy based independent power production requirement.
Could you also speak about oil and gas, especially in India, because that's a sector where, I mean, you were practically absent in the last upcycle. We are seeing a number of refinery additions, and they will also set up captive power plants. This is not just the drive turbines, but the captive power turbines. Have you also been qualified by the likes of EIL for the CPPs, and what's the kind of business momentum we are seeing in that space?
Yes, we're qualified by EIL, by PDIL, and by other consultants. Largely, like you said, apart from the API drive market, which may be driven by compressors or pumps or blowers, et cetera, there's a need for captive power production within refineries. Refineries largely tend to use gas turbines for the refineries requirement of power production, but auxiliary requirements such as waste heat recovery and other steam requirements do come from steam turbines. I'll let Prasad comment on the domestic market. Prasad, if you could just comment on the oil and gas captive power requirement.
Yes, sir. Yes. Oil and gas captive power requirement, yes. As you rightly mentioned that there is upswing there, and we have been approved by EIL, PAL for even captive power plants that is generating alternator drives. Right now, all the inquiries whatever we are having, yes, we are eligible to participate in those things. But as our Nikhil mentioned that there's a limited traction in this because the main plant will be gas-based, the gas turbine based, this sort of a thing, with auxiliary plants or the alternator driven plants. We are there in that market. We'll be participating in all these new inquiries, whatever it is, by IOCLs, BPCLs, all these sort of things. Yes.
Sure. Just a follow-up here. Are these potentials like in INR 100 crore or a couple of 100 crore each project?
No. No, I think, I mean, it depends what scope you're looking at. For us, no.
Oh, sure. Yeah, thank you so much.
That's it. Yeah. Thank you.
Thank you. Before we take the next question, a reminder to the participants, please limit your questions to two per participant. Should you have any follow-up, may we request you to rejoin the queue. The next question is from the line of Kunal Sheth from B&K Securities. Please go ahead.
Good afternoon.
Mr. Kunal, your line is in talk mode. Kindly go ahead with your question, please. As there is no response from the current participant, we move to the next question from the line of Ashutosh from Ocean Dial. Please go ahead.
Hello.
Yes. Good afternoon.
Yeah. Hi, hi. Congrats on a very good set of order inflows and decent numbers in general. I just wanted to understand, I mean, you also alluded to the fact that you would be expecting a decent set of order inflows last quarter as well, and this quarter as well, you have done very well. Just wanted to understand how much of this is a very sustained base from a demand side perspective. How significantly do you see the demand for your products changing from, let's say, something like last two, three years? As some of the other participant also mentioned, we have been in the range of around INR 700 crore of top line. How significant do you see that run rate changing order inflow and the growth for us in, let's say, next two to three years?
The revenue for Triveni Turbines is directly related to the order booking. Let's just focus on order booking to that extent. Apart from the aftermarket segment, which is under a very short cycle of order booking. The aftermarket itself has grown to now nearly 27% of revenue, and that is performing exceedingly well, and we expect that to continue growing by about 20% a year, 15, 20% a year. On the order booking side, our optimism stretches multi-quarter. While in this past quarter we were surprised by the greater participation of the domestic market. I'd actually anticipated the international market would've contributed more. We believe that the next couple of quarters will have the international market contributing.
As I had alluded, that should provide visibility very easily for FY 2023 in terms of the high growth that we want to maintain. Following that, we believe the market segments that we talked about, which is an increased participation in the 30-100 MW space, which actually has an order delivery cycle of about 14-16 months. You must keep that in mind. The API, which has an order delivery cycle of four-six months, I think, as well as other applications will continue to aid our growth in order booking. We're quite optimistic that we'll be able to grow at a decent pace in the coming years.
Do you think this is kind of the base run rate which we are looking at right now, around INR 300 crore kind of run rate?
No, I think this is somewhat on the higher side. This is record. Well, I think about 200-250 is something that's quite visible for the next. Well, no, 250+ is visible for the next couple of quarters. Maybe more. It's a little more.
Yeah. Fair enough. Thanks a lot for the clarification.
Thank you. The next question is from the line of Kunal Sheth from B&K Securities. Please go ahead.
Hello. Thank you for the opportunity. Am I audible, sir?
Yes, you are.
Yeah. Hi. My first question was relating to the margins. We did make a comment that, you know, the margins were impacted because of the higher contribution of domestic, you know, in the current quarter. I was just wondering, you know, is that the trend in terms of are domestic generally a lower margin business? Because one would have assumed, given that, you know, domestic you have a large market share, the margin profile would be relatively better than an international market.
No. It's the domestic market, I think not for us, but for all capital goods manufacturers is the lowest, you know, compared to international for a variety of reasons. The competitive intensity in India is much higher, and so that drives a lower profitability margin. Also the ability for us to transfer and therefore then transfer any price increases in the domestic market are more limited also. Having said that, we also run a program whereby we like to maintain a market share and by that at times you have to take lower margin orders.
Okay. Does that really mean that you know the competitive intensity in domestic market has increased? Because you know in India you know you were the dominant player and then there were you know hardly one or two other players. Have new players come up recently?
No. I think the predominant competition between Siemens and us, and we have a healthy competition. As you would estimate the fact is that even though domestic margins may be lower from a global perspective, and I think even domestic perspective, getting margins on the capital good itself is an achievement because nearly 85%-90% of the value of a customer from a profitability perspective comes in the aftermarket. Really getting that installed base is a very important factor for us because that gives visibility of earnings for a much longer perspective. Having said that, there is some movement right now in terms of a huge fluctuation on input pricing.
We have taken and recreated our costs to current prices, and we are not anticipating any price reductions going forward in terms of raw materials. Therefore, this is where it turned out in terms of how we priced and how we positioned ourselves in the market domestically.
Sure. Sir, my second question is relating to our international market. Because we have such a wide exposure in the international market, you know, what would be the best way to, you know, track, I mean, what are the variables that one should track? Because it becomes almost impossible for us to, you know, get a handle of, you know, your outlook on international markets, I mean, from an outsider perspective.
You see, what are the drivers for demand? They depend on geography. Geographies like Europe are heavily dominated by renewable energy, both from biomass-based IPPs as well as solid municipal waste incineration. A lot of these are supported by government policies, and so therefore government policies which provide some subsidy to the developer would be a good benchmark for you to judge Europe, Japan and to an extent the United States. The United States also does have fresh CapEx, much like Southeast Asia, Africa, Middle East. Middle East and parts of South America are also seeing requirement growth in API requirements from our order book perspective.
Actually very difficult to say, but I would say general fixed capital formation stability are what would lead to a visibility for you to take on our order book internationally. The competitive intensity has not changed internationally. The players are the same. In fact, we find some of the larger players leaving the market because of the pricing that I think we are bringing in. I think we're quite confident. The bigger issue that we have internationally is reach to be able to ensure that we are able to cater to every inquiry effectively.
Our investments recently in terms of being able to get specific technologies in our blades and in terms of efficiency and reliability have gone a long way in terms of meeting customer expectations internationally, which are all learning that we get over a period of time. I think we're quite well positioned going forward in the international market as well. Of course, we hope that there is no third wave, fourth wave, fifth wave of COVID, which inhibits our mode of doing business, which we are heavily reliant on travel for, to be able to get international orders.
Sure. Thank you. Thank you so much for such a detailed answer. Really appreciate it.
Thank you.
Thank you. The next question is from the line of Manish Goel from Enam Holdings. Please go ahead.
Yeah. Thank you so much. Nikhil, just want to get a sense like in 2011, 2012, we probably saw the peak market of 2,000 MW. Have we come back to that level, at least on the inquiry terms? That is the first question. Second is if you can also give us a perspective as to like, how was the market between 0-30 MW and 30-100 MW at that point of time? I was not clear as to you did mention about 30-100 MW opportunity in India, but maybe if you can repeat in terms of what is the dynamics over there.
Manish, in 2011, which was the last peak, I think that we've talked about a number of times, we saw the entire market of 0-100 MW at about 4,300-4,400 MW of orders placed, which is split somewhere in the region of about 1,800-2,000 MW below 30 MW, and the rest above 30 MW. Of course, at that point in time, that was significantly driven by fixed capital formation in industries such as cement and steel. As we sit today, in the first half year, we've had orders in the below 30 MW range of about 550-odd MW, and we anticipate the year to end somewhere in the region of about 1,100-1,200 MW.
We still have growth from a potential perspective of people who remember the growth spurt in that period of time. In the 30-100 MW segment, India has, we've expanded our capacities of industry in general. People who are ordering the 20- 25 MW turbines will now order 35- 40 MW turbines. We anticipate the fact that even though the market size may have been over 2,000 MW back in 2011, it's currently somewhere in the region of about 400-odd MW on the half year and maybe 800-odd MW for the full year. This is an area which will grow, in our opinion, quite significantly going forward.
Sorry, you mentioned 400 MW was the market in first half of the current year.
Half year for above 30-100 MW.
Okay. Globally, so
Globally, the market size of 30- 100 is about 1.5 x what it is in India. To give you an idea, like I alluded to earlier, the inquiry levels from domestically in the second quarter increased by 40% and internationally increased by 67%. 67% because there wasn't as much finalization as we anticipated. The inquiry levels as a whole for the half year increased on a year-on-year basis from about 2.3 GW to about 3.5 GW. The domestic part of that was from about 900-odd MW to about 1.5 GW. There's been good growth.
Sorry, can you repeat the domestic one?
I think you know, now you're gonna get me into trouble because everyone seems to keep asking for these numbers every time, which I've been really hesitant to do. Suffice to say that the domestic inquiry level contributes about a third to 40%, a third of our entire inquiry book.
Sure, make a note. Thank you. [audio distortion]
Thank you. The next question is from the line of Nilesh Jethani from Envision Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. My question was on the capacity utilization levels and thereafter margins. I wanted to understand at present what is our capacity utilization levels? Second part of the question is, so going forward, once the operating leverage kicks in because of the strong ordering flows in the recent past, will this operating leverage help us to more than offset the impact of commodity prices, or you expect margins to remain stable going forward?
Like I said, well, they're two separate questions actually that you asked, was on the capacity utilization space, over the period of time and if you looked at our balance sheet, we operate on a very asset-light model. We've consciously moved further into a more asset-light model by encouraging only graduates on our shop floor who will be multi-disciplined and be able to do multitasking. We want to move more into manufacture of only IT sensitive and critical value-added products and largely stick on the assembly testing space.
For growth in the capacity that may be required for our order book going forward, we'd have to use a prudent mix of vendors and a variety of other means by which to achieve our production levels. We're cognizant of it, and we've planned on it. There may be a little bit of investment, INR 5 crore, INR 7 crore, INR 10 crore here and there, but I think that we. Capacity is really not the constraint for Triveni turbines. The second question was what?
Capacity utilization today currently would be at what levels?
You know, it's difficult to say because like I said, a majority of our capacity is measured on assembly and testing. With that, you have to base it on the theoretical number of shifts that we may run, which may be three. The fact that we're running possibly one plus shift right now means that we have ample capacity. It's not fair to say that we're at 30%-40% capacity utilization, but it's not fair to say that we're at 70%-80% capacity utilization also.
Got it. This incremental order inflows won't help to add too much operating leverage.
Yeah. There will be some overhead absorption, especially from the fact that higher revenue will. We have fixed overheads in terms of R&D and marketing, and those are the more expensive overheads that we have. Higher revenue always does give us operating leverage, and something that we will benefit from.
Got it. On the margins front, going ahead, as we largely do the short cycle products, this operating leverage of course won't help to aid the margins. Will the margins improve going ahead?
Margins are a reflection of where the product order is from. This is something that, you know, it's difficult to explain why there's such a sharp difference between domestic orders margins and international orders. Having said that, we believe that we have factored in price increases into our pricing at the current point in time. We're not. We don't want to pass full prices into our customers, and so there may be a margin impact on the negative side for the domestic market in the coming quarters.
Overall, given the fact that it'll be higher participation of the international market in revenue, as well as the fact that we will have good revenue from our aftermarket, margins should be somewhat the same. I think right now, what would be a greater focus for us is to expand revenue. I think that was the question earlier. Actually, we're quite confident that we'll be able to maintain, at least maintain margins, if not slightly better than.
Got it. On the exports front, sir, are we also facing some freight related issues, the cost going up? Going forward, next six-nine months, how we envisage? Because, of course, exports are a higher margin business for us, but with the freight cost going up, will we be able to get that kind of margins as enjoyed in the past?
No, freight is. We generally have freight as actual. The customer usually takes the freight cost into his consideration. We would freight to the extent that our supplies are impacted would impact us, but it's largely passed through. Containerized costs have gone up, but most of our containerized prices have gone up because of non-availability of containers. A lot of our supply goes with skids. It's not containerized. Some parts are containerized, of course. It's not fully a matter for Triveni Turbines to be worried about. Having said that, our clients are also cognizant of it, and we cost in all prices at the point in time of order.
We don't really take open risk much like we do for currency hedging, et cetera. We don't think it's our business to risk all these fluctuations in market. At the time that the order is taken, we try to mitigate that risk immediately. The customer bears it.
One last question, sir. I guess it was asked initially also, but this sharp jump in the order inflow, so what percentage you would attribute it to the volume growth, and what percentage would be value growth?
Oh, no, it's pretty much all value. Put number of orders growth.
Sorry, I missed it.
It's pretty much all of it is volume growth.
Okay. Okay. Got it. Okay, sir, those were my questions. Thank you so much and all the best for the rest of part of the year.
Thank you very much.
Thank you. A reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is a follow-up from the line of Ankit Babel from Shubhkam Ventures. Please go ahead.
[audio distortion] Hello.
Yes, yes, please.
Yeah. Sir, just wanted to check any execution challenges you might face in your existing order book in that 30-100 MW range, you know, in the company which you acquired because at the point of placing order, GE was a partner and lot many customers would have placed an order because of GE and now GE is not there. So any, I mean, complaints or anything from the customer side?
Well, firstly.
How are you addressing that?
Yes. Firstly, the joint venture, the way that it was operated was that all manufacturing was done by Triveni Turbines itself, and marketing was done by respective partners. GE, Baker Hughes did it internationally. Triveni Turbines did it for India. Technology was contributed by both partners. Given the fact that we have acquired that company, the executing resources are now part of Triveni Turbines from a project management perspective. Of course, the manufacturing was always with Triveni Turbines. The nature of the settlement, which was amicable, has also specifically catered to this worry of yours, which is that all support will be given by both partners and whatever technology is required for executing the current order book, which may be on their technology, would still continue.
A number of orders that the company is still executing or has executed in the very near past have been to Baker Hughes and GE as related parties, and so they continue to support us because it is in their best interest as well. I think that very frankly, we have all the resources necessary. The customer communication that is necessary has also been. We've ensured that we keep the customers and the customer satisfaction in mind in terms of execution.
Okay. Sir, my second question is, how you arrived at the valuation of this, you know, buying the stake, 50% stake at just INR 8 crore? I mean, the-
That's the book value.
company into a profit.
Yes, that's the face value of the shares.
No, I agree. You know, from, I mean, a company which was making a profit of, say, INR 7 crores-INR 8 crores-INR 9 crores, valuing that at INR 16 crores. What was the basis of that?
Well, I wouldn't need to go into those details, but it was a comprehensive settlement. All the numbers were combined into, so it's better for you to look at it as one whole net settlement number rather than differentiated settlement numbers.
Okay. This INR 200+ crore also which you get was because of some, I mean, some losses which you could have incurred or the, I mean, again, the INR 200 crore.
Yeah, this number was just a settlement of dispute. It's a question for us to put what the issues that we had behind us and move forward. We have a lot of things to do from Triveni Turbines perspective, where we're very excited to be approaching this 30-100 MW segment independently and with the vigor and entrepreneurialism that we have shown in the below 30 MW segment. We have other growth avenues that we need to spend time on. We have a lot of technological investments and interventions that we're making. We also have good money in the bank, which we need to find prudent uses for. We didn't want these disputes to take up so much of our time, you know. It's better for us to move on, and I'm sure our shareholders would agree with that as well.
True. True, sir. Yeah, great, sir. Thanks. Thanks for the explanation.
Thank you very much. Thank you everyone for joining. Are there any more questions, or should we wrap up now?
No questions, sir. Over to you for closing comments.
Thank you very much. Thank you very much, ladies and gentlemen, for joining the call. As I said, we're very optimistic on the future for Triveni Turbines. The order booking in the next couple of quarters, we anticipate to be quite robust. As to lead to a very good and a record order booking starting FY 2023, which should of course then lead to an increased and enhanced revenue along our expectations. We will continue to keep you informed on decisions on utilization of cash which the board may make. We look forward to being in touch with you. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Triveni Turbine Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.