Q4 20/21

Jun 29, 2021

Quarterly report

Ladies and gentlemen, good day and welcome to Trivini Turbine Limited Q4 FY 'twenty one Earnings Conference Call. As a reminder, all participant lines will be in a listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Rishabharar of CGR India. Thank you. And over to you, sir. Thank you. Good day, everyone, and a warm welcome to all of you participating In the Q4 and FY 'twenty one conference call for Trivaney Turbine Limited, we have with us today on this call Mr. Nikhil Soni, Vice Chairman and Managing Director Mr. Arun Mote, Executive Director Mr. Suri Chanuna, 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 Maybe 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 invite Mr. Nikhil Sawhney to share some perspective with you with regards to the operation And outlook for the business. Over to you, sir. Thank you very much, Jussard. Very good afternoon to everyone. And I trust everyone is well and everyone has had their vaccinations or is in the process of getting their vaccinations. To start off with, at Sibanye Turbines, we have vaccinated over 1700 of our employees and employee dependents, contractors and contract workers and by July end, we expect that we will have 100% reclamation of all our staff and employees And typical notice. The offices are operating in full swing, though which work with home protocols as well. And our factories are operating at 100%. Having said that, our subcontractors are currently operating in the region between 50% to 60% given certain mobility issues with workers. All of this will be addressed and I will touch upon this later during my introductory remarks. The turnover for Q4 for 3 heavy turbine for the financial year FY 'twenty one has increased by 16%. However, EBITDA and PAT has increased 44% and 78%, respectively, as of Q4 FY 'twenty. The turnover in the financial year is at INR 702 crores, A year on year decline of 14%. The decline in product sales is at 19.2%. However, there is a growth 24% and in FY 'twenty one that stood at INR 168 crores. The PAT percentage FY 'twenty one, it's similar to that of FY 'twenty at 14.9 percent despite an extraordinary charge of INR 18.5 crores On account of certain employee to date VRF expenditures as well as a lower share of profit from the joint venture. The employee cost is also significantly lower For this year, by 15.9 percent at INR85 crores, investments have increased INR347 crores against INR147 crores, that is an addition of INR 200 crores in investments in this year. And this is reflective of our strong cash management And earnings visibility. There's been a significant reduction in our working capital as well due to lower trade receivables by 38%, And it stands at INR77 crores as opposed to an earlier figure in excess of INR120 crores. Inventory is also lower at INR160 crores. Now on the year itself, ladies and gentlemen, this is an extremely difficult year And all of you, I'm sure, have had COVID and this pandemic impact you in some manner or the other. The company's performance has been satisfactory given the backdrop of the restrictions in both the domestic and international markets And the emergence of variance that has led to the second wave on the domestic front. During the year, the global market For steam turbines in the range of below 30 megawatts in which we participate has shrunk by 32% and the domestic market Has shrunk by 43% in the calendar FY 'twenty in megawatt terms. However, despite The company has maintained its leadership position in both the Indian market and internationally. We have attached an international report and the findings of that, which tells you about our leadership position in this space globally. The mix of domestic and export sales has remained more or less at similar levels at 54% domestic and 46% export in FY 'twenty one. And in line with outlook last quarter, the company was able to reduce and decline reduce the decline in revenue and profits FY 'twenty one to 14% compared to 21% in the 9 months FY 'twenty one. The improvement in EBITDA margins for the financial year has been driven by a combination of higher share of aftermarket Sales mix but also on account of the lower raw material cost and value engineering. Further, there will also be significant reduction in employee expenses due to the realization BRF benefits and the reduction of manpower, these are sustainable benefits and the quarterly EBITDA margin of 16.8% does not reflect the longer term EBITDA margin levels for the company. For the quarter itself, As you could tell, the raw material percentage at 54% as opposed to the annual figure of 51% was driven by a skewed product Dispatch into the domestic market, which carries a lower margin, but also by higher other administrative expenditures, which are nonrecurring in nature And we believe do not reflect the longer term earnings potential of the company. There has also been a significant reduction in manufacturing costs And we are due to an increased effort on value engineering as well as streamlining our manufacturing process to look at more standardized The measures of manufacturing. Similarly, there have also been certain reductions in travel costs and other administrative expenditures, which are which will be which will come back in this color detail. The profit margin has been maintained at 14.8% And this is after the exceptional expenditure that I've already spoken about. The consolidated outstanding audited position stands at INR303.39 billion as of 31st March, which is lower by 9% as compared to the previous year. The company achieved a total order booking of RMB6.43 billion, which is lower by 19% year on year. And finally, the Board of Directors has recommended a payment of dividend of 120 percent, which is INR1.2 for the financial year FY 2020, 2021. Daeleen Daehwal, order booking is at the crux of the performance of Sravani Turbine. The product order booking that we saw for the financial year FY 'twenty one that's about INR 4.41 crores, which is the most order booking for products that we have seen in the company for the past, I would say, almost decade. This though has the visibility that we had in Q1 of FY 'twenty two sitting out right now on order booking a completely different situation. All the booking for the entire financial year on the product side that we saw in FY 'twenty one It will be something that we would be able to capture before the second half, but before H1 of FY 'twenty two. This visibility is something that I would talk a little bit more once the question and answers are opened up. But as you can tell from the performance of the company in the financial year FY 'twenty one, the aftermarket business is a steady rock for the company. That business contributes Over INR 200 crores to our order booking as well as revenue and easily about INR 100 crores in cash flow and similar amount in terms of profitability before tax. This is recurring in nature and due to the closeness of relationship that we have with the customer, it is a true testament that we've been able to capture and maintain this level of In the trying times of COVID, we've been able to reach our customers and we have been able to ensure that there is a high degree of customer So that we could have a lifetime relationship with our customers. This is extremely important as the life of our relationship with the customer for one product Stretches in its FY 'twenty five tells. Having said that, of course, we leverage that for further sales so that we can build on our product relationship as well. I will talk more about how we are growing this business and what visibility we have on the growth of our aftermarket business You're in the question and answer session as well. The factories have been operating in a normal manner, but we have seen an increase in commodity prices which have impacted the company. The company has tried to mitigate this through bulk ordering as well as value rationalization and through expanding our supplier relationships On a global basis, but certain percentage of this price increase may not be able to be passed on, but we'll have to see how that develops In the quarters to come, as it currently stands, the margins on which the company operates are stable. The company has also been focusing on its international marketing efforts. We've been considerably constrained over the course of the past year in terms of being able to address our international market. It is extremely creditable To our marketing teams to sell a high key technological product virtually, we've been able to secure significant international orders, Of course, not as many as we had gotten in previous years or as much as we would have expected. But despite that considerable international orders, Through virtual means and through means by which our customers have been able to derive confidence in our products and Processes and Technology. We think that this will lead to a new form of marketing. But having said that, Because of the disruptions of lockdowns that we've seen in various international markets over the course of last year, we have an inquiry book, It reflects that the demand is growing in many different geographies in a variety of different sectors. Therefore, we need to certain degree optimism of an expanded international sales within the current FY 'twenty two. This will also be supplemented with our expansion into different product Segments such as the API segment, which we've already spoken about in the quarters of past. The domestic order bookings for Srivani Turbines was at INR4.32 billion, which is a decline of 5% as compared to last year. And the domestic or outstanding order book stood at RMB4.49 billion, up 14%. During the year, The global market in which the company operated experienced a significant shrinkage of 32%. And in FY '21, the shrinkage in market size has moderated 2.9%. According to the restrictions, this has impacted The order bookings of the company. This is from the product side. On the aftermarket side, during FY 'twenty one, The aftermarket registered an order booking of RMB2.02 billion, which is lower by 7% when compared with the corresponding period of the 3rd year. And aftermarket turnover was RMB1.92 billion or growth of 3% over the previous year, which has been driven by our refurbishment and spares Businesses. The aftermarket contributed to 27% of total turnover in FY 'twenty one, up from about 23% in the previous year. Design and development continue to be a key focus of our business and we have expanded and continue to expand the Overhead in this segment so that we could design and reflect our products, not only in terms of our current product ranges to improve their efficiency and cost structure, but also to expand our services product range to be more solution oriented. The inquiries and evolution during FY 'twenty one and Q4 FY 'twenty one remained strong In both the domestic and international markets, which is positive for all the bookings in the coming quarters. During FY 'twenty one, the inquiry generation of the domestic market grew by 35% as compared to the financial year 'twenty, which we believe is a positive indication of order finalization in the coming quarters. These have been driven by process cogeneration and waste heat recovery segments. In the international segment, the acquired generation was dominated by thermal renewable based Independent power projects as well as process cogeneration. Global economies in many parts continue to be affected by the pandemic, Which continues to affect the company's business, but we believe that the vaccination drive and lower COVID-nineteen cases The company's prospects will significantly improve in the coming year. The inquiry pipeline is strong and international markets are gradually ensuring signs of recovery. While we continue to carry a healthy order book in the Qwadi pipeline, we do expect some delays and performance of executive orders In H1 of FY 'twenty two with respect to order booking with respect to dispatch. Order booking We'll be extremely healthy to the extent that we will have a book and bill within this current year, which we were not able to attain in FY 'twenty one. This is what led to a lower turnover and slightly lower overhead absorption in Q4 FY 'twenty one. Overall, we expect both the global market and our market share to remain the same, if not improved in the coming year. And this is going to be backed up by Technology and R and D Developments. As the company has been talking about for the last 5 years of energy transition and moving towards a low carbonized economy, The company has made significant efforts in its research and development towards establishing Solution and product pipeline to cater to the segment effectively. This is in 2 parts. 1 is through rotating equipment In the steam turbine lines, but also as we've spoken about in other areas such as concentrated solar thermal, which will lead to a better value proposition for our customers We require both heat and power solutions in an industrial context. This is a significantly large market, and we believe that we are Optimally positioned to leverage it. The other thing that we will be working on over the course of the next quarter is to Dream's increased visibility to our shareholders is a more articulated capital allocation policy. As the company now has Over 400 odd crores in this bank. We believe that a prudent capital allocation policy, Which imbibes the values of Soudini Turbine as being a high return and high return on equity company should be maintained. We will be articulating this in more detail in the coming quarters, but it will provide a visibility In terms of how we aim to grow and it will be closely linked with our research and development, our organic growth opportunities and possible diversifications. With that, I'd like to introduce you to our new Investor Relations Manager, Sylvie has joined us recently. She's had an experience with Morgan Stanley as well as with some other public companies. And she would be happy to have a long term Mutually, mutual dialogue on the company so that we can both benefit from the engagement. So Bhi, would you like to say a few words? Sure. Thanks, Mitra, for the introduction. It is my absolute pleasure to be part of the Griveli Group, and I look forward to interacting with investors and analysts community. For anyone wanting in touch, my co ordinates are mentioned in the Investor Brief from yesterday and also listed on our website. Thanks, Vinay. And if we are done, then we can pass it on back to the moderator to start the Q and A session. Thank you very much. Yes, let's start the question, Ankit. Sure. We will now begin the question and answer session. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Ravi Swaminathan from Spark Capital. Please go ahead. Hi, sir. My first question is with respect to export order inflow. So I mean, Over the past couple of years, it has seen a declining trend. Is it attributable purely because of the COVID restrictions which are there? Or is it Which are there? Or is it you had in your press release, you had mentioned that global steam turbine market has kind of come up over the past 3 to 4 years. This is a combination of the reason because of that also and our customers moving away from coal based Skin turbine solution. So you can give a broad outlook as to when we can go back to FY 'nineteen levels of inflows, Thanks, Ravi. So let me answer this in a couple of ways. We've tried to provide data That there is a macro trend of decarbonization and that is something that I'm sure if you are, it's extremely conversant with. The different segments of markets which we've As in below 30 megawatts, below 100 megawatts and then above 100 megawatts are impacted by different situations. The decarbonization Has there been any impact in all these different segments? So the utility segment has been really disastrous in terms of the amount of new thermal power plants that are coming up. But the requirement from the industrial side is slightly distinct because we require both heat and power, which cannot be substituted From renewable energy sources. So the demand is following a CapEx cycle rather than the decarbonization stream. Having said that, this market exists within the larger formal market. And so there will always be Pools and pushes and strings, which where banks have funding, which are funding commitments and objectives, which are driven around decarbonization. But having said that, efficiency based solutions are the name of the game and those are the ones that are being implemented In the international market as well as in India. But when we look at the international market, and this is reflected in our order booking as well An inquiry book, it is dominated by waste to energy, which is thermal renewable as well as Process code innovation. Process code innovation is a requirement from a variety of different sectors. So we actually see from the Danish side in this coming current year The fact that for the FY 'twenty one, we were not able to cater to a majority of the market Due to travel, but still maintained our market share. The market declined by over 30%. That pent up demand will get Realized over the course of the next quarters. I'm going to say next year for sure. And so therefore, we would see an increased Market available to Srinivasan, and therefore, what I'm going to presume, but we already have indications of Because we're already 3 months into the current financial year, it's for the booking also. Got it, sir. And with respect to the domestic market, Seems like core sectors like steel, a lot of companies are announcing CapEx. Cement also, there seems to be some CapEx activity. So if you can give a broad outlook as to domestic market Over the next 2 to 3 years, how fast can the market expand, 12 weeks later? So the domestic market in FY 'twenty Well, somewhere in the region of about 1400 megawatts. And this decline is somewhere in the region of about 800 megawatts this past year. We're seeing that this market would rebound to in excess of FY 'nineteen in the current financial year and Driven by a variety of different sectors, you have the Distillery segment, which in the sugar space, which is expanding quite aggressively. You have a different value proposition there for companies moving away from the assets based distributes to direct use, Which would mean additional capacity of turbines that will be required, the same infrastructure may not be suitable. The power complex in this delivery would comprise approximately 25% of the entire cost, of which 10% would be The steel turbine. So we came to we will gain from that segment growing and I believe the company of Sibanye, the bank which is Sibanye Engineering is close to the industry. We have good visibility that There is an expanded CapEx program in that space. Similarly, in our process for generation is also good visibility in terms of investments into food, food processing, paints, pharmaceuticals, etcetera. These are slightly lower in capacity but higher in value From a per megawatt perspective. The segments of weight feed recovery in cement is growing, but fresh CapEx in terms of new capacity addition in cement side Have not been announced. I mean, they may be announced, but they have not realized into orders as yet. And similarly, on the steel side, there has been very muted orders. But we are hopeful that given the rise in commodity prices that CapEx would be would realize, Would we translate into orders in possibly in the next couple of years? Okay. So from, I mean, still, generally, the ticket sales of orders are pretty large, most of us. So can we see Not an answer, but you have the rolling mills and the have a smaller down integrated player who will require who will require in our side. The chemical side is doing extremely well and possibly is still doing the transmittance also. Got it, sir. Thanks. Yes. Thank you. The next question is from the line of Shriman Doudoria from Unifi Capital. Please go ahead. Yes, good afternoon. So if I look at the historical trend of your order book mix, closing order book mix lasts at least 4, 5 years. The absolute number from the products has Being stagnant, both exports and domestic together about at nearly about around 600 odd close. But it's really the aftermarket, the closing order book, which has actually gone up. I think it's doubled from FY 'eighteen, 72 gross to about the 1.33 gross now. So in the past calls, you had mentioned that this aftermarket is your key driver and you have Some 2, 3, 4 strategies, one among which you said was servicing 3rd party turbines. What is our penetration level now in this category, both in the domestic as well as export markets? What are we doing differently to service the 3rd party turbines? And What could be the share of this business in the next 2 years? I think you bring up an extremely good point. Not only is the aftermarket segment of Tsugumi, as for all capital goods companies, a driver towards profitability And to the life cycle relationship with the customer. But to expand it is a very delicate balance because you cannot push Most is to customers without losing credibility. And so therefore, to expand the growth of this highly profitable segment, We have to look at the refurbishment side, which is exactly what you had spoken about. I'm going to ask our resident aftermarket, Mr. Pratshan Farhan, We give you a little bit of visibility on exactly the question that we talked about, what are we doing and what is the visibility that we have to growth in both Spare and scrubber business, but also in terms of refurbishment. Now you must remember refurbishment for us is refurbishing Okay. The equipment, so of course it includes steam turbine, but it also includes certain other Okay. The equipment. So Sachin, can you give a little insight on this one? Yes. Good afternoon, everyone. To answer basically the question posed about the penetration level In domestic and export, to be very honest, we have today only a small penetration in The multi brand service offering for Malaysia. So there is a lot of scope for us to grow in the future. And that is why we are going Both on the domestic and export front, there is a good potential for growth. As you rightly mentioned, So order book has been growing and the carry forward order book has also been growing over the years. We are trying to do things differently in terms of Improving our reach, our coverage in the international market, we are strengthening our organization And our marketing efforts, both physical and digital. So this is helping us and even in the We were able to manage with good order between the data request and the digital and our spend and marketing. In terms of your question about the share of business going forward, it has historically been Aftermarket business has been about 25%. This year, it's about 27% of our revenue. And we target to grow Most were around 30% of the revenue in the years to come. The refurbishment business as a part of our aftermarket business has also consistently grown. And the reason for that is basically the diversification that we are doing. And as Nikhil Sanmi mentioned, We are not just focusing on industrial steam turbines. We are diversifying into utility turbines where there is potential. We are diversifying into new geographies, new industry segments such as geothermal that we have talked about in the past. And our successful entry into this segment has given us a lot of confidence on our capabilities and the potential can be tapped Very successfully by our company going forward. So all of that and the recent successes and the traction in some of the export markets Gives us good confidence that we will be able to achieve our plan for future. Thank you. Thanks, Sreedhar. So In the overall aftermarket order book, what is the mix of refurbishment? So, basically, sorry, please go ahead. No, continue to, sir. Yes. So this has also been growing over the years. About 2 years ago, our reform This is the overall order book was about 27%. FY 'twenty one, this has become 31%. FY 'twenty two, we are targeting 35 persons. So there has been a good growth in the retail business and the part of overall order book So hopefully you'll take my aftermarket. I hope that answers your question. Sure. So I just another maybe a little granular detail, I'm not checking. You mentioned that it's not just the industrial turbines, which you're looking in the aftermarket, but the utility, Your trouble and even the other parts in the system. So the driver going forward will be industrial turbine or these other things which you talked about Can also, Madhvi, let me explain it to you rather than looking at the product itself in terms of what is the solution you're providing. There are different and varying degrees of solutions that we provide, which could be anything from Cobovol to ELLI Engineering. And this stretches the value chain of technology. So the point is that we want to stick to high value added services, but at the same time, Capture it with the liability that we are willing to accept. There's a large Value, warranty, liability question that comes into this, which plays into what is the technology level that you are going to be putting in. So this varies. So for example, the stream turbine line, of course, we would be much more comfortable going into the higher end of valuation, which is upgradation And life extensions, etcetera, which may or may not be the same in other markets. But having said that because the profitability of the segment is extremely high and the return on equity The strategic business line is extremely, extremely high. We would Go after this market in an opportunistic manner in terms of being able to source demand from wherever we find it. In terms of a consistent buildup of demand, we, of course, need to work with certain customers and geographies so that They can have confidence in our capabilities and our capacities to be able to deliver because it's obviously already in a running condition in their plans. Under breakdown conditions, most people usually go back to the OEM because of speed of execution. So to bridge The credibility gap with the customer is the 1st breakthrough and that happens over a period of time with successful installations and that is something what Sachin was Pointing out too that it only happens over a period of time in certain geographies as you have successful institutions, your credibility grows Are you able to then offer this to a wider set of customers in a varying degree of industries and technologies? Great. Thanks for the detailed explanation. So in your initial remarks, you had, I think, gave a number that out of your Profit before tax number, if I noted it right, about INR100 comes from the aftermarket. Is that the number which you said? Sorry? $100,000,000 free cash flow constraint. Okay, cash flows. Okay, okay. Got it. So I had two questions, specifically on the quarter gone by. You had highlighted the margin compression that has happened in the quarter 4 was driven by, I think you said about a domestic order, which No, I said that it was driven by any particular question? Yes. So I just wanted a clarity on that. Did I got the point correct? No, no, you didn't think exactly. I said that there are a variety of factors that relate to a slightly lower EBITDA margin. One of it is the fact that the product The turnover mix between domestic and international was skewed more to domestic, which carries a lower margin and so that's reflected in the Higher material cost or raw material cost percentage of turnover, which is at approximately 54% versus 51.5% for the full year. Secondly, there were higher other administrative expenditures, which are non recurring in nature, which had impacted the quarter. But I would encourage you to look at the full year numbers as what we believe is a sustainable number for the company going forward, not only For FY 'twenty two, but for the years, Jitam? Yes, sure. Thanks. I'll get back in the queue. Thank you. Thank you. Before we take the next question, a reminder to the participants, please limit your questions to 3 The next question is from the line of Bhavan Vaidani from SBI Mutual Fund. Please go ahead. Thank you for the opportunity. So could you give us an update on the ongoing case with GE In the last section of your press release, you mentioned that there was a judgment by NPLT. If you could Help us understand that will be useful. So, Marvin, you're asking me for something which is subject to it. Will it be correct? I'll So that's exactly that this is something that we should not be commenting about in public. I think the information that we had, we've given you and we've given to And this is what the Board has mandated us to disclose not only to The shareholders but to the exchanges as well. Suffice to say that as we can see from the performance of the joint venture Performance of the company in FY 'twenty one that the joint venture is a growing concern And there is profitability in it. There is a dispute and the details of the dispute have been Detailed to some extent in the disclosures. There will be more disclosures that will be carried in our annual report. It's suffice to say that the company is differently positioned. And And I think that we all await a TV resolution to all matters, but I think that is all I think I can say to function Pangam's, unfortunately. Sure. Maybe your next question is on the growth part. So you did mention about Some outlook on the sugar and Yes. That's a good question. I want to ask Arun, Pooja, Executive Director and CEO, and he can bring in Prashad, who's our President As well on the visibility that you that we're seeing and especially, Bhavin, as I pointed out in my introductory remarks, We are pretty much done with Q1 already. And so we have a firm idea as to the orders that we have secured with advances as well as no repeat secured without advances. I'm surprised to say that It's a significantly high number, which leads us to have extreme confidence that the product order bookings of this 440 odd curve that we achieved in the full financial year Of FY 'twenty one, it's something that we'll exceed within the first half year of this year, Vikash. Arun, would you like to comment and give a little bit more clarity into the sectors that you're seeing This is Ram. And if you could just add to your comments. Yes. Good afternoon to everyone. As our Vice Chairman, Mr. Nikhansani, has said, We started the year very well off, and we have begun for the 1st quarters. All the Budgeted parameters have been met as regards to various financial parameters. And market is looking up. As indicated by him, we expect that our order booking for the half year this year will be well over Last year's full order booking in the product line and on the customer care, the growth that is planned, we are already coming in. As far as the operations of the company are concerned, we are very strong. We have made all the arrangements to meet COVID eventuality, even if you would have 3rd wave, we are not likely to be affected severely because we have locked out Arrigivings for all our working staff to be staying together and ensuring that the company runs. That's on the operations side. As regards to market, we are very well poised. Even If the market is shrinking overall in even in the industrial space, which is not much, but due to introduction of new products And new blade designs, we will be able to address the market with certain Exceptional efficiencies which are required in some operations and also the product gap is being closed, wherever we find But the portfolio has not been sufficient. So overall, for the company assets, the market would be expand addressable market would be Finally, irrespective of what happens to the overall market, which we expect anyway to come to 3 core levels in a year's time. So that is the situation. We have in domestic market, we are looking at good order bookings in process Trojan, It includes pharmaceutical. As you know, people will be going for bullet drugs production, so we're targeting that. And we are also looking at the delivery segment where we already have a good market share and we expect to improve its share. On the cement side, the wet seat recurve market has come up, and we hold a dominant position in that market. So all these three segments are giving us good order booking as well as the inquiry generation has been quite good. So overall, as a management, I see we're quite satisfied with what is being done in Q1, and I expect Similar things in Q2. So H1 hopefully should be a good one as expected. Thank you. Thank you. Just last question from my side is on the margins. As we see a cycle of Increased product orders and execution and given that the margin percentage is lower, Would it be fair to assume that our underlying margins, which has been in the 20%, 21% range, Could trend down as we see growth coming back? You said it should trend. I don't need to answer. Yes. See, it's like this, margins are What has been indicated are over a fixed turnover, and when you're talking of, we are expecting growth in aftermarket as well as the product. So it is not that the margins would be suppressed. It could depend on the product mix and the total expenditure that we would go through. So when the turnover is increasing, it is both product as well as customer care where we would have turnover. We expect that they will compensate each other along with the value engineering that we are putting. Sure. Just last follow-up, what could be the faculty utilization Currently? Currently, our capacity, we have I don't think we have any problem in capacity utilization. We are operating It depends on the number of ships, etcetera. But if you look at it in terms of what could be the top potential output, we would probably be operating anywhere in the region Between 45% to 55%. Sure. Yes. Thank you so much. But I have to say, Bhavan, on the margin question that behavior is a commodity price pressure. I think that you have to it could be definitely you have to mention that We will try and address it to the extent possible and to see how best we could pass it on. It may not be possible for us to pass it on in the extremely short term, but over the medium term, of course, it will all be passed on. And so again, quarterly Execution will I would refresh you to look at annual numbers for Visibility on the numbers and the margin that we have, is that clear? Thank you. The next question is from the line of Manish Goel from INR Holdings. Please go ahead. Yes. Thank you so much. So just to carry forward from Bhavin's Question on the margins and the reply you gave. So the current order book, what we have, Is it a fixed price contract? And do we have any escalation clause built to it? These are short division product contracts and we actually take our scope is only for product supply. Yes, separate contracts for installation and the directional commissioning. But as I indicated to you earlier, 1 of the potential from 1 customer from a lifecycle relationship, If you sell me a product worth 100, over the next 7 to 8 years, we are or 10 years, we're going to derive same amount of value from the aftermarket problem. So establishing that relationship with Penni Tredibility is extremely important. Of course, we will try and push As much as we can because these are unique and discrete products and really you cannot compare 1 with another in terms of pricing. So It all depends. There's nothing uniform in terms of acceptability to customers. Ultimately, we have to do what the customer is happy to accept. No, I agree, Nikhil, I appreciate that like we leverage a lot on the aftermarket going forward. But Just from a shorter term perspective, you did mention that difficult to pass on in near term. So basically, We should probably factor in that in the first half, we may see a fair bit of margin pressure. No, but look at it this way, the ratio is that our material costs as a percentage of turnover is somewhere in the region about 50%, 51%, 50%, Which includes we don't buy any direct steel. It's always fabricated or value added on it. So the percentage of direct raw material in terms of metals would not be as a percentage of higher Raw material cost would not be more than 10%, 15%. So even if I'll go by 10%, we're not looking at very large numbers. Okay. And On the new products, if you can just provide an update on API drive turbines, how is it progressing? I think I wanted to ask That's a very, very good question. In fact, we have set extremely ambitious targets for ourselves this year, and I think You could remind us of this in the subsequent quarter as well to talk. I'd like Prashad, who is After I will introduce the Airline to give you a little bit of insight on the API market As well as an international, Pafar, if you could just talk about international thermal products, Shahid, as well as the API marketing specific. Yes. Good afternoon, everyone. Starting with API market, as we informed in This is one of the key segments for us, and we have a product readily available, which is developed and well accepted. Our vendor registration process since the last 2 years, whatever efforts we put on that, so we could able to achieve the desired target. Today, we are accepted as APA product suppliers, over 90% of refineries consultant, EPC, OEMs accepted I said Triveli as a approved lender. Even our Q1 order booking is as per the budget. So we booked quite a good number of orders API segment. So that is again a mix from international as well as the domestic, not domestic like Indian oils and all these things. And international also be picked up from South America and some orders be picked up from North America as well For the API segment, so that way, it is a quite bullish market for us. And based on the inquiry pipeline, if you see on the API segment, There's a huge growth on the inquiry pipeline. Today, we are sitting substantially over 1,000 machines inquiry pipeline on API. Coming to international non API. So the inquiry, AFI Prime is quite good. So we are seeing from Middle East, North Africa region, which is one of the key Area for the APA as well as the non APA segment. Under Turkey and Europe, these are the other two areas where We are following up for the Phase 2 Energy inquiry base and the Phase 3 recovery options sort of, I think. And the MENA is substantially giving us Yeah, anxiety pipeline. So that way, we see even in international, apart from domestic, domestic, obviously, there is Over 30% inquiry pipeline increase is there. Even in international, we are seeing a good traction. And through virtual interactions, there's a good accessibility Even though last year numbers are not that good, but based on the current inquiry pipeline and the Q1 tractions, what we are having, We have quite often as quick as we'll be able to meet the desired results what we are expecting in international markets as well. In the international, again, we are seeing one of the combined cycle opportunities increasing for us apart from waste to energy and waste to recovery cogeneration proposals. So this is a new segment where we are entering as a combined cycle that is along with Gas turbines as well as gas engines and PV sets, that is the one segment we are entering into that. So would it be able to give a perspective like currently in API Turbines Out of existing market, how much of it is we are able to address and to what Megawatt range we have launched the products for API turbines? Based on the current product availability to us, Almost 85% of the market that we'll be able to address to the product. So across because in API, the megawatt ranges are not Much bigger. These are all majority of these sizes are sub-five megawatts, sub-six megawatts, enterprise turbine application. The megawatts here, number of machines drives now. So today, we can address 85% of the market. And this market is substantially in a good market. Is it 57% from a From a number of units perspective, it may be about 60% from value perspective. Okay. So basically, just to clarify, We are now addressing 85% of the total API market. It is not that the products what we have launched, we are addressing 85%. Just to clarify. Total, total APA market. So our product we gained was 85,000,000 tons back, technically. And this motion has only been in the last 18 months, Of course, the last 12 months have been very difficult from an audibility perspective, and we've already talked to you. But this will be This we should be able to have very good penetration there in the current year moving forward. Okay. Okay. And typically, the product order size would be similar to what we have in steam Fine. Like if you will probably want to look out on a per megawatt BVs or something like that. If you can just give us a perspective just to get a perspective as to How can our order book look like going forward? We don't really break it down into drives per megawatt. Surprised to say that because we have smaller turbines and in a segment which has extremely high Environment Health Safety guidelines, the price per megawatt is higher than normal, but the scope is less. You're not providing the entire scope. So turnover will be less per megawatt because you're not providing other Other equipment such as generator, etcetera, etcetera. Okay. So here we will not be taking on a EPC basis but purely product supply? But even Ajay, we were not doing ETC, we were just doing installation package. Because I look at ETC from the perspective of liability you take Exactly. Sorry, sorry. What I meant was that so here we will probably do a product drive turbine Apply to the integrator and we are not doing that by integration. No, but there will be some integrations, for example, the Bupol system, etcetera, will banks will come under us. But the scope of supply is less in this segment. Okay. Okay. And thank you so much for that. And just for a housekeeping, if you can provide us a breakup of order inflow and order book of the aftermarket Between domestic and exports. Okay. Manish, maybe we could take this offline. I'm sure whatever numbers we've been giving in the past, But suffice to say that order booking in the aftermarket side has been Consistent in both the Mexican aftermarket and even in this last year, we have used a lot of digital means to maintain and grow International Aftermarket Business. Thank you. The next question is from the line of Amit from Edelweiss. Please go ahead. Hi, Nikhil. I have two questions. First, on the strategy of diversification, Can you specify which areas should we look at when we use the balance sheet to And my second question, once we finish the first, I'll basically ask. So I want to try can you just I couldn't follow your question exactly. Are you saying that what how would we Look at the allocation from the perspective of technologies? Yes, I was just trying to understand the possible diversification route, what Which segment will you look at in terms of pricing plans? Yes. So the 2 aspects to this, we Our competency from SG and A perspective and our balance sheet is what we would keep in mind because we need to be we need to ensure that we'll have some sustainable growthings are the segments that we do look at. And so we've already talked about us looking at an ultimate Offering some technological perspective to providing heat and power, which is through superconducting carbon dioxide. But equally, As we look at the transition from decarbonization away from carbon based To maybe a potentially more hydrogen based economy also, which I have an opinion that I think that there will be a certain segment which will definitely move to hydrogen either it's from A perspective of electrolyzer is to fuel sales requirement, but the fee requirement from that on the combined cycle requirement could still require our offerings, which will come. So We will be moving towards looking at both rotating as well as static technological solutions within that space. Thank you. We take the last question from the line of Pranav Tendulkar from RARE Enterprises. Please go ahead. Hi, sir. Thanks a lot for the opportunity. Sir, I have just one question. Can we just elaborate If any industry decides to put up that 2 power plant coal waste versus it puts Various renewable plants like solar or no, we are not can you repeat the question, sir? Yes, yes. So I'm just saying if any industry puts up a captive power plant, Thermal power plant based or gases versus if it puts a captive renewable plant like solar or wind, How does the economic efficiency compare? And because what I see is that there are many industries which are our large customers like paper, sugar, Simeon, this is now our actual No, thank you. I think you bring up a question that we take for granted. I think we need to explain a little bit better and possibly we'll give a working paper with our next earning call, which is to explain The cost of heat and when we talk about cogeneration, there will be requirement of not only power but also heat In industrial? In residential establishments, establishments also the particular that we're talking about industrial. So when you look at sugar, paper, leather, Textiles, etcetera, Pharmaceuticals, Chemicals, we require steam, that is heat as part of the process, which cannot be generated On a renewal basis. Now or if it was to be generated, it would be the cost, the capital cost as well as the efficiency cost of access is prohibited. But to give you an example, say solar works at the efficiency levels and sometimes the region of 10%, 12% and could lead to capacity factors, etcetera. A thermal based plant running off even coal at a small size would be somewhere in the region about 25% efficient. If you move up the technology curve and actually use then let's use the technology curve. Let's just say that if you were to look at the efficiency, that's the power production. If you were to include heat, you would probably be in the region of utilizing approximately 50% to 60% of the thermal power thermal energy In the application. So I think that now a renewable solution hasn't come about for heat, Which is as obvious as what it gives for the power the utility power market. The utility power market has a very clear We know. I think that is quite obvious that renewables has a better cost economics. Okay. All right. So because what happened is that last year, the coal excavation was de centralized, right? There are like 150 more private coal licenses and the coal supply in India is going to go through a very high growth phase. And it is going to be very, Very, very easy to put up our coal by power plant, which was not possible previously because you had to import coal and there are many things. So I think that if that is the case, then you could have a very high enough pain in next 2, 3 years. I think if you already look at spot power rates or forward rates, You do have an increased power consumption in the domestic market in India. And in fact, fact, this is a global phenomenon. And you are probably going to see very high spot rates of power to install, which will lead to a lot of expenditure on short term power. Got it. Okay. Thank you, sir. Thanks a lot. Thank you. I now hand the conference over to the management for their closing comments. Over to you, sir. Thank you very much. Ladies and gentlemen, thank you for attending the Financial Year 'twenty one earnings call. We face that Turing Airlines is in a very steady position even though our order bookings for the financial year 'twenty one It's not after Mark. Due to the COVID pandemic, we have great visibility on FY 'twenty two from all of its perspective, and we believe that we are in a steady and stable footing and anticipate and look forward to our move on this energy transition part. Thank you very much. Goodbye. Thank you. Ladies and gentlemen, on behalf of 3 Rainy Turbine, That concludes this conference. We thank you all for joining us, and you may now disconnect your lines.