Ladies and gentlemen, good day and welcome to the Triveni Turbine Limited Q2 and H1 FY 2021 earning conference call. As a reminder, all participant lines will be in the listen- only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Surabhi Chandna from CDR India. Thank you, and over to you, sir.
Thank you. Good day, everyone, and a warm welcome to all of you participating in the Q2 and H1 FY 2021 conference call for Triveni Turbine Limited. We have with us today on the call Mr. Nikhil Sawhney, Vice Chairman and Managing Director, Mr. Arun Mote, Executive Director, along with other members of the senior management team. Before we begin, I would like to mention that some statements made in today's discussion may be forward-looking in nature, and a statement to this effect has been included in the invite, which was mailed to everybody earlier. I would also like to emphasize that while this call is open to all invitees, it may not be broadcasted or reproduced in any form or manner. We will start this call with opening remarks from the management, following which we will have an interactive question-and-answer session.
I now invite 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, Surabhi. A very good morning and good afternoon to everyone on the call. I hope everyone is safe and well in these COVID times. I also do wish everyone a very happy Diwali, which is going to be upon us soon. Welcome to the Q2 H1 FY 2021 conference call for Triveni Turbine. The overall performance of the business in terms of turnover, order booking, and profitability has been lower in H1 FY 2021 as compared to H1 FY 2020, which has mainly been due to the impact of the pandemic in the first quarter of this financial year, as well as to a limited extent in the second quarter as well.
The net income from operations in the half year FY 2021 is at INR 3.51 billion, which is lower by 24%, and EBITDA in H1 is at INR 977 million, which is at a margin of 28%, which is only lower by 7%. PAT, after taking into account the exceptional items, which I will go into in a little bit of detail, for the half year is at INR 516 million, which is lower by 36%. The outstanding carryforward order book as on 30th September 2020 is at INR 6.7 billion, which is lower by 3% when compared with the corresponding period of last year.
Overall, the order intake in Q2 FY 2021 is 22% higher than Q1 FY 2021, even though it is lower by about 16% compared to Q2 of FY 2020. Overall order booking for the current half year has been also severely impacted due to the pandemic.
More so in the export market where restrictions on travel had not allowed us to finalize and close orders, and customers are waiting for us to travel to do that. There's been some movement on that front. Within Q3, we've already seen a greater mobility of our personnel to the extent that over 25 teams are already internationally traveling. We believe that we should have better traction in the coming quarters. The turnover and profitability have increased by 12% and 29% in the second quarter compared to the first quarter of this financial year.
In the quarter under review, the revenue from operations grew by 12% as compared to the last quarter, mainly on account of significantly higher exports as a percentage of the entire product sales portfolio, even though there has been a decline of 25% when compared with the corresponding period of the previous year. The mix of domestic and export sales was at 48: 52 in Q2 FY 2021, while the mix was 57: 43 in Q2 FY 2020. There has been a significant improvement in the EBITDA margin in Q2 FY 2021 of 580 basis points in comparison with the corresponding quarter to previous year. The improvement in margin is over 300 basis points in comparison to the Q1 FY 2021.
The improvement in the EBITDA margin is driven by a combination of higher share of exports and sales, but also on account of lower raw material costs, which have consistently shown improvement over the previous many quarters. Further, there has been a significant reduction in overheads, especially in manpower and administrative overheads. While many of the cost reductions achieved are sustainable, the administrative cost reduction, especially in travel, may gradually increase in the quarters to come as we necessitate a greater interaction with our international client base, but also in terms of fulfillment of the orders. The company undertook a major rationalization program of its manpower cost, which could be achieved due to a focus on higher automation and resulting in improved productivity and better outsourcing strategy, all of which enabled the company to reduce its manpower strength.
This has resulted in a one-time cost of INR 185 million, which has been accounted as an exceptional item during the second quarter results, which is in front of you. The benefit of this will start accruing immediately. This specific initiative was done at the instance of the union, and I must say that this was an offer which was brought to us and which we, given our long-term planning, and which I've already alluded to in the previous conference calls, in the move to allow Triveni Turbine to be more agile and dynamic in its employee base and its employee cost to allow for a greater degree of multi-skilling and work planning, which will allow us to really move forward in our business plan and our vision to be a top-rung global manufacturer in this digital Internet of Things age.
We believe as this currently stands, and this is something very important for all of you to recognize, that Triveni Turbine now has no workers in its company. All people who will be operating at the shop floor will either be officers and at graduate level with a higher degree of productivity, a greater degree of automation in their process. We believe that these productivity improvements have already started and will show results within this year. Therefore, the cost which we have incurred in terms of rationalizing people has been very fruitfully done. More than that, in this time of COVID, the 61 odd personnel which have decided to take part in the VRS scheme, had an average outflow of about INR 30.3 lakhs. We also, as a company, facilitated their movement into other occupations which they might find productive or of interest to them.
Multi-skilling and other skilling were also offered. More than that, in case they wish to continue, those offers were also left open to them. I'm happy to take more questions on this at a later point in time. On steam turbine market in general, as you know, McCoy, which is an international market research outfit, ranks Triveni as the steam turbine manufacturer in the steam turbine space. This is driven by our over 20% market share in the global market and a clear dominance in the Thermal Renewable segment. This, as you would imagine, is the only growing segment within the entire ambit of steam turbine market. The above 100 MW market has continuously declined in terms of its output on basis of declining demand for coal in the entire power basket.
More so in between the ranges of 30 MW to 100 MW and 0 MW to 30 MW, the renewable energy space plays a much greater role. The domestic order booking in this previous quarter has an increase of 19% when compared with Q1 FY 2021. The domestic order booking has been from sectors such as process cogeneration, which is mainly distilleries, sugar, also cement waste heat recovery, chemical, fertilizer, and paper and pulp. The inquiry generation in the domestic market has surprisingly shown a very robust increase of over 30% in the first half of this year. The main segments of attractions in order finalizations have been witnessing is in the sugar cogeneration, including distilleries, biomass IPPs, food processing, and the waste heat recovery sectors. These are expected to continue to be drivers of demand in the Indian economy going forward into the second half of this financial year. The export markets.
The overall order intake has been higher than last quarter at an increase of over 30% in comparison to Q1 FY 2021. The order bookings in the export markets have been witnessed mainly from Europe, the Middle East, South and Central America. The segments include solid municipal waste incineration-based IPPs, as well as biomass and sugar cogeneration. While the market globally are yet to regain its level of previous years, we witnessed the overall export order intake, which has increased by 30% during the quarter under review when compared with the first quarter of this financial year.
In my expectation, and as I had said in the previous call, our expectation in the export market has been more muted than what we had expected, which is largely driven by the lack of transportation and the lack of travel that our service engineers and marketing engineers have been allowed to do. We believe that with a greater mobility in the coming quarters, yes, there will be small shocks in between in terms of shutdowns and lockdowns, which will happen for months at a time or one month or two months, but in general, the ease of traveling will only increase in the coming quarters. We believe that this will suit our strategy to be able to cater to our customers on a face-to-face basis while still utilizing the best of digital technologies.
Toward the latter part of the quarter under review, we could already see physical movement in a limited manner, which has already gained us success in this current quarter. In the export market inquiry generation, the renewable energy sector is driving demand specifically from the biomass and waste to energy projects. The company currently has orders and installations from over 70 countries and will be focusing on new markets in the coming years. Some of the segments of focus are biomass, paper, process cogeneration, and other agro-based industries, including palm oil, et cetera. The aftermarket segment during Q2 FY 2021, the aftermarket order booking has increased by 77% at INR 710 million in comparison with Q1 FY 2021, and a 41% in comparison with Q2 FY 2020 on account of the increased volume of spares and refurbishment.
On account of the substantial order booking in Q2 FY 2021, the half year order booking for the current year has reached almost at similar levels as the half year FY 2020, which under the current circumstances is significant. The team has played a very important role in trying to build the order booking from the aftermarket segment, which as you know, includes Triveni brand spares and the service of our own install base, but also third-party offerings that we do through our refurbishment offerings. Our proposition has been far more successful in the domestic market, and again, in the export market has been hampered due to a lack and a slowdown in terms of travel. We believe all of this will get eased in the coming quarters, and we are more optimistic in the order intake on both these fronts in the coming quarters.
As regards the joint venture, GE Triveni Limited, which has already been communicated to you, Triveni has filed a petition in the National Company Law Tribunal, and the matter is currently sub judice. As with most things in the pandemic, these NCLT hearings have also been continuously postponed due to the pandemic reasons. More so about where the company is positioned right now. We believe at this point in time, Triveni Turbine is poised to transform itself into a truly world-class, efficient, productive outfit to manufacture at a quality level where there is a minimal amount of rejection, but more so which meets every standard globally applicable on a technological level, which is truly world-class.
We have been utilizing the best in digital technologies to ensure that information is seamlessly communicated through the entire value chain within the organization, from sales and marketing through to process planning, manufacturing, design, engineering, et cetera, without any human intervention, which allows for a seamless and error-free transmission of data. More so with a focus on cutting-edge digital technologies. We aim to be closer to our customers, to be able to cater to their requirements from a more remote basis, but to do all of this with lower costs and with higher accuracy. This, coupled with our technological investments in R&D, which will continue to expand our product portfolio but also expand it over to other rotating equipment, both from a product perspective as well as from the aftermarket, and aftermarket capabilities will be significant.
Already in this current quarter of Q3, we've had great success in the refurbishment market for utility range turbines, and we believe that this is an area where our offering of being able to offer world-class quality at a technological level which will benchmark with the world's best, but at a price point which is immensely affordable, is a win-win situation for everyone. The outlook of the company, as we had spoken about in the previous quarters, this current year will be impacted because of COVID. There will be a decline in turnover, which as you can see, is already reflected partly in H1 . Having said that, the margin by which the company is operating will continue to sustain to some extent.
We may not be able to achieve and sustain the 26.8% PBT margin which we've achieved in the current quarter, but definitely we would be able to sustain a margin somewhere between 20%-22% on a going-forward basis. We believe that this, coupled with our long-term vision on expanding and growing our markets, both from a product perspective, technological perspective, and a variety of different means, is something that would allow us to grow quite significantly. We are very ambitious and aim to utilize some of our free cash reserves to aid this growth in the coming quarters. Currently, the board hasn't taken any decision in terms of utilization of its reserves, which are very healthy at this point in time. As they do come about, we will definitely let you know.
Having said that, for this year as a whole, PBT for this current year should be at the same level as of last year, without including the performance of the joint venture as well as the one-time write-off. Having said that, in a year of pandemic, we think that these performances would be quite good, but it positions us extremely well for the year to come, where we are extremely ambitious to be able to further our growth in a very sustained manner. I look forward to giving some of that insight in the quarters to come. With that, I'd like to open the floor for questions.
Thank you very much. Ladies and gentlemen, we will now begin the question-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 handset 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.
Hi, sir. Thanks for taking my question. First question is with respect to the aftermarket. Basically, we have seen very good growth in this quarter. Do you think that 40% kind of year-on-year growth that we have seen this quarter, at least to that extent, is it sustainable? Or is it like these orders were supposed to come in one queue and they got spilled over the second quarter? If aftermarket growth has such pace, and we see the EBITDA margin also seeing an expansion, can we see a structural expansion by 100, 200 basis?
Yes, Ravi, you've been following the company for a while, so you know two years ago what our EBITDA margins were. We had certain cost increases, which we had to get out of the system, which took three, four quarters. Following that, you can see our material cost had reduced from about 56-odd percent to a sustained level of about 50-odd percent. 46% as of this current quarter may not be the most realistic number for us for you to assume going forward, but I would imagine that we have a sustained increase in our material cost. This is supported by two factors. One is the product mix. The fact that you rightly say the higher degree export gives us higher margins, but also a higher amount of aftermarket as a percentage of the order book also gives you greater comfort in terms of margins.
More than that is our internal strategy of standardization, which you've seen through our balance sheet, being able to actually reduce inventory. I haven't talked about how we manage our trade receivables, et cetera. Happy to do that as well. When we get more operationally efficient, this all translates into higher productivity. The moves that we've done in terms of employee rationalization further lead to a sustained higher margin. We'll give you better clarity in the coming quarters as to what our sustained margins would be, but I've given you an indication as to where it stands. From the aftermarket order book, as you've rightly pointed out, we were a little disappointed in the export order book for the aftermarket coming in in the previous two quarters.
We had a higher expectation, and we think in the coming quarters, we will be able to get some of that back into our order book. We think that currently, as you said, the 40% increase is something that the team has worked very hard to get, but this has been focused on, as we know, we have three distinct segments of our aftermarket, which is Triveni branded spares, the service of our own installed base, and the service and part for third-party turbines. Each of these has distinct growth. The growth within our own installed base will be somewhat linear to the extent that we are able to drive the confidence within our existing customer base to upgrade or to buy spares on a sustained basis from us.
The real growth in the market comes from the refurbishments market. I already gave you an indication of some wins that we've had in this current quarter, which is Q3. We believe that we should be able to expand this part of the business quite significantly and into areas into aligned rotating equipment, which gives us not only a competency to approach a broader market, but also improve our own technological levels as we cater to those. In a roundabout manner, the growth that we've seen in the market has disappointed from the export market, which we hope to bridge in the coming quarters.
In an overall sense, we are very ambitious on this particular business line, as we pointed out, because not only is there a gap in the market for a service provider like Triveni globally, but that this is a very high margin business as well, which requires lower capital.
Got it, sir. With respect to the domestic market in the last quarter, you had mentioned that steels and such kind of sectors are seeing some traction. Are you seeing that kind of sustainability and traction from these core industries which were not there for quite some time?
We spoke in the last conference call as well. Our expectation was that domestic order booking would be slower. As it has turned out, this quarter we've seen a much higher degree of domestic order booking. We are very pleased by that. Also the inquiry book has grown quite rapidly. We are quite enthused by what seems to be at least an appetite for growth in the Indian market. I have our President, Mr. S.N. Prasad, on the line. Maybe he can add in a little bit as to how he feels which sector is in the market picking up. Prasad?
Yes. As we are seeing this sort of domestic order book, as well as the inquiry book is quite strong because we are seeing like a process cogeneration industry based energy, especially into cement plants and all these things. Because there, their final product will be competitive only after adding this sort of a turbine, because everybody's looking for a cost reduction in their final product. We are seeing efficiency improvement in the system. Those sort of the inquiry base is increasing substantially. What we feel that as going forward is this will continue because a competitiveness of their final product is decided by these sort of equipment getting added into their CapEx and reducing OPEX. We are quite bullish on this domestic market as well.
Of course, international market, once travel opens up, we'll be able to get back because all the inquiry pipeline, nothing we lost because these are all delayed. The finalizations are getting delayed because there is no travel sort of it is.
Got it. I must point out that in the previous quarter, we had a near 81% market share in the domestic market, but on a reduced market, so very frankly, we didn't wish to highlight it. We are even more competitive than we've ever been. We continue to maintain our dominance in this steam turbine market for India and maintain our global second position.
Okay. Got it. My last question is with respect to working capital. Working capital has improved significantly YoY, and obviously the cash flow from operations has also increased significantly. How much of this is sustainable? That's my question.
Mostly it is. You see, again, when I take you back a couple of years, when we talked about the fact that there were some cost increases that happened with Triveni, this was due to an extreme degree of customization that we were doing with our turbines. As we moved to a more standardized platform, not only did this actually reduce our raw material cost, but also our inventory and other working capital needs. The degree of standardization has allowed us to streamline our balance sheets to a much greater extent. This, coupled with good customer advances, has allowed us to be extremely comfortable in the working capital space. That is not a matter of concern. We don't see this. Of course, given turnover, our inventory will move a little bit here and there, but mostly it's sustainable.
Got it. That INR 300 crore of cash, can there be an increase in dividend or buyback or some other thought can happen given that it's like 30%-50% of the market cap?
That's a good question, Ravi. The fact is that the board hasn't considered any of these proposals at this point in time, so it won't be correct for me to actually talk about this. The thought of the board at this point in time is focused more on growth. We need to show a higher top-line growth. I think that what investments are needed internally to be able to drive that growth is something which will be a matter of priority. As we are able to discover what those avenues of growth would be, the other strategies will become a lot clearer.
Got it, sir. Thanks. I will come back to you if I have any questions.
Thank you.
Thank you. The next question is from the line of Bhavin Vithlani from SBI Mutual Fund. Please go ahead.
Yeah. Thanks for the opportunity, Nikhil.
Hi, Bhavin.
My first question is on the competitive landscape. We've seen in the last quarter a couple of your large competitors announcing that they are exiting from the steam business. Are you actually seeing them exiting from the smaller turbines that you are addressing, or they are more on the larger turbines?
That's a very good question, and I'm going to answer it in a sort of roundabout manner. This has been a phenomenon that we have seen for the last, I'm going to say 10 years, which is that the percentage of coal in thermal power generation in terms of new orders has been continuously declining. Continuously. It's a steep slope, downward slope. Therefore, large utility-based turbines are really not getting sold, especially into the thermal power generation sector. The entire market size for large utility turbines has disappeared. At the same time, the market for steam turbines has radically changed from it being based on the fuel source of coal to more renewable-based measures.
Therefore, what we've seen over the last three or four years is that the steam turbine market, both from a megawatt as well as number of units ordered, has remained largely the same. It might increase by maybe 2%, 3%, 4% annually. The larger market of above 100 MW has fallen by, I would say, over 70%, 75%. Therefore, when our larger competitors, which is the people who have a lot of money to invest both in technology and marketing the space, see that the entire market shrink, I don't know if it suits them from a perspective of being able to address the market. The fact is I don't think it is lucrative enough for them.
Secondly, given competition like us, who are more nimble, who are more agile, who have a much lower overhead cost as well as structurally manufacturing cost, who have aligned their technology to be cheaper, I think that larger competitors find it very difficult to compete with us also. What we've seen is that actually, globally, we benchmark our competition versus Siemens, who is by far the most dynamic company in this space. Really apart from them, we think that other competition is something that is very manageable. If you look at it in terms of people who are exiting this market, it's been happening continuously over the course of the last seven or 10 years. The larger competitors, I think you're talking about certain press releases that came about in the last several weeks.
Those will have further impacts in terms of the number of participants in this market. We are enthused by the fact that other people do not find it a lucrative market. We, as we've always said, are one of the few companies that makes a margin on the product. Most people in this capital goods space, and specifically steam turbines or turbines in general, end up making their margin only in the aftermarket. They drive their sales just so that they have an install base. We believe that we're positioned well. We're happy about the fact that other people don't find it lucrative, and it is primarily driven by their cost base as well as the size of the market.
Thanks so much. A couple of updates from the previous quarters. One is that our endeavor to actually get into the refurbishment market for third-party turbines. Where are we in that? I do understand you did mention about patent restrictions impacting, but more structurally, how have you progressed on that, the efforts taken by us? Second is the efforts that we have been taking to enter the drive turbine markets in the oil and gas space. That'll be useful.
You brought up two very good points, and I'm going to get the heads of these businesses to actually answer both of these questions for you. It was my omission that I did not talk more about our drive turbine API market offering and our plans for order booking in this current and coming year. First, maybe I'll ask Sachin Parab, our President, Aftermarkets, to talk a little bit about how he sees refurbishment. Sachin, can you give a little bit of insight as to where Triveni Turbine is placed in terms of getting orders from the refurbishment market in the short term?
As far as refurbishment business, which is our multi-brand service business, is concerned, we have seen a steady progress in the inquiry generation over the last couple of years. As our Vice Chairman has mentioned, I will refer to the short term. As you are all aware, because of the pandemic situation and the travel limitations, the international order booking has not been up to our expectation. On the domestic front, we have done considerably well, and there is a remarkable improvement in our performance, both for inquiry generation and order booking on the domestic front. Going forward, as travel eases further, we are looking at better order booking and inquiry generation from international for the refurbishment business. As far as the sectorial performance is concerned, glad to say that our constant efforts towards expanding footprint have helped Triveni get into new markets for the refurbishment business.
Not just new geographies, but also new segments as an end-use application, diverse from what we had done in the past. Thank you.
Bhavin, before I ask Prasad to answer on the API market, we are currently in the process of doing a five-year strategic plan for both the product business as well as aftermarket. I have to say, the ambition levels that we are putting are quite tough to achieve, because we believe that we have to be growing at a level which allows us to compound. This will need all our market segments to perform, and we have to have the correct ecosystem and culture within the company. Therefore, the rationalization that also took place allows us to align all employees of the company. Prasad, can you talk a little bit about what your ambition levels are for the API market.
Yes.
In the broad? Thank you.
Yes. Coming to API market, as we mentioned in the last investor call also. As approved vendor list, to become a part of approved vendor list is one of the major challenge, where the last two, three years, our efforts in this have given a very positive result. Today, globally, 75% of the requirement, Triveni is approved as a approved vendor. One more important point I would like to mention, that even domestic market, as per recent Prime Minister's announcement, there is huge investment getting planned for next 10 years into hydrocarbon sector, where Triveni is approved by EIL, PDIL, all the reputed consultants and EPC players in the state.
Globally, what we have seen, the size of the market, totally when we map this thing, over $2 billion is the size of the market, which will be opening to us the next five to seven years sort of a thing, as we start building the references. We are quite optimistic in Middle East region and especially in South American region, then Europe and Southeast Asian region, apart from domestic India. Since the product is proven and running references are established and we as Triveni approved in over 75% of refineries and hydrocarbon companies and consultants and EPCs approved today Triveni. We are quite bullish on this, and we may be able to really drive this segment to a great extent. Thank you.
Thank you. Thank you so much for taking that question. Thank you, Mr. Prasad. Thank you, Sachin. Thanks, Nikhil.
Thank you.
Thank you. Before we take the next question, a reminder to the participants, please limit your question to two per participant. You may rejoin the question queue if you have a follow-up. The next question is from the line of Harshit Patel from Equirus Securities. Please go ahead.
Hi, sir. Thanks very much for the opportunity. Sir, I had a couple of questions. Sir, the first one was that a couple of quarters ago, you were planning to develop a strong value proposition for the supercritical CO2 turbine. Have we made any progress on this front? When do you think we'll be able to commercialize this technology? That would be my first question.
No, that's a very good question. We are extremely bullish on this technology being the disruptor for our own market. We thought that it is worthwhile for us to invest at a point in time that global investment is going in the same space. The research has progressed substantially. Unfortunately, I am not able to get into detail as to where we currently stand, both from a perspective of our academic collaborations as well as industry partnerships, because they are subject to a certain degree of confidentiality. Suffice to say that this market will develop over the medium term. This is not a short-term product, and I think that if you look at it over the next five, seven years, this market will develop quite substantially and possibly suppose that it will replace steam turbine market.
Sure, sir. That was helpful. Sir, secondly, you have earlier indicated that the domestic 0 to 30 steam turbine market was around 1,000 MW in FY 2020. What do you expect the size to be in 2021?
That was the 0 MW to 100 MW segment was about 1,000 MW. We believe in this current year it would decrease. Well, in the first half, it declined by 50%. Going forward, I would say that we anticipate some growth, so maybe 25%-30% down year-on-year.
That 1,000 MW entire field was for 0 MW to 100 MW. What would be 0 MW to 30 MW out of it?
I think it is only 2/3 of it, or maybe about 75% of it.
Sure. Sir, just lastly, on the bookkeeping front, sir, could you tell us the share of exports in our aftermarket order books and similarly on the order booking front as well? That would be all from us.
I'll get Narayana to get those informations to you. Suffice to say, I think you heard what Sachin had to say also that we were slightly disappointed on the order intake on the export front for aftermarket. We believe that given the fact of travel will be allowed, and we already have people out traveling, that this should get made up in the second half of the year.
Sure, sir. Thanks a lot.
Thank you.
Thank you. The next question is from the line of Kaushal Shah from Dhanki Securities. Please go ahead.
Yeah. Thank you very much, sir, for the opportunity, congratulations on a fairly decent set of numbers. Sir, I had two questions. One was the execution, as you spoke about in your opening remarks also has been a little weak. If you can just share your thoughts on how we expect the execution to progress over the next few quarters, also the key sectors which can drive better execution both in the domestic and in the export market. The second question was on the employee front. You've done very remarkable rationalization. What could be a sustained number in terms of the employee expenses that we can build in, going forward?
Okay. From a output perspective in the next several quarters, it ought to improve because we already have an order backlog, which is sufficient enough for us to take forward for the full year, of course. The issue is the customer acceptability of the turbine. We have been prudent in terms of actually working with our customers, because not all customers are able to accept because of various problems that they may have. Therefore, whilst we had said that turnover for this year may be down compared to the previous year, between 10%-15%, I think that is still reasonable for us to assume at this point in time. This is also compounded by what we have in any given year, which is the book-to-bill within a specific fiscal.
Given that pretty much Q1 was wiped out because of COVID and part of Q2 as well, the amount of book and bill has also been limited. Having said that, we think that we're being realistic in terms of the outcome that is necessary for where our customers can accept. Of course, if there's a greater opening up of the market, we will be able to push out more products. I have to tell you from a output, from a productivity perspective of labor, we have two units. One is in Sompura, one is in Peenya. They have the same degree of output, which is the number of turbines that they would produce, et cetera. The number of people involved with the same degree of productivity in one factory versus the other was 20% of the other.
This rationalization aims to move us to a unified productivity level throughout our manufacturing base. From an employee cost perspective, while I think the INR 20 odd crore that we have at this current point in time for quarter is slightly lower because this quarter, for the other rationalizations are included in that. Also given the fact that we are going to be hiring across the breadth of the higher value-added services. I think that maybe INR 22 crore-INR 23 crore is a sustainable number for us to take in the short term for employee cost per quarter.
Sir, just one last thing. You had alluded in the first quarter that for the full year, the revenue number could be down by about 50%, and just now also you've given the similar range. The first half has been a little weaker. Does that mean that in the second half, we are expecting significantly better traction across segments? Just one additional point on the execution part. If you can just also share which are the sectors which are slow moving, and which are the sectors which are ready to take delivery?
Actually, it's not a sector, it's customer to customer. The sectors which are placing orders you know, which are largely sectors of food, pharma, a certain degree of distillery and agro, and cement from a basic perspective. It depends on customer to customer in terms of their balance sheet really, in terms of how they've been able to put the rest of their plant up together. I think that is very difficult to say which sectors are volatile.
Understood. That helps, sir. Thank you. Thank you very much.
Thank you. The next question is from the line of Anand Bhavnani from Unifi Capital. Please go ahead.
Hello. Hello. Hello. Hello. Hello.
Yes. Yes.
I'm I audible?
Yes. Good afternoon.
Yeah. Good afternoon. Sir, with regards to order book, I see that about 20% of all the order books is now aftermarket. It has increased steadily over last 15 odd quarters from like 10%. Even in the absolute level, they have done very well. Do you anticipate this trajectory of improvement in aftermarket to kind of continue and, let's say, in three, five years, we get to a 40%, 35% kind of a number? Is that kind of a realistic expectation?
I think your expectation should be that we should continue with the same growth trajectory of our Aftermarket. As far as the % share in our turnover, we are equally optimistic that our products will grow in the newer market segments as well as capture greater market share in the existing market segment. The previous question had alluded to our turnover mix. I think the fact is that while we're cognizant of where we sit in turnover because there's a great degree of overhead and cost absorption through that, our margins and profitability is something that I think will be sustained going forward. While we may see a decline in turnover for the current year, at a PBT basis, we would be at the same level as last year in absolute numbers.
Yeah. Sir, the Aftermarket breakup, you mentioned you have three areas. Just wanted to double-check. One is spares, second is services. What is the third?
Third is we offer the same offerings to third parties. It'll be to third party spares and services. You see for third parties, where the offering is a little bit more diverse because the offering could be anything from balancing to complete revamp and upgradation of efficiency. The value addition is different across the entire chain, so it's very difficult to place it under any other bucket than just a generic name of refurbishment.
Okay. Sir, given that the larger megawatt size is reducing and DSR OEMs are exiting that market, have you seen GE able to get refurbishment business in that domain? If a player is exiting the market for manufacturing, most likely would be exiting the refurbishment market as well. Is that the right assumption and are we getting any share there?
No, the assumption is slightly wrong. They are exiting the product business, which is to manufacture, but they will stay on in the aftermarket. It makes our value proposition even stronger, which is to say that we are also a full-line manufacturer. Therefore, we do target that segment very actively and we've gained success, and gained success in a very prestigious Triveni Turbine order very recently. The ranges are not constrained by any limiting factor that we place on ourselves for participating in the market below 30 MW, et cetera. Yes, it's a target segment for us. The value proposition changes slightly because no OEM is actually going to give up that market because it's sort of bread and butter for them.
Yeah. Sir, with regards to our five-year plans, is there a possibility for us to do some inorganic growth? Is that option being explored, considered, and have you contemplated any potential kinds of such action?
Well, I'll tell you, no, we have not contemplated any action in that front. The board has not considered anything. Is it part of management thinking? Yes. Is it something that we'll act on? We'll have to wait and see. The more important thing is that what we do recognize is the strength of our balance sheet and the way that the company is run. That technology is at the heart and soul of what we do. Therefore, whatever we do have to keep that in mind. Really acquiring assets is not of great concern to us because we think that the way that we operate, which is asset-light, is the way forward. I don't have a clear answer for you apart from saying that the principles by which we would evaluate anything would be the same way we evaluate our current business.
I cannot definitely rule out any inorganic assets or plan as well, depending on where our growth trajectory takes us.
Yes. I'll come back to this. Thank you.
Thank you. A reminder to the participants, if you have a question, please press star then one. The next question is from Manish Goyal from ENAM Holdings. Please go ahead.
Yeah. Thank you and very good afternoon, sir. I have a couple of questions. Sir, on the GE exiting the global business, 1st-tier turbines, how will it impact our JV going forward, sir, for the small turbine business?
You're putting me in a very difficult situation because, like I said, our joint venture with GE is we filed a petition at NCLT, which is subjudice. I really wouldn't like to conjecture on what their plans are. Suffice to say that it doesn't impact our-
Sure
growth in any manner.
Okay. Sir, as you were mentioning that for the market for smaller turbines, it was growing steadily in last 10 years. If you can just throw some more light as to how do we see these going forward for next three to five years, and also keeping in mind that between the mix of industrial driven demand for process cogen and on other side, the renewable based, biomass based renewable energy demand. How do you see the landscape evolving for next five years?
I'll just give one specific segment as an example to you, and this is pretty much prevalent globally.
Yes.
Municipal waste. It's actually reasonably certain now that landfills which lead to leachate and to other problems in groundwater and other issues is really not the way forward. Incineration or some degree of treatment of the waste is necessary. If you have incineration, you have a potential economic output in terms of power. Therefore, when you look at European countries, which have always been the environmental leaders, we believe there's a significant amount of greater investment which is necessary in this space. Europe only has, I'm going to say, approximately 10-odd% or 12-odd percent of global population. The amount of waste that's created everywhere else in the world presents a significant opportunity, which we are seeing in a small manner right now in the solid municipal waste incineration sector.
We believe that the growth in this renewable form, both from biomass-based Independent Power Producers, as well as the other forms of renewables, will continue to grow the market. This is despite the fact that captive power generation based on coal may actually decline. Waste treatment may increase. That, coupled by our greater market participation in areas which expand our reach into the market, be it in API turbines or combined cycle offerings, et cetera, will continue to aid our growth in the entire market, even though the entire market may grow by 1% or 2% or 3% annually.
Okay. Yeah. That is what I was trying to get a sense that overall market now at a particular size, maybe as you also mentioned, that currently the pandemic has kind of led to muted environment. I just wanted to get a better sense on next five years. Okay. Basically we are expecting low single digit growth going forward as an overall market, but we are looking to increase our addressable market and that is how we can look forward to the growth going forward.
Yes.
Sir-
Also we'll add new markets, like the drive turbine market is a new market. It is not something that we've addressed at all. There'll be certain market segments like combined cycle, which we've not addressed at all in the past, which has a combination of technological input as well as market and sales and customer acquisition. Sorry, you said about domestic market?
Yeah, I was referring to, as we have been mentioning that demand especially for the process cogen has been increasing. Just to reframe, did Chinese players have a meaningful presence in this waste heat recovery market?
No. They've not had a meaningful participation in the steam turbine market, steam turbine market since 2007, 2008.
Okay. Sir, coming to the Peenya plant. The entire rationalization which we have done is at the Peenya plant. Will it in near future continue manufacturing?
Yes, sir. No.
Okay.
No. It will continue to manufacture. It is just a question that we wanted to raise the productivity level by 4, which is the output. Unless you do really bring in elements of higher capability and capacity. We only have diploma or graduates on the shop floor. We want to move away from the worker culture and unionization. Now we have no union in Triveni. More than that is to move to multi-skilling and to other elements whereby you actually are able to not only raise the output but do it with much better quality, first time right, et cetera. These things are all based on capability and capacity, and that's where we move towards, and there's a conscious shift towards that.
Sir, did I hear clearly that you are looking to raise productivity by 4x or?
No. Just labor productivity.
Okay. Sure. Sir, with the recent second wave COVID in Europe and lockdowns happening for almost a month by certain countries, are we seeing any renewed challenges in execution and order bookings, sir?
The order placement cycle for these products is long. Everyone goes into ordering steam turbine with knowing the timelines that are required. Negotiations may happen, finalizations may get delayed because of degree of uncertainty. From an execution viewpoint, depending on where we are on the execution cycle, where it may be, for example, if the product is already delivered and it's a question of commissioning it versus how ready the entire plant is. There's no unique answer we can give. Having said that, this is a time of extreme uncertainty. Having said that, we've taken in as much of the buffer as we have to by giving the visibility that we have to you. We've said that we have anticipated that there will be some lockdown, there'll be some pressure in the next couple of months.
We think that things may open up a little bit later. Surprisingly, the Indian market has given us very positive results.
Sure. Sir, I have a question on the opportunity which is emerging from the increased focus of the government on ethanol side. Have we actually started seeing some traction? Because we are still reading that it's work in progress and lot of policy formulations are happening on tripartite agreement as well. Has this ordering kick-started from the ethanol segment?
Yeah. It's been there for the last year and a half. It's only increasing. This is not only from the sugar ethanol segment, which is either taking the B-heavy or C-heavy molasses or even direct from cane juice to ethanol route, but also from grain-based alcohol. There is ample stocks with the Food Corporation of India and with other state agencies in terms of their grains. This, when it spoils, goes into the ethanol sector as well to make fuel. There's a lot of grain-based fuel which is made both for potable alcohol as well as for ethanol for cars. I think the entire biofuel market is actually quite in a very good growth stage.
Sure. Last question, sir, on our in-house capability. Like we had earlier mentioned that in worst case scenario, if the JV with GE does not progress going forward, our in-house capability to go beyond 30 MW has been building up. Just want to get a sense as to how has it been progressing on capability front end.
I don't know if I actually said any of that, to give you an idea, yes, Triveni Turbine is a manufacturer and designer of turbines up to 100 megawatts. We have our own indigenous models, which we have sold up to 60 MW odd. We have the capacity, the ability, designs, and references.
Okay, sounds good. Okay, thank you. Thank you so much, sir. I'll come back again.
Thanks for inviting me.
Thank you. The next question is from the line of Anand Bhavnani from Unifi Capital. Please go ahead.
Thank you for the opportunity again. Sir, you mentioned combined cycle is a market that we are now exploring. Can you give us some sense of the size of the market? Like in case of drive turbines, you mentioned it's a $2 billion market, which for next five, seven years can be one engine of growth. Combined cycle, if you can help us understand where it is used and what could be the potential opportunity size for us.
Combined cycle is a market that whereby you use a bottoming cycle of a gas turbine or gas engine to take that waste heat and utilize it in a heat recovery steam generator to produce power through steam turbine. that is the application. It's basically a waste heat type of turbine, but with more technical features from injection, et cetera. The market for this is, as the availability and accessibility of gas improves, it is rational for people to be efficient in their power production cycles. This is adding a product into it. The size of the market currently is at the higher megawatt range, which is, say, between over 30 megawatts odd. It is a very large market. It is probably 1/3 of the entire power generation market globally.
Okay. This is primarily used when you're using gas for making power.
Yes. You have waste heat out of gas, you use the waste heat. That's called combined cycle. You're using both cycles.
Okay. Have you shipped any, in this particular category, any turbines as of today?
We have some references, and technological developments are underway to ensure that we can get greater customer confidence.
Okay. We are in the approval stage at this point in time in this.
It's not approval because we're not selling to that type of supply chain. You're selling mainly to developers in this market segment. It's not the same as the API market where you have to go register and book it. Here, there's a degree of marketing and sales that is involved, which has to go down to the customer level to sell it rather than be registered with some large oil marketing companies or refiners.
Yeah.
It's a little bit more difficult. We'll give you more visibility in the quarters ahead. The intent here was that we're looking to expand the market both technologically as well as through our sales efforts continuously. Whichever the large market segments are, we aim to ensure that we fit squarely within that.
You have to go sell.
Yeah.
Sir, with regards to municipal waste incineration, in terms of the size of the market, what could be the current size? Have you seen any specific geographies apart from Europe, taking this out of Australia or North America, Latin America, any particular geographies which are.
Yes.
looking into this heat incineration?
In fact, Europe is of course, a leader in this. We have a dominant market share in countries like Korea as well. Japan meets its own requirements for technological products. They don't tend to import capital goods. In countries like Korea, we have a very large market share, and even countries like Thailand. Other countries are coming up, and I think that India on that front also has shown some signs. We have maybe seven to eight orders a year which come into the municipal solid waste sector. Really, for a country the size of India, which produces the waste that it does, you should see hundreds. We're probably at a tenth of the level where we should be.
Okay. What would be the total size? You mentioned about drive turbines is a $2 billion, but this would be like absolutely in INR millions, the waste heat recovery. Do you have a number handy which you can give us a sense?
I think it is a driver of growth, and let us work something out and get back to you.
Okay. Thank you, sir.
Welcome.
Thank you.
Okay.
Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments.
Thank you very much for participating, ladies and gentlemen. Triveni Turbine, I think is well poised in this pandemic time to transform itself into a new stage of growth. Management is extremely bullish on where we sit today, and I think the days coming up will be very good for everyone, both from a shareholder, employee, and the stakeholder perspective. Thank you very much, and I look forward to addressing you again next quarter.
Thank you. On behalf of Triveni Turbine Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.