Ladies and gentlemen, good day. Welcome to the Triveni Turbine Limited Q4 and FY 2018 Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode. 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 telephone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Rishabh Barar of CDR India. Thank you. Over to you, Mr. Barar.
Thank you. Good morning, everyone. A warm welcome to all of you participating in the Q4 and FY 2018 earnings call for Triveni Turbine Limited. We have with us today on the call Mr. Dhruv Sawhney, Chairman and Managing Director, 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. A statement to this effect has been included in the invite, which has been emailed to you 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. Dhruv Sawhney to share some perspective with you with regard to the operations and outlook for the business. Over to you, sir.
Thank you, Rishabh. Good morning, everybody, to the Q4 earnings call. I'm happy to be able to report to you that we've had a record performance, the highest-ever quarterly turnover. It's 33% over Q4 FY 2017. A PAT growth of 33% to INR 354 million. Our consolidated key highlights have a net income of INR 7.5 billion. A PAT of INR 960 million. Crucially, we've had a record annual order intake. There's been a 17% growth in order intake over FY 2017. More importantly, the exports order growth has grown by 40%. One of the points that is strong for the future is the strong outstanding order book, which stands at INR 7.1 billion on the 1st of April, a year-on-year growth of 12%.
The turnover growth in Q4 allowed us to achieve the same turnover as last year, even though we had a slow start in the first few quarters, as you are aware during my previous earnings call. During the period under review, the domestic sales were significantly higher than they were in the previous year, and export sales were down. This is because of the opening order book in FY 2018, which had a different percentage of export sales to what it is now for the future, FY 2019. This impacted margins quite substantially. In the services segment, we are proceeding well. The second effect on our performance for the year was on other income.
We had a INR 21 crore decline because of a change in the accounting policy through adopting Ind AS, under which we had to recognize all MTM gains in FY 2017, while normally these would have been spread over to the current year, FY 2018. The difference you see in the consolidated and standalone results has one significant factor. We have been setting up our offices, which has entailed substantial legal compliance, accounting expenses, and which have all been booked in the current year. We now will have a much lower base of expenses in the export market in FY 2019. This impact has also affected the profitability of the subsidiaries, which you will have noticed when you look through the results. This has done well in terms of establishing our footprint, our interplay with customers, and more importantly, using each center for a larger geographical spread.
Our decisions to where we went have been borne out by the increase in inquiries that we are getting in the international front. On the domestic inquiry generation front, it's increased by about 7% over the past year, and they're from a large segment: cement, steel, paper. You're seeing activity in the steel and cement sector in general. In the international market, we are fortunate that the renewable IPP space is quite buoyant. Just as you know the space in solar and wind is, so is this space, and it has contributed a majority of our inquiries and export order bookings. This will continue in FY 2019 and for many years to come. Sugarcane generation is also an integral part of this process. Our key geographies are Southeast Asia, Eastern Europe, MENAT, and parts of Africa.
The export trend, the growth in exports is continuing in the Q1 of the current year. Up to date, we are quite well-placed for order bookings for the Q1 year. Similarly, our dependence and our concentration on services has been borne out, especially in the export field. We expect this to also contribute to margins and to our efforts in FY 2019. With the mix in order booking has increased to 51% in FY 2019, and it was 42% in FY 2017. This 9% difference is what you've seen has been a major cause of our margin. The domestic market flavor for the future, we are not expecting great growth, but we are expecting some growth, because we are having a better state of inquiries, tend to get higher inquiries in various sectors, process cogeneration, and waste to energy. I'd like to dwell on our research and development.
This has been a major concentration again for the past year, it's been borne out by a number of new models being introduced catering to the new market. We are able to now cater to a wide range of efficiency and cost-effective models in geographies which we hadn't tackled before. We're also able to penetrate new sectors. We are much stronger in the waste-to-energy sector, having now put certain projects into commissioning. This sector is growing globally, less in India, but globally, including Southeast Asia and the developed countries such as Europe and the U.K. We have a number of associations with research institutes in India and with institutes globally. This is giving us a further fillip to our R&D efforts. Our expenditures on R&D are continuing, and we're putting in new facilities in the current year, just for this purpose.
Both our R&D facilities today are benchmarked globally, we feel that we are second to none in terms of our manpower and facilities. The new generation portfolio will carry the company for the next two, three years, and we have a new generation coming up in the next years as well. I think the outlook for the company is very strong. One, with the opening order book, and two, with the inquiry base, which is leading us to expecting an increased order booking in FY 2019. With the same pace of export order booking to domestic order booking as we achieved in FY 2018. The focus on new geographies is showing positive results, and our inquiry generation is supporting these efforts. We are having a lot of order bookings coming from Southeast Asia and from Eastern Europe, something that was a new geography which I just mentioned.
I'd just like to also comment on a few items which you may have noticed. One is on our receivables. A few orders were postponed, and even we had the letters of credit. These orders have been recovered. The payments have come in the month of April and beginning of May. About 90% of it has already been received. This is temporary hiccups which happen, depending on when the financial year closes. This is something that we're not forecasting for the future. Our inventory has gone up by INR 35 crores. Here I'd like to mention that a major order, which was being executed by GE Triveni Limited for Africa was rolled over. We expect it to go in the next few months. This has affected not just the turnover in Triveni, this has affected the results of GE Triveni as well.
We are a little disappointed in the order booking performance of GETL. We are having renewed dialogues as to how we should accelerate this, even though we know that the market is very tough. As you all know, when you're reading the power markets of our Other people in the industry, they've also had very big problems. We feel that with these renewed sales efforts, we shall be successful in getting things. Our inquiry base is still very strong. We're just delaying order conversions, and that is something we're concentrating on with targeted specific areas and targeted sectors. We had a provisioning of an order which was executed by GE Triveni, and we follow an extremely conservative norm, so we are provisioning it, and we expect the benefits of the insurance to come in future quarters in the current year.
I would like to just end my short introduction by saying that Q4 has really shown us that what we were expecting through the various quarters has come through in terms of turnover and in terms of increased order booking from the export market. We're well-established in terms of our presence overseas and in an opening order book. I think we see FY 2019 having better results than FY 2018 in all terms, starting with the first quarter. Thank you.
Thank you. Ladies and gentlemen, we will now begin with the question answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Ravi Swaminathan from Spark Capital. Please go ahead.
Hi, sir. Thanks for
Morning.
Morning, sir. Yeah. Sir, just wanted to know how large is sugar as a part of our overall order book. Sugar over the past couple of years have been good, but prices have been on the decline. Will it have an impact in terms of inflows over the next year or so? Also your views on rising crude oil prices, how would this likely to impact the fortunes of yours in terms of inflows from Middle East, et cetera? If you could explain these two details.
Ladies and gentlemen, please stay connected. We've lost the line for the management. Please stay connected. Please do not disconnect your lines as we have the management reconnected to the conference. Thank you. Ladies and gentlemen, thank you for patiently holding the line. We have the management reconnected to the conference. Over to you, sir. We have Mr. Ravi Swaminathan from Spark Capital online. You may please go ahead with your question. You're back.
Sorry, Ravi, we got cut off. Can you just start again, please?
Sure, sir. Basically, I just wanted to know on what proportion of your overall order book is sugar. Given the fact that last couple of years, sugar, the entire industry has been doing well, you would have seen good orders. Prices have been on the decline, both domestically and globally.
Yeah. Actually, it's about 20%-25%. With the sugar prices down, people are looking at cogeneration for supplementing revenue. In fact, it's a reverse thing happening. Our inquiries are not bad because with the excess sugar cane crushed, there's much more availability of biomass fuel. The potential is large because the pricing they get otherwise is not that great. Internationally also, sugar cogeneration is very much a part of sugar complexes. This is in line with what I started off by saying about the renewable sector and the biomass sector. It's quite good, and we expect the same percentages to continue.
Okay. We don't see any decline or something of the sort, in fact it can-
No. Not in the inquiries and not in the bookings.
Okay. Got you. With oil prices going up, how would the demand shape up from Middle East and other oil-
Yeah. Good question. We had this one order which we got in the Middle East, API 612 order from Kuwait and with Shell. This is the highest technical performance. It is way beyond the normal API specs. This is going to be delivered in the Q1. Part of the inventories going up was because of this order. This is a very big breakthrough for us. Our offices have moved very substantially in getting ourselves registered with a lot of companies such as SABIC and others in Saudi. I haven't put this in our plans because we are at the stage of getting qualified and then we get the inquiries. We are extremely competitive, and now we have a track record. In the next few years, I see this as a very good potential high-margin business.
It'd be really helpful if you could quantify, sir, say, in terms of, say, crores or megawatt, how-
No, I can't do that. I say that we're concentrating on two markets, the Middle East and Malaysia, and Indonesia, but starting with Malaysia.
Okay. Sir, in terms of our reach expansion and after-sales. Basically, over the past two years, we had been seeding more number of offices, more number of employees we have recruited, et cetera. Have we done with it? Is this likely to continue?
Yeah.
What I'm trying to understand is, have the costs been incurred and we won't be seeing further cost increase, and we'll start seeing revenues flowing in? Or is it like we'll spend some more time and some more-
Good point. We've had some very detailed reviews post our year closing. We're having no further additions. In fact, we are cutting some expenses, administration, and others. When you set things up for the first time, you incur a lot of first-time costs in legal and office and administration and travel and all that. We've got a very strict budget. We expect our expenses on overseas offices to actually go down this year a little bit. We're not budgeting for anything increased. We're at our right levels. In fact, a little low.
Got it. That will translate into, say, lower increase in employee cost and other related costs.
Correct. Absolutely.
Got it. Sir, in terms of GETL, just wanted to know what is our current order book? This year, FY 2018, we had executed close to INR 95 crores. Will there be an execution flattish or will there be a decline trend?
So we-
Yeah. My last question is, there are a couple of large steel projects which are coming up. Would we see orders from the domestic side for GETL in the 30-100 megawatt range, large ticket size orders? Will they possibly come in? Thanks.
The first question is that our orders on hand are 154 in GETL. We expect a better performance, certainly a better performance in FY 2019 for GETL in all ways. Certainly with the orders on hand, with our executions, we don't expect delays on lifting, which happened in FY 2018 Q4. That's point one. In the steel sector, there are some inquiries, in the mining sector also, definitely, we will be pushing hard in our 30.1-100 megawatt range. We're also looking now fairly aggressively, as I said, internationally in these lines. We're trying to have a renewed sales effort in GETL, so to meet with our expectations and your expectations there.
Got it.
The one other point I'd like to make is that, I'm talking about GETL, that with the oil price going up, combined cycle projects are much more viable with the gas pricing and things. With this being part of the GE gas turbine packages, that's another good potential for the future for GETL pretty soon.
Okay. We can expect more orders like the Argentina one which we had won last.
Yeah. You got it. You're in terms there. Yeah.
These domestic orders, do you see them closing this year itself?
That's a million-dollar question. We don't actually bank on that only happening. We have this commit and budgetary. Right now, I'm not sure that.
More than steel, we have a lot of inquiries from the metal space also, which is broader than steel. You will see some activity on the broader metal, steel space.
Thank you.
Thanks a lot.
Thank you. We'll take the next question from the line of Darshika Khenia from Edelweiss. Please go ahead.
Hello.
Hello. Good morning.
Hi, sir. Good morning. This is Sanjesh. Sir, congratulations for a good set of numbers. I've got a couple of questions. First one on Triveni GETL. It's been third consecutive quarter for the losses, and you did explain you had made some provision and all. Sir, just wanted to understand if you can give some color as to why there is no order booking. Is it on account of higher competition or some issues on the acceptance side?
There is not a question on the acceptance side. It's more a question of orders taking long to fructify. We are accelerating our move into different sectors, new sectors. We are pushing that. To couple with the fact that just generally in the non-renewable space, orders have been slower to be converted. You'll notice that in your surveys of other sectors and power sector generally. I don't think that's really going to happen again in FY 2019. The movement of the oil price will also help generally combined cycle much more than it has in the past. You've seen the larger combined cycle companies globally and their results and what they've happened in Q1 for the calendar year. I feel that the movement of combined cycle. We're also really adjusting our sales channels.
We're being more aggressive on our sales for the future. We think that we are at a stage where we can more aggressively go and penetrate new markets. We're of that maturity stage in the journey.
Okay. Sir, what was the provision actually you made in GTL this year?
It was on a contract, that's something that commercially happens in large capital goods companies. We are following this very conservative policy that we look for the return from the insurance later.
Sir, can we quantify that provision?
We want to keep it with the.
Okay. No issues, sir. Sir, secondly, if you actually look on the domestic CapEx. I think the CPP market is stagnant at around 700 MW or much lesser than that.
It came down by about 2% this year in our calculation over the previous year. You could say about the same.
Yeah, about the same.
inquiry book is up by about 10%. That's where the market is.
Okay. What is this amount when converting megawatts, how much is this? It's somewhere around 700 odd megawatt?
Yeah. No, the inquiry book is about 1.75 gigawatts. This is below 30 megawatts. The growth we're anticipating is about 10% in this current year of the domestic market from about 650 to about 720, 730.
Okay. Sir, thirdly, if you look at the after-market business, I think our recent initiative like which we took almost two and a half years back of penetrating into the export market, that is going well. We are now almost around 40%. You see this increasing further the exports mix in the after-market business?
Yes, we do. It's slower than we expected. We have a lot of new initiatives that we started. We've developed packages of services, including remote monitoring and AMCs. Overseas, I'm talking about. These are two offerings. Interpretation offerings. They take time to actually get this bevy of services ready because these are different types of services to what customers want in India. We do see it increasing, yeah. Now that our offices are stabilized, that's also going to help in this push.
All right, sir. That's it from my side. Thank you.
Thank you. We'll take the next question from the line of Sumit Jain from ASK Investment. Please go ahead.
Good afternoon, gentlemen. Just to deliberate more on the opportunity in the domestic market. You spoke about the inquiry book, which is up 10%, 1,750 megawatts. What was awarded in your estimate in FY 2018? How much up or down that was compared to FY 2017?
648 megawatts was awarded, which is a decline of 2% over FY 2017.
This is below 30 megawatts.
Below 30 megawatts.
This includes IPP process, COGEN, everything that would fall in.
It includes everything which are power-driven market.
Can you give a sense as to this is cyclical and where it is right now in the cycle? What was it, let's say, three, five years back, and what was the peak of this market, and what was the trough of this?
The peak of the market was about 1,800 megawatts in about 2011, 2012. This is not cyclical. It is not expected to go up to 1,500 again pretty soon because there's been structural changes. You will have a substantial increase once the rate of growth, as you see, has picked up from the hiccups of the past year. Certainly the last couple of years, those hiccups are now over, GST and other things. They are being digested, so people are now coming out of the phase of non-investment. We look to a very good increase, certainly in FY 2020, starting with FY 2019.
We see our customers, they're more keen to engage on discussions on their inquiries, and so that is the positive trend.
FY 2018 at INR 648 would be the trough for FY 2017 or lesser than that?
Probably, yeah. Probably the bottom. Yeah.
What is the threat to this particular space from microgrids based on solar energy in future?
You see, the point is that a majority of our customers are, like you said, in the CPP market, require steam as part of the process. Now, either they produce waste heat, which is a form of steam, which for us. Now, if they require steam as part of the process, that's for the alternative. This is the most cost-effective method for them to deliver power for themselves.
Biomass, in any case, is different. That is a renewable, just like solar. That space as well.
In this space of renewables, as long as the feedstock is available, it always makes sense for you to set up this plant. There's enough funding behind it, there's enough capital, there's the returns exist. Even if the payments are delayed, that is a risk that is shared with all renewables. It's not distinct only to municipal solid waste or.
Yeah. Basically, we are fortunate that we are in four or five sectors which are not subject to this competition. One is the waste to energy. The second is cogeneration, which is coming in from both biomass conversion and also combined cycle, which is looking at the gas and oil prices, and we're completely separate to. Lastly, process industry. Our sectors are fairly solid, not just in India. The same model is there, settling in all the developing nations to a very large extent where there's a lot of growth. In certain sectors as a developed nation, which is waste to energy and biomass.
Renewable side.
Renewable side.
Out of the 650 megawatts, how much would be coal-based captive power, roughly?
Not much. The majority is.
Almost none.
Maybe about 15%.
Yeah.
Maybe. Max.
What was our market share? What it has been like in this space?
16%. We're retaining our historic market share.
What are the rough realizations that we have in products?
I think that's a different question. We won't be able to answer that very accurately, unfortunately.
One last question is, how big is the market in India, about 30 MW up to 100 MW?
Well, last year it was very small actually. That's part of the reason that our growth was low. There were only two, three orders that were actually placed, of which we had one, and so you could say we had a 1/3 market share.
The market in India is, we haven't started moving to larger projects of waste to energy or in biomass like it's internationally. Also combined cycle markets in India are not following the same trend. Gas is still not, even though we don't have the same availability as many other countries have. Our markets are a little different in the 30 to 100 megawatt space. That's why our push internationally is much more, and that's where our comparative advantage is.
Can you quantify what got awarded in this space in FY 2018? These 200.
No, I don't think that is our role here, actually. Thanks.
Okay, sure. Thanks.
Thank you.
Thank you. The next question is from the line of Vicky Cheng from Sundaram Mutual Fund. Please go ahead.
Hello, sir.
Hello.
Congrats on a good set of performance. My question is with regard to, say, this coal availability, there's a shortage in the market. Does it having any impact on our, say, order flows or order inquiries?
No. There are not so many coal-based inquiries in our pipeline that will get delayed. This is not a trend really that's going to affect us. The coal problems are more for existing power plants and for the very large ones.
When I give you an example, even if a captive unit is using coal for their production and is unsure of it, the cost of him importing the coal for his captive requirement would easily still meet INR 2, INR 3 cost of production that he may want. The price of coal would not deter him from setting up the captive power plant. No one's using coal at this size to actually export to the grid. It's not grid competitive right now.
Okay. Still there will be viability. Sir, in such a case of power deficit scenario, like we are having a power shortage, do you expect that the demand for captive power will increase, sir?
Yes.
Other things being same.
Actually, the demand for power is now for decentralized power.
Okay.
The trend is decentralized power rather than relying on the grid. Anyone who has anything to do with steam, of course, they must have their own captive power. The viability of smaller power plants with the high efficiencies that we are able to offer in our products give a good ROI to people to be self-sufficient in power.
Also, industry bears a disproportionate brunt of the subsidies in the electricity market, and so people do look at captive power. I know.
Yes, sir. That's right, sir. Sir, on waste-to-energy domestic market, any traction happening, sir?
Small. I think we can ask our president, sales, too.
In domestic market, waste-to-energy, there's not much traction. There's the inquiry base is there, so few orders getting finalized, but probably FY 2019 may be a year where we can see some traction on that front.
Okay, sir. Sir, on international front, any large traction coming in, sir, actually, any large growth you are seeing, sir, for next year?
Yes, as I said, the growth that we've had in exports in the current year, we are foreseeing a similar situation next year. Growth in Southeast Asia and Eastern Europe, in the sectors that we talked about, we expect to continue in FY 2019. The first quarter is promising. First quarter is already showing good traction.
Okay, sir. Sir, in terms of new office setups, are we planning some more new offices, or we will consolidate, and we will optimize our available offices and reach? What will we do, sir?
Yeah. We are consolidating now. As I answered before, we have gone through all our startup expenses. We expect no further expenses to be incurred. Firstly, we're not setting up any new offices immediately till we start using these offices for larger geographical spreads. They've all stabilized. The expenses are going to be comparable with last year, if not lower.
Okay, sir. Thank you, sir. That's it from my side.
Thank you. We take the next question from the line of Pawan Motwani from Axis Capital. Please go ahead.
Morning, gentlemen.
Morning.
Congratulations the way you have been able to mold your business in exports and aftermarket and weather the downturn. My question is, we have seen large orders booking by Thermax, especially in the fertilizer sector, and L&T yesterday announced two large fertilizer order of some INR 4,000 crore, and most of these are speaking about captive power plants, gas-based. Would Triveni be the beneficiary of this trend that we are seeing?
You see, a lot of the plants coming up, unless it becomes combined cycle, these plants may have an open cycle, which means gas. Unless it becomes combined cycle, where the steam comes in, it's not there. Eventually, one of the big markets for us globally is for people to go from open cycle to combined cycle. It's happening internationally quicker than it's happening in India, because they haven't got to that as yet. Here, we have not seen too much traction on the steam part from the fertilizer.
I understand. My second question is, you spoke about waste heat, which we believe cement is one of the sector. How large is that market, and how do you see this market shaping up? If possible, what percentage of the cement plants would have waste heat, and how do you see that as an opportunity for you over the next three, four years?
That's a good point. I think I'll ask my president. I think it's a good market, the waste heat market for cement.
Yes.
Sir?
Cement waste heat recovery is one of the biggest opportunities what now we can encounter FY 2019 and FY 2020. Today, installed base of cement plant, only around 7%-8% of the plants having this waste heat recovery, that the clean waste-based power plants. The inquiry base is increasing. As these plants, whatever running plants are more successful and started giving good returns to the investment, we see this as one of the big opportunities for years to come.
Sir, how large could this be? Any rule of thumb that is like 5, 6 MW per million ton, and how large that opportunity could be for your company?
I think it is something like around the waste heat based on the technology available today, which is like a million ton plant closer to around 6, 7 MW of waste heat generation.
Okay. That's very helpful. Basically.
Excuse me, sir. I'm so sorry to interrupt. I request you to please join the question queue for a follow-up, as we have people waiting in the queue.
Okay, fine.
Thank you. Before we take the next question, I would like to remind all the participants, please limit your question to two per participant. You may come back in the question queue if you have a follow-up. Thank you. We take the next question from the line of Pavan Kumar from Unifi Capital. Please go ahead.
Sir, regarding the working capital cycle, did I hear right the INR 90 crore have already been received from the receivable parts?
Yeah. Absolutely.
The inventory, that shipment is going to happen in this quarter, or how are we seeing that?
We're seeing it actually it is going to Africa as part of a GETL. We're pushing very hard with them, they're pushing hard. It will be, I can't say for certain, definitely June, July, Q1, Q2.
Okay. Lastly, on the numbers.
We're going to get some storage charges.
Okay. On the TTL side, you mentioned that the order book was INR 154 crore. If my calculation is right, last quarter it was around INR 130 crore. Have you won any new order in this particular quarter?
Yeah. International. No, and sugar. International.
Oh, you have won a new order in the international market. Is it? Okay.
Correct.
Okay.
Yes. There was a sugar order in Bangladesh.
Currently the receivable position would be normalized at around INR 150 crores or INR 130 crores, INR 340 crores, sir?
Yes. That's right.
Okay.
Correct. Actually that's on an annual basis. The fact is quarterly it comes lower because Q4 is always a high dispatch month. Through the other quarters it will normalize to a lower level.
Okay. Do the steel prices affect us? The commodity prices which have been going up. Would it have any kind of margin impact on us?
Yes, to some extent we have a cost increase, that is being compensated by higher realization of prices from the market. Overall, margins are not much affected.
Right. On the realization, while you mentioned that it's difficult to give a realization number, just wanted to know the trends in the realization, how that has been in the past, say, 18 months.
Very favorable.
Okay. In spite of the commodity prices going up?
Yeah.
Commodity prices to the extent that they end up impacting is only two, three %. That's absorbed by the price. That impact really is not much.
The raw material and then of that, the commodity, it's not a big mover.
The raw material as a percentage of sales for us is somewhere above 50%, and of that, the raw commodity prices is very little. The movement of those prices is not all that material.
GETL
Mr. Kumar, I'm sorry to interrupt. Requesting you to please join the queue for your follow-up as we have people waiting to take turn. Thank you. Before we take the next question, I would like to remind all the participants again, please limit your question to two per participant. Next question is from the line of Manish Goel from Enam Holdings. Please go ahead.
Hello. Very good afternoon, sir. A couple of questions. One, continuing on the waste heat recovery. It was mentioned that 1 million cement plant requires 6-7 MW of waste heat recovery. What would be the overall project cost and what would be our addressable market in waste heat recovery, sir?
You're asking some cement consultant question. You see, it depends on every single case. You know the cement production and you know what is the cement capacity today. I think if you look at that and see the fact that there are only about 10% or 15% of them that have it.
Less than 10%.
Less than 10%. You have 90% of the cement production.
Right
That have this potential. That we are seeing in cement the cement price is a fairly good business deal for cement manufacturers.
No, sir. Where I was coming from is what would we say the project cost for one megawatt out of that, if it is, say, INR eight crores-INR 10 crores, what would be our share in-
The project cost will be somewhere around INR five crores to INR five and a half crores per megawatt. The 1 million ton cement kiln has a potential to generate six to seven.
Yeah.
The entire market is open to Triveni because our technologies are applicable to the entire market.
Okay. We can get the entire project order. Basically that is where I'm coming from.
Exactly right. Yeah.
Second question on the agri-waste. Basically, we were looking at potential market because typically in Delhi surrounding areas, we see a lot of pollution due to burning of agri-waste. Now, what we also see on other side is strong government push for 2G biofuel from such agri-waste. Do you anticipate that the market opportunity could be lost for us?
No, it's going to take quite a long time.
Right.
The technology still have to be-
There's space for everything. There's space for the both models. The fact is that agri-waste is primarily stubbles as opposed to the stock itself.
Sure.
There are different models that both will apply, both will work. I think on scale, incineration will win out as a technology over the bioethanol.
Okay. Last question on aftermarket segment, how do you see the growth going forward?
We see the aftermarket growth in the export field. On both fronts, we see both absolute growth in the aftermarket as well as the percentage of sales
This is something that's consistent with our rising order book. You see the order book, I'm sorry, installed base. As the installed base grows-
over a period of time, we get more orders. That coupled with the fact that our offerings also in the servicing market is increasing.
We see that there will be continued growth on this front. We believe that our focus on actually making sure that we get more orders, and therefore a larger installed base, will continue to then allow us to grow the aftermarket.
Okay. Basically, we were looking at refurbishment opportunities, even from third-party products where we haven't supplied turbines, which we haven't supplied. Are we getting any breakthroughs in such opportunities?
Yeah. We got some in FY 2018.
Sure.
That market is a slow market, international. It's lumpy.
Right
Because you have to get somebody else's machine and have it air freighted to India and repaired and then sent back again. Many people don't want to take that time and dislocation. We are offering very good offerings. It's definitely a good market. It needs more effort, but there's good margin.
Fine, sir. Thank you so much.
Thank you.
Thank you. We take the next question from the line of Sumit Jain from ASK Invest. Please go ahead.
Sir, the refurbishment market for us, what is the general average size that we cater to?
It depends on the type of work. You see, the work that we offer is through the value chain. We could do anything as simple as overhauling to actually re-engineering also. It depends. Of course, that has to be sufficient enough for our overhead and our capacity. That doesn't make sense. We've gone all the way up to doing 250 to 300 megawatt turbines as well in terms of work.
Would the margins be very high in this segment, like 25%-30%?
They are normal servicing margins. We have them. It's sporadic. It depends on where it comes from. We have good margins, including the cost of transport and bringing it here and back again. Both the customer and we get a good return.
Sure. Thanks.
I'm sorry. Here also I forgot I had a question. Our competition is very fairly limited in the refurbishment. It's mainly from local people where they try to convince them not to send it and not to do such a big job. There. Many people do want to have this efficiency and power improvement, which is what we offer. We offer a completely different value proposition, and more and more people are coming to that and willing to sacrifice the extra time that it takes to send it and have it done by us.
Thank you. We take the next question from the line of Ajay Singh from First Global. Please go ahead.
Hello.
Hello.
Hello. Hi, sir. Congratulations on good set of number. My question is, just wanted to get a clarity on EBITDA margins. If you can give us segment-wise EBITDA margins like export, domestic, and the refurb to-
No, we don't share that.
Okay.
No.
Okay, no problem, sir. No problem. My second question is, could you give us some just guidance? Could you give us some view on export market? How we are looking for next two years or three years, like a simple broad view?
All right. We are seeing a growth. Firstly, there's growth in the export market.
Okay.
We are seeing growth given you the sectors where we feel will sustain in the medium term. They're not subject to going up and down because we are looking at sectors such as waste to energy, process cogeneration, renewable. These are sectors which are in the plans of countries for the future, and some countries have incentives, some have lesser incentives, but they give the potential for there. We don't find the competition from what large coal-based power plants have. Secondly, more and more countries are coming into this space in the developing world in terms of waste to energy, and all the sectors. We are seeing growth-
Okay
In the short term from Southeast Asia and Eastern Europe, also from LATAM and Africa.
Okay. Second question. Any view on order books for next two years, excluding VAT? Any view for the next two years?
Yeah, we are up. We expect to increase the order book in FY 2019 to what we achieved already.
Okay.
We're looking at increasing order books year-on-year, and the first quarter is a good start.
Okay, sir. Thank you so much, sir. Thank you.
Thank you. We take the next question from the line of Pawan Pareek from Renaissance Investment. Please go ahead.
Hi, sir. I have only one question. These regional service centers that you've set up, any revenues that we've booked in the current quarter or current year from these service centers, which otherwise in the absence of these service centers we wouldn't have been able to book so far?
Well, from an accounting perspective, the fact is that there hasn't been significant revenue to these subsidiaries. The costs have largely been built up. As they build up their own inquiry book and forms what they may want to execute. First, the fact is the reason that we set them up was to get greater visibility. To answer your question, we believe that the performance is what will come in going forward from here. We are optimistic that visibility that we would not have seen earlier, we would get. Also the confidence that the customers would get would be more.
Okay. Sir, as of now, only costs is in the P&L, no meaningful revenue. Going ahead, those revenues should also start flowing.
No, I think when you say costs, you see these are startup costs. When you're starting offices, you have legal and commercial and other costs, so that when you're looking at the cost base on the subsidiary results, you've got to take that is a bit one time. Certainly, our revenue stream from these subsidiaries is going to show a good increase in FY 2019 versus FY 2018.
Okay, sir. Great. All the best. Thank you.
Thank you. We take the next question from the line of Kamlesh Kotak from Asian Markets Securities. Please go ahead.
Thank you. Good afternoon, sir. Hello. Good afternoon, sir. Sir, just wanted to understand how many turbines we would have under the order book under GETL as of now.
We've given you the value of the order book.
Yeah, order book you have given. How many turbines would be to be executed this year in GETL and how many we would have executed last year?
We have five under the order book right now. We were fine, about a little less than-
Executed how many, sir?
Three. When you take numbers, it doesn't mean the same because they're different sizes.
Sure.
This is not a pro rata thing on-
Value per turbine
on value per turbine. It can be very distorting to look at it. We have more orders than we executed last year on hand.
Sure. Secondly, sir, given that whatever order book we have, what kind of visibility and what kind of growth you are looking at the current year in terms of the revenue?
As I said, I was not happy. We're having an increased sales push in GETL, both regionally and segment-wise. I expect better results.
Can we assume that with the higher proportion of export markets orders, the margin also could improve compared to what it was last year?
Yes.
Okay. Lastly, sir, how much investment we need to make in the new facility? Any CapEx that we plan this year?
No. With this all over.
Okay.
We've commissioned just normal maintenance. There's no CapEx really. We have some R&D, but they're all small.
Thank you. We take the next question from the line of Ashwin Jain from Sundaram Mutual Fund. Please go ahead.
Sir, Siemens had recently announced that in the European region and some of the regions, they are closing their turbine division. Any spillover or any benefits we are seeing, sir?
I think it validates the value, the chain that we actually operate in. If they move it to India, it means that this is where the competitiveness lies. It validates our model, in fact.
Actually, it is happening. We are in a space where engineer to order capital goods is globally being as competitive in the Indian space with a model of global sales force with offices to provide service. We are getting to the same platform as what the people had overseas.
In fact.
With [DDI railway].
In fact, actually, one of the biggest issues that we may face in export is the acceptance of the customer from a Make in India perspective. If that is becoming a more standard in terms of production, that actually helps us in many ways.
Mm-hmm. Will there be chance of more market share gains, sir? Like customer will have a Siemens reliability and say, life cycle service issues, so customer will come to Triveni only, right sir?
In our case we have a very life cycle guarantee also. I think the space for Indian orders globally is on the up.
Okay. Sir, finally, on this currency benefit, will we benefit fully or will we pass through the market and gain market, sir? What is our thought, sir?
Typically we run a hedge book, and so we take two gains. One is a forward premium, and there's some MTM on that. Given our hedge accounting now under Ind AS, what we were not able to absorb at all in FY 2018 will now revert into FY 2019 other income. Hopefully this will answer question in subsequent calls about where our other income comes from.
Sir, how much, sir, hedge books, have we hedged for three months or six months, sir, roughly?
No, we hedge it. It depends on our order cycles. We hedge it according to that.
Okay. You have an order book of INR 700 crores, will we be hedged for INR 700 crores or-
We will see, depending on our hedging policy.
No, it's only on the export. 700 includes domestic as well.
Oh, sorry. Correct. Thank you, sir.
Thank you. We take the last question. It's from the line of Varun Agrawal from BOI AXA Mutual Fund. Please go ahead.
Hello, sir. Sorry I missed the initial part. My question is on the international competition. In terms of competition in Europe and other parts, how is competition doing, and has there been any consolidation in the competing businesses?
No, competition is there. We don't have as many competitors in the steam turbine space as in some other product lines. Competition is as much as you would expect. The competitiveness and the value proposition being offered from India is being much more widely accepted, and we are able to now provide customers with a good value proposition and with a good return to the company. Now that is the general spread. Technologically, what we are doing is concentrating on our R&D and our value engineering on our service, so that we provide a world-class solution to these customers and in all the segments that are relevant. I think we are matching now best in class, what is happening with the international competition.
Okay. Thank you.
Thank you.
Thank you. Well, ladies and gentlemen, that was the last question. I would now like to hand the floor over to the management for their closing comments.
Thank you very much for an interesting Q4 session. Thank you for your comments on our results for the Q4. I'd like to just end by saying with a good order book to start with more exports in the order book and flowing right now in Q1, and our inquiry pipeline for FY 2019, and the feedback we have from our offices. We feel the FY 2019 is going to be a better year in both terms, and we are looking forward to good growth. With that, thank you very much.
Thank you. Ladies and gentlemen, on behalf of Triveni Turbine Limited, this concludes this conference. Thank you all for joining us. You may disconnect your lines now. Thank you.