Ladies and gentlemen, good day and welcome to Q2 and H1 FY 2024 Earnings Conference Call of Triveni Turbine Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then 0 on your touch-tone phone. Please note that this conference is being recorded. I now hand over the call to Mr. Rishab Barar from CDR India. Thank you, and over to you.
Good day everyone, and a warm welcome to all of you participating in the Q2 and H1 FY24 Earnings Conference Call of Triveni Turbine Limited. We have with us today on the call Mr. Nikhil Sawhney, Vice Chairman and Managing Director; Mr. Arun Mote, Executive Director; Mr. Lalit Agarwal, Chief Financial Officer; Mr. S.N. Prasad, President, Global Sales Products; Mr. Sachin Parab, President, Global Sales Aftermarket; Ms. Surabhi Chandna, Investor Relations and Value Creation, along with other members of the senior management team. Before we begin, I would like to mention that some statements made in today's discussion may be forward-looking in nature, and a statement to this effect has been included in the invite which was mailed to everybody earlier. I would like to emphasize that while this call is open to all invitees, it may not be broadcasted or reproduced in any form or manner.
We will start this call with opening remarks from the management, following which we will have an interactive question-and-answer session. I now request Mr. Nikhil Sawhney to share some perspective with you with regard to the operations and outlook for the business. Over to you, sir.
Thank you very much, Rishab. A very good afternoon to all the ladies and gentlemen joining this call. It's my privilege to be talking to you today for the Q2 H1 results for Triveni Turbine Limited. It's a very good day. The quarter and a half year ending 30 September , Triveni Turbine has reported yet another strong set of results across all key metrics of revenue, profitability, as well as order booking. Again, we have our highest-ever quarterly revenue and EBITDA, along with a record closing order book, keeping the growth momentum over the last two, three years. We had a revenue of INR 3.88 billion in the Q2 , an increase of 32% year-on-year. And we also had the highest-ever EBITDA at INR 889 million in Q2, up 34% with a margin of 22.9%, an increase of 25 basis points year-on-year.
PAT to the quarter at INR 640 million with an increase of 38% year-over-year, with a margin of 16.5%, an increase of 70 basis points year-over-year. We also had a robust order booking of INR 4.59 billion in the Q2, an increase of 27%. For the half year, again, we had a record revenue of INR 7.64 billion, an increase of 38%, as well as our highest-ever EBITDA of INR 1.73 billion, which is up 41% with a margin, again, of 22.7%. PAT for the half year, we're at INR 1.25 billion, which is an increase of 48%. The order booking for the half year was at INR 9.12 billion, which is a 27% increase year-over-year.
The record outstanding carry-forward order book as of the 30 September was INR 14.76 billion, an increase of 30% year-on-year, which positions us very favorably for the coming quarters as well as for the next year. Our robust cash generation, as you would have seen from the balance sheet, which has been circulated to SEBI and to the stock exchanges, has now an investment portfolio at INR 8.32 billion, an increase of 24% on the 31 of March 2023. Our reserves now are the same as what they were at the same time last year, which was prior to our INR 240 crore buyback. We are sustaining on our long-term growth strategy, which is to expand our presence in international geographic markets while at the same time expanding our product as well as service portfolios.
This strategy seems to be working out consistently for us, and we see a good visibility to sustain our growth momentum. Beyond the growth rates mentioned, beyond the growth that I've already talked about, some of the key highlights are that exports as a contribution of sales have increased to 47% from 41% in the half year FY24 versus FY23. Aftermarket as a percentage of sales has contributed 33% in the first half of FY24 as compared to 25% in the same period of the corresponding period of last year. Speaking about order booking, our order booking for the product segment grew by 12% to INR 3.06 billion. For the half year, it stood at INR 6.13 billion. Demand from sectors such as sugar, distillery, steam, oil, and gas has also contributed to this growth. Both industrial as well as API drive turbines are contributing to these orders.
Despite the global turmoil, we remain positive on our growth prospects in the medium term and have good visibility of underlying demand through our robust inquiry book, which has increased 33% year-over-year in the first half of FY2024 with a healthy contribution from both the domestic as well as international inquiries. In the Aftermarket segment, order booking grew also impressively and very impressively at 73% for the quarter to reach INR 1.53 billion, translating to a 57% growth to INR 2.99 billion in the first half. There's been a strong performance both in the domestic and international orders coming from efficiency upgrades as well as automation. The Aftermarket business has been expanding its horizons through a wide array of customer refurbishment solutions going beyond industrial steam turbines to other rotating equipment while expanding its global footprint.
We are progressing well on this front and will keep enhancing the addressable market for these lucrative and niche segments. Combining the two segments, overall, the order booking for the quarter and the half year period registered growth of 27% to reach INR 4.59 billion and INR 9.12 billion, respectively. Contribution of exports to order booking was considerably higher at 49% in the first half of FY24 versus 40% during the same period last year, which bodes well for the future both in terms of our product mix as well as margins. During the quarter under review in terms of revenue, revenue from operations grew by 32% as compared to the previous year to INR 3.88 billion, which is the highest ever achieved in a quarter. The growth was well balanced between both domestic as well as international revenues.
Domestic sales increased 29% to INR 2.12 billion, while export turnover increased by 36% to INR 1.76 billion. This is, of course, a consequence of the order booking of the previous year. The mix of domestic and export sales was at 55-45 with a quarter of broadly similar at 56-44 in the previous corresponding quarter. The product segment turnover was INR 2.68 billion during the quarter and increased at 20% over the previous year.
The aftermarket segment grew handsomely at 71% to INR 1.2 billion during the quarter. For the half year, revenue from operations grew 38% year-on-year to INR 7.64 billion, which is a record for the company. Domestic sales increased 25% to INR 4.07 billion, while export turnover increased by 59% to INR 3.57 billion. As mentioned earlier, for the first half, the mix of domestic and export sales improved considerably in favor of exports.
The product segment turnover was INR 5.15 billion during the first half and increased to 24% over the previous year. The aftermarket turnover came in at INR 2.49 billion during the first half, registering a strong growth of 81% over the previous year and contributing to 33% of total turnover in H1 versus 25% in the first half of FY23. On other aspects of the company, we continue to focus on R&D and technology and technology developments.
It's very important for a company like us to continue to focus and spend money on research and development, not only on our current product lines but in terms of other enhanced product lines that may help enhance the value that we bring to our customers. This is both from our product business as well as our aftermarket business. We continue to invest with global institutions as well as academic institutions, but also internally.
We have a very strong recruitment pipeline, and we aim to become a best-in-class in terms of research and engineering research in the rotating equipment field in the country. As far as the market updates, we remain confident of the growth drivers of the company's product and aftermarket solutions with a robust inquiry book. Positive customer demand and overall acceptance of our offering has expanded our presence worldwide across segments. But as I pointed out, our inquiry book, which has grown by about 33%, gives us good visibility in terms of enhancing our order booking in the quarters to come, which bodes very well not only for this current financial year in terms of order booking but also order booking going into FY25, which then bodes well for revenue in FY26.
With a formidable product and aftermarket portfolio, underlying demand drivers are in place, and continued focus on innovation and sustainability allows us to focus on people, which is really the center of what our focus is for the next several quarters in terms of being able to build and enhance the capacity and capability of our workforce not only within the country but internationally as well. We are also focusing on internationalization of our efforts to continue with the growth that we have in our export order booking, both on product as well as aftermarket. With that, ladies and gentlemen, I'm happy to take questions.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use the handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, to ask a question, please press star and one on your phone now. We have a first question from the line of Abhijeet from Yes Securities. Please go ahead.
Yes. Good morning, sir.
Good morning.
Sir, my first question is on the aftermarket business. Out of the aftermarket revenue, what is the proportion of the revenues coming from our own machines versus the machines from other companies that are installed? Can you give us a split?
Sorry. Are you asking the difference, the split of the revenue in aftermarket between servicing and sales of our own product versus refurbishment or third-party services?
Yes.
Unfortunately, we don't get that split, but what you can imagine that a significant amount of growth has over the period come from a refurbishment, which is a very key growth driver to our business. As you can imagine, the growth in sales of our sales and service is commensurate with our installed base, and the growth of that installed base over time lags. Let me ask Mr. Sachin Parab, who's our president of aftermarket, to provide some more clarity. Unfortunately, the exact split I'm not going to be able to give you, but Sachin, maybe you could provide some more clarity around the question that Abhijeet asked.
We are seeing good growth in both of our revenue streams. That's the part sales and service business as well as in the refurb business. As our Vice Chairman has mentioned, the growth of the refurbishment business has been extremely good, and that's gaining in terms of part of the overall share. The refurbishment business is growing much more than the part sales and service business. But as our product business is also growing after a lag, the part sales and service business will also be growing at the same rate. We are seeing good traction in international markets, and that is helping us provide these good numbers.
But also, our offerings in the aftermarket space have also expanded. So when you look at offerings such as upgradation and automation, these are not services that we were providing earlier. So there's enhancement on our service offering also, which is also aiding the growth of this business.
Right. So one part is the upgradation of our service offerings. Making entry into automation. Enhancing those offerings that work in what we used to do earlier. The other part is the.
Hello?
Can you use your handset mode, please, Mr. Abhijeet?
Yeah. Yeah. Am I audible now? Is it better?
Yeah. There's a little echo. Just keep saying.
Sir, my question is that, so one is the upgradation part from a service offering point of view. We talked about automation, and so that is one part. But the other part is servicing of third-party product. So I think we talked about that. We are also aggressive in terms of gaining share in that category. So what is our strategy? Why do our customers would opt for our services versus the services of the OEMs of those products? That is my other question.
Sir, that's exactly the barrier that we need to break with the customers. The fact is that you have a competitive scenario where you have a lot of OEMs that have left the market, so you don't have OEMs which are providing service to certain customers.
Secondly, there are many OEMs who have not been able to keep pace with technological enhancements, and so they're not able to effectively provide solutions for newer technological upgradations. But more importantly, it's the proximity to customers to be able to provide a value addition where the customer needs it. So that's a break that we need to make, and that has been an issue that we do deal with. Of course, as you rightly point out, the market is enormous, and there's no concept of market share here because, very frankly, we are negligible in the broader scheme of things. But it all depends on what degree of value addition we talk about. You have lower value addition of services that you may do for third-party turbines, which may be items such as overhaul, and you have higher value addition items such as upgradation.
Now, it all depends on not only the appropriateness of our solution to the client but the confidence that we're able to build with him that we may be able to provide the solution better than the OEM. But the alternatives here for the customer are largely OEMs and what I would say is local repair shops. And so we fit somewhere in between as being an OEM ourselves with capabilities of technological development but not exactly a local workshop. So we fit somewhere in between as a value proposition. We aim to be able to enhance that in front of the customer to be able to provide returns. Yeah. So that's our strategy.
I think that by focusing on geographic expansion and being able to build confidence with our customers on a localized basis wherever we do operate, we aim to bridge those uncertainties that a customer may have in terms of placing orders on us.
So right. So, sir, are we targeting a certain capacity of turbines? I mean, in this kind of strategy you're talking about, that you are somewhere between the OEMs and the local shops. So is there a certain category of turbines in terms of capacity that you're targeting here, or is it across 25MW and above?
No, there's no restriction at that. Ultimately, the fact is that to cover overhead, there's a minimum value of order that, obviously, we look at. But very frankly, the market is open. It's not limited directly to turbines only. We do it for other rotating equipment, including gas turbines and compressors and other rotating equipment. So it's a question of being able to, again, take that whole value proposition in front of those our industrial customers.
Right. Thanks, sir. That was my questions. Thank you.
Thank you. We have our next question from the line of Amal Kedia from Ambit Capital. Please go ahead.
Yeah. Hi, Nikhil. Good afternoon and congratulations on continued momentum on your strong performance. So my question also is related to the aftermarket business. And we have been looking at some very strong numbers in this business for some time now. This quarter also over 70% growth in new order. Last year, if I recall, part of this outperformance was led by a South African acquisition and some utility aftermarket orders in that part of the business. What is driving the growth right now?
Yeah. So very frankly, as our SADC orders are something that we are continuing with. But Sachin, could you provide a little bit more visibility as to what segments of growth came in the last quarter?
We are seeing good success in other geographies also outside of Africa. In Asia and Europe also, we are seeing some good growth. So that is helping us show the good numbers that we are able to demonstrate. Also, the market in India is also giving us good traction. We mentioned about upgrades and automation. That is also a big chunk of the India business. So this is contributing to the growth.
Okay. So Amal, I think the fact is that we are expanding our product offering in the service space as well. So there's a routine supply of work that we do in terms of sales. But as we move that along with greater technological offerings, which ultimately have to deliver value to the customer, this is reflecting itself in terms of order booking and, therefore, I mean, ultimately turnover.
Right. Understand that. So the perspective was that SADC orders led perhaps margin-dilutive compared to your regular aftermarket business. But now that you're mentioning that the current set of orders are coming in from regions beyond Africa and perhaps more related to your normal offering in the aftermarket business, I would assume that the margins here would be more or less aligned with the regular margins here, then? Is that how one should look at it?
Well, Amal, I think that what we've said in a number of quarters in the past is that Triveni Turbine, in the way that we calculate it, aims to benchmark a minimum profitability of 20% PBT at any given point in time. And so, obviously, we aim to be above that. What we want to drive more is growth. So we're not really going to be margin-dilutive. Yes, all the facts of export as a higher percentage of sales, aftermarket as a higher percentage of sales are positive to margins, and which is somewhat reflected in this quarter, and you see it in the next several quarters also. But in general, the fact is we want to drive greater growth and adoption. Refurbishment as a market segment has multiple different value propositions. So you have low value addition, which is lower in margins, and you have higher value addition.
It's difficult to say quarter to quarter where you aim, but what we try to make sure that on a blended basis, what we're pushing more than anything else is growth because we need to be able to demonstrate our services in many different geographies. As we can do that and gain customer confidence, that's of more value to our business in the long term than any short-term margin expansion.
Sure. All right. And also related to SADC acquisition, I think at that point of time, you had highlighted that there were similar acquisitions or at least plans of maybe similar ventures in two or three other geographies. So is that plan still on, any work in progress over there?
Well, Amal, as you know, the fact is that this is, obviously, a very material subject that you bring out, and if there's anything, we'd have to take it first to shareholders and to inform SEBI and the stock exchanges. But let me give you our experience that we had with our South African acquisition, which is that we acquired a significant stake in a company to control a bit. And at the same time, we also did establish a local subsidiary which was able to garner orders by itself. That allowed us to actually get an extremely good return on equity and capital for our efforts in that region. Not only has it been accepted very well by customers, it's becoming a little bit of our regional support hub for our efforts, both on the product as well as the aftermarket side.
The concept is something that we do agree with. As far as acquisitions go, we don't have the capacity or the capability to do any large acquisitions. We don't actually have the bandwidth for that even. In this small service space, it's something that we have looked at and something that we will aim to discover. At this point in time, we have nothing to take forward to the board. The board hasn't considered anything. I should point out that this does not stop our organic growth endeavors that we will do in markets where we are seeing demand.
Right. Just one last question from me is that Siemens Energy at a global level is facing troubles, and it is a major competitor for you in the global markets. India perhaps will continue as it is. But do you think this presents you at least a temporary opportunity to expand your presence more aggressively for the time being?
Obviously, I can't comment on Siemens. We respect our competition. We think that they are the benchmark from a perspective of market share and technology in this space. We are not seeing any lightening of competition. So that's all I can say. I don't know if they're particularly in trouble. It doesn't seem like that.
Okay. Okay. All right. Thank you so much, Nikhil. That's all that I need.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer queries from all participants, please restrict your questions to two at a time. You may join back the queue for follow-up questions. We'll take our next question from the line of Mahesh Bendre from LIC Mutual Fund. Please go ahead.
Hi, sir. Thank you so much for the opportunity. Sir, I mean, the last two to three years, we have been growing with a very rapid pace. Now, we are at the far end of this calendar year. So just if you were to look for the next 18-24 months, what kind of growth are you anticipating in the domestic and international market?
Thank you for your question. Of course, this is not a question that I'll be able to answer directly because we don't provide guidance. But let me give you the fundamentals as to what drives our growth and to give you an idea as to how we're seeing it. Orders for this financial year are already captured within our order book. For the next financial year, for the Q1 at least, we have orders in hand, and I think probably for Q2 of next financial year as well. The inquiry book that we have right now is what is suggestive of the orders that we will take in in the next several quarters, not only for Q3, Q4, but also Q1 and FY25, which all seem quite robust for us to continue on the growth momentum of order intake that we've had in the past.
What that means in the order book is what provides us visibility in terms of revenue. As we sit today, both in terms of the order booking that has happened from the aftermarket and product segments have been robust. But that is also backed by investments that we are making in technology and people as well as in terms of having a more local presence. We're trying to allocate capital in ways that will allow us to risk mitigate any slowdown that we may see because of geopolitical pressures or other aspects. Though I have to say that a lot of growth that we are seeing is coming indirectly from energy transition where companies are looking to enhance their efficiency both internally as well as maybe directly generate power from renewable sources. We're in the right space right now both from the product and aftermarket segments.
I think that growth visibility seems to be quite adequate from the management perspective.
Sir, outlook for both domestic and international segment, I mean, both are saying that.
I have to give you some. So actually, I didn't want to go into a lot of detail on this, but our domestic Inquiry Book has grown in the first half by about 100%. And that's providing a good degree of comfort on the domestic market picking up, which wasn't so in the first half, which we pointed out in the last conference call. The international market in terms of its Inquiry Book is, of course, a very large Inquiry Book for us. And so for us, it's a question of conversion of that, but it is also continuing to grow at a healthy pace. So all in all, we are quite we have the Inquiry Book. It's for us to go out and convert those orders.
Sure, sir. Thank you so much.
Thank you.
Thank you. We have our next question from the line of Ravi Swaminathan from Spark Capital. Please go ahead.
Hi, sir. Congrats on the set of numbers. My question is a kind of an extension to the previous participant's question. In terms of the inquiry pipelines, we have seen good growth. I think overall, almost 30% kind of growth that we have seen. Which geographies and which sectors are driving this inquiry pipeline growth? If you can go into more granular detail, it'd be great. Because while we are marking this question, some of the larger large-cap companies over the past two, three quarters have talked about a bit of, say, moderation in terms of growth, especially in the domestic market with elections coming up in the next six months and globally things also muting a bit. So if you can give your broad thought process as to where we are seeing a delta, which other large-cap companies are seeing some moderation.
Well, I want to ask Mr. S.N. Prasad, President Prasad, to talk about that. But before he does, of course, it's very difficult to get into granular details because every quarter, the visibility sort of gets enhanced with other geographies and other customers. But if you look at the quarter gone by versus Q1, Q1, we'd already reflected that in the domestic market, the inquiry generation was muted, sort of reflecting what you were saying. But in Q2, we've seen a very different perspective, actually, with specifically segments such as cement coming back in a much stronger form. Steel has also been reasonably resilient in demand cycles, both in Q1 and Q2. This is from the domestic perspective.
You continue to see a certain degree of demand from the distillery segment, even though there seems to be a little bit of slowdown due to lack of visibility on raw material availability. Prasad, can you provide some visibility to Ravi?
Yes. Yeah. On the inquiry pipeline-wise, yes, domestic market is almost 100+% growth is there, especially coming from steel. It's one of the interesting segments. Steel, cement, and process co-generation, these are the segments. Coming to international markets, yes, we have a strong growth in inquiry pipeline from Africa. That is covering complete Central, South, and North America region. And Europe and Turkey is another area where we are seeing a good traction, good growth in inquiry pipeline, followed by Southeast Asia. These are the regions contributing. Even in international, again, we are into a process co-generation, independent power plants, biomass, and municipal solid waste. These are the segments which are giving that sort of a growth traction, sir.
Got it. Are these in the higher range of turbines, or it's a regular range that we are seeing an increase in?
It's spread. It's spread through the sector.
Okay. Now, why I am asking this, sir, so our EBITDA margin seems to be locked in that 19%-20% kind of range for a very long period of time. In spite of the very strong growth that we have seen, usually, companies see some operating leverage kicking in and that leading to margins expanding. I'm checking whether is there the further possibility of margins to expand from, say, 20%, 90%?
No, no. You see, the possibility is always there, but you have to tell you what we said this in the last several quarters, and I think you were on those calls as well, Ravi, is that we are going to be spending much more on manpower. We're going to be spending much more on R&D. And these are investments in the future, actually, that pay off in the longer term. We added over 15% to our workforce last year, and we continue to add in numbers like that. So they have an implication which comes down to where the operating leverage does get minimized. Yes, this is all building towards our capabilities for the future. We don't seem to think that margins is really the biggest problem for Triveni.
Our focus is on growth to sustain the margins that we have at a minimum of this 20% PBT margin that we say. But we ended up this quarter at 22+% . We think that that is somewhat sustainable for the company.
Got it, sir. Thanks a lot.
Thank you. We have our next question from the line of Jonas Bhutta from Birla Mutual Fund. Please go ahead.
Hi, Nikhil. Congratulations on a great set of numbers.
Thank you.
Two questions, sir. Firstly, can you talk about the API turbine-based market? Your comments in the investor note do highlight that that segment, along with the industrial segment, has sort of seen growth, but slight more understanding from a product positioning perspective, market share gains that we've seen in the last 12, 18 months. And is that becoming a larger part of our inquiry pipeline, maybe from what it was about two years ago? Some perspective on that will be helping. And then I'll come back for my second question.
Yeah. As you rightly point out, there is a spurt in investment in the oil and gas segment. For us in specific, we had to make a lot of headway in terms of getting registration with the end users and with consultants in this manner, which we had largely overcome. There's still some work that has to be done on that front. But if you look at it from a perspective of inquiries and order booking, we started from a position of having negligible orders in this segment. And we've enhanced that quite rapidly. And we continue to believe that our offering here is very appropriate for us to capture some market share. Meaningful, meaning we'd have to work towards getting a meaningful market share of over 25%-30%. That's a long-term vision.
But as we look at it right now, you have API requirements which happen for drive turbines, which is driving process equipment such as pumps, compressors, blowers, etc. But you also have power-generating requirements from the API segment as they are growing. We have requirements for API both in the domestic market as well as international markets. And we are participating in both and performing quite well in both. I'm going to ask Sachin to provide a little more visibility on this API. And Prasad, if you could just give an idea as to where you see it.
Yes, sir. Yes. So API inquiry pipeline, as our vice chairman mentioned, that yes, there's a strong growth in the inquiry pipeline we have seen or almost around 20% growth we are seeing year-on-year sort of a growth. And our registration process also, majority of the international EPCs and consultants, they are there on their AVLs. And going forward, I think this pipeline further, we are hoping that this will increase or maintain the same sort of a growth level. And today, our acceptability in domestic as well as the international markets is quite positive. And we see this segment will grow quite steep compared to IPP segment 130.
Just a follow-up here, sir. What we've seen is some massive ordering by the Middle Eastern oil majors, particularly on gas processing, fields, etc. So would we be beneficiaries of anything that happens on the gas processing side, or we are largely currently from a product positioning perspective, downstream refinery-based?
We're largely on the downstream refinery. But very frankly, anywhere that there is bottoming cycle, heat requirements, we participate. And so in gas processing, for example, if you're looking at just an LNG terminal, there'd be limited use for a steam turbine apart from maybe properly driving equipment. But very frankly, there's steam turbine requirements in every oil and gas establishment. And these happen at a small MW range, a small horsepower range to drive equipment. And we believe that this is that. I mean, you're pointing out one or two investments, but there's actually global investment that is happening in oil and gas.
Understood. My second question was circling back to this entire growth that we're seeing in the aftermarket because this is the third straight quarter where we've seen INR 1.5 billion worth of inflows consistently in that segment, while you and your colleagues have sort of highlighted that both revenue bands seem to be driving it. The question is more on the implications on margins because we remember that when we did take on this SADC order, we did mention that it may have a margin implication given that it was more like an entry pricing.
But at least, could you give us some visibility on whether, with progressive orders, that strategy is being folded back into your steady state margins, or we should sort of see it more as a two to three year process where not just in South Africa, but with every incremental country with that same client, you sort of go through the same process? That's my final question.
Yeah. But you see, the margins, even though we may have taken one order at low margins, have not impacted the overall margins either of that segment or of the company. You could say that it's partly driven by operating leverage. It's partly driven by a segment of exports versus domestic. In fact, we've had margin expansion in those contracts. And those contracts are largely over also, but though there are some continuing kind of contracts that we'll get into. But very frankly, now, this is becoming part of routine operations where we think that certain low-value-added services, be it overhauls, will continue to have a certain margin profile. But they'll be supported by high-margin orders in different offerings that we will have for upgrades, etc.
So on a blended basis, both for the aftermarket segment as specific as well as for the company overall, we really don't think margin is a problem, especially given our growth possibilities. We're not really going to go for orders which are low-margin specifically. Sometimes, even the SADC order was not entry pricing. It was just lower than our normal margins. But on a blended basis, we cautioned investors that we may see something fall. But ultimately, the team was able to deliver very strong margins even on those low-margin orders.
That's well appreciated. But just wanted to flag off that even in the worst of times, say, 2015 through 2020, 2021, our other expenses as a percentage of sales were in the average of about 14%-15%, which on a substantially higher revenue base, we are clocking closer to 19%-18%, and which is where, I think, one more participant was sort of asking on the operating leverage bit. And so what?
So the R&D and the manpower investments, again, would we function more in the employee cost, or how should one think of the more steady state operating expenses, sir? So operating expenses, if you notice that we had in the last several quarters, we had notes to accounts which talked about a subcontracting charge that we had which related to the other expenses based on this SADC order. Now, this SADC order has gotten extended to an extent where it's becoming a little bit more routine. And so we don't feel the need to actually start giving the breakup in the notes to accounts.
But to give you visibility on other expenses, because that's a very legitimate question that you've asked in terms of the growth from the half-year perspective, especially, but also as a percentage to sales, a significant portion of that is contributed by just the subcontracting charges which may have been for the half-year for that particular one order. In general, we think that there are efforts that have to be made in terms of increasing our operating leverage apart from this subcontracting charge, which is a direct cost in a sense. We could either put this as another expense or have included it as raw material, and you would have had the question either way. One would be, why is the raw material percentage of sales increased or the other way around?
But for us, it's better to put it in here because until we are certain that this is a long-term business, there's no reason for us to account it in another manner. But I do agree with you that there is some work that we need to do to get better operating leverage, specifically in terms of our travel and other expenses related to sales, which, as you know, have gone up considerably over the course of the last several quarters based on international airfares, etc. And so we're cognizant of it, but we think that we'd make some more efforts in the coming quarters to see how best we can rationalize that. But Arun, do you have any comments around the question on operating leverage and specifically other expenses? Yeah. We are keeping tabs on other expenses.
What we find that because of the travel tickets almost doubled international, this is an effect. But then it's getting optimized. And over a period of time, for the next six months, we'll be well within our normal limits that we are expecting. There is no immediate correction to it.
Thank you. We'll move on to the next question from the line of Harshit Patel from Equirus Securities. Please go ahead.
Thank you very much for the opportunity. My first question is on the domestic 0-100MW market. Could you highlight what was the rate of growth in the Q2 at the market level? I believe you had shared that it would grow by more than 25% for the full FY2024. Would you maintain the same outlook?
I think the market is the Inquiry Book is suggesting that the market will grow to that extent. Yes.
What would be the market in absolute value terms? I believe you had quoted a number of 200 MW for the full FY23.
No, I don't think we could have said 200. It must have been more like 2,000.
Sorry. 2,200, sir. 2,200 for 0-100 MW.
Yeah. I think that's somewhere accurate.
Okay. Sure. Sir, second, coming on the pricing front, I believe almost all your orders would be customized in nature and only produced against the customer requirement. But let's say if I take a standard, let's say, 8-10 MW SKU, then what would be the differential in pricing on an average as of now, whichever is what we used to offer a couple of years back? I think there would be a lot of factors impacting the sale, given how the raw material prices have behaved, how much more value addition we are now doing versus a few years back, and so on and so forth. But just to get a sense on how broadly the pricing would have moved, let's say, in the last couple of years.
You're asking a very different question. I think it's very difficult to answer that because it is somewhat competitive given the fact that this is a public call. Suffice to say that there have been pricing pieces that the company has taken, in general, based on movement of raw material prices, as well as the fact that as competitive intensity weakens, which is that the market grows, you do have certain more pricing flexibility. So when we look at it from the basis of five to seven years ago to now, there has definitely been an increase of at least, I would say, 25%-30%.
Understood. Thank you. Thank you very much for answering my questions. And all the best.
Thank you. We have a next question from the line of Himanshu Upadhyay from o3 PMS. Please go ahead.
Yeah. Hi. Good afternoon. Congrats on the great set of numbers. My first question was, as we see more and more renewables playing a role in power, to a certain extent, it leads to faster shutdown and ramp-up of power, okay? What impact does it have on the turbines, okay? Does it lead to more wear and tear and bigger opportunity for us, or it does not have any impact because most rotating equipment, if you are starting into a faster shutdown and so on?
So steam turbines have a longer rolling cycle than a gas turbine would. You don't really have so many start-stops in a steam turbine. From an industrial perspective, you have different considerations. The majority of our customers are either producing steam and therefore generating power out of it, such as in waste heat recovery, or are using steam as part of their process. So really, their requirement is for energy, which is both in terms of heat and power. It's not really only for power. We have customers, of course, who are generating power only both for internal capital requirements but also for supply to the grid. The turbine is sophisticated enough to have automation for both cost down and for other aspects of startups.
The real issue that happened in terms of wear and tear is either the wrong inputs in terms of steam or other aspects or also the management of the turbine itself. Those are the bigger causes of problems that we see with operations. I don't think that we can generalize for our segment in terms of the current power situation and shortage of power and shutdowns, etc., as being a real driver to any growth for aftermarket.
Okay. Thanks for clarifying and helping me improve my understanding. Second question is, what are our top three priorities besides revenue and financial but in terms of product development? What are the adjacencies which we would like to look with a three to five year perspective besides the API turbine and the steam turbines where we are? Can you elaborate on that?
Yeah. Efforts are always going to be to benchmark globally in terms of all product characteristics. And very frankly, the field of technology development has various different aspects, not only in terms of computational fluid dynamics but structural analysis and component engineering, be it from the vanes to the valves to the field, etc. So there's a comprehensive approach that we have to take for a very complicated product and to look at it not only from the perspective of the manufacturability of it from a modular basis but also in terms of what our customer requirements are and to ensure that we're able to provide value to the customer. So R&D is a very complex area in terms of investment. And from a market perspective, of course, what we're making is a steam turbine as far as what the market is concerned.
But there's a lot of intricacies in terms of the capabilities that are required for us to meet both our internal expectations as well as market expectations. So the multiple disciplines that are involved. It will involve everything from structural to flow dynamics to materials to etc.
I get your point. I saw your plant this time, and it was a pleasure to go and meet the people on the shop floor and understand the product intricacies. My question was more broader. So we have a good understanding of thermodynamics and all those aspects. What are the other areas which we can use our knowledge base for products, okay? Or what can be the adjacent products which we can try to develop, like API products what we have?
Yeah. I know what you're saying. The fact is that given our competency in rotating equipment, you could say that there exist parallel lines that we could enter. At this point in time, I think our focus on ensuring that we are able to grow this market segment and cover it in a more comprehensive manner needs a lot of space. We have product development opportunities that we've talked about in the past which we continue to do. And we may not have focused on it in this call, which is, say, on our carbon dioxide side. And we continue to do work on that because we believe that it is a working fluid of the future. We think that there is a very good use case to have an unsubsidized use case for carbon dioxide.
We aim to provide technological solutions for that, both at a subcritical, supercritical, as well as transcritical perspective. These are things that we'll provide more clarity on in the coming quarters.
Okay. One last small question. Last year, we increased our workforce by 20%, okay? And we had guided that this year also, there will be an increase. Can you give what will be the increase, and is it across the divisions of the company or there are?
Yes. Yes. I'll let Arun, our Executive Director, see you answer that question.
You see, we have had an HR plan based on the recruitments that have been done. The recruitments are proportional to the effort required to reach the targeted business that we are thinking of in the current year. We also need to provide for the future years. Accordingly, the headcount is getting increased. It is in all the functions. It is not only in one function. In fact, we're spending quite a lot on training our people because HR needs to be very strong. All necessary actions are being taken to support it.
Okay. Thank you from my side. Best of luck for this.
Thank you.
Thank you. We have a next question from the line of Rohan Nandu from Goldfish Capital. Please go ahead.
Yeah. Hi, Nikhil. Congratulations on a great set of numbers. I just have one question, right? I mean, just from a longer-term perspective beyond FY26, right? Because till that time, we have visibility based on the inquiries that we are generating. Some of the trends in terms of industrial CapEx, API, as well as biomass and that aspect of renewable energy, some of these trends are something which might last for longer, right, in some sense, rather than just petering out in a few years' time.
So is it fair to probably say that what we are doing in terms of product innovation, adding more and more services to our aftermarket business, do you think that I mean, we can probably, in a way, come I mean, not be part of the cycle and taper down after FY26 and the growth that we are seeing right now, not at the same pace but might continue beyond FY26 as well?
Yeah. I think that we are in a segment that is, and I've tried to allude towards this in previous calls, that we're in a segment which I think is quite secular in terms of growth. It's not cyclical. Energy transition and climate change is a reality. The amount of money that's been spent on it is still quite small compared to what has to be spent in the future. So we only think that the market and our appropriateness of our products and solutions will only be more enhanced as we go forward. If we look at it from a perspective in terms of internal targets, while I can't give you the exact numbers, as you know, we have taken a resolution to our shareholders to adopt an ESOP program.
The ESOP program is for some top management, but it is similar to the incentive program that is being offered through the company to a variety of different segments of people to be able to sustain growth even further than the timeframe that you're suggesting. This is something that we're trying to inbuild into the culture of the company where we believe that the market exists, the appropriateness of our product is suitable to the market. There's no reason why we should not aspire to sustaining the growth in the long term.
Sure, Nikhil. Thank you for that. Second question would be that while you have stopped giving this whole 0-30 and 30-100 kind of distinction in terms of any comment that you make, but how is our traction in 30-100 where we are relatively newer? And just an added question to that would be, you said that you were adding a lot of services in the after-sales part of it, right, refurbishment. So in terms of whatever is required in the market, I mean, where are we? Have we covered 50% of what is the requirement in the market, and there is still 50% of services that is left from our offering point of view? So if you can just give some quantitative number as to yeah. Sorry.
So from the perspective of the offering itself, that changes with both the customer expectations and the technologies available. So you have a certain degree of digitization, automation, and AI which is building out right now. And so to what extent are we actually being able to use those services directly within our offering? I think we have a little bit of way to go. But do we have plans to cover that? Yes. So to what extent are we covering it? I think to the appropriateness and benchmark with our competition, we would say that we're appropriate in terms of our service offering. In terms of market coverage for refurbishment, it would be not even 1%.
Okay. And any comments on 30 and 30-100? I mean, how has been the success in?
Yeah. Prasad, can you talk a little bit about your experience with the 30-100 MW segment? I think we have a good market share, and we have good opportunities in our Inquiry Book also. Prasad, is there anything you want to add?
Yes, I have. So 30-100 MW inquiry pipeline also, even though we are not seeing that differently, up to 100 MW, we are considering as an opportunity for industrial steam turbines. Otherwise, since there's a specific question there, yes, there's a good inquiry pipeline there. Even opportunities, they're getting converted. Inquiry is getting converted to opportunity. And the trend is quite wider across the regions and both domestic and international.
So you know certain segments like steel and cement have larger capacity, or there are certain segments like distilleries and sugar, etc., would have lower MW orders. So it depends quarter to quarter. The segments coming up would be in the higher MW range.
Sure, Nikhil. That's it from my side. Thanks a lot.
Thank you.
Thank you. We have a next question from the line of Namit Arora from Indgrowth Capital. Please go ahead.
Yeah. Yes. Thank you for the opportunity. My question was around your efforts in innovation and research and development. What are the efforts in that area which might yield results over the medium term? Thank you.
Oh, you've got a very open-ended question. We believe that we are a technology-focused company. Very frankly, technology lies at the heart of not only what we do but what we offer our clients. So it is what we are. In terms of our efforts, not only do we have enhancement in terms of recruitment to add capacity, but we have to enhance the capability. There's a question of global benchmark and looking at our research platforms from a perspective of partnerships with academic institutions so that we can continuously upgrade our knowledge but also benchmark ourselves with global best practices. It's quite an intricate space where we think that this is going to be an area that we think we need to spend more on. We think at this point in time, we're not spending enough on it.
We will be aiming to spend more in the coming years.
Got it. Thank you very much for your very candid thoughts and all the best to the entire team. Thank you, sir.
Thank you.
Thank you. We have a next question from the line of Manish Goyal from Thinqwise Wealth Managers. Please go ahead.
Yeah. Thanks a lot, sir. I have a few questions. First, on the aftermarket sector, no doubt, sorry for dwelling more, but historically, we have seen that whenever aftermarket revenue contribution increased, we had a margin improvement. And if I look at the first half numbers and the incremental revenues of roughly INR 200-odd crore, it is evenly split between products and aftermarket. So I'm just wondering that is it that the nature of incremental aftermarket revenues what we have been margin profile is quite lower in terms of what historically we used to enjoy? Because earlier, it was spares AMCs and small refurbishments for our own machines which got extended to third-party refurbishments and now upgradations and automation.
So, just also in related questions, sir, number two is that right now, what we observe is that we're probably providing international aftermarket services through subcontracting, and maybe we are outsourcing that. The last part of the cost probably is getting captured under other expenses and somewhat in employee costs. Do we see that going forward, the service offering what we have, we probably have our in-house facilities or how do you see that changing? That was the second question. Third related question, what do we offer on upgradations and automations? You said we have some orders in India. Maybe if you can provide some perspective. On product side, are we seeing any issues on executions and order inflows pertaining to probably geopolitical disturbance in the Middle East and Europe markets? Thank you, sir.
So I'll start with the product side first. Our Inquiry Book is large. And so yes, from quarter to quarter, different aspects of geopolitical disturbances do have an impact. And so they would but overall, I don't think that it's impacting the company in terms of its order growth plans. In terms of execution plans, certain current orders will have delays, but that's not largely impacting what our growth visibility. One or two orders here and there, the same thing happened with Ukraine. When the Russian war started, we had orders from Ukraine. But that really hasn't really impacted our growth efforts as a company. On your Aftermarket question, you're right that a greater contribution of Aftermarket percentage of sales should lead to a margin expansion besides the operating leverage, obviously.
But as I said, our attempts here are to firstly expand our geographic presence to be able to be closer to customers, which is a cost which comes under other costs. We're able to see here that the growth should not be compromised. Like I said earlier in all your questions were asked, that we aim to maintain certain levels both for the company as well as segments which allows us to be able to push growth faster. So that is our primary objective. Certain orders that were taken on the aftermarket side were, what I would say, lower than our normal margins. Therefore, the operating leverage that could have come with high expansion of turnover didn't get translated.
But we believe that in the medium term will get corrected because we will revert to what are globally accepted norms in terms of aftermarket pricing or aftermarket margins. Your other question in terms of how we do execute these orders, they're largely executed by us only. And apart from certain lower-value orders which require manpower, those would be outsourced, of course, and they would comprise of they would take a part of other expenses. Our attempt is to stay at the higher end of value addition of service. So we would always aim to add people at the higher end of what we can offer our customers both from a perspective of sales as well as engineering and execution. Last question was on what does upgrade mean?
Upgradation is taking a turbine and enhancing its heat rate so that the customer is able to get a payback very quickly. Automation is to the same extent. Ultimately, this is all sold on the basis of payback to the customer in terms of what he's able to generate for what amount of fuel he uses. That is globally.
Right, sir. Thank you so much.
Thank you. Thank you very much.
Thank you. We have a next question from the line of Amit Anwani from Prabhudas Lilladher. Please go ahead.
Hi, sir. Congrats for the strong set of numbers. My first question on this capacity expansion which we did in Sompura, and we did talk about some 300 turbine capacity per year after the expansion. Is there any further requirement since we are now penetrating into more global markets and seeing a good, pretty heavy inquiry pipeline? Is there any reassessment that we need more CapEx on increasing the?
Sorry. There's nothing that we've taken to our board for further expansion. Right now, in terms of capacity utilization, we seem to have adequate capacity for our growth for the next couple of years. But I would say that as you know, the time we went for a CapEx to add a bay at our Sompura plant, we were able to do that in a short period of time. So the constraint to growth in terms of capacity is not really a challenge. We do have some efforts that we need to do in terms of vendor development to ensure that our vendors are up to speed with our growth. And that is continuing. That's an effort that continues.
Sure, sir. So I wanted to understand any assessment on the market share globally as we are expanding in newer geographies. So first on global addressable market and our standing with respect to market share and what is our experience with respect to competition in the newer markets wherever we have entered from the global players operating in 0-100 MW?
Okay. Great question. I mean, we are constrained by the fact that there isn't any true visibility of market share that one can get in terms of data. Data is very spotty in terms of market share. So the way that we benchmark our success in terms of market and growth is well, in India, every inquiry crosses our desk so we can get a market share assessment. But internationally, which is a real growth area, we try to benchmark our growth based on growth in inquiries because an inquiry for a capital good is a serious thing. It's not frivolous in terms of being able to provide a quotation to a customer. It's time-consuming for us as an OEM to provide it to a customer, and it's time-consuming for a customer to read it. So it's only given when it's serious.
Therefore, an inquiry is a very good assessment for us for where the market is and why we don't know the market. So the conversion of inquiries to orders is an internal benchmark that we use for being able to assess our success in the international market is something that we measure very closely. In terms of competitive intensity, there are no new players who come into the market globally. The same players seem to exist. We have more direct competition with our largest global competitor in nearly all global markets. And in certain regional markets, we have certain other regional players who do quote as well. But having said that, the market is largely oligopolistic. In some markets, it's duopolistic. And we think that there's healthy competition. And ultimately, customers do get the benefit of that competition.
Having said that, we're comfortably paced as long as we can get a good value proposition in front of the client from a lifecycle value perspective and enhance that with adequate aftermarket service capability. We don't think that that's too much of an issue. The bigger issue would be to overcome perception of the country as a source of supply.
Sure, sir. So my last question on the other expenses, and you did highlight it, is there anything with respect to more outsourcing that is becoming a constraint that you're getting orders which needs to be outsourced right now? And as you said, the value at the higher value orders keeps on increasing, then you'll be in a better position to have better operating leverage from this level? Is that what we can reach?
I think that as Arun has pointed out as well, there are certain elements which have increased in a disproportionate manner in other expenses which is largely based on the administrative side of travel and expenses around that. As you know and as we can see, not only do our orders that we take in the international market do they have overhead costs, but inquiry generation is also quite expensive from a perspective of cost to the company. As far as outsourcing, these are part of normal routine businesses, and we don't see it expanding in any manner that is material.
Sure, sir. Thank you. All the best, sir.
Thank you.
Thank you. We have a next question from the line of Nikhil Agrawal from VT Capital. Please go ahead.
Good afternoon, sir. Thank you for the opportunity. My question was, again, on your inquiry book, what percentage of your inquiry book mostly gets converted in the domestic and in the export market?
It does change here. But like I said, this is data that we're not really giving out. But it changes really quarter to quarter. But internally, we use it as a reference for performance.
All right. And you said your inquiry book in the domestic segment has increased by about 100% year on year in H1. So what would be that in the export segment, export inquiry generation in H1?
Sorry. What is your question? What is the export inquiry generation in H1?
Yes.
It's in excess of 5 gigawatts.
Sorry?
It's in excess of 5 gigawatts. The international specific is about 3.5 odd gigawatts.
Okay. So year-over-year, what growth would that be?
The growth of the international, somewhere in the region, 4 GW odd. It's somewhere in the region of 15-odd% growth for the international markets.
All right. All right. Sir, coming to that, the question on Siemens, I believe they have some issues in the sub-3 MW segment. Since we cater to the oil and gas industry as well, are we planning to expand based on that front in the sub-3 MW segment and cater to more segments, industries?
Since this is the second time that it's been brought up, we'd have to just investigate this a little bit further. We're focused more on really what our customer requirements are to be able to provide that better in front of them. We take it for granted that there'd be competition. If there isn't competition, that just ends up helping us. But we use competition as a benchmark in terms of offering for the client so that we can enhance our value proposition to the customer better than our competitors. That is the objective by which we benchmark with competition, both from a technology, service, and other aspects of what the customer may consider as being useful. But I think as we currently stand, we have the visibility in the market. We are tactically going around getting growth.
The team seems to be confident in not only the revenue that we'll get in this current year, which is already locked in, but order booking for the next several quarters, which will lead to revenue growth for next financial year and actually possibly order booking also for FY25 as well. So I mean, our competition is very large. And whatever problems they have, they'll overcome them, I'm sure. In specifics, like you said, in oil and gas, that's a segment which is growing. I think that there's a lot of uncertainty in this space, and there hasn't been a lot of investment over the last decade. There's a lot of replacement CapEx that has to happen. So we will be there wherever we can be.
All right. And sir, just one last question. Your exposure to Middle East countries, if you could quantify or something?
No, we have a presence with people and offices in the Middle East. They are safe and secure. In fact, they're seeing their own growth opportunities in the Middle East. We don't have any presence in Israel in specific or in Gaza, so we're fine with that. There may be some impact of this spilling over into countries like Turkey, but those are catered to and was already forecast in our execution plan. In specific, in the UAE or Saudi, there doesn't seem to be any impact.
All right. All right. Got it, sir. Thank you so much for the opportunity. Thank you, sir. That's it from me.
Thank you. Thank you very much.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Over to you.
Thank you very much, ladies and gentlemen. I'm sorry that we extended it by 10, 12 minutes, but I believe that it is important to cover everyone. I look forward to addressing you again next quarter where we should hopefully, again, have a record quarter. Thank you.
Thank you, sir. On behalf of Triveni Turbine Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.