Ladies and gentlemen, good day and welcome to the Triveni Turbine Limited Q2 FY25 earnings conference call. We have with us today on the call Mr. Nikhil Sawhney, Vice Chairman and Managing Director. Mr. S. N. Prasad, Chief Executive Officer. Mr. Sachin Parab, Chief Operating Officer. Mr. Lalit Agarwal, Chief Financial Officer. Ms. Surabhi Chandna, Investor Relations and Value Creation. 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 this conference, please signal an operator by pressing star and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rishabh Barar from CDR India. Thank you, and over to you, sir.
Good day, everyone. We will now start this call with opening remarks from the management, following which we will have an interactive question-and-answer session. I now request Mr. Nikhil Sawhney to share some perspectives with you with regard to the operations and outlook for the business. Over to you, Mr. Sawhney.
Thank you, Rishabh. Apologies, ladies and gentlemen, for starting the call a little bit late, but it's with good news that we have this call for another record quarter for Triveni Turbines. This is the 18th straight quarter of record results, and I'm very happy to take you through our results. This is, again, the highest quarterly revenue and EBITDA, along with a record closing order booking, providing very good visibility for the near term in this Q2 H1 FY25. We've had the highest quarterly revenue in the second quarter of this financial year of FY25 at INR 5.01 billion, which is an increase of 29% year over year. Domestic sales increased by 32% to INR 2.79 billion, while export sales increased by 26% to INR 2.22 billion.
This is also the highest-ever quarterly EBITDA with INR 1.31 billion, up 47% year over year, with a margin of 26.1%, which increased 320 basis points year over year. PAT for the quarter was at INR 910 million and increased to 42% year over year. And we also had a very healthy order booking of INR 5.72 billion during the second quarter, which is a growth of over 25% year over year. There was a record outstanding carry-forward order booking as of the 30th of September of INR 17.96 billion, an increase of 22% year over year. The period highlights for the half-year: revenue from operations grew 26% to INR 9.64 billion, which is a record for the company. As far as the sales mix between domestic and export goes, we had a domestic sales increase by 29%, while export turnover increased by 22%.
In the half-year, the mix of domestic versus export sales was 55%- 45%, as compared to 53%, 48%, 47% in the previous corresponding period. EBITDA increased by 42% to INR 2.46 billion in the half-year, as opposed to INR 1.76 billion in H1 FY24. Margins for the half-year versus previous year increased by 280 basis points to 25.5% in H1, as opposed to 22.7% in the last corresponding period. I'd be happy to take questions because I'm sure a lot of you will ask about the sustainability of these margins. As you all know, the company operates in a customized engineered-to-order segment and has different margin profiles for export orders as well as domestic orders and between aftermarket and product, we also have a different margin structure where it's more weighted towards the aftermarket.
As you can tell from the sales mix, which is still currently more domestic-focused, but our order booking is more export-focused, we don't seem to have real issues with our margins at this point in time, and so we're happy with these margins, and we think that they may be somewhat sustainable in the short run. Though in the medium term, we imagine that we would like to expand sales, and having sales as a focus for the business and sales growth for the business is really the greater priority. As I said, order booking for Q2 FY25 ended at INR 5.72 billion, as against INR 4.59 billion during the second quarter of FY24. This was a growth of 25%, and export order booking grew by 50% year over year at INR 3.04 billion. The domestic order booking grew by 4%.
Order booking for the half-year was at INR 12.08 billion, which was an increase of 32% over the half-year of FY24. Domestic order booking for the first half grew 3%, while export order booking grew by 63%. This overspill for the execution of these orders, which will happen in the subsequent quarters as well as in the next financial year as well. Coming to the segments, product sales in Q2 FY25 grew 30%. Sorry, order booking for product grew 30% year over year to INR 3.98 billion, and for the half-year, grew at 44% to INR 8.85 billion. The product segment turnover recorded a 26% year-over-year growth in Q1 and 25% growth in the half-year compared to the previous year.
The aftermarket segment grew 13% in terms of order booking to a record high of INR 1.74 billion in the current quarter and grew by 8% in the half-year FY25 compared to the previous period of the previous financial year. This, again, bodes very well for the short-term execution of these projects, and the aftermarket contributes a very healthy 33% to the total turnover of H1 FY25. With the high contribution of aftermarkets to turnover, as well as a robust and healthy growth in our order booking for the export segments, the company seems to be making good headway in its newer market geographies in higher megawatt categories in the API segments, as well as in both renewable as well as industrial power generation segments.
To take you through the total outstanding order book position, which stands at INR 17.96 billion as of the 30th of September 2024, which is higher by 22% compared to the previous year. This bodes very well. The domestic outstanding order book was lower by 16% at INR 7.09 billion, while export order booking stands at INR 10.87 billion, which is a growth of 71% year over year and contributing to a robust 61% of the closing order book. The company continues to focus on R&D and technology. Our investments there continue to bear fruit. Our developments happening on the carbon dioxide fronts have already been commercialized, and we have good success in certain applications. I'd be happy to go through some of those if there are questions along those lines.
But it provides us visibility on commercialization of newer technologies and newer product introductions, which Triveni Turbine will be bringing out in the subsequent quarters, and provides a good medium-term and long-term runway for diversification of our product mix over and above the diversification that we already have in terms of going into higher megawatt categories, going to API and newer market segments, as well as focusing more on refurbishment as a specific growth driver to our aftermarket business. All of this is only possible with a great focus on people. We are expanding our resource base in terms of people and investing significantly in training and development. We not only take a good intake of GTs, graduate engineers, and diploma engineers to be able to augment our staff and provide adequate succession planning for intermediate levels of professionals, but we do this at higher levels as well.
If you find people who are good, please do encourage them to apply to the company for jobs, and the job positions are available on our website. As far as the outlook goes, we expect to maintain a robust business performance in the medium term. As I said, this is our 18th record quarter in a row, and we aim to maintain that momentum going forward as well. The expectation is supported by substantial order booking in both the renewables, API, as well as industrial power generation segment. The aftermarket business is also showing good promise in terms of growth and is bolstered by an expanded range of offerings, including spare parts, services, and refurbishment.
These services are also being augmented with our digital offerings, and we aim to enable all of our services with a certain degree of digital offering as we go forward so as to be able to provide a greater value to our customers. Ladies and gentlemen, Triveni Turbine Limited operates in the space of industrial heat and power. If we look at the incremental amount of energy consumption that is going to happen in the consumption of heat, we are very aptly poised to be able to leverage the positions that are transforming the market, both from a perspective of energy transition as well as the growth that will happen in terms of the replacement of the current capital stock that is currently in play, mostly in developed countries.
With that, I'd be happy to open the floor for questions and answers, and I hope to be able to answer them.
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 the touch-tone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Harshit Patel from Equurus Securities. Please go ahead.
Thank you very much for the opportunity, sir. Sir, my first question is, how are our domestic and overseas inquiry books? How much did they grow on YoY basis at the end of the second quarter?
Well, if you look at it for the half-year performance, the inquiry book is, for the overall level, somewhat flat. You have to remember that the domestic order booking in the previous financial year, Q4, financial year 2024, as well as Q1, financial year 2025, has been muted due to the election situation. But having said that, we said that the inquiry book has grown, and it has again grown in this current quarter for domestic. Mr. S. N. Prasad is with me. Can you give some visibility as to the segments that you are seeing growth in the domestic inquiry book?
Yes, sir. Yes. So on the domestic inquiry book, basically, as a Q1, muted Q1, we saw a strong recovery in Q2 in terms of inquiry. So again, the inquiry requires our process power generation, where combined heat and power is one of the key segments where we are operating quite strongly. The other opportunities are like municipal solid waste-based power plants, cement and steel. We are seeing the traction is increasing compared to the earlier things, and of course, chemical, petrochemical plants. So that way, stronger inquiry pipeline from different segments getting added into Q2 in domestic market.
Just to finish on the domestic market before I touch on international, you should remember that H1 order booking, which was impacted by the inquiry books pretty much of Q3, Q4 of the previous year. We believe that the growth in the inquiry book that has happened in H1 and Q1 and Q2 of this financial year will translate into better order booking in Q3 and Q4. But having said that, the point is that we anticipate this growth in the total market to be along our expected lines of maybe a 10%-20% growth year on year in the total market domestically. And what gives us what is quite encouraging is that we believe that this is a sustainable growth. This is not any sudden peak.
We see consistent demand coming right now from certain segments, as Prasad had pointed out, be it in the cement space or steel space. There are obviously newer market requirements that are happening, both from renewable municipal solid waste as well as biomass-based applications. Specifically on the energy efficiency side, we see a lot of interest both domestically and internationally. Internationally, our order book, our inquiry book is an effort of our endeavors and our salespeople and partners reaching out to expand it. The inquiry book is still quite robust, and for the half-year, represents, I would say, a consistent market to what we had in the previous year. As we currently stand, we believe that the inquiry book is sufficient for us to give the growth that we need in our order book, which will then translate into turnover in the coming quarters and coming years.
The segments for international, which are contributing, is the API segment, which is oil and gas. As we said, that was a big contributor in the first half, in the first quarter of this financial year, but we believe that this segment will continue to contribute in the coming quarters as well. We have good requirements from both industrial cogeneration, which is both heat and power applications from a variety of different industries, including paper and pulp. And we also have requirements coming from renewable-based applications such as municipal solid waste incineration, as well as other waste-to-energy-based applications.
Understood, sir. Secondly, I wanted to get some color on two specific end markets in India. First, on distilleries. I believe we expected a pickup towards the end of FY25. Do you still see that happening, or there is some slack in the new investments which are happening in this particular sector? Secondly, you also alluded to a little bit towards answering the previous question. Are there any green shoots in the waste-to-energy theme in India? Have we booked any such orders so far in financial year 25?
Let me ask Prasad to answer.
Yeah. Coming to waste-to-energy plants, yes. We supplied turbines to some of the waste-to-energy plants in India. Recently, one plant commissioned in Ahmedabad also with our turbine, and more than eight, nine plants with our turbines are in operation, and the inquiry pipeline is strong in waste-to-energy. Coming to distilleries, yes, Q1 is a muted quarter for us, but based on the inquiry pipeline, there is a small growth we are seeing from the distillery, and we are seeing some sort of a traction in finalization in Q3 as we move the last 45 days. So that way, we are hopeful on the distillery. Otherwise, we are quite bullish on MSW, the way how the inquiry is picking up, and there's a focus coming on MSW plants.
Understood. Perfect. Thank you very much for answering my questions and all the best.
Thank you.
Thank you. The next question is from the line of Amit Anwani from PL Capital. Please go ahead.
Yes, sir. Congratulations for the great set of numbers, and thanks for the opportunity. My first question is on U.S., and you have been talking about setting up workshops and investing in employees in the U.S. I wanted to understand, was there any contribution post the change in government in the U.S.? Are you seeing anything impacting our view with respect to expansion in the U.S. for the aftermarket business? And I wanted to understand how much contribution from U.S. aftermarket business can come in the next couple of years. Yeah.
Okay. So as it currently stands, the plant is set up with some small additional machinery that we need to get anyway, but the majority of it has already been capitalized. But it is not contributing at all in terms of revenue. In fact, as we said in the previous conference call, we would anticipate a full-year loss from that entity in excess of INR 25-odd crores. But that has been factored into consideration, and a proportional amount is already included in our H1 results. So the results that you see are post the expenditures that we've had in the U.S. Of course, the investments that we're making in people and capital and machinery in the U.S. is because we do see a very large market there.
In fact, as I pointed out in our last conference call, the estimation that we have for the market has only improved, and the visibility has only improved since we have established our presence, and our efforts there will be on two fronts. Not only will it be to sell new products and to service our existing base in the region, but it will also be to capture the markets for refurbishment, which includes refurbishment opportunities for steam turbines as well as other rotating equipment, and we're very encouraged by this because, as you would imagine, the US market presents as the largest capital base of any country in the world, and so regardless of which government and administration is in, you have requirements that stem from very short-term returns. Triveni has always played in an unsubsidized market, so subsidies only sweeten the value proposition for our customers.
But ultimately, for us, we are agnostic to it. We think that this is very consistent with both global demand as well as trends. And what I mean by that is, regardless of the way that you view the governments, the subsequent administration of the United States, the push for energy efficiency is going to be not only mandated by global protocol, but it will be mandated by economics. With energy inflation and the cost of energy, the expenditure efficiency is really the need of the day, and it's something that we see everyone expanding on. And so we see the US market contributing in the subsequent years, as you rightly point out. As it currently stands, it is not contributing at all, and we do not expect it to contribute in this financial year. Let's say in any significant manner.
Yeah. My next question is on the strong growth which we are witnessing in export. Just wanted to understand if you would like to highlight any key geographies or markets where this growth is happening apart from U.S. and?
The growth is not in the US It's in other markets. The market, as we see it, the Middle East is a strong market for us for oil and gas-based applications. We see very good demand coming, actually, from parts of the other Americas as well as parts of Europe for both process power generation and mainly renewable-based applications. So this changes quarter to quarter. A market segment that has sort of been underperforming in the last two quarters has been Southeast Asia for us, but we think that we need to push a little bit more. It is not as if the market doesn't exist. It's based on our marketing efforts that I think we need to double down on and spend more time.
But as it currently stands, and I did point out in my opening remarks, we have approximately 60% of our closing order book, which is from the export market, and we are extremely bullish on taking this number up. We think the Indian market will continue to contribute, but it will provide a base for us to grow from.
Sure, sir. And one more thing I wanted to ask on the one you highlighted about the higher megawatt category in last quarter. Also, we entered into 120 MW. Any new higher megawatt products on the verge? And will that expand our market, and by how much they can expand our market just to get a sense on the higher megawatt category? Yeah.
The point is not to be able. We have the technology to produce up to 120 MW. It's different if the customer places orders on us. Again, this is based on customer confidence in them having the confidence to be able to place orders for different applications and for different use. In fact, in this current quarter, we have an order of a 95 MW turbine also in this space. I wouldn't like to go into too much detail on the applications and the geography, but suffice to say that this is a high-technology product with a variety of different extractions which are necessary. So it is for so we do have the ability, and we are confident that we will get further higher megawatt orders as well, which will help aid our growth.
Because, as you know, the market for higher megawatt turbines is something that Triveni Turbine has been pursuing independently only over the last couple of years, last three years, four years, since our joint venture ended. And that is where our market share has been traditionally very low. So to augment that, now that we have the products and the push and the establishment of the confidence that we've given to customers, we will get more orders in this segment. This, as well as the API segment, will continue to provide good growth opportunities despite market cycles for our product business. The aftermarket business will, of course, gain from being close to customers and the installed base as well as the refurbishment opportunities that come about.
Great. Lastly, very quickly, so there was an announcement on CBG plant set up by Reliance. So just wanted to understand, is there any scope for you for gas-to-energy conversion with the turbines might be needed that is not?
Typically, a gas-based power plant would either use a gas engine or a gas turbine. And the way that you should think about it is, unless you hit a gas turbine requirement of somewhere in the region of 25-40 MW, only then will you go for a combined cycle. Because we would take the waste heat that would come out of a gas turbine. And the ratio is approximately 3:1. So if the gas turbine is 3 MW, you'll have a 1 MW steam turbine. If it's for gas engines, it's 10:1. So 10 MW of gas turbine would equate to 1 MW of steam turbine. So there's an economics in terms of what is viable to be set up. I think these small CBG plants don't have the economics to allow for a steam cycle to capture waste heat.
Thank you so much, sir. All the best.
Thank you.
Thank you. We have the next question from the line of Chirag Muchhala from Centrum Broking. Please go ahead.
Congrats for the good set of numbers, and thank you for the opportunity, sir. So first question is on the aftermarket segment, where the price list, as you have mentioned, that you have been some breakthrough orders through some diverse customers. So is it possible to give more details regarding the same?
The segment of refurbishment covers a vast, very varied set of customers and different applications. For us, when we enter into new segments, it is very meaningful because it allows us not only in certain geographies but certain types of customers which propel our value proposition forward. If you start going to what those newer segments are, it's never-ending in terms of because it can cover either other rotating equipment, it can cover similar steam turbines and their applications, but it can also cover the different and larger types of companies. In fact, we're making progress in all three. So we have very reputed utility refurbishment opportunities that have come to us from marquee OEMs. We have great applications which have also contributed, as well as very good customers.
So we're making some traction on this space, and we think that as we invest more in people and in being close to customers, we will have greater opportunities that will come to us because ultimately, we have to be able to provide value to our customers. So sorry I'm not able to provide much more specific clarity on these types of orders.
Yeah. No issues, sir. And just one follow-up regarding the previous question on compressed biogas plant. So actually, two avenues where I mean, heavy investment in India is this compressed biogas, whereas you mentioned gas turbines are used, and the pumped storage, where I believe hydro turbines would be used. So in aftermarket services domain, where we have actually enhanced our offerings to go beyond steam turbines and also service these types of turbines, so will aftermarket segment play any role in these two areas? Pumped storage and CBG were very huge investments that are lined up in India.
But firstly, I think that aftermarket only comes into play once the installed base has been there for a little bit and a little period of time. So it's a little premature to start talking about that. Secondly, I would imagine that the local OEMs would have adequate capabilities to service them. The real value proposition for refurbishment only comes, or third-party, is when the OEM is no longer present or no longer able to service that at an adequate price point. But having said that, and you did bring up two applications on the, what I would say, battery storage side. It gives me an opportunity to talk about our developments that we have in our carbon dioxide front, which is quite encouraging. We have already commercialized our carbon dioxide-based turbines, which is for a battery storage application quite similar to pumped storage.
This is for a 20 MW application in Italy, and we look forward to those results, which come sometime in April, May next year.
So sir, how large is this CO2 turbine market has already become globally, or it is still in its very initial trial and error phase in terms of end-user applications?
It's still an innovative product. It still requires it. But the fact is that the cycle is quite well-known. And so we'll have to wait and see, but this provides a diversification for us in terms of our product offering, and so we're quite optimistic on this front. And it will aid in sustaining our growth.
I basically just wanted to know that, are there already sufficient battery storage-related CO2 turbines orders in the market, where I mean, year after year, we can still have a, let's say, a single-digit contribution in our total order inflow, or this is still in the next three, four years going to be more of a developmental phase type of thing?
No, this is no longer developmental. It's commercialized. We are one of two companies or three companies making this globally. So it is an innovative area. But the point is that it's very difficult for us to say how the market will develop and how it will contribute. All I can say is that we are excited that this provides another route for us to diversify our revenue base.
Okay, sir. And then lastly, on API turbines, as you mentioned that H1 has seen good order inflows from the Middle East. So how large would have API become now? I mean, would it be kind of a one-fourth of the total inflow would have come from this space?
No, no. It's less. But I think that it is a meaningful contribution, and we think that we shy away from giving exact breakups, but it is a meaningful contribution to our order book. But as you would imagine, these are customers who are extremely demanding on quality and specifications as well. So while megawatt may be lower because the specifications are higher, such as vibration, etc., the costs also are quite high. But the margins would be commensurate with our export margins.
Okay. Yeah. Thanks for this, sir.
Thank you.
Thank you. We have the next question from the line of Yash from Stallion Asset. Please go ahead.
Hi. Thank you for the opportunity. So the question was more to do with just slightly long-term basis. I think in your presentation, you have a chart where the global steam turbine market itself has degrown over the past 10 years. So I'm just trying to understand why, obviously, our growth has been way, way higher than what the industry has grown. So what are the drivers of this growth? Are you gaining market share from your peers, or is there some sort of a new trend within the steam turbine market? And do you think that this trend will persist, that the market will keep on sort of decreasing in size, and maybe we are just gaining market share?
I think your reading of the chart is wrong. The overall market for steam turbines has reduced, which you were very right about. But that includes utility turbines. And what we try to distinguish is the requirement from an end-user perspective between utility requirement for turbines and industrial renewable-based requirements for turbines. And we typically just split that market as to below 100 MW and higher than 100 MW. So if you look at the market as a whole, yes, you're very right. It has year after year continuously declined. But if you look at the market below 100 MW, in fact, going back the last 15 years, you've seen that market grow by anywhere between 1%- 3% CAGR. You will have one or two years where it will go down a little bit, but on average, that is the trend.
The reason for that is that industrial heat and power is generated at site and at source. So you have both fixed capital formation that plays into this, but increasingly, you have a requirement that comes from renewable-based applications, which are either direct renewable-based applications such as municipal solid waste or biomass or geothermal or energy efficiency-based expenditures. We see this latter continuing and picking up. At the same time, given the global shortage in terms of energy generation and the push towards energy transition and increased electrification of requirements stretching from anywhere from industry to data centers, etc., we see a robust requirement for electricity. At the same time, the requirement for heat, which is required for industry, also remains robust. So therefore, we see this growth of whatever 1%, 2%, 3%, 4% of the overall market continuing.
In fact, it may pick up in case energy requirement goes up more. But we see the requirement for energy in its entirety, which includes both heat and power, to increase going forward. This is driven by not only increased per capita consumption and therefore more requirement for developmental energy consumption, but also the transition itself, which, because it's going to be decentralized in nature, will be therefore you'll have more capacity, excess capacity that will be set up over actual requirement.
Got it. Got it, sir. Thank you. And just last question. I don't know if you disclose this number or not, but what would be your EBITDA margins in aftermarket and product?
No, sorry.
Okay. Okay. Sure. No problems. Thank you.
Thank you. The next question is from the line of Ankit Soni from Sharekhan. Please go ahead.
Yeah. Hi. Thank you for the opportunity, sir. So just wanted to understand, we have been on the domestic order book, we have been more of flatish or something. So any sort of guidance or view as to what would be the factors the domestic order book should be growing or the domestic order should be growing?
I think I tried to allude to this a little bit earlier that Q4 FY24 order booking was lower because I think due to uncertainty of elections. And Q1 of this financial year was also impacted because of elections. So if you look at it on a year-on-year basis, you'll find FY24 as well as FY25 have one-quarter each of constraints. So when you look at the H1 performance in terms of order booking for FY25, which is a resultant of the inquiry book as of Q3, Q4 of the previous financial year, we think that the subsequent quarters should provide more leeway in terms of growth in these markets. At the same time, as Prasad had pointed out earlier, we see a consistent requirement in terms of inquiries from all sectors. And so I think that we would see growth in the overall market in this financial year.
It's not going to be very large, but there will definitely be growth. And the growth, in our belief, is something that will be more sustainable for the next one, two, three, four years.
Oh, okay. That's true. And on the second side, second question, basically, our exports business and the aftermarket segment is expected to be contributing significantly higher in the coming quarters and all. So do we have any sort of cushion for the margins to improve from here?
No. You see, the margins are actually quite high already. Like I've said in previous calls, we aim to maintain at least a 20% margin level, and now we're ending up with margin levels somewhere in the 25+ level. So we've always said that margins are really not a problem for civilian turbines. What our push is to increase our inquiry book and therefore our order booking and therefore our revenue. And now the constituent of that order book is what is resultant in our margins. The more export you have, the more margins you'll have. The more aftermarket you have, the more margins you'll have. And so therefore, the conscious strategy is to expand sales and order booking as much as possible. And the resultant of that, because it's diversified in engineered-to-order and a customized product, it will differ quarter to quarter, product to product, and order to order.
Sure. Thank you. Thank you, sir. Thanks. All the best.
Thank you.
Thank you. The next question comes from the line of Harsh Devani from Motilal Oswal. Please go ahead.
Yeah. Hi, sir. Thanks for taking my question. So I just one question on the gross margin front. If you see sequentially, there has been around 250 basis points contraction. So how do you read this contraction as per you?
So again, it's a question of the mix in terms of what has been executed. We had a certain large-value service contract that was in our aftermarket segment, which has contributed significantly less in this current quarter. So even though the mix of aftermarket in the previous half year to this half year has gone from we were about 33%-34%, the margins of aftermarket are significantly higher also. Also, at the same time, exports and our revenue is also higher. Having said that, the reason that a lot of this has happened is because we have more stability in our commodity pricing when you look at an year-on-year basis. We have longer rate-term contracts. We have more standardization of our engineering platforms. So we have more operational efficiency. We have certain operating leverage that has also come through.
You have a product mix that is benefiting us and genuinely higher margin orders that have been executed. But I think 52% is full credit to the team in terms of being able to get the operating efficiencies out. And we aim to maintain it anywhere between this region of 52%-54%.
Sir, what is the status of the SADC order that we had got, the second order that we had got?
No. So that's why I talked about it. It just contributed less in this current quarter, and so therefore margins were a little bit higher. Our turnover would have been higher otherwise. But if you look at it on an absolute basis, our absolute profitability is still quite strong. We have a 90+ growth, PAT, for the current quarter, and we aim for the coming quarters to be even record going forward.
Thank you, sir. That was all from my side. Thank you very much.
Thank you.
Thank you. Ladies and gentlemen, you may press star and one to ask a question. We have the next question from the line of Mayank Chaturvedi from HSBC Mutual Fund. Please go ahead.
Yeah. Hi. Thanks for the opportunity, sir. So just on the other expenses piece of things, there's been a sharp fall quarter on quarter. So is there any one-off gains included there? You've already said that there's a large service value contract that you've executed. Besides that, anything else that you would like to highlight here?
So in general, most of our expenses and other expenses are proportionate to our growth. So manufacturing expenses would increase with, obviously, some operating leverage to the growth in revenue. Our warranty and other expenses would also continue to rise at the same proportion of being prudent. The real degrowth that happened there was because of the servicing contract, which we used to have as a separate line item, but we no longer need to actually give that explanation. But you've already hit it on the head. Having said that, all expenses are under control. It's not as if the expenses are out of control in any manner. We see a good degree of predictability in our supply chain costs. In fact, I have our COO on the call as well, Mr. Sachin Parab.
Let him give you an idea in terms of how costs are looking at both the supply chain and other expenses.
So our efforts on the supply chain front in trying to improve our margins is continuously on. We are looking at different opportunities to bring down our costs. There are, as our Vice Chairman has mentioned, efforts on always to get into long-term rate contracts so that we can stabilize our costs and take care of unexpected fluctuations. Also, we are looking at diversifying our vendor base. We are also looking at imports from low-cost origins. That pursuit is always on to identify sources where we can look at improving our margins. So strategic sourcing is a big initiative at our supply chain team, and we are always scanning the environment at looking at opportunities to improve our margins. So that is definitely a focus area for us.
So would it be right to assume now that you have a healthy vendor base? I'm assuming it is in the SADC region that you're alluding to. So the subcontracting charges as a percentage of what you are executing in the SADC region is starting to come down now that you're increasing the supply chain?
Sorry to interrupt. Sorry. My answer was more to do with our supply chain in terms of our cost structure and the future possibilities. As far as the SADC area is concerned, it is one strategic order that our Vice Chairman mentioned about. So the dip in that order is what has caused the reduction in the subcontract expenses. And that's to do with a small period of time. So we are always looking at improving our margins even in the SADC region. And there is more amount of in-house work that we are trying to target so that we can optimize in terms of the expenses that we incur. But that is specific to only just one last strategic order.
All right. Now, why I am hopping on this thesis is because we are seeing that in the short term, these margins will be sustainable. So I just wanted to get a sense of how the other expenses could pan out. But no worries.
No. Despite the fact that in the subsequent quarters, we will see the business return, I think our margins are still quite robust and something quite resilient.
No, of course. Just the other piece, Nikhil, you have been guiding in the past that the possible growth that we might see in probably the mid-term would be closer to what we saw in the previous two years. But now the massive order booking has slowed down, and it is playing a spoilsport. So any revisions that you would like to make on that guidance?
No, no. Order booking is very robust.
Yeah.
Why would you say the order booking is slowed? In fact, the order booking is growing at the pace.
Oh, domestic.
Oh, domestic. Well, as a company, overall, the fact is that we aim to diversify and diversify. As you know, we cannot instigate demand. We are reactionary towards it. Our reading of the inquiry book is that actually these are very serious people who want to place orders. It's a question of timing. That's something that we cannot force that on anyone. So we think that if the domestic market can grow at this 20-odd% level every year, it's a sustainable type of number for the next several years. And we see that as being a greater driver. So we are optimistic on Q3, Q4 coming through, given the fact that overall the market between H1 of FY25 and H1 FY24 is pretty flat.
All right. Okay. That was very helpful. Thank you.
Of course, we know that Q4 of last year was low, so if you look at it on a year-on-year, the full year to full year, we know that Q4 of this current year will be significantly better than Q4 of last year.
Okay. Great.
Even if you continue with the same momentum.
Yeah. Thank you.
Thank you.
Thank you. The next question is from the line of Omkar Chitnis from Trade Brains. Please go ahead.
Good afternoon, sir. My first question is, how much are we planning to spend on R&D over the next three years? And can you give guidance for a top line for FY25, sir?
So firstly, sorry, we don't provide guidance, but I think you can hear our previous conference calls and ultimately our order booking translates into revenue, so you'd be able to get a fair idea as to how we execute in the coming quarters. As far as R&D goes, you're very right. It is a keen focus for the company, both in terms of personnel and people who are required for the multiple disciplines that we require for our steam turbine. But we also require for our product diversification. So we have both in-house requirements, requirements with academic institutions, requirements with certain consultants who are aiding us in this endeavor. At the same time, we also have expenditure that will happen on infrastructure such as what our test beds and other infrastructure will cost us to set up.
The sensors, etc., and the data mining and the data gathering endeavors costs that will be those. Some of those will be one-time costs because you don't need to spend them continuously. Some of the other variable costs will be spent year on year. We typically, as far as what is reported on our balance sheet, have spent anywhere between 1.2, 1.3 or 1.4% of turnover in R&D. But that really doesn't capture the full number because most of our R&D projects end up getting sold. When we end up selling these projects, they get recognized as revenue and don't really form a part of what would be R&D. Having said that, our R&D expense is quite high. We have a very large department and continuously developing newer IP.
Without giving you a specific number, our expenditure is significantly higher than that 1.3%, which is reported on our balance sheet, annual report.
Okay. Sir, several , global competitors have adopted USC technologies and modular and digital technologies in their turbines. Do you have any plans on that?
I couldn't understand that question. So can you speak a little slower, please?
Yes, sir. Some of their competitors globally have adopted ultra supercritical technologies and modular and digital technologies for their turbines. Do you have any plans on that?
Ultra-supercritical turbines are pretty well. We have critical technology. The point is it's not economical to make it at this small size. I don't know which competitor of ours is making in this industrial range. I don't think that's correct information. As far as digital and modular, all our products are digital and modular and have digital and modular offerings.
Okay. Got it. Sir, can you explain about the asset-light models you have mentioned in your strength in presentation?
Sorry?
What do you mean by asset-light models, sir?
Your line is not clear. Can you pick up your phone?
Yes, sir. Presentation, you have mentioned your strength as an asset-light model. Can you provide some insights on that?
You see the asset-light model. You see our balance sheet. You see our assets employed, and you see our returns. The numbers are quite apparent. In fact, actually, if you take cash off the books, you'll see in this current quarter on an annualized basis, our return on capital employed is in excess of 600%. So if that is not an asset-light model, I don't know what would be.
Okay. I thought about in hospitality business, there is an asset-light model, sir. In that way, I thought it.
No. Asset-light is, we look at it on a balance sheet basis. Our metrics of performance and the way that we'd like to be evaluated by our investors is on return on capital and return on equity basis. We aim to be a free cash generative company. We aim to deploy those free cash in a way that is productive to the company and to the long-term growth of the company.
Okay, sir. Got it. And my last question is, are you planning for any partnership with any PSUs companies in India for the upcoming projects?
The company continues to evaluate a variety of different schemes. It has to ultimately form the basis within the strategy that I just said. We aim to be a technology-first, customer-centric organization, which has to translate into higher return on capital, higher return on equity. The risks that the company takes are never apparent on commercial terms, etc. We reach out to a variety of different customers for a variety of different applications. Some of those are PSUs. Some of those are non-PSUs. Though I have to say that going forward, we will have a much greater diversification in product mix as well as geographic mix coming in. So I don't know what specifically you're talking about. Even then, I wouldn't be able to talk specifically about an order.
Okay. Understood. Thank you, sir, for all the questions for the upcoming quarter.
Thank you very much.
Thank you. The next question is from the line of Bimal Sampat, an individual investor. Please go ahead.
Yeah. Good afternoon. Two, three questions. One is now America, you are saying this year we will be losing about INR 25 crores. Correct?
Yes.
Next year onwards, will we start contributing? I mean, will we be able to break even next year or still one or two more years of drag?
No, no. We should see from next year it will start contributing. Maybe not in as meaningful a manner, but we have to wait and see. The fact is the factory has just come up. People are ramping up. We're optimistic on the market. There is a certain degree of transition that's happening over this quarter and beginning of next quarter. We'll have to see how that plays out into the confidence of customers there.
Yeah. So but in two years, definitely it will start contributing. Correct? By 2026.
Our attempt is to get it to contribute as quickly as possible. So the reality will be we.
Yeah. That I understand. I mean, business is dynamic. We don't know what happens. But our estimate is that by 2026, it will start contributing to our bottom line.
Yes. Yes. Yes.
Yeah. And second thing now.
Not as meaningful a way that the general market does, but we think that it provides us a very good base to then leverage on.
Yeah. So now this U.S. base, will it help us to the South American market also? Will we be able to serve from there better? Canada.
You already know our strategy better than us.
Yeah. No, sir. And lastly, now we are sitting on a lot of cash. So our buyback also was some time back. Now, are we, as you said, I know you have some products ready. So are you planning to get into more products now, or still there is more juice left in our API turbines than the current products?
There's much, much more juice left in our steam turbine business. That is the business. So before I say that, that is our business. We have a very good runway for growth in our product line. We just want to create newer product lines so that we are able to sustain our growth and be derisked from any market cycles that may come about.
Right. So next four, five years, we have a good runway for growth.
The thing is that we have to have the appropriate products. We have to have the capabilities in place to be able to cater to our customer requirements and make sure that they're satisfied. Now, the predictability that we get in terms of visibility for revenue is based on our inquiry book, which will translate into order book and then revenue. So as we expand our product offerings, our inquiry books will grow and give us more confidence. But as it currently stands, the relevance of our products in market segments, which are where a lot of people are spending money, seems to be quite appropriate. So we think that there is a certain degree of.
Certainty.
Confidence from the medium-term growth.
Right. Right. Thank you very much and best of luck.
Thank you.
Thank you. The next question is from the line of Kushant Arora from Baroda BNP Asset Management Limited. Please go ahead.
Yeah. Hi, sir. Congratulations on a good set of numbers. So my question is on the capacity front. What is our current capacity utilization, and what kind of a number can we achieve with peak utilization levels?
I think you've brought up a very good point. I didn't get the opportunity to address this a little bit earlier. We are an asset-light business model, as you've already heard. But having said that, given the growth that we are seeing, which is even more than what we had expected when we had expanded our shop a couple of years ago, we would probably go to the board for a CapEx approval to expand. But these will be, again, as you know how much we spent in our last CapEx growth, this will be something that will be spent over FY26, FY27. But it is something that will be well within the, I would say, the resources of the company.
All right. Any ballpark number on the CapEx front?
We'll come back, but it will be annualized. It would be somewhere in the region of about INR 70-80 crores, I would imagine.
All right. Understood, and is the capacity being fungible for refurbishment?
Yes.
Or?
You see, the majority of our capacity that comes up is in the nature of being able to assure quality to our customers. So the majority of it that comes up is an assembly, testing, quality assurance. As far as manufacturing capacity goes directly, that is fungible between both in-house and third-party refurbishment requirements. And those will be taken on a basis of being able to augment our vendor and subcontractor capabilities so that we're not either dependent on one vendor excessively or that we are at risk at any given point in time in terms of breaking the machinery, etc. So I think that we make sure that the machinery has multiple uses, the facility and factory has ample area and capability to be able to service. So we do cover both things that you've talked about.
Understood. That's all from my side. Thank you.
Thank you very much.
Thank you. Ladies and gentlemen, we will now take the last question from the line of Sriram R., an individual investor. Please go ahead.
Thank you for the opportunity. Sir, I mean, you just mentioned that the market for a sub-100 is growing at 1%-3%. But then we are actually going much faster now. Whereas if you look at FY 2013- 2020, our top line actually stagnated. So what has actually changed post-COVID? I mean, is it like other competitors are focusing on above 100 MW, and we have some kind of white space in the industry? Can you elaborate on that? That's my first question. Second is, what is the mix between replacement to OEM demand for domestic asset export now?
Okay. Unfortunately, the point is that there are many analysts on this call. The data that is available in terms of market size is a post-fact data, which we've always said is something that is susceptible to the fact of data being reported. There are not many players in this market. And so if people don't report accurately, we can't really comment on that. Now, on where has Triveni's performance been, and you bring up what is pertinent to us as a company. Until maybe three, four years ago, we were not really participating in the above 30 MW category directly. That was not contributing either to our top line, and very indirectly only to our bottom line, to our joint venture.
At the same time, we did not have any participation in the API market space, and our refurbishment as a sector was not meaningfully contributing to our turnover. So what has happened over the last three years is that all of these three segments have started meaningfully contributing to our order booking, and they will now start contributing to our revenue going forward. For example, the API orders that we've got in the last quarter will be executed next year and the year after, and same with the large value megawatt orders. So you see, our market share in certain segments is growing from being largely negligible to something more significant. And we believe that we can sustain this if we hit some level of appropriate market share.
Great. And on the second part, I mean, the mix between OEM and replacement for domestic and export?
Yeah. So India doesn't have a large capital base as such. If you see, a majority of our industrial CapEx has happened over the last 20 years only. So there's not that much of a replacement CapEx that happens in the Indian market to such a large extent in terms of OEMs leaving the market. In India, most OEMs are still present as have been. I think the Russians who left the market have a replacement market, which is more on the utility side. But I think this is more of a value proposition internationally. Again, the requirement stretches from sector to sector and product to product. But there's no generic answer to what you are saying.
But the generic answer is that the larger the capital base that exists, which is mostly in developed countries such as the United States or Europe, the greater the refurbishment opportunities that would be there.
Great, sir. What is the life of these products?
So we have turbines that have been operating for over 45 years. Now, what has happened in the meantime is that technology has changed quite significantly. And so therefore, newer technologies can even validate the replacement of a turbine as young as five to seven years old. So do you replace the entire footprint of the turbine, or do you replace just the rotor? Now, these are different commercial propositions that we take to customers, and we see what works for them. But a turbine itself is robust enough to be able to last for multiple decades.
Okay. Okay. Got it, sir. Great. Thank you so much. All the best, sir.
Thank you.
Thank you. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you for joining us for the H1 FY25 earnings conference call, ladies and gentlemen. We hope to continue our performance in the coming quarters and coming years, and we look forward to, and I look forward to speaking to you after our Q3 nine-month results in the next year. Thank you.
Thank you. On behalf of Triveni Turbine Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.