Triveni Turbine Ltd
NSE:TRITURBINE
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Triveni Turbine Ltd
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Ladies and gentlemen, good day, and welcome to Triveni Turbine Limited Q2 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar of CDR India. Thank you, and over to you, Mr. Barar.
Thank you. Good day, everyone, and a warm welcome to all of you participating in the Q2 and H1 FY '23 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. Sachin Parab, President, Global Sales - Aftermarket; and 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 also like to emphasize that while this call is open to all invitees, it may not be broadcasted or reproduced in any form or manner.
We will start this call with opening remarks from the management, following which we will have an interactive question-and-answer session. I now request Mr. Nikhil Sawhney to share some perspectives with you with regard to the operations and outlook for the business. Over to you, sir.
Thank you very much, Rishab. A very good afternoon or good morning, everyone, and welcome to the Q2 H1 FY '23 earnings call for Triveni Turbine Limited. It's my great pleasure to address you today given the record performance that we've had on a number of parameters, our top line, our EBITDA, our order booking, which all bodes very well for this current year as well as for the year to come.
But to get into some details, the performance of the company during the quarter under the review has been very impressive, with the turnover and profitability growing by 41.9% and 53.8%, respectively, when comparing to the corresponding quarter of last year, excluding exceptional income.
The company is well on track for a strong multiyear growth trajectory, aided by positive momentum in its addressable markets, ably supported by focused business strategy and extremely capable execution. The revenue, as I said, for the second quarter stood at INR 2.93 billion, which is a growth of 41.9% and is the highest ever on a quarterly basis. The domestic sales showed an increase of 17% to INR 1.64 billion, while the export turnover increased by 93% to INR 1.29 billion, driven by the company's success in international markets in both the below 30 megawatts and the above 30-megawatt segment in the post pandemic time.
As a result, the mix of domestic and export sales changed to 56% and 44% export in Q2 FY '23 as compared to 68% domestic, 32% export in Q2 FY '22.
The Product segment turnover was INR 2.23 billion during the quarter, an increase of 48% and the Aftermarket turnover was INR 700 million during the quarter, a growth of 25% over the previous year. As you could see, Aftermarket contributed 24% of total turnover in Q2 FY '23 versus 27% in Q2 FY '22. EBITDA for the quarter was at INR 664 million, up 39.2% year-on-year with a margin of 22.7%, which is again another record for quarterly performance.
PAT for the quarter was at INR 463 million, an increase of 53.8% year-on-year. As I've said, the highest ever quarterly order book is also reported in this quarter and which was at INR 3.61 billion, registering an increase of 18% over the last year. Our record order booking for the half year INR 7.19 billion during H1 was an increase of 23.9%. And now our outstanding carryforward order book as of 30th September stands at INR 11.37 billion an increase of 37.3%, which is again another record for the company. Investments, including cash stand at INR 7.83 billion, an increase of 4.3% from 31st of March '22.
And talk about -- more about order booking. On the product side, order booking during the quarter was at INR 2.72 billion, which was higher by 17% when compared with the corresponding period of the previous year, and this is the sixth consecutive quarter of the company clocking over INR 2 billion in order bookings for the Product segment.
The Aftermarket segment also recorded an 18% increase in its order booking to INR 886 million in this current quarter. At the half year mark, order booking in H1, as I said, stand at a record INR 7.19 billion and growing a healthy 23.9% over last year.
Noticeably, export contribution has increased to 39.5% and order booking for the aftermarket segment has also shown a solid growth of 44.7% over the last year, reaching a record INR 1.9 billion in the first half. This is all stemmed, sells very favorably for the years to come. But as I will keeping try to give you confidence in -- during the later part of my remarks, H2 seems to be even better, and we are quite optimistic on all the performance metrics of sales, profitability, order booking, which also does very well for the years to come.
The total outstanding order book, as I already said, stands at INR 11.37 billion as on the 30th of September which is an increase of 37% when compared to the previous year, and the domestic outstanding order book stood at INR 6.46 billion, and the export outstanding order book stands at INR 4.91 billion, which contributes 43% of the closing order book.
In the Product segment from an order booking perspective, we have received a high number of enquiries from the international market. Our growth in international market enquiries have grown by over 50% in this current quarter. At the same time, domestic enquiries specifically led by a decline in Metals and Mining segment, the domestic market have declined by about 19% in the current quarter.
But on an overall basis, the entire inquiry book for Triveni Turbine has grown by over 26% in this current quarter.
This is coming from a variety of different segments. Of course, Triveni Turbine is a preeminent supplier of thermal renewable solutions to both independent power producers as well as industry, and we continue to maintain both our domestic as well as global leading market positions. In India, of course, we have a dominant market position. Increasingly, in the international market, we are making greater headway.
Market segments in which they are arriving from include solid municipal waste incineration in which we have received orders in the higher than 30-megawatt category in this current quarter, which again strengthens our market position as a dominant supplier into this market segment of municipal solid waste incineration globally. This is for an order from West Asia.
And we have other successes in this area as well. We've also received orders from Southeast Asia, Europe and North America in this current quarter, which should -- which gives us confidence in terms of the recovery in these markets as they open up. The requirement stems, like I said, not only from thermal renewable solutions, but also from industrial CapEx, which is happening in terms of fixed capital formation in a variety of different industries. They seem to be led by process cogeneration and heating requirements for a variety of industries, but also in terms of independent power production based on biomass and other renewable fuels.
The company also is performing exceedingly well in its API market segment, and that is a market segment that is growing quite rapidly for us. And our developments in this line place us at the forefront of technology that is being provided to our clients in this market segment.
We provide both single stage and multistage designs, which are extremely energy efficient and have an extremely good payback for our customers. On the Aftermarket side, the company continues to grow across its three market segments of refurbishment, spares and service.
In the traditional business of energy enhancement and upgrades have significantly contributed to both the international and domestic market orders. As I had alluded to in our last quarterly call, we have picked up a significant order in the South African development community area for servicing of large utility turbines. These are orders which contribute not only a lot to our top line, but also to the capability of the company to then further work with our clients to move up the value chain to get an increasing number of spares and other higher value or higher margin orders.
These -- this order in specific in the half year contributed to approximately INR 13-odd crores of cost, which was included in other expenses, as you will see. There will be other expenses such as this coming in the future quarters. And while the margin level for these orders is lower than our typical Aftermarket segment, we as a company, given the growth, operating leverage mix in export versus domestic. The reduction in material costs are confident of maintaining margins in the short, medium and long term for the company.
Our focus is on growth. And as I had alluded to in our previous conference call about a growth of over 35% odd in the current year and next year, we are quite confident given the state where our order book lies to be able to achieve these numbers. If not try to exceed them.
Given that fact, given the growth, given the higher return metrics of the company and given the fact that really the company does not have much use of its capital, it's cash and bank. The Board of Directors have decided to do a buyback in this current quarter. And subject to the approval of shareholders, the Board has approved a proposal to buyback from equity shareholders of the company up to 5.28571 million equity shares at a price of INR 350 per equity share for an aggregate amount not exceeding INR 190 crores through a tender offer on a proportionate basis in accordance with the provisions of SEBI buyback of securities regulation 2018 and the Companies Act 2013.
This is a request that we received from many shareholders and especially our large and largest mutual fund shareholders in India. We believe that this is a good way to return a chunk of money to all shareholders. The performance of the previous buyback that the company did in February 2019, at a subscription of over 184% and small shareholders had a subscription of over 2,000% in that buyback. So we are quite confident that this will be taken very favorably by shareholders and seen as a means by which the company looks to return capital to shareholders. The promoters will be participating in this buyback as well.
Having said that, now our R&D continues to perform exceedingly well. We are focusing on further IP development on all existing product lines in terms of improving blades, blade parts, structural analysis and other parts of the turbine. While at the same time, our developments on future technologies also continues to do very well. We are in the process of piloting certain technologies, and we hope to report soon on some progress in these lines.
With that, I'd be happy to open up for questions and answers. I have our colleagues on the line as well to help, assist in any questions you may have.
[Operator Instructions] The first question is from the line of Kunal Sheth from B&K Securities.
Congratulations on a very strong set of numbers. My first question is pertaining to your export market. While we have had exceptional performance in the export market, generally, there has been concerns around what is happening around the world in terms of slowdown in economic growth. So if you can share your views about what you're hearing from your end markets in -- especially in the export side?
Okay. You bring up a very important question because there are two factors to the market in which Triveni Turbine operates. And as I've been trying to allude over the last several conference calls, Triveni Turbine provides heat and power solutions to industries as well as renewable energy-based power solutions to the IPP industry.
So very frankly, when we see demand coming from places like Europe, it is coming from a perspective of energy transition, where you have requirements of energy efficiencies stemming from industrial processes such as Waste Heat Recovery or other Biomass-based IPP plants. The largest segment of growth in markets such as Europe, which is currently under a huge degree of energy crisis as well as a conflict, stems from diversifying their energy requirements. So needs such as municipal solid waste incineration as long as the waste exists provide extremely good business case for entrepreneurs or businesses to set up these capacities. And as you know, there's ample funding from -- for these type of plants.
Globally, otherwise, you have an enormous amount of growth happening in agro industries. And agro and process industries continue to provide growth for us in a variety of different markets, especially Southeast Asia, Central America.
The API market, as you know, given the level at which oil and gas prices are at, continues to be quite robust, and we are aiming to increase our order book in this segment gradually over a period of time, but it will be -- it will reflect quite well on our overall order booking. So from the perspective of our traditional market of below 30 megawatts, the international market seems to be doing quite well, and we are very optimistic in the coming quarters to exceed our current performance.
And the above 30 megawatts segment also, we've had success, and we aim to continue pushing in this market segment, though, of course, it is more lumpy than the below 30-megawatt segment, as you could imagine because of the number of turbine orders that actually do come about. The API market segment also continues to grow.
A factor which will aid our international growth considerably is our servicing -- is our focus on servicing internationally and our aftermarket proposition.
I have President of Aftermarket, Sachin on the line. Sachin, could you give a little bit of indication as to how you see aftermarket growth and especially on the international side?
Good morning, everyone. I'm glad to actually bring you up to speed on the...
This is the operator. We have lost the connection for Mr. Parab. Sir, you may continue in the meanwhile.
Yes. Okay. I'll get Sachin to answer the question when he gets back. But if that answers your question, we can move on to the next question.
Thank you for such an elaborate outlook. My second question is pertaining to the margins. You made a comment about that you are quite confident about maintaining your margins for this year and current year. But would you believe there are also drivers within the business that can help you expand margin going ahead, especially that we are also talking about increased focus on services?
Yes. I think you see that multiple areas where we can improve margins. As I said, operating leverage will allow us to improve margins. The product mix both on the export domestic as well as aftermarket to product will allow us to expand margins. Stability in commodity pricing and the fact that most of our rate contracts will now be renegotiated at lower rates could mean a certain margin expansion. But having said that, we also see expenses along the way. We will be -- we have already expanded our workforce by about 15% compared to last year's same period. We aim to increase that more significantly going forward to cater to our a very large growth coming forward.
We also aim to invest into R&D and to future-proof ourselves from a technology perspective. But at the end of the day, the fact that we're seeing this amount of growth, and we are confident that we have pricing ability in the market. We have to be cognizant that we don't overcharge our customers because we're playing a longer-term game here. So we're confident that we could improve our margins, but why constrained growth at this point in time, let us run with growth. We are confident that we can maintain margins at where we're at. We just -- I don't think that there's any reason for us to expand margins at this point in time to rather push for greater growth.
[Operator Instructions] We have the next question from the line of Amit Anwani from Prabhudas Lilladher Private Limited.
So my first question is with respect to exports, and you highlighted that we are seeing a strong pipeline in 3, 4 geographies. So if you could just elaborate more where are we seeing the larger contribution expected to come? You mentioned about Southeast Asia, Europe, Africa. So if you could just elaborate more on which part and which category between like 0 to 30, 30 to 100 megawatt, where we are expecting to receive orders?
Actually, the thing is Triveni Turbine has enquiries from over 110 countries, and it has an installed base in over 75 countries. So we're quite diverse as far as this goes. So when we talk about demand coming from areas like Southeast Asia and Europe and North America, these are very large markets. And of course, it will be spread between countries within them.
Our focus as a company and our competitiveness and our market proposition is always strongest in the thermal renewable segment. So of course, a considerable amount of our enquiry book and order book is in this market segment.
As you'd imagine, this is a market segment that is also growing in the market because that is ultimately what finds adequate funding, and lease resistance from climate change supporters. So very frankly, that contributes a lot.
Industrial growth by itself would contribute maybe about 35%, 40% of our growth, excluding API markets. So we are reasonably insulated, although we play very strongly into the energy transition market.
In the ranges, of course, our historical market of below 30 megawatts from a number of turbines is always going to contribute far, far more significantly than anything above 30 megawatts. But we have been very good headway in this past year since our joint venture with General Electric ended, in this market segment, and we aim to continue getting orders both domestically and internationally from this market.
As I told you, our recent order of municipal solid waste incineration was for an above 30-megawatt market. And so were our orders earlier in this year for wastage recovery in the steel sector. So we have confidence that it's broad-based. It's in terms of geographies. It's driven around thermal renewables and solutions either directly for great dispatchable power of internal heating requirement. And yes, I think that's what I can give you right now.
And with respect to, sir, enquiries, I think if I heard it right, you mentioned that enquiries have grown by almost 27% for this quarter. But I think there was a decline in enquiries in domestic market. Is it right?
Yes. So enquiry overall grew by 25%. Internationally, it grew by 58%. This is what gives us confidence in international order bookings in the coming quarters and year. Domestic market enquiries reduced by 19%, and this was pretty much all driven by the Eastern belt of mining metals.
And sir, any outlook? Are we expecting the same in coming quarter?
Outlook is still equally robust. The market itself for the half year in the domestic market, for somewhere in excess of 700 plus megawatts and for the below 30-megawatt category, we didn't have much of any orders above 30 megawatts. So we're confident that the year-on-year growth is there. If we look at order conversions in certain industries, they seem to be very robust, especially in terms of markets such as paper recycling, new markets such as plastic recycling, et cetera, will be picking up as well.
You have cement expansions and cement wastage recovery, which will be coming up quite seriously in the coming quarters. So we're very positive on the domestic market. As I told you in our previous conference call as well, the entire market has still a long way to go before it hits its peak for the domestic side. So we think that while we have an upswing in fixed capital formation, it is nowhere near any peak in any manner. So we aim to -- or we believe that we will continue to see growth in the domestic market in the coming years for the next 2, 3 years, we should continue to see it.
Sure. One last question, sir, on the SADC, you mentioned that it contributed around INR 13 crores to the cost, other expenses, and margins typically here are lower. So in this large service turbines, are we -- what could be the market for us? And are we expecting the margins also to improve here in coming quarters? And anything in the pipeline here apart from SADC?
Yes. Pipeline has orders from there as well, and they will be contributing in this financial year as well as next financial year. I think Sachin is back. So I let him speak a little bit more about this. But in general, the SADC, what -- the reason I highlighted the cost for the half year, which form the part of other expenses so that you get an understanding on the published results as to why other expenses gone up so considerably. And therefore, we will continue to provide notes to our accounts to get that clarity.
These orders will aim to improve margins, but it's difficult for these particular orders to come back to general aftermarket margins. We think that providing the capability here, the market is really giving us credentials for the global market for us to provide this as a service provider everywhere. The market is extremely large. Extremely, extremely large.
So Sachin, if you're there, could you just provide your views?
Yes. The specific question was about the SADC market. The services market in SADC region is huge. I don't have a figure to share with you. But we have a very, very small rather in significant market share. And the reason why we have entered into this strategic services contract is so that we can build credibility, create a reference and get into the reckoning in other markets as well.
So there is a lot of headroom in SADC itself for us to grow in the services region. And clearly, from a service standpoint, the manpower supply, we are aiming to upgrade ourselves in the value chain and get into more of supplies of parts and upgrades, which will actually help us in improving the margins even better. So this is just the beginning, the foundation being laid in SADC region for the services. And we are confident that the reference we create here will help us get new business in other markets. The market remains extremely large. And as I said, the market share is very small, so tremendous headroom for us for growth.
Sachin, why don't you give an indication of the overall Aftermarket growth also?
So this year, we have seen good order booking across the spares, services and refurbishment domains of the Aftermarket business. The growth has been driven significantly by efficiency enhancement and upgrade projects. And we see that across the markets, more so in the Indian context where we find that a lot of customers are finding value in getting upgrades done on their turbines.
We are seeing good traction across Asia and in Africa for all our revenue streams. And the growth this year, some of the numbers, our Vice Chairman has already mentioned, we are quite hopeful and confident of achieving the same growth numbers in the next year as well. So the momentum should continue for the services business.
[Operator Instructions] The next question is from the line of Himanshu Upadhyay from O3 Capital.
Congrats on good set of numbers. I had a question on our order books are increasing and even for our competitors. Are the pricing also improving in the market and because some of the peers are European-based players, okay? So what is the pricing happening? Are we seeing any improvement in the pricing?
The thing is that we've come off an extremely volatile raw material base. So at which point in time you look at it and orders, but in general, you can see because the market is expanding, margins are expanding. You are right. But that's general principle. So that is a positive thing about it, but it is an intensity competitive market also at the same time. So we do see, in general, margins expanding because of the market expanding itself. Also given the fact that different companies have different cycles of having absorbed the raw material cost increases or the revision of costs downwards.
Okay. And one question, I had was, see, in turbines, we see that refurbishment happens after a period of time, okay. If you -- at what point of time the company decides that it is time to buy a new turbine versus just getting it refurbished, okay? Can you just give some...
Yes. So you see the product itself is a customized product and used by operators in their own manner. So really, the wear and tear is dependent on a lot of inputs from the customer side itself. And primarily amongst those is the operator use, especially if the turbine is used in an extraction mode or a backpressure mode, whether heat is provided to an industry, the requirements, both from a quality of water perspective lead to degradation of different parts there. So you have different wear and tear that happens between different customers, both based on industry as well as geography, driven by different levels of automation, et cetera.
So the refurbishment cycle can be as quick as 1 year to 20 years. It is all unique in customized and depends on specific consideration. Our turbines itself allows to build or designed to build in excess of 40 years. So they can last, they are rugged turbines. So they have no problem. But even in our own technology, we ourselves are developing new blades and new blade parts, which improve our efficiency by 3%, 4%, 5%, 6% over the previous generation.
And so you could even validate with our own installed base to improve and replace rotors and change blade parts to improve efficiency with an installed base of maybe 5 years ago even.
Okay. And one more thing. On that API turbine business, okay, what has been the progress and the path ahead on that product? Can you elaborate on that also?
So, the path ahead that, this is a market segment that's newer to us. And so we are building our enquiry book here and our order book. We have received good orders. We continue to believe that we will receive good orders. We are not -- the market is quite large. So we think that before we become a significant player there and coming to the line of more intense competition, we have a way to go in terms of our order booking here. But it will grow at a very fast pace year-over-year, but it won't contribute more than 10% turnover in -- we'll let you know when it contributes over 10% of turnover. Right now, it's not there.
The next question is from the line of Alisha Mahawla from Envision Capital.
So like an update on the CapEx that was announced last quarter, I think it is expected to come on stream this quarter?
I'll have our CEO and Executive Director, Arun, to answer that.
As regards to CapEx, the expansion at our new plant at Sompura is more or less complete and some balance portion would be completed after the month itself. There have been certain other acquisitions as far as land and equipment is concerned. So most of the CapEx is now over. There will be some balance in Q3 that would happen. And I would like to tell you that all of it has been put to use.
There's no fresh CapEx proposals. So whatever the CapEx we had is always we're doing. 80% of it is in fixed infrastructure and about 20% is in software and other IT-based CapEx.
This is the CapEx that was going to increase the capacity to 200, 250 turbine sir?
Yes. Yes, Ma'am. And that's what I have said that it has been already put to the use. As you recall last year, we had done over 100, 110 turbines. And this year, in the first half itself, we have reached a figure around that. So the capacity so the building of numbers in the current financial year will be twice as compared to the last year. And we have further space to expand it with the current infrastructure that we have.
And as our Vice Chairman has told you earlier, we are looking forward to around 300 turbines that can be built of various types and sizes.
Okay. Sure. And also, will it be possible to quantify how much of our growth this quarter is attributed to the price hikes that we've taken in this quarter in the last 3, 4 quarters?
Every order is unique. So we don't have any list of standard price. So it's not possible to determine it that way. I think the previous caller had mentioned in terms of margins, and I think that's the only way that you can say that we've seen an expansion in margin.
Okay. Sure. And you did mention earlier on the call that there is a drop in domestic enquiry. Is this only attributable because of steep inflation in raw material costs or CapEx cost? Or is it a general slowdown that now we're witnessing? And are we expecting this to come back in H2?
Yes. I think it will come back in H2. But I think you have to look at it less on a quarterly basis and more on an annual basis. On an annual basis, you will continue to see growth.
The next question is from the line of Chirag Muchhala from Centrum Broking.
The question is on the SADC order of INR 1 billion that we had won. So anything of that order has been booked in Q2 as inflows?
No. No inflows in that on Q2 too.
Okay. On this similar lines, are we exploring servicing of utility turbines in India as well in the near future? And if yes, then what kind of incremental capabilities we will need to build for it?
Yes. The capabilities are something that we already have. In India, it's a very funny market, which works on references and prequalifications, et cetera. So these are things that we will have in place.
India is also a very competitive market. So we'll have to see how we entered into it, especially given the fact that we don't like assuming liabilities, especially in these matters, state like, three boards are notorious and lack of transparency in the operation. So we'll have to see how we operate in that market. But needless to say, we have the capabilities, we have the capacity as well. We have the knowledge. We have the references now. And we just have to see how we approach the market and build customer confidence we'll be able to execute.
Okay. But -- so at least from the private sector plants, any immediate plans to also, I mean, start exploring that market? Or I mean, probably not something over the next couple of years? Hello, am I audible?
Yes, sir you're audible. Management members, please confirm us if you're able to hear us.
Yes, we can hear you. To answer your specific question, this is Sachin here. In terms of the private players in the utility segment in India, as our Vice Chairman mentioned, it's a very fragmented and competitive marketplace here. So we have -- we are going to be very selective in terms of the businesses that we will pursue where the risk is limited and there's much more transparency in doing business. As far as independent power producers go with utility turbines, we are supplies of parts. So that's an area which we have been actively exploring. Services will be more in the medium term. But for the short term, we are looking more in terms of supplies of parts to earn the utility turbines for independent power producers in the private sector. I hope that answers your question.
Yes, yes, sure. And on the 30- to 100-megawatt space, in the last call, it was mentioned that we were successful in a thermal renewable project also, which will be booked in Q2. So has that been booked or that is yet to be booked?
No, it's been booked. Good order, great reference, good technology application.
So this is a different order from the one that you are mentioning from West Asia of the solid municipal waste incineration, right?
I don't fully refer what I said last time, but this is what we have booked in this quarter.
Okay. So for the 30 to 100-megawatt space specifically in Q2, how many units have been booked? Can that be -- I mean, can that be given out?
We want to move away from -- I want to -- I started off our conference call post our joint venture ending to give greater credibility around orders here, but we would like to stick away from giving individual orders until they're material, unless they are material.
But regardless to say that we're getting good market traction here, we get good market participation, our enquiry levels in this space are going up, our customer references and our result from customers is going up. And so therefore, we believe this will definitely add to -- and is already adding to our order booking. And we'd like to then just look at the turbine market in terms of applications asked in size over the period of time.
The next question is from the line of Prolin Nandu from Goldfish Capital.
Just want to understand your after sales business a little bit better. You mentioned that these are customized turbines and life cycle can depend on the usage -- but as a thumb rule, let's say, if a customer pays INR 100 for the turbine over the life cycle of the entire turbine, what could will be the revenue that the customer will have to pay for the first refurbishment, spare, and service element?
About 3x over a 20-year period.
Okay. So you say INR 100 is paid for turbine, it's INR 300 for [indiscernible] turbine.
On a non-inflationary business.
Noninflationary basis. Okay. That's good enough. 3x right?
Yes.
Okay. And just on addition -- I mean you talked a lot about the international aftersales market. In the 0 to 30-megawatt in terms of the turbine that we sell, we have a very high market share, do we have a similar or a higher market share in aftersales in domestic market in 0 to 13 megawatt? My question, what I wanted to understand was that how are we looking at the service or the after sale element of the turbines of our competitors. Can you help share some strategies to cater to that market?
Yes. So actually, it's a very good question you bring up. And as you would see that growth markets such as India, Southeast Asia, where the installed base is lower, that means that both Triveni reference sites as well as competitor reference sites are lower. The focus is always obviously going to be in terms of more product sales.
In India in specific, because really the expansion in the Indian market in terms of captive power generation, it really only picked up post 2003 Electricity Act. Triveni's market share and installed base is a preeminent market base here. And of course, majority of our market base is catered to by ourselves only. Those customers who don't buy their aftermarket services from us, I'm not buying it from a competitor. They're pretty much fabricating it in a very rudimentary manner. So those are not type of customers that we would like to sell to anyway because there's no price and margin there in any case.
On the international side, as you rightly say, the installed base of our competitors is far larger. And our focus would be to incrementally take share from those OEMs who are largely no longer participating in this space or are very expensive.
But this is dependent on giving credibility to our customers in terms of having underground presence and capabilities. And to that extent, as we build out our international capabilities and underground presence we would see a greater degree of customer confidence. So we have received numerous orders in this past quarter only from our competitors -- sorry, from clients for competitor turbines, and these range from utility turbines of 660 megawatts to combine cycle application turbines of 60-plus megawatts of our competitors.
And so we think that it's very difficult to -- this is more a question of effort in market and making sure that our presence is there and is continuously selling. We know our capabilities are high and that our cost structure allows us to be extremely competitively priced for the customer. Again, as Sachin has said that this is a key area of growth for us going forward.
Sure. Just a follow-on to that would be -- I mean, let's say, in some of the international markets where you need some people on the ground. Does it mean that initially, we will have to probably invest and then it does not make sense to probably compare our aftersales margins that we have done historically because of this investment phase, and maybe in some of these key countries, we will have to probably put that feet on street. So would it be slightly margin value to at least in the short term? Is that the right way to look at it?
No, no. Not at all actually, because this is -- we're not a CapEx heavy company anyway. So our capabilities are people. And so very frankly, through expansion into markets is a HR constraint as well as a question. To that extent, like I started off in my initial remarks, we have a very ambitious and aggressive hiring plan. And so we are looking for capable managers. We're looking for capable, competent managers at all different levels, business managers, technical and engineering managers, service support staff, supply chain people. And so we're looking to expand operations. I'll, of course, keep in mind the fact that we will continuously look to contain employee cost as a percentage of turnover.
The next question is from the line of Harshit Patel, Individual Investor.
This is Harshit from Equirus Securities. My first question is on the Europe. As you have highlighted rightly that Europe is going for MLP securities and that might open up a lot of prospects for us. Sir, could you give us some flavor on the European market as a whole as to how large is the market, what is the structure of the competition over there as to what would be the market share of top 3, 4 large MNC players, which are the Tier 2 players? And where do we stand in this overall scheme of things?
And lastly, on the similar line, what would be the difference in pricing between these players as to how much premium would that Tier 1 player would be targeting and where are we in the full sector? That would be my first question.
No, no. So thank you, very detailed questions. Unfortunately, I don't think I would be able to give you answers on the pricing levels. But obviously, you would understand that a price quoted to a customer and accepted by a customer means that other people were higher or lower to that. We at Triveni don't use orders based on price.
Our biggest issue in the international market is a question of visibility, as we can expand our visibility to the greater extent, which is an indication through our enquiries, the chances of our success are higher.
In general, Europe is going through its energy transition and its requirements are specifically catered around thermal renewable solutions only or district heating as a matter. And typically, from a competitive viewpoint, Europe has had the largest number of incumbent OEMs, but they also have the largest number of OEMs that have gone out of business or are sold out also.
And so the competitive nature of the market in Europe is the highest. We find that -- despite the fact it is a competitive market, you have very healthy margins, I think, for all manufacturers.
The market, not only in Europe, but globally is dominated by Siemens. So Siemens is by far, the largest player in all market segments in all markets, especially if you look at it from a global or regional perspective.
And so they are the dominant player and the rest would fall below including us. So we are there. Now what you must keep in mind is the fact that the amount of enquiry that we see from Europe are pretty much the same number of enquiries that we see from Southeast Asia. But Southeast Asia provides a different application to those -- to the requirement. There's more industrial CapEx and fixed capital formation happening in Southeast Asia as well as Africa, than would be happening in places like Europe.
Sure. Understood. Sir, my second question would be on the geographical fleet of our overall international revenues. So if not the exact number, but if you can give a broad split as to what is the percentage of international revenues that we are getting from each of the geographies: Europe, Southeast Asia, West Asia, Latin America and so on and so forth. That would be my last question.
Actually, firstly, I don't have this information, not me, but I don't know how material it is due, given the fact that, like I said, we sell in over 110 different countries. And very frankly, is the economic climate between India and Bangladesh and Pakistan is not the same. So getting on a regional basis apart from Europe is not really constructive.
But having said that, our order book, like I said, is based on two applications. One is industrial heat and power application and the other is renewable energy-based power requirements. Now you could tell from areas that wherever the installed capacity or size of economy is larger, that will obviously be larger markets for us. So Indonesia is always going to be a larger market than Singapore. That's just obvious.
Indonesia is also going to be a larger market for us than Thailand. And Thailand is going to be a larger market for us than Vietnam. These are just consequences of markets. And so very frankly, we participate in the growth of those markets and the energy transition as well.
[Operator Instructions] The next question is a follow-up from Prolin Nandu from Goldfish Capital.
You mentioned that you are also always upgrading, and there is this whole element of 3% to 5%, 3% to 6% improvement in yield and that also is forming a decent part of your order book. For a customer, what could be the breakeven to probably upgrade, right? If that is an improvement of yield of let's say 5%. Is like what could be the payback for that kind of a replacement?
Yes, it all depends on cost of capital. But as you would imagine -- and cost of capital and the price of your fuel. So what we've seen -- and this has been a large driver of growth for us, both on the product as well as aftermarket size is the fact that raw material fuel prices, be it biomass, coal or even notional cost of heat has gone up considerably in terms of calculation. And so the paybacks are very, very quick.
But I would say that for a 5% efficiency upgrade at a 12% cost of capital should give you a payback somewhere in the region of about 3 years, 3.5 years.
The next question is from the line of Khadija Mantri from Sharekhan.
So first question is that in the results we had a special mention of some INR 11.4 crores of expenses towards execution and maintenance expenses in the SADC region. So was it a one-off or we are clarifying because we did not book any revenue for this order in Q2?
No, no, there was revenue. The expenses of it were not directly incurred, that is the efforts on the part of other expenses. We had alluded to this in our previous conference call as well as this conference call as the fact that there will be further revenue coming in this bucket and to expect that in not only this current financial year, but the coming financial year as well.
Okay. And sir, when we see that better product mix to lead to improvement in margins, so what would be the ideal product mix for Triveni Turbines, which can lead to like 100 to 200 basis points improvement in margins from current levels of 19%? I'm talking about operating margins.
No. I mean I think the fact is that it is a dynamic market. Of course, the fact is that we could expand our margins tomorrow to 20% to 25% if necessary. We just have to refuse certain orders. .
The thing is that the domestic market is always more competitive. Market share, we aim to maintain a good market share, a dominant market share in the Indian market as the strategy. And the fact that we consider it to grow the domestic market as well as our international market growing, we believe that in the medium term, we'll have a 50%, 50% product both international and domestic revenue share. So that is one thing that will stabilize margins.
The next part is on the aftermarket versus product mix, is not part of in the revenue mix, where currently you have the 24% of turnover for this current quarter, the previous quarter, previous financial year -- sorry, the last Q2 of FY '22 was at 27%. So you can see why there is a margin difference because of the average margin that you would get in the Aftermarket segment are considerably higher than what would be from the product.
What we aim is, again, in the short term, is that we will incrementally grow our percentage Aftermarket to sales as well. This has been difficult given the fact that we have an extremely high growth rate on the product side. So this is something that we'll have to try and that will be a challenge for us in the coming quarters is to maintain the growth rate.
And Sachin has already spoken about the fact that surging grown quite considerably from an order booking perspective, and then, therefore, execution, and we will aim that this will continue to grow even faster. So we should have a higher aftermarket as a percentage of sales figure than the previous year. This all gives us confidence in the fact that ultimately, we have a yielding revenue from our aftermarket and something that we think holds us in very good state for years to come.
[Operator Instructions] As there are no further questions, I now hand the conference over to management for closing comments.
Thank you very much, ladies and gentlemen. We're very pleased with where we've ended up with Q2 FY '23 as well as the H1 FY '23. We have full confidence that H2 is going to be considerably better than H1. And FY '24 is going to be much better than FY '23. So we look forward to your participating in our growth journey. Both Arun and I thank you for being on this call.
Thank you. On behalf of Triveni Turbine Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.