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Triveni Turbine Ltd
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Ladies and gentlemen, good day, and welcome to the Triveni Turbine Limited Q3 and 9 Months 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, sir.
Good day, everyone, and a warm welcome to all of you participating in the Q3 and 9 months 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. Lalit Agarwal, Chief Financial Officer; Mr. S.N. Prasad, President, Global Sales Products; Mr. Sachin Parab, President, Global Sales Aftermarket; Ms. Surabhi Chandna, Investor Relations and Value Creation, along with other members of the senior management team.
Before we begin, I would like to mention that some statements made in today's discussion may be forward-looking in nature, and a statement to this effect has been included in the invite, which was mailed to everybody earlier. I would 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, and a very good morning to everyone. And welcome to the Q3/9 Months Investor Call for Triveni Turbine Limited. We are extremely pleased that the company has recorded a record turnover, profitability, order booking and even the balance sheet. Multiple factors have been a record for the company in its history. And so we're very excited to have this call with you because not only have we had very good results, but the visibility for results, both not only in Q4 but in FY '24 as well seem to be very robust.
We've identified the growth avenues in the form of all the 3 product segments, which is the leadership in the below-30-megawatt category, with newer focus segments of 30 -- above-30-megawatt space as well as drive turbines. And that, coupled with a very robust aftermarket strategy encompassing spares, service and multi-brand refurbishment gives us great confidence in achieving newer milestones in the quarters to come, both on operational and as well as on a financial basis.
Revenue from operations for Q3 FY '23 stood at INR 3.26 billion, an increase of 44%. EBITDA for the quarter was at INR 750 million, up 40 -- over 40%, with a margin of 23%. And PAT for the quarter was at INR 526 million, an increase of 47.3% year-over-year.
For the 9 months, the results have also been very good, with revenues from operations at INR 8.78 billion and EBITDA at INR 1.98 billion, and all these numbers have crossed the yearly figures for FY '22 already in the 9 months of FY '23. We've also ended -- this current quarter, we had an order booking of INR 4.2 billion and a total order booking in the 9 months of INR 11.39 billion, which is an increase of over 26% year-over-year. The outstanding carryforward order book as on the 31st of December 2022 stands at INR 12.32 billion, an increase of 33.3% year-over-year, which gives you a visibility in terms of the revenue and turnover that the company will have to execute in the coming quarters.
On the balance sheet side as well, we have a record situations, with investments at -- in excess of INR 8.3 billion, an increase of over 10% from March 31. But we also have further negative working capital in the business as well as extremely high free cash flows, which are higher from a quarterly perspective at 9 months because [indiscernible] than the profit after tax under respective period.
On the order booking and order books, the company has achieved, like I said, another quarterly high in total order booking, crossing INR 4 billion. And the domestic order booking for the quarter was at INR 2.31 billion, an increase of 181% compared to last year. The export order booking during the quarter was at INR 1.9 billion, lower by 21% as compared to last year's order booking of INR 2.39 billion, but it has to be kept in mind that quarter included some exceptional, very large and very prestigious orders from the international market.
On the product side, order bookings during the quarter reached the INR 3 billion mark and came in at INR 3.06 billion, which is higher by 13% when compared with the corresponding period of the previous year. And the product segment turnover was INR 2 billion during the quarter, an increase of over 19% of the -- over the previous year.
The aftermarket segment registered an order booking of INR 1.15 billion during the quarter, growing handsomely over 130% when compared with the corresponding period of the previous year. The aftermarket turnover was INR 1.26 billion during the quarter, a growth of 118% over the previous year. And aftermarket has contributed to 39% of total turnover in Q3 FY '23 versus 26% in Q3 FY '22.
The domestic outstanding order book stood at INR 6.90 billion, up 37%. And the export outstanding order book stood at INR 5.4 billion as on the 31st of December 2022, up 29% and contributing to 44% of the closing order book.
During the quarter under review, revenue from operations grew by 45% as compared to the previous year, with domestic sales showing an increase of 14% to INR 1.85 billion, while the export turnover increased by 123% to INR 1.41 billion, driven by the company's success in the international markets, especially in the aftermarket segment. As a result, the mix of domestic and export sales has changed to 57% and 43% in Q3 FY '23 as compared to 72% domestic and 28% export in Q3 FY '22.
In the product segment, inquiries increased by 31% year-on-year, and we are witnessing higher inquiries, especially from the international markets such as Southeast Asia, Europe, West Asia and North America. In its entirety, we have seen an increase in the international inquiry base by over 55% in the past quarter, and we've seen a decline of 5% in the domestic inquiry book. Amongst industry segments, renewable energy independent power producer segment led by -- led to a higher inquiry base, followed by process industries.
In the domestic segment, we are seeing good prospects in the distillery, pharmaceuticals, chemical industries, amongst others, including waste heat recovery for the cement sector as well. The API segment in the domestic market as well as internationally is very robust, and we had good visibility in terms of orders coming from this market segment.
On the aftermarket side, the company is again witnessing very good growth in the subsegments of spares demand as well as for efficiency improvement and refurbishment with strong inquiry pipeline. The expansion of the portfolio to cater to utility turbines, geothermal and other rotating equipment is yielding good results, and I'll be happy to discuss more of this as we take the conversation forward over the question and answers.
An update on the buyback, the Board of Directors at the meeting held on 2nd November 2022 approved the proposal to buy back equity shares at the price of INR 350 per equity share for an aggregate amount not exceeding INR 190 crores through a tender offer on a proportionate basis. Subsequently, the shareholders of the company approved the buyback through a postal ballot by e-voting on the 11th of December 2022. The tendering period of the buyback has commenced on January 17, 2023, and will end on the 31st of January 2023.
As far as outlook goes, despite the global recessionary concerns, Triveni Turbine is constructive in the business prospects in the coming years, and our inquiry book suggests the same. On the domestic market, we believe that industrial CapEx growth is expected to continue, and the small decline that we've seen in the inquiry base for this current quarter should be overturned in the coming quarters. We believe that segments such as waste heat recovery and waste-to-energy will receive further impetus from the government of India as well as state governments. And this is for focus in India specifically, but it equally applies to the international markets as well, where there's adequate funding in the space for renewable energy power generation, especially as we see continents such as Europe clamoring for an increased energy transition.
Triveni Turbine is also at the forefront of innovating and leading this energy transition by working with premier Indian education institutions towards developing emerging technologies. We believe these will lead to a variety of different marine, industrial applications for cooling, heating as well as power requirements, including recovery of waste heat. The company's long-term vision is well supported by a growing workforce, with a focus on upskilling and reskilling, higher international presence to increase proximity to customers as well as continued investment in customer-centric innovation through research and development.
Our total number of IPs filed stand in excess of 315, and IPs registered are well over 220 now. The company has also added in excess of 90-odd people in the previous 12 months. And we believe that the growth in personnel will continue into the coming year. We are optimistic on the future performance of the company, and we believe that with a highly motivated workforce with sales and marketing abilities, engineering excellence and a strong aftermarket capabilities, the company will continue to improve its market position and maintain its growth momentum in the years to come.
Thank you very much. I'm happy to take questions now.
[Operator Instructions] The first question is from the line of Himanshu Upadhyay from o3 Capital.
Yes. Am I audible?
Yes, you are.
Congratulations on great set of results. I had a few questions on the aftermarket business, okay? So in this quarter, when we see the doubling of aftermarket revenues, okay, so was this a onetime order? Or it is -- how should we understand this? Because historically, we believe that this aftermarket business, which is around 22%, 23%, slowly steadily reached 30%. We see a very handsome jump through. How should -- what are your thoughts on it?
Yes. So actually, we've been talking about this for the last couple of quarters on our investor calls. So if you read the transcript, which are on our website, you'd see what we've been talking about, specifically in terms of certain refurbishment service orders that we have taken in our aftermarket segment. As you rightly say, the percentage of aftermarket as a percentage of revenue has hovered in the region of 20%, and it's gone up incrementally every year from 23% to 24% to 25%, 26%. And I think last year, it was 27%, 28%. And in this current quarter, it's coming to about 39%.
This is driven by some -- these are not onetime orders. We believe are large sustainable orders which will increase in value over a period of time. But if you look at an aggregate, the growth in the product side of the business is equally robust. So while this quarter may have come in at 39% aftermarket as a percentage of revenue, I think for the yearly number, where you would take it somewhere in the region of around 30-plus percent, would be a little bit more accurate.
So having said that, the aftermarket segment is going to grow faster than the product segment. And so you would see a greater contribution from aftermarket as a percentage of revenue in the years to come. This is supported by the robust margin structure that we have in both the product as well as aftermarket side.
But let me ask Sachin further who heads this business in the aftermarket side to give you a little bit more visibility on the -- specifically on the refurbishment side of the business. Sachin?
Good morning, everyone. Yes, we had a good quarter. In terms of the sales for the quarter, the percentage of the total seems unusually high, as our -- [ recently as ] mentioned. In the range of 30% of the gross sales of the company is what aftermarket sales will be typically. The business is consistent. The orders are consistent. But the percentage this quarter -- the third quarter is slightly on the higher side. It is -- this is not really the percentage which we are looking at in the long term. Gradually, the percentage will go up, but it will hover around 30% or slightly under that.
And one more thing. You said that aftermarket will grow at a faster pace than product, okay? But generally, in capital goods, what we see is product grows better in the upcycle and refurbishment and all those things have been more in the down cycle. So [indiscernible] the aftermarket is leading. So can you elaborate what is the reason for that, yes?
Yes, yes, yes. So as we have been stating over the past couple of quarters, we have 3 distinct product segments which are growing in independent ways. The first is our historical market of below-30-megawatt turbines, which will grow, given our market share based on the market size movement. And we see the market size expanding year-over-year, which is evidenced by our inquiry book. So that's -- but I agree with you, is not going to grow at very high numbers. The second market is the market in which we don't have a very high presence, but we have ambitions to increase our market share, which is the above-30-megawatt space, where we will see good growth in as far as Triveni Turbine is concerned, and equally with drive turbines.
But all of this combined, and as you can see from our order book, the product order book grew over 20% year-over-year and while aftermarket order book grew by over 130%. Now the aftermarket is comprised of 3 distinct segments, which is spares for your own existing turbine base, services for your own existing turbine base and then refurbishment, which is what we call both parts as well as service for third-party turbines. Now the first 2 will grow based on the growth of your own existing installed base. And so they will grow the same rate of growth of your product growth.
The refurbishment, given the fact that we have a strategy to have a more localized presence in international markets and has their own independent growth strategies to cater to third-party turbines before the population of Triveni Turbine pick up in any specific geography has gone very well -- good -- has gone out very well for us. And so we see that market segment, which provides not only parts or service to third-party turbine users, and this stretches across the spectrum of turbine users, be it from utility turbines to applications such as geothermal has gone up very well for us. But it's all based on localized presence, and that is the strategy which we have elaborated on in the past, where we aim to increase our international presence going forward and, therefore, capture markets like this, which we will do opportunistically.
One last question, then I'll join back in the queue. See, we acquired one company for the aftermarket business, okay, and which was basically a team of people who were present in aftermarket. And we said if that strategy goes well, we'll look at more this such type of bolt-on acquisitions, okay? So what has been our learnings from that? And what is our thought process currently on growing the business or -- through inorganic...
I don't -- inorganic is a very strong word because we spent about INR 6.8 crores to acquire the stake that we did. It's not entirely capital. It's an -- it's basically a quicker acquisition of talent, which is what we did through that route.
Our strategy seems to -- our learnings from it are many. Of course, it's very difficult to elaborate on this call, but suffice to say that we are very optimistic on the fact that we need to have a localized presence. The route to that localized presence being organic or inorganic, I think, it is more enough strategy to attempt to do things organically, but it's small. Again, I must repeat, small inorganic opportunities exist, we will definitely evaluate them.
Sachin, would you like to elaborate on certain geographies that you may wish to be -- that you are considering?
It looks like Sachin's line has just got disconnected. We will now try to connect.
Okay, no problem. Well, I think that Triveni Turbine is looking at multiple different geographies, be it Southeast Asia, Europe as well as North America and South America to move on this strategy. And so we'll come out with the correct disclosures once the Board has approved -- has allowed us to disclose that. But having said that, we are actively contemplating our growth strategy internationally on the same lines or similar lines of having an increased international presence within the quarters to come.
[Operator Instructions] We'll take our next question from the line of Kunal from B&K Securities.
Congratulations on a great set of numbers. My first question is pertaining to the domestic market. While you did allude the fact that there is some slowdown on the inquiry pipeline in the domestic market, but any sense that you're getting in terms of why this is happening in terms of is it more transitionary? What is basically causing this slowdown? Any sense that you're getting when you talk to your clients?
Okay. In general, actually, it's still quite robust. I think this is more of a quarterly phenomena where you've seen -- where we know that -- see, we registered an inquiry when it comes at a formal request. The conversations that we're having in the market seems to be very robust. So that -- but for us, inquiry is a technical matter where, very frankly, a request for proposal has been raised. So that is a level of seriousness, is much higher as well as the fact that people are looking for raising funding. And so the bankability of the project, et cetera, requires a lot of these RFQs to be in place.
But the conversation that we're having with our customers or potential customers is as robust, if not more. And so we see a variety of different sectors adding to not only the inquiry book but also have contributed to the order book for the domestic market perspective. Firstly, you have segments which have been very strong for us, such as municipal solid waste incineration in the global market and really haven't contributed so much on the Indian side. We saw that contribute quite well in this current last quarter. We saw cement waste heat recovery continuing its momentum. We saw a certain process called generation from chemicals and other side also being quite robust.
You have a lot of government expenditure coming up from fertilizer, petroleum, petrochemicals, et cetera, in both the coming quarters as well as the coming year. And so we are quite optimistic of government CapEx also, which will be leading to hybrid capital formation in the PSUs. So we think it's strategically in nature, and we'll see, I think, next year a much higher number than we did in this current year.
Sure. My second question is pertaining to exports, especially on the Europe side. With energy costs starting to stabilize and come down in Europe, have you seen any change in discussions with customers in terms of their thought process? So basically, cooling of energy costs in Europe, how does it impact our business?
Actually, it's the opposite. The fact is that given the uncertainty in energy cost that they are facing, they're trying to speed up their energy transition. So that means to become energy independent as well as become more [indiscernible] and localized in terms of energy generation, especially the [ potential ] for decarbonized power generation. So that fits directly into our product basket. As you know, the fact is that we provide -- from a renewal energy power generation space, we provide solutions in only 2 industries, which is biomass-based IPPs and foreign waste incineration.
And both of those are dependent on the waste that's available. So when the waste is available and does get used, it's a question of ensuring that we are present in front of those customers to be able to build those orders. The order does contribute about 20% of our inquiry book. So it's very pertinent to our execution strategy.
Our next question is from the line of Harshit Patel from Equirus Securities.
Sir, my first question is for our greater-than-30-megawatt segment. So could you highlight what has been our order intake in the first 9 months of FY '23? I remember we had received an order in the municipal waste incineration category in West Asia in the last quarter. So have there been any follow-up orders from that point onwards?
No. But you are right that this is a segment that we're very actively pushing. And if we look at it, this current quarter didn't see any order booking, but we are very optimistic in the coming quarters we'll get good traction in this space. So the follow-on orders, et cetera, don't -- they don't exist, and there weren't any other -- any follow-up orders. So both on the domestic market, which really doesn't -- hasn't had many orders in the above-30-megawatt category as well as international, the market is something that we see will expand a little bit in the coming year, and so we'll be participating more aggressively in that space.
But in general, the fact is that technologically, we are quite confident on our product range all the way up to the maximum-100-megawatts. And so we are going to stop differentiating between below-30-megawatts and above-30-megawatts from next year onwards and just talk about the industrial heat and power market as well as the renewable energy market. The reason to provide distinction between the below-30 and above-30 was to give confidence to analysts and investors about the growth of the business. The company seems to be growing exceedingly well in all its different growth avenues. And as we see the record profitability and turnover in Q3, we hope to better that in Q4 and in the quarters to come in FY '24. So we're looking at a very robust growth from the business, and it will be split amongst all of different component categories.
Right. Understood. My second question is on the SADC region, where we have done a small acquisition. So earlier, you had highlighted that the total order value with the current customer could be as high as INR 1 billion over the years. And we have also booked a small order worth INR 190 million in the first quarter. I think, however, in the second quarter, you had mentioned that there was no incremental order from that customer. So what was the situation in the third quarter? So what is the cumulative order intake that we have booked from that particular utility-level customer?
I think somewhere in the region -- in this current 9 months, it's somewhere in the region of about INR 60-odd crores. [ Let me know ]. Sachin, are you online?
Yes. A similar number as you indicated, sir.
Yes. But I would encourage you, Harshit, to not look at individual orders because that's not really reflected. We don't have a concentration of customers in both aftermarket and product categories. And so our attempt has always been to diversify both geographically between customers and between the market segments and industries. And so very frankly, getting repeat orders is what's important to us because that is a sign of confidence in our execution and the quality of our execution. But really, getting repeat orders for the sake of building our order book is really not how we benchmark it.
So we would use our success in the SADC region with other customers in the region, with other countries and with other aspects. So we're optimistic, and that joint venture and our presence there has aided in providing that visibility.
Sure. Sir, just a bookkeeping question on the same line. So you have started highlighting the kind of subcontracting cost that you incur as part of the other expenses. So does this subcontracting cost only on account of this SADC region? Or that is generally spread across the globe in your aftermarket business?
No, I think it's really difficult to answer that, but it is -- the reason that we needed to highlight it as it was highlighted in the note 2 (sic) [ note 3 ] accounts, as you can see, that was for the SADC region only as what is explicit in that note because it is material enough for us to disclose. In either case, the fact is that this is a competitive space in a competitive world. So to provide excessive information even on calls like this leads to a degree of disclosure, which my colleagues on the marketing side would not appreciate.
Understood, sir. And just a last small question from my side. So you have highlighted that you have added 90-odd employees in past 1 year. So that's a pretty significant ramp up. So do we see a further ramp-up from here? Or the employee strength will kind of stabilize at the current levels in your opinion?
No, no. No, we will see a similar number of people joining within the next 12 months as well.
Arun, can you provide some visibility on the employee recruitment strategy and how we're approaching it?
Yes. As you know, the volume of the sales has increased, and we needed people for manufacturing and then other activities of the company also. So these 90 people have been added across the board, from senior level to the trainee level. And we expect a similar number to be added in the current year. This will also ensure that our employee expenditure as a percentage of sales is not likely to be more. In fact, it will be well within control, and there will be a productivity increase also. So there is no reason to worry about the extra manpower that we will be adding. And there is an attrition in the last 1 year, which was more, and we expect the attrition to continue because that is the way the industry is poised today.
But to add on to that, the fact is that we've -- in terms of specific competencies that we've been -- we try to add has been more on internationalization front, more on execution capabilities as well as on technology. And of course, everything has to go along. We believe that employee cost as a percentage of turnover will come down in the coming years and despite the factor we need to add more capabilities and more technical capabilities. The -- both the -- while the employee cost per turnover is going to come down, the revenue per employee is going to go up, and that's a sign of productivity. And so we're very hopeful that what is basically our frontline in terms of people will be adding productively to our order booking as well as execution.
Our next question is from the line of Amit Anwani from Prabhudas Lilladher.
My first question is about aftermarket. As we see, obviously, this quarter, it has been contributing very strongly. And what I can see in previous quarters, it has been contributing to the average of about INR 70 crores, INR 80 crores. And as you highlighted that at least INR 40 crores, INR 50 crores extra has been booked this quarter. So I think is this -- just wanted to ask, is this because of SADC contribution largely?
No, that is the one-off, but the segment itself is going very -- in a very robust manner. That is the aftermarket, specifically refurbishment. Now refurbishment for us comprises of a variety of different services. You have what I would call slightly lower value-added services such as overhaul and higher value-added services such as efficiency upgradation. And so it depends on customer to customer and geography as to how we're able to instill confidence in a customer to be able to avail for them to buy some of these services.
Obviously, the greatest confidence that a customer gets is by having a local presence. And so therefore, given the fact that we have partly through this acquisition, partly through having employees based in the Southern African region, we do have a critical mass to be able to get orders. And so that as a strategy has worked well for us and derisked in a market, which is reasonably low in terms of profit liability. And so we -- as we look to expand the model out, you'll see this coming from everywhere.
On -- and specific on the aftermarket side, yes, in the current quarter, you did have the SADC contribute well. But very frankly, if you look at from a perspective of profitability as well as the focus, it is very widespread amongst all the different customers and geographies that we cater to.
Right. And I also wanted to understand within export, how much would be product and aftermarkets? And any key geographies which is significantly contributing to export? Obviously, you have highlighted 4 to 5 geographies. If any percentage range you can [indiscernible].
No, you don't give percentage ranges because that ends up giving you the number of the turbine value only. But having said that, we've seen good orders from South America and Africa in this quarter, then coupled with the regular and routine orders that we have picked up from North America and Southeast Asia and Europe. The one that we would highlight in the larger range, which are closer to odd -- 30-odd megawatts will go from these regions. And in a very competitive environment, we've performed very well.
Essentially, what we've seen over the course of the past year is that the market has expanded. And with that expansion as well as commodity prices coming down, the booking margins have actually expanded. And so we're looking quite optimistically in the years to come. It doesn't mean that it will all translate down to our bottom line. We have more expenses that we'll incur in terms of internationalization. But as a company, overall, we are very comfortable with our margin profile as well as what we forecast for the year to come.
Right. So my last question is, if you can highlight, if possible for you, the megawatt-wise addressable market for you between 0 to 30 and 30 plus? And any sense on market share, as you can, in losing, retaining any absolute number? And if you can highlight on the capacity expansion, which you mentioned last quarter.
Yes. On the megawatt-wise market share, I think you may take it offline and discuss it with Surabhi, but we've maintained our domestic market share. And our international market share is -- has gone up as you can see from our order booking. This is -- and so therefore -- and this is in a variety of different segments that you have to look at. But in general, the performance is based on the fact that in certain market segments, we haven't had a great degree of market share to begin with, such as specifically in the higher range of megawatts as well as in the API turbines. And so as we capture more orders, therefore, our market share will increase.
How to break it down directly in terms of market share is a little difficult. We internally benchmark it based on the inquiries that we have. So the success rate that we have on our inquiries is, especially in the international market, it is what is the way that we would judge it. Of course, that is not the entire market. As you would understand, we -- at times, we don't have visibility into a lot of these product segments.
The last question was on CapEx. CapEx-wise, if everything is on track, we will be -- as we come into the new financial year of FY '24, we will spend a little bit more money on balancing because as you would imagine, over the course of the last year, we -- or year before last, we may have manufactured in excess of 110, 120-odd turbines, where this year, we may take it up to 160-odd turbines, and next year, it will be in excess of 200-plus or well above 200. And our booking, of course, will be in the higher range of nearly like 250, 280 turbines.
And so we do have some execution-based CapEx that needs to be done. But the majority of our CapEx is going to go into R&D, into to new software and skills and capabilities, new programs that we will be launching, along with educational institutions, both in India as well as internationally as well as a certainty of internationalization of more service centers, et cetera.
So that is where our CapEx is going to be focused on. A little bit of balancing will have to happen. But in essence, our entire CapEx is quite reasonable. I think when we had expanded our base, it cost us about INR 35-odd crores. So there may be some resulting CapEx and follow
[Audio Gap]
on CapEx of INR 2 crores, INR 3 crores and another INR 5 crores, INR 7 crores that may have to be created. And then we'll provide more visibility into this as we get into the new year.
Our next question is from the line of Chirag Muchhala from Centrum Broking.
Congrats for a very good set of numbers. Sir, so we have seen a very strong ramp up in our order inflow for FY '23, where we will, more or less, end the year in excess of INR 1,500 crores of inflow. So over the medium term of, let's say, next 2 to 3 years, based on the inquiry pipeline and CapEx trends across the industries and the regions that you're operating, on this base also, will you see that reasonably high growth rate of 15%, 20% is possible, sir, over the medium term of 2 to 3 years?
Most definitely. The fact is that you see, one is that we obviously try to aim to beat your order booking number for this current financial year. But that's why we're providing so much visibility on the inquiry book and the growth in order booking also. So that gives you an idea as to how we see the years to come. As you understand that our product execution profile is usually in the range of about 9 months -- 8 to 9 months for smaller turbines and about 12 months for larger turbines, and services is pretty much always within 3 to 6 months. So you have a lot of bookings within the current financial year. And so that provides us visibility for sustaining growth.
The main question is how are we going to be able to sustain the growth. And so while FY '24 is pretty much locked in the bag with high growth, this is despite the fact that we will have book and bill in the first quarter of FY '24 as well. Going forward to FY '25, '26, we do have good visibility of sustaining growth in those years.
Good to hear that, sir. On the Sompura plant expansion, so I -- so that was supposed to be over in Q3. So any update on that? And what would be our total turbine capacity now?
Arun, are you online? Can you...
Yes. Yes. The total expansion is more or less complete. We have already started using that bay. So partially, the capacity is being used. In another 1 month, it will be complete in all sense. So the full capacity will be added. We are looking at the capacity between 250 to 300 turbines, depending on the size. And also, there will be a flexibility. So we are quite comfortable in meeting the higher demand that may come in the years to come.
Okay. So sir, this 250 to 300 is total of both the plants, right? Or only Sompura?
Yes, of both the plants. Both the plants total.
Okay. Okay, sir. And sir, lastly, on the API turbines. So sir, you mentioned in your opening remarks that the government CapEx on fertilizers and petchem is also healthy. So sir, in API turbines, I do believe that we also have qualification in the domestic market, Indian market. So any addressable market opportunity for us that you can highlight, specifically for API turbine in domestic market?
Yes. We refrain from talking about individual customers, and I'll ask Prasad to comment a little bit about this. But the API market segment has 2 requirements. One is for power generation, and the other is drive. So as long as we keep that in mind, power generation is much like industrial power generation, where the turbine will be coupled with the generator. The drive turbines are those that will drive equipment.
But so for the domestic market, Prasad, can you provide a little bit of visibility as to which segments are giving you inquiries of potential order bookings in the quarters to come?
Yes, sir. Yes, sir. And so, as you rightly mentioned, the API market is divided into power generation as well as the drive turbines. We have been approved by major OEs and the EPCs and technical consultants or both. So the pipeline-wise, there is a strong growth in API inquiry pipeline. So today, we address across the global API inquiry pipeline. There is a considerable growth in that.
As going forward, yes, we can see some orders, which we are in the advanced stage of discussion, even power generation turbine orders from the API. Apart from drive turbine, we are quite optimistic and bullish on this segment going forward.
Sir, any approximate [ mark to market ] even in megawatt terms?
Because the API is a more stable market because this market is, again, one is CapEx growth market. Other is replacement market as the fleet completed its total lifetime. So that way, market size estimations-wise, probably those things maybe offline, we can share it with you. But otherwise, today, our market share is quite miniscule in that, and there's a huge growth opportunity for us. I can put it that way.
Okay. And sir, last question is related to [ these trends ]. Currently, this sort of service by like guys like Siemens or any other entity with an India-based manufacturing capacity or these are largely imported?
This is a mix, even in the imported as well as the India-based. Again, based on the type of the inquiry requirement or specification, for some of the specifications, the India-based competition [ time ]. For some specification where we are also approved, [ then ] multinational competition [ time ]. It is a mix.
Our next question is from the line of Ravi Swaminathan from Spark Capital.
Congrats on a good set of numbers. Just to continue with the earlier participant's question. So API turbine globally, what is the size of the market? What is our opportunity there so we can [ broaden thought process ]?
Yes. So thank you for your wishes firstly, Ravi. From the API market segment, based on real data, the data is in our inquiry book, again, like I'm saying. So when we're looking at market share, we're looking at versus the inquiries that we have. There's no third-party data out there which says how many turbines are being ordered, or we [ will post ] some data that's available in terms of how much is placed. At the point of time of bidding, it's a little difficult.
But when we look at the API, our market share in the API segment, like Prasad, yes, that's quite miniscule. And so when we had said last year we would get 30-odd orders and this year we get 70 orders odd and growth for us may be doubling in this market segment, it's still miniscule in terms of single-digit market share globally. So very frankly, there is a long way for us to go in terms of being a significant player here.
Got it, sir. And usually the turbine sizes on the lower single digit, like 3 megawatts, 5 megawatts, 4 megawatts, is my [ understanding ].
It will range from 1.5 megawatts to 5 megawatts, but usually be in the lower range of 1.5 to 3 megawatts somewhere there. They're driving equipment, so they drive equipment such as fans, pumps, blowers, compressors, et cetera. They might both API 611- and 612-compliant.
Our next question is from the line of Nikhil Agarwal from VT Capital.
Congrats on a great set of numbers. Sir, a couple of questions. Like coming to your other expenses, do you expect this kind of run rate going forward? Or was it just a onetime for the 9 months?
See, the other expenses and the disclosure that we made was on the subcontracting charge in other expense. The reason that we did it is because it wasn't really necessary for us to provide the disclosure, but we thought it would be helpful for investors to see because from a quarterly perspective, there is a big jump over the previous year. And so it's for that reason that we highlight, just to provide visibility and a little bit of clarity. I think we're focusing a little bit too much on it because the fact is it's more routine. As we look at it going forward, these are charges which have negligible, a very low liability for the company in terms of continuing costs. And so they will be incurred as and when revenue falls. And so to that extent, we will have the profitability in those quarters as well.
What's important for us is that overall as a company, we aim to expand or maintain our margins. We've always said that we would have PBT margins in excess of 20% as a company. We think that in the environment going forward, regardless of what type of refurbishment contracts we take, the team has performed very well in giving visibility. That should at least be maintained. We have commodity prices coming down. We have an increased internationalization of our product mix in terms of sales as well as an expanded market and so therefore, more easing of margins in order booking.
So overall, I think that we're in a very comfortable position as a company. We've tried to provide visibility in numeric terms. And I think we're going to beat all of those numbers that we had given you.
Okay. Good. So I mean we -- I mean we do expect other expenses to be within this range, but on the gross profit -- on the gross margin side, we expect margins to inch up going forward. Ultimately, the PBT margin will [ remain ].
We have good confidence that there are lot of reasons that it may inch up, but very frankly, we also want to be spending money on adding capabilities where we see future growth so that we can sustain our growth. Triveni Turbine came off the last 7, 8 years with very low growth. And so while we are facing growth at this point in time, we want to double down on it to ensure that we can sustain it. But very frankly, margins is not a pressure for us.
Yes, sir. Great. And sir, you maintain your guidance on PBT of 20%, but any revision on the revenue front, any -- like you maintained 35%, any upward revision or anything?
Well, I mean, you know what our 9 months results are. That's in front of you, and I think Q4 being better than any quarter this year. So then it gives you an idea that we're quite optimistic.
Our next question is from the line of Alisha Mahawla from Envision Capital.
So first, I just wanted to understand in your opening comments, you mentioned that there is some softness or decline that's seen on domestic inquiries. Similar comments have been made in the previous quarter also. So are we now seeing some sort of slowdown in the domestic side?
Well, you had such a large ramp-up of the inquiry book in the quarters before that, that when you see 5% decline in consecutive quarters, it's -- I mean it is a point to be noted. I agree with you. But it's not entirely material.
Prasad, can you provide when we're talking -- can you give some visibility as to how you're looking at inquiries on the domestic market?
Yes. Yes. Domestic market, even though on the inquiry side, we are seeing a 5% decline. But for the way orders getting finalized are the leads, what getting generated. Yes, we are seeing still there is upbeat in that. But when it comes to inquiry registration means RFQs release and all, we have seen a little slowdown on that, around 5%, then also basically from a particular industry segment. Then we see in the domestic also out of 5, 6 industry segment, in 1 industry segment, there is a little slowdown with noticed. But really, we are not worrying on that by seeing the leads what we are getting and finalization pattern, what it is happening.
Can you help us know which segment or which industry is it that is probably taking slightly longer? Like is this just delay in decision making maybe because there's been price hikes taken or, in general, there has been a lot of commodity inflation? Or is this just that maybe some of the demand is now indefinitely pushed back?
No, no. This is a market segment that you all know about. It's a metal space. And very frankly, it is a large contributor towards power generation. But if you look at it from an aggregate capacity perspective, the country needs to add ample capacity going forward. So this is a question of moving from quarter-to-quarter because they match the cash flows based on commodity price. I mean it's something that will come back in the coming quarters and years. So this demand is not going away. It has to get fulfilled at some point.
Okay. Understood. And with respect to what the other participants were asking on the subcontracting expense that's sitting in the other expenses, which is the gross profit has expanded quite -- has an essentially healthy expansion. 9 months is almost at 46%, significantly above the 40% to 45% we were doing. Is this also considering the product mix that we have, how the inflows that we're witnessing slightly through towards export aftermarket? Or what will be a consistent [ reason ]?
So very right. I mean the way we measure it the other way around by saying material cost as a percentage of turnover, which is just the inverse of what you're saying. Historically, we've had a material cost somewhere in the region of 52%, 53%. And right now, it's somewhere in the region of about 55%, 56%. And we see it coming down in the quarters, to come in the years, to come -- driven by 2 factors. One is we have a better product mix from aftermarket and product. We also have a better turnover mix on international and domestic as well as general commodity price easing and higher margins on product.
So all point towards a good operating cost. Other expenses may go on with other selling and other expenses that we may need to have. We will incur more expenses on R&D, like I've already said, and those will have to be then factored in. But we've taken all that into consideration and are still optimistic on factors such as gross margins, et cetera.
Do you think the 55%, 56% material cost is what could be expected?
No, it should come down.
It should come down. Okay.
Our next question is from the line of [ Krishna Kansara ], an individual investor.
Congratulations on a good set of numbers.
Sorry to interrupt. [ Krishna ], we are not able to hear you clearly. Can you switch to handset mode and speak, please?
Can you hear me now?
No, I can't hear you. Sorry.
Can you hear me now?
Yes, please continue.
Yes. Sir, you mentioned that you saw a decline of 5% in the domestic inquiry. So how do you measure it? Is this sequential decline? Or is this Y-o-Y?
Y-o-Y. Y-o-Y.
Okay. Okay. And do you think that it will marginally reduce going forward?
Okay. Could you please repeat yourself?
So do you think that this will marginally reduce as we move forward?
Sorry, the question is very unclear.
What are you asking? [indiscernible] I'm sorry. I didn't get it.
So do you think that this decline in the inquiry order book will accelerate as we move in the coming quarters?
So we're hopeful that it will expand in the coming quarters, the inquiry book from the domestic market.
Okay. Okay. So this decline is just temporary, right?
That's what we're seeing. We'll have to wait and see what actually happens.
Okay. And sir, I just wanted to know your thoughts on the sustainability part of the order inflow. So do you think that we can maintain this run rate of order inflow or order book?
That's what we've been talking about for the last hour to give you visibility as to how we could provide that. So I think that you have that information in front of you now.
Okay. But I was just asking if -- can you sustain this growth or it will marginally decline is my question, in the order book part.
No, order book growth is looking to try and maintain. The turnover growth of 45% odd is something that -- obviously, it's a very high number. But on a year-on-year basis, the fact is that we will grow very well, and we have the visibility of growth into FY '24 as well. And our inquiry book suggests the growth that we would have into FY '25.
And so we're in an optimistic stance. This is not including any new product release in terms of our new developments that we have on the -- on either the concentrated -- the supercritical carbon dioxide or on the transcritical carbon dioxide products, which will get released over the course of the next couple of years. And so we see newer revenue streams come into the business. And so yes, we look to sustain order booking and, therefore, sustain revenue growth on an average basis.
We'll take our next question from the line of Mohit Khanna from Banyan Capital Advisors.
Congratulations for a very good set of numbers here. You actually just answered my question, just taking this a little bit forward. So in the terms of the order book and inquiries, how are different sectors now coming in, especially for the domestic market? I mean up till now, distilleries has been good contributor. Do you see any sort of change in trajectory by the distillery companies or other segments that you would like to highlight?
So firstly, on the international market, we have a disproportionate order booking, which comes from renewable energy-based power production. That could either be directly for independent power production or for [ adaptive ] use. On the Indian side, markets get split quarter-to-quarter, but if you look at it on an annual basis, you see market segments such as distilleries, cement waste heat -- metals have come down a little bit, but paper was strong. Chemicals, API in that form has done well. And as we look going forward, you'll see independent power production renewable basis in India, both from solid municipal waste as well as biomass pickup. You'll find a changing of sugar consumption moving from extraction condensing machines to back pressure machines, which is a replacement market, which is just so that they can have a higher gas saving and, therefore, more revenue for them.
So demand will change dynamically. Structurally, like I said, the fact is that Triveni operates in 2 distinct markets. And again, I'll just repeat this is the industrial heat and power market and the renewable energy-based power production market. Under industrial heat and power market, given that about 50% of end energy consumption is in the form of heating and cooling and especially when you look at the industrial and institutional form a part of that we are heating and cooling is very difficult for that to get disrupted by electricity, be it in the form of renewable or otherwise because it's far less efficient. And so therefore, production of heat on site is something that is necessary, and we cater to that market, which is actually globally expanded by about 5-plus percent CAGR over the course of the last 10 years, despite the fact that the overall utility market has declined considerably to maybe 1/3 the size of what it was 10 years ago.
So on the industrial side, that's one. Secondly, on the renewable energy power production side, given the fact that waste is available, both in the form of a heat waste products such as biomass or municipal solid waste, these are increasingly becoming commercially viable despite subsidies to be able to be followed by developers. And I don't know if you had a look at the Inflation Reduction Act and what is contemplating in Europe as well. But this is all despite the real push that is coming on capital subsidies in developed markets. I'm sure that India will have to do the same at some point to spur growth, which is far in excess of the PLIs because the PLI is more of a production-linked incentive-based scheme. These are more developer-based schemes, which are happening in other parts of the world.
Right. And just the last question. How do you -- how are you seeing competition? Are you seeing competition getting stronger? Or do they increase the number of inquiries in the market? Or is this just business as usual?
No. Well, the situation in the domestic market has been between Siemens and us, and we have very healthy competition. It's intense, and we compete. And they're, of course, a much, much larger firm than us and both in India as well as internationally. But we compete as peers and in front of clients. And so that is unique to each order book because as you know, each steam turbine is customized. And so therefore, there is a competitiveness level on each model, depending on the characteristics that a customer may have. But it's the same as it has been. The dynamic is, in general, as the markets expand, the need to take orders at lower prices declines. So the intensity of competition, I have to say, comes down slightly just because the market has expanded.
In terms of number of players internationally, we've seen it quite constant as of last year, but in general, there's been a declining trend in the number of participants in this market over a period of time. So we've seen a number of competitors decline over series of years. But I think that our push in terms of trying to be the best at what we do, invest in this market, both in terms of cost as well as technical efficiency still doesn't stop. And so we will continue our investments. And we know what we're good at, and we have to expand our reach in terms of marketing to be closer to customers and have a bigger presence because the preference that customers have to place orders is based on the confidence that they have on the aftermarket also.
Right. And what was the attrition rate in the 9 months because we've been [indiscernible]?
[indiscernible] region about 6%.
Our next question is a follow-up from the line of Amit Anwani from Prabhudas Lilladher.
So I just wanted to understand the decline in the domestic inquiry pipeline. Is it specific to an industry where we are witnessing this decline?
Yes, it's in metals.
Okay. And second question, sir, if you can throw some color on the megawatt-wise inquiry pipeline, anything on that stuff.
Right. We don't give that data, but I'm sure you'll be able to...
Overall, sir. If it is possible for you, overall.
I think you can take that offline with Surabhi to see if that is information that she can talk about. In essence, we've seen good growth in the market, and so we're quite optimistic.
All right. So last question on -- in the past, we witnessed the low growth rate for at least 6 to 7 years, and now from almost 1.5, 2 years, we are seeing the robust opportunities domestically and internationally as well. So I just wanted to understand how long you're seeing the sustainable growth in the domestic market. Is it the complete [ system ]?
No. It's a very good question you asked because the fact is that as you can see from our balance sheet, the company is not really dependent on CapEx to cater to its growth. It's more people-centric, and we need people. And so the fact that we're continuing to invest in people is a good proxy for how much we can sustain our growth. This is something that we have to internally manage in terms of being -- onboarding these people, finding the right people and in all the different capabilities and capacity that we need them for. So we're investing in the right places, we think, which is something that -- I mean we could afford it in terms of money, but the business couldn't afford it in terms of the sustaining profitability in the past.
As there are no further questions from the participants, I now hand the floor back to the management for closing comments.
Thank you very much, and thank you for your good wishes. I think everyone has appreciated the good performance that the company has put forward. This is really due to the hard work and dedication of all Triveni Turbine employees from Arun, Sachin, Prasad and the team in Bangalore. So we thank you for appreciating that. We look to sustain this growth into Q4, and we look forward to hearing -- look forward to speaking to all of you in May. Thank you very much.
Thank you. On behalf of Triveni Turbine Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.