Triveni Engineering and Industries Ltd
NSE:TRIVENI
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Triveni Engineering and Industries Ltd
Earnings Call Analysis
Q1-2025 Analysis
Triveni Engineering and Industries Ltd
Triveni Engineering & Industries Limited reported a revenue of INR 1,301 crores for Q1 FY '25, marking an increase of 8.6% compared to the previous year. This growth is primarily attributed to the sugar segment, which saw a 12% rise in turnover, driven by increased sales volumes and a 5% increase in sugar realization prices.
The profitability landscape varied across segments. The profit before tax (PBT) plummeted by 54% to just under INR 42 crores, reflecting lower profitability across all sectors aside from the Water business, which benefited from cost-saving measures. Notably, while the Sugar business saw higher sales contributions, its profits fell due to lower production and increased off-season expenses.
The Alcohol business faced headwinds, with production volume increasing by 8.3% to 5.5 crore liters, yet overall sales volume dropped by 4.3%. The shift from rice to maize as feedstock, driven by government restrictions, impacted margins negatively. The company aims to enhance its ethanol production capacity, targeting over 31 crore liters for FY '25 and aspiring for 35 crore liters in FY '26.
The Power Transmission business reported a marginal turnover increase of 1%, with order bookings decreasing by 12%. However, a record order book closing of INR 306 crores signals solid demand, especially from global OEM customers. The company expects to continue benefiting from increased domestic and export orders.
Triveni’s Water business faced a significant downturn, with a 21% decline in turnover due to project award delays. However, the management expressed optimism, citing advantageous positioning for a forthcoming INR 250 crore project in Europe and several other expected contract awards in the near term.
The company’s debt levels rose, with standalone debt increasing to INR 1,150 crores and consolidated gross debt rising to INR 1,281 crores from INR 1,011 crores a year earlier. The overall cost of funds has increased to 7.2%. This uptick in debt underscores the need for careful management as the company navigates growth initiatives.
Looking ahead, Triveni anticipates several government policy changes that could significantly impact its operations, especially concerning ethanol pricing and the Minimum Support Price (MSP) for sugar. The company has requested an MSP increase to INR 39.14 per kilogram, hoping for a favorable government response before the next sugar crushing season.
As part of its operational strategy, Triveni continues to pivot towards premium sugar products, including refined sugar and pharmaceutical-grade variants that now constitute 70% of its total sugar production. This shift is expected to improve the company’s profitability profile moving forward.
Management expressed confidence in achieving growth targets amid anticipated structural improvements in pricing frameworks for both sugar and ethanol. They emphasized aggressive measures taken to boost sugarcane yield through improved agriculture practices and strategic variety selection.
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Ladies and gentlemen, good day, and welcome to the Triveni Engineering & Industries Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir.
Thank you. Good day, everyone, and a warm welcome to all of you participating in the Triveni Engineering & Industries Q1 FY '25 Earnings Conference Call. We have with us today Mr. Tarun Sawhney, Vice Chairman and Managing Director; Mr. Suresh Taneja, Group CFO; Mr. Sameer Sinha, CEO of Sugar Business Group; as well as 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 of this effect has been included in the invite which was shared with everyone 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 commence the call with opening remarks from the management, following an interactive question-and-answer session.
May I now hand it over to Mr. Tarun Sawhney. Over to you, sir.
Thank you. Good afternoon, ladies and gentlemen, and welcome to the Q1 Fiscal '25 Earnings Conference Call for Triveni Engineering & Industries Limited. For the quarter under review, the revenue from operations stood at INR 1,301 crores. The PBT just a shade under INR 42 crores and the PAT was INR 31 crores. The net turnover increased by 8.6%, mainly due to a higher sugar turnover, up 12% due to similar increases in sales volumes and approximately a 5% increase in realization price.
The turnover of the Power Transmission business improved marginally by 1%, whereas there was a marginal decline of 2% in the turnover of the Alcohol business due to lower sales volumes despite higher production. However, the turnover of the Water business has declined by 21% due to certain delays in the award of contracts of projects.
The PBT is 54% lower at INR 41.8 crores. Segment profitability was lower across the businesses with the exception of the Water business, where cost savings led to a higher profitability.
The profitability of the Sugar business, despite higher contribution on sugar sold was lower due to lower production and higher charge of off-season expenses owing to the earlier closure of the sugar season.
The profitability of the Alcohol business was adversely impacted due to restrictions that have been imposed by the government on grain feedstocks and as a result of which the rice operations were substituted by maize and of course, there was an increasing transfer price of molasses. And due to the lower sales volume of 4.3%, which was lower dispatch from ethanol on higher-margin sugarcane-based feedstocks.
Looking at business-wise highlights in the Sugar business, we achieved a blended realization of 39 -- of over [ INR 39 crores ] per kilo, an increase of 5% over the previous corresponding period. This is because of improved domestic realizations.
In the Alcohol business, we reported the highest ever quarterly production of 5.5 crore liters, an increase of 8.3% over the previous corresponding period due to the additional capacities are being commissioned. The company's IMFL business commenced its operations in July -- in the month of July 2024, with the launch of two brands in the state of Uttar Pradesh, The Crafters Stamp which is in the super premium category and Matsya which is in the premium category.
The Power Transmission business reported a 12% decrease in order bookings this quarter and a record closing -- order book closing of INR 306 crores, which is an improvement of 12.5% (sic) [ 12.6% ] over the corresponding period. And of course, it's important to mention that we've crossed an important milestone of INR 300 crores order booking for the first time in our history. In the Water business, we're happy to report that the business has been favorably placed for a project in Europe about INR 250-odd crores, and we are eagerly anticipating the letter of award in the immediate future. We will update more details on this in due course. There are several other projects, which we're expecting the award also in the next few weeks or so.
The debt position of the company on a standalone basis on June 30 increased -- the debt position increased to INR 1,150 crores as compared to INR 920 crores (sic) [ 918.5 ] on June 2023. The standalone debt at the end of period under review comprises of INR 245 crores of term loans and all such loans are with interest subvention. On a consolidated basis, the gross debt is INR 1,281 crores on the 30th of June '24 compared to INR 1,011 crores as on June 30, '23. The overall cost of funds on a standalone basis stood at 7.2% versus 6.7% in the previous corresponding period.
Turning to our Sugar business, in the last call, the sugar season '23, '24 had just concluded. Since then, we have been focused on preparing for the upcoming season. And the focus has been to restore normalcy in our sugar operations and we are rigorously working towards this direction. Looking at approaching any effect on crop, substituting vulnerable varieties with more robust varieties enhancing yield with on-ground intervention at a scale that we have [ never even ] larger than what we had done in the previous few years. And stepping up of surveillance activities to get early warnings for any challenges to our crop and the challenges could be with respect to increased water levels. It could be due to disease, it could be due to pests or any other conditions, agronomic conditions that can impact the crop. I think the sensitivity is at an all-time high for the group and we're eagerly anticipating the upcoming season.
We continue from an operating perspective to focus on premium products such as refined sugar and pharmaceutical-grade sugar which now on a collective basis, comprised of 70% of the overall sugar production of the company. And this will, of course, further improve the profitability profile of the company as we look forward.
The company reported a 12% increase in the Sugar segment revenues to just under INR 1,000 crores, which improved 12% year-on-year driven by 12% higher realizations and 5% improved -- sorry, 12% higher dispatches and 5% improved realizations. [ On the books ], there were no exports in this quarter.
From a segment profitability perspective, profits in the Sugar business declined up to INR 36.5 crores, a decline of 26.5%. And this was despite the higher contribution on the sugar sold, and it is, of course, due to lower production and a higher charge of off-season expenses in this quarter due to the earlier closure of the season.
The sugar inventory on the 30th of June '24 was 44.73 lakh quintals valued at an average of INR 35.2 per kilo. Currently, sugar prices are a bit high, and we are selling refined sugar at [ INR 3,990 crores ] an ex-factory for a refined-grade sugar and sulphitation sugar at INR [ INR 3,940 ] per quintal ex-factory as well, pretty good prices. And I believe that these prices will remain at these levels, at least for the immediate future and, of course, some gentle increases as we get into the holiday season in late September and early October and through the month of October. This actually [ bodes ] the well as far as the pricing, the immediate future as far as sugar pricing is concerned.
Looking at the balance sheet from a nationwide perspective, we anticipate an opening balance for next year. On the 1st of October '24 of approximately 9 million metric tonnes against domestic sales of higher than 29 million tonnes of sugar. And for next year, we expect that the closing stock without exports remain around about the same, and this is considering a 4.5 million tonnes diversion of sugar into ethanol for the '24-'25 sugar season. I must caveat this by saying these are our internal estimates from our research group.
Looking at the international industry scenario. As per S&P Global, the sugar balance sheet is pointing towards a reasonable -- reasonably large surplus of about 5.5 million tonnes. And the outlook looks largely balanced despite the surplus in Thailand, in Europe, and in India.
International sugar prices after a remarkable performance in the last fiscal year have trended downward as the news of this larger balance -- for future balance as per related to the markets. And we've seen that decline not only in white but also in raw. However, in the last few days, we've seen a recent surge in pricing, but we are still substantially lower than the highest that we had just a few quarters ago.
Turning to our Alcohol business. During the quarter, we commissioned the Rani Nangal distillery which led to the highest ever quarterly production of 5.5 crore liters, placing us amongst the leading ethanol manufacturers in the country. Sales volume were lower by 4.3% over the corresponding period due to dispatched schedules moving into the next quarter while the ethanol is held in inventory.
The feedstock mix of ethanol or Alcohol business sold is 58:42, 58% to grain in this quarter, very much in line with what I had mentioned to you in our last earnings call and even the previous earnings call. And last year, it is important to note that it was 64:36 sugarcane to grain. So very much changed as a result of market dynamics. The fact that there was a curtailment of diversion of sugar towards the ethanol program. However, we were capably set up to be able to process grain. There are challenges around that, but at least we have the capacity and the infrastructure to be able to process large quantum of grain sort of to keep up the total volumes for the company.
The domestic scenario as far as ethanol, and the OMCs have floated a tender of 825 crore liters with a 15% blending targets. So the 30th of June, contracts of 714 crore liters have been executed by the OMCs, owing 61% coming from sugarcane-based feedstocks and the balance of 39% or 281 crore liters coming from grain-based feedstocks.
The OMCs have thus far procured 401 crore liters under the total contracted quantity up to the 30th of June '24. And with this procurement, ethanol produced from grain-based feedstocks contributes to 53%, i.e., 211 crore liters, while sugarcane-based feedstocks contributes to a smaller number, 47%, about approximately 190 crore liters. This marks the first time that the ethanol from grain has actually surpassed ethanol from sugarcane-based feedstocks. And we achieved blending percentage nationwide, it was 13% as of 30th of June '24.
I must say that while the target was given 15%, the achievement was 13%, given the challenges that have existed across the country, given the fact that we were in the middle of an election year. And given the fact that there were several infrastructure issues that needed to be hurdled, 13% which is most commendable. And I think that we are certainly on the number of achieving even higher blending percentages. The core process at this particular point is the government will try to achieve 18% blending next year, in the next supply year moving quickly to the 20%, which was targeted by the honorable Prime Minister for many, many years.
Looking at the Power Transmission business. PTB has been on a sustained growth path over the year, and this quarter has also performed extremely well, and there were several breakthrough orders, especially with international evident customers and OEMs. The company continues to witness excellent demand for its products, including in the high-technology compressor gearbox market and a recent addition.
Once again, there's been a demand for the high power, small hydro turbine applications both domestically and internationally. Other very promising segments include high-power API, which is gearing to the requirements of the oil and gas and petrochemical sector, integrally geared gearboxes as well, also adhering to the same sector as well.
The outstanding order book, as I mentioned in my opening remarks, stands above the INR 300 crores milestone, at INR 306 crores, with longer duration orders of approximately 1/3 of that portion. This is a record for us, and I hope that we will be achieving a continuous report in subsequent quarters coming forward.
Turning to the Water business. Revenues have declined because of the delay in execution in certain projects and the delayed award of certain projects. And I had mentioned to you on the last call that I was not waiting [ election ban] for the last 3 months because we were at election season across the nation. And it would take time for things to revert to normal for projects to come. And I'm very happy to report that over the next few weeks, we expect many projects to be finally concluded. And we are -- we believe we are very, very well placed for a few of those projects. In the opening remarks before, I mentioned that we had extremely favorably placed for INR 250 crores project in Europe. We're expecting the award of that in the next few days in so.
The PBT margin for the Water business stood at 12% for the quarter, and the outstanding order book on the 30th of June stood at just shade under INR 1,200 crores which included INR 867 crores towards O&M contracts over a slightly longer period of time.
I quickly hope that the outlook for the businesses in view a very comfortable inventory situation in the country. We are very hopeful that the government will do away with the feedstock restrictions and address ethanol the ethanol pricing framework as well and look at the viability of both grain-based and sugarcane feedstock-based distilleries.
In essence, it is a two-pronged process. Firstly, there was a limitation in terms of what could be diverted. We expect that to be lifted in the very near future. And we expect that the government may very well look at absorbing all the quantities of ethanol that will come from the sugar sector. I do believe that this will require another revisit in prices, which did not happen last year both for sugarcane-based feedstock ethanol as well as grain-based ethanol as well.
From both sides, Triveni would benefit with any increase in the price. The industry is also keenly awaiting the revision to the MSP of sugar which is vital benefit for the industry. The MSP, as many of you know, has remained unchanged since 2019. While in book of costs and sugarcane price, both FRP and SAP have risen significantly.
The association this month has made a very rational request through the SPV and to other ministries of requesting a rate of INR 39.14 per kilo of sugar as the MSP for the country. And it's a very logical explanation based on the previous increases in MSP that has happened. And we're hopeful that the government will look at this favorably and will give a high increase to MSP. Again, I anticipate that this is very much on the part certainly before the next crushing season and hopefully before the end of this quarter.
Sugar prices, as I had mentioned even on our last call, I'm happy to report that we were correct that they have remained at very healthy levels throughout the quarter. And going forward, I expect some small increases in pricing. It could be because of increases in MSP, it could be because of very rational releases that have been given by DFPD and it could also be due to other factors. But I do see that sugar price stability is something that is not our concern that we need to answer at Triveni.
Looking at the Power Transmission business group outlook. Indian economic productivity has continued its momentum and we believe that growth in India and export markets are very [ bombastic ] as lot of replacement orders, a lot of new fresh projects that are fantastic especially in the sectors of oil and gas and petrochemicals and some basic industry sectors as well contributing to significant growth.
Our international customer outreach has been extensive, the effects have been extensive, and we have made continuous investments in research and development, a lot of which has resulted in a material cost decreases as we've seen in this quarter that has gone by, a lot it has to do with the R&D programs and the successful outlook of those R&D programs. And of course, the R&D initiatives to continue, and we're hopeful to have even more improvements, both on the cost side and the addressable market size as far as our gearboxes in the Power Transmission business is a concern.
The government of India has continued trust of Atmanirbhar Bharat and Make-in-India has directly opened up plethora of opportunities for indigenization of imported gearboxes, and we expect this to be a growth driver for both the industry as well as the aftermarket business and including Defence as well.
In the Defence segment, the business expects increased order booking from some critical segments, and we progressed quite a long way, of course, during the cause of the election, few orders that were finalized again and then anticipating that over the next few weeks and quarters, we will be able to get back to distribution and there's a lot of business that is awarded while [ we are contending ].
As far as the Water business outlook is concerned, we are placed very favorably in a variety of business rigs, and we're expecting to get those awards in the next few weeks. So that's quite close and we are actually very, very positive about a few of those as well.
From a longer-term perspective, given the significant gap between the demand and the current availability of water and wastewater treatment plants, the water sector, by and large, is a very, very positive outlook in the nation. And not just between the nation, also externally and internationally, we're seeing a lot more focus coming on water. The company continues to evaluate various international opportunities and intends to participate in several tenders for international projects.
Turning quickly to the company's new subsidiary, SSEL, Sir Shadi Lal Enterprises Limited. During the quarter, the company has further acquired 36.34% equity stake of SSEL on June 20, from the balance members of the promoter group under the share purchase agreement. The company now cumulatively holds 61.77% of the total shareholding of SSEL. Consequently, the company has become a subsidiary of Triveni and the company in compliance with applicable laws has launched an open offer with the acquisition of 26% voting shares of SSEL on January 30, '24, but we -- that process is well underway. We've received SEBI approval, and we expect that open offer to conclude during the month of August '24.
In terms of concluding remarks, I think we are very hopeful for a robust performance from the sugar sector this coming year and a robust performance of the distillery sector this coming year. Led by improvements in pricing, led by more availability of raw material on the sugar side, we're expecting great quantum of sugarcane. And then we have a very positive outlook on the engineering businesses as well as I had mentioned, both gearboxes, Defence as well as in the water and wastewater treatment solutions. I'd be delighted now to take some questions.
[Operator Instructions] The first question is from the line of Sanjay Manyal from DAM Capital.
I have a few questions on the sugarcane crushing side, means what is our expectation for the next season, given the last season was a bit subdued with 11% decline in crushing number, what is our expectation? What is the work we are doing in terms of the variety change in our catchment area?
Right. So excellent question, multi-pronged question. And I think I'm going to take you back to comments that I've made in previous conference calls. We were actually just reviewing it before this conference call. As you know, last year, we had 77% of Co238 variety across the 7 sugar units. This year, and I had mentioned at that point in time that our target was to bring this around 50%. And I'm happy to report that, that reduction has been achieved. So in all sensitive area, water-logging areas, low-lying areas were dedicated to Co238. Intention of course, is to take this to [ harvest ] again in the following year as well and then only to keep it an opportunistic area because it does give a good return in [indiscernible], and it will last for a few more years. So very much -- my answer is very much the same as what I mentioned one quarter ago and 2 quarters ago, and we're well on track in terms of what we had said, have targeted for us.
Now given that fact that we have managed to eradicate large transport area under Co238, we have substituted for other excellent varieties we found other area under cane has increased. The surveys are now on, I can't give you an exact number right now, but we're looking at an increase in area under cane for the group as a whole. And also, we're looking at a possible double-digit increase in the cane availability for our sugar business for next year.
Now I have to make sure that we're only halfway to the most of it. So you have early estimates, I offered you an early estimate. This is given the fact -- given what rainfall, what weather patterns and the impact of pest and disease, will have an impact on the pest and disease we have seen as far. However, reading this morning paper, which [ monsoons ] as well, we're looking at a lot of rainfall coming our way in the month of August and September. I think the hope has to be that in the month of September, whatever rainfall happens, if it happens in the first half. So that does not -- it does not affect the early start of the sugar factories in October of 2024.
So even if we have a imbalanced weather events, I think we have certainly improved looking at a good rebound as far as our sugar operations are concerned. And we have been very successful in our team development. We have achieved all the targets that we set ourselves out to. Of course, our program is a multiyear program, it's a multi-pronged program. So I was very happy with the successes that we've had as of now.
Yes. So you mentioned that you are expecting a double-digit kind of increase in the sugarcane availability. So are you including the acquired entity in this? Or you're talking only about the standalone entity?
Since I'm talking about the standalone entity, the subsidiary company is an independent company, and I'm not interested in their targets, although I do believe that they had a very particularly poor crushing season last year because they had a very short season. There were some administrative issues, which led to a very delayed start for the sugar factory and also an early end because of some engineering challenges for the season. Triveni having taken over the management control of Shadi Lal, we anticipate that we will get back business-as-usual and a substantial increase in sugarcane crush at that factory in the upcoming sugar season.
Right. Great. So one question on the ethanol side. I mean we have done -- now we have sort of completed our ethanol CapEx. Ideally, with this kind of a capacity per day, I mean annual number ideally should be close to 24 crore liters, if I'm not wrong. So can we have some guidance on that front? What kind of number are we looking in FY '25 and FY '26?
You see in FY '25, we are looking what we mentioned in the previous one of a number in excess of 31 crore liters, right? And it was also explained that would made the capacity a little lower. And therefore, you -- while you are right, otherwise, it should have been 24 crore liters. And going forward, we would be at a significantly higher number close to about 35 crore liters in FY '26 from the same set of the sites.
Exactly. And I will just add that we have one project still it remains on hold until we see the next molasses pricing by the central government and at which point we will review that project. But as I mentioned on previous calls, the engineering work has all been completed. It's just a matter of ordering the equipment. And given our track record, we can have a distillery up and running in 3 quarters that's -- and at the stage that we're at so a pretty good time. So with that, of course, we'll return to the 30 crore plus target rates. But at this particular point, had that distillery remains on hold with the capacities that we've had, you just heard from Sameer, we should be at a very good production rate.
Surely. Just last one on the engineering business. I mean the current quarter performance on the gear business has been -- you can say a bit muted from the revenue side. So is it just have to do with Water business certainly has been impacted by the election part. So what could explain the gear business performance as of now?
So it was very much budgeted. This is not -- and we have performed in fact, a little bit better than our budgets as well. One has to recognize that the last quarter was an election quarter for the country. And so for several weeks, there was a lot of delays and a lot of companies and clients not accepting orders.
And we had many clients that have just delayed. Our accounting policy is that we will only account for revenues on dispatch from us. Our finished goods has increased and we will expect a huge catch-up to happen in Q2. This was all planned. I think we're very happy with both the numbers, both for the top line as well as on the bottom line.
You can also see from the order booking increase that I will not discourage you in the quarter-on-quarter in this business. I think for engineering goods, you always find that at the end of the half, which is Q2 and -- especially Q4, a lot of companies to take advantage of depreciation at set deliveries in those quarters. So it's typically heavily skewed towards Q2 and Q4.
The next question comes from the line of Somnath Saha from B&K Securities India Private Limited.
My question is regarding the distillery segment. Now in the event that the margin is significantly lower, why we used maize? And even after that, we are continuing with maize. So I really wanted to understand the thought front here. I think comparing with the other big players, they have admitted maize is not covering at all. So wanted to understand is this because you want to run the facilities or anything else you have in mind, sir?
Yes. So again, I think I stand behind what we've said in the last few quarters, the maize profitability is severely dampened because of the market dynamics. Despite prices for the output for the ethanol for maize is increasing, because you have unsettled increases in the input cost as cost of maize. The entire advantage has been taken up by either the prices at trade and some portion to the farmers.
Farmers has a good portion, but the huge increases that have gone to the traders have unfortunately went that the margin scope for ethanol manufacturers has been problematic. Now as far as we are concerned, we have controlled the facilities. The bulk of our distilleries are next to our sugar factories and therefore, we had lower conversion costs because it could be fuel cost, it could be almost of other inputs cost being lower.
But for the industry as a whole, since you asked the question for the industry, I think maize at this point was definitely a huge problem. Now what is the solution around it? And yes, it does. For Q2 as well, we will be processing a large -- we are one of the largest maize processors in the nationwide right now actually. And so we can see this as a first-hand view of what is going on in the market. And honestly speaking, under this present scenario, the margin simply has evaporated because of the increases in input cost prices.
Now there have been many representations that have made the numbers that we need to find innovative ways of ensuring that there is renewed help as far as the grain opportunity is concerned. We will always be slightly better off because of our co-joint facilities, the sugar factory.
But honestly speaking, and I've seen the representations that have come from the grain manufacturers' association to the government, they are very much solved at present input prices. So I think that in the next policy, I am very hopeful that we would have some multi-pronged pricing strategies that will allow people to get back to the types of margins that we were experiencing earlier, and especially with -- when we were processing FCI rice. And you would remember that the margins of FCI rice factory very, very healthy and attractive and with the state governments having been allowed to procure rice by the central government, as you are well aware, I think the availability of rice to the distillery sector, to the SMR program, I think it's just a few steps away and it may very well happen in the next few quarters, given the producing stocks and given the high output of rice -- seasonal rice in the country.
Also, if you can just quantify the sugarcane crushing numbers for the quarter and the recovery for both gross and net recovery for the quarter?
I'm sorry, you have to speak up. We didn't get -- you said crushing numbers for the quarter. We missed the next question.
Yes. That was the question, the crushing number for the quarter and also the gross and net recovery, sir.
During the quarter, we crushed 66.7 lakh quintals as compared to 157.7 lakh quintals in the previous quarter and our gross recovery was 12.35% as compared to 12.43% in the previous quarter.
And net recovery, sir?
Net recovery was 11.41% as compared to 10.58% in the previous quarter, production of [indiscernible] lakh quintals as compared to 16.7 lakh quintals in the previous quarter.
[Operator Instructions] The next question is from the line of Rayan Dalal from Ficom.
Sir, my question is on the Power and Defence business. So are we on track on to commission the facility, the expansion in December?
So the expansion in the existing facility is very much on track. In fact, we can anticipate that this facility will be commissioned 6 weeks in advance. So we're hoping that in the month of November, just after Diwali, we'll commission the new gearbox facility. As far as the Defence facility is concerned, we've had a slippage, and we will be about of quarter late. So we're looking at the commissioning of that facility in the first half of the next calendar year.
Got it. And sir, the incremental capacity that will come on in the Power business, could you give a sense of the end industry user if the demand growth that you're seeing maybe in the domestic market and maybe on an international level as well?
Absolutely. So we're seeing strength in -- I'll talk about OEM segments and then I'll talk about industry and customer segments as well. As far as OEMs are concerned, we've seen huge growth domestically and internationally. In fact, all of our OEMs are global OEMs. And we've seen an enormous growth in order booking and deliveries and the future forecasts are for even better rates of growth from these levels.
Now this covers segments such as steam turbines, it covers compressors, it covers the pump segment as well. The one sector, which is a little bit of a dampener, which has always been tiny little sector for us given that the infrastructure does not really exist in India is on the gas side. So that has been kind of muted, but it accounts for such a small market, it doesn't really matter. The 3 sectors that I've mentioned has been absolutely outstanding in terms of growth from the OEM side.
Looking at the final user segments, we're seeing huge opportunities domestically and internationally in the API segment, so oil and gas, petrochemicals, across the board, both onshore and offshore, are looking extremely exciting as far as the gearbox requirements are concerned. We're seeing huge developments in the mining sector as well as in cement and steel, both domestically and internationally.
So funny enough, the demand has been mirrored in export orders as what we're experiencing in India. I think the one sector that is where we've seen orders decline is the distillery sector in India, which accounted for a lot of gearboxes in the past. But distillery orders are still muted. But again, it's such a tiny segment now compared to our overall business that it has [ catered ].
Got it. And sir, I'd ask another question. On the defence segment, our would tie up with General Electric, just wanted to know like how we -- maybe the work that we have done on the LM2500 engine, maybe just an idea of like how things are going on that end, do we expect any sort of delivery soon on that product or are you thinking about so?
So that program is a 2-decade program. The first few orders are yet to even be allocated. I think the -- as far as nomination of the order has already gone for the port coming from GE, the assembly will happen at in-house and the packaging to happen at Triveni. So we're hopeful that for the next generation of warships, these orders will be placed relatively soon.
Our defence portfolio goes well beyond just the packaging of gas turbines. We're looking at several orders in the smaller GTG space, gas turbine space that will be shipped soon in course of this calendar year. We have several light projects. We're the only company in the country which builds shaft lines. As you know, we're building sharp lines for sub-sea platforms. We're also building sharp line for [ micro submarine ]. So it is a good spectrum. And we're anticipating several new orders there.
We did a lot of work on gearboxes for the Coast Guard and the Navy. Orders has been, a lot of orders on pumps for the Navy as well, 3 key applications and the products go on. So what we have tried to is expand our exposure for mechanical equipment and entire where we deal developed technology where we need to develop our own technology. So dual-pronged process that is centered around [indiscernible] program.
[Operator Instructions] The next question is from the line of Manish Dhariwal from Fiducia Capital Advisors.
Yes, thank you for sharing a very detailed perspective about the sugar sector as it is expected to be play out for the company. Now we also spoke about the acquisition of Sir Shadi Lal. See, we already are one of the leading players in the game. So some insights into the rationale for this acquisition, which we find is really -- it's a very old plant and machinery must be dilapidated. You mentioned that the sugar season is also very low. And the kind of price that we paid for it. So all -- so we request for some insight into what went for this decision?
Right. Very happy to provide an answer to this question. I think -- and I'll start from your last question and move backwards. As far as the price that was paid for the shares that have been acquired, we did a valuation exercise internally and looked at what that asset would be worth. And I think we're very happy with the price that we've paid. We believe that this is going to be significantly accretive acquisition for the company in the short term and definitely in the long term. That's from a financial perspective. I can't go into the numbers in terms of payback, et cetera, because that's not public information. But what I can say is the strategic part of it, which is very important. Shamli is -- has possibly the best farm area and acreage in the state of Uttar Pradesh.
The farmers are most loyal and have been for decades. Yes, there has been a blip in the last few years due to a variety of issues, especially the management issues and operational issues at the unit and that had led to some amount of disharmony in terms of relationships with the farming community, but that still does not change the essence of what the farmers deliver.
Shamli is the factory that has had the longest season in terms of operating days. In my 30 year experience in the sugar industry, it for the vast majority of years, it has the longest operating season. And the reason for that is the tie that they have with the farming community. We believe that we will be able to revise this tie immediately with the farmers. And I think we've had a very great success, great support from local communities as we've taken over the management operations from the 21st of June 2024. That's number one.
Number two, the yield in Shamli is one of the highest. And that do go well to the future in terms of operating at higher capacities for the future, et cetera. Yes, it means that you will have to invest in some more CapEx. But we will make those decisions in a very prudent manner like we do, looking at returns. This is a demonstrated strength that we have at Triveni. We'll continue to apply the same science in all investment rate Sir Shadi Lal area.
The third important factor for this acquisition has been its close proximity to 2 of our largest factories. With buy came from Shamli society at the cane society, both for our factory at Deoband and for our factory at Khatauli. So we have immense knowledge and now we've been able to actually capture a more joining area. And we believe that in the medium term, we will have significant advantages having areas that are connected and sugar factories that are connected. So there has been a huge strategic rationale besides the financial rationale in terms of acquisition of this company.
So are there any plans to merge this company into the main corporate? Or how would you like to take it forward?
At this point in time, we're in the open offer process, we can't do anything. We're bound by the laws of the land in terms of looking at any other optionality. And as and when the Board decides any corporate action, we will, of course, inform the -- intimate the stock exchanges. At this particular point in time, we're just interested in focusing on a quick R&M program that is cost effective that we can actually have a record season at Sir Shadi Lal in '24, '25.
The next question is from the line of [ Dheeraj Ram ] from Ashika Stock Broking.
Congratulations for the great set of numbers. My question is more focused towards the Water sector. Historically, we have seen payment delaying in this water treatment segment. So do you see any further delays in payments going forward from state or central government? Or how do you think the order inflow is sort of -- is it more confined towards state government or central government? Or are you planning to go into any in-hand kind of projects?
So we have already in-hand projects. Our orders are evenly split between state and center. Actually, the orders that we're expecting finalization of majority for the next few quarters are all state. But historically which is between state and center. But we don't really experience any payment delays on the work because they have very finely targeted time lines and its performance-based, it's metric tonnes rate-based amid that happened. On the on-hand side, sometimes it takes an extra few days, et cetera, but nothing that is inordinate and nothing that is not expected. I wouldn't even classify that as a significant risk to the business.
Got it, sir. And post budget, do you see any increase in [ add-ons ] going on from [indiscernible] to the Water segment. There will be a lot of funds getting allocated for this particular segment going forward. So how do you see the next 2 to 3 years?
Yes, I think you asked a great question. I think it's outstanding the amount of inquiries that have been generated post the elections. State governments, municipalities and the central government, water is playing an absolutely pivotal role in the infrastructure agenda of the nation. And you're absolutely right. So when we look at our inquiry book and the new inquiries that have just come about even in the last few weeks since the election, of course, the idea has started earlier, but we're getting close to the bidding stages, we're seeing a huge push on all fronts and across the country, across the country is the most important part of this.
Got it. My last question is on guidance. we can see a lot of players entering into this wastewater treatment segment and [indiscernible]. So do you see any competition while bidding for the several projects? Do you see any competition here?
I think it's a sector that has competition across all assets of it. As far as wastewater is concerned, you will have a different set of players. But I think it is a competitive environment because it holds so much attractiveness as an industrial sector. You see different players from different segments. We find ourselves in a very unique spot of across segments and having RPQs across segments, which is a rarity, frankly speaking, for players in the Water business in India.
As there are no further questions, I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Ladies and gentlemen, thank you very much for joining us for the Q1 Fiscal '25 Earnings Call for Triveni Engineering & Industries Limited. I think we're at a very exciting point in time for across our businesses. Sugar and ethanol are expecting huge changes, especially from the central government, MSP on the agro, exports could potentially be considered in the immediate future as well to [ evacuate ] the stock -- the global world market price as we previously explained.
I'm quite certain we'll be able to export that good returns, frankly speaking. As far as ethanol is concerned, I'm anticipating a huge improvement in terms of pricing and structural improvements to ensure that both grain and sugarcane-based feedstocks are measured out with a core positive treatment over the next couple of months. Defensive gears continues to do well and I'm expecting orders within our Water business group in the next few weeks. So it's all exciting times. I look forward to talking to you in approximately 3 months. Thank you so much.
Thank you. On behalf of Triveni Engineering & Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.