Triveni Engineering and Industries Ltd
NSE:TRIVENI
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Triveni Engineering and Industries Ltd
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Ladies and gentlemen, good day, and welcome to Triveni Engineering & Industries Limited 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, Mr. Barar.
Thank you. Good day, everyone, and a warm welcome to all of you participating in the Triveni Engineering & Industries Q4 and FY '24 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 to 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, Rishab. Good afternoon, ladies and gentlemen, and welcome to the Q4 Fiscal '24 Earnings Conference Call for Triveni Engineering & Industries Limited. The year that's gone by has presented several operating challenges to the company, especially in the Sugar and Alcohol businesses, while our Power Transmission business has actually delivered another year of exceptional performance. It's heartening to note that the company has reported satisfactory results despite these challenges.
The key financial numbers for the year are the following: net revenue from operations stands at INR 5,220 crores, with a profit before tax and exceptional items at INR 529 crores and a PAT of INR 395 crores. The Board has recommended a final dividend of INR 1.25 per equity share in addition to the interim dividend of INR 2.25 per equity share and a special dividend of an amount of INR 2.25 per equity share was paid earlier during the year.
Looking at the performance, the net turnover is lower by 7%, which is mainly due to lower sugar sales volume of approximately 16%. However, the PBT before considering the share of profit of associates and exceptional income is lower by only 3%. The lower sugar sales volume is primarily due to lower quarter that has been received by the company in the absence of any exports.
The sugarcane crushing during the sugar season '23-'24 ended at 11% lower for the company at 8.26 million tonnes compared to sugar season '22-'23. The gross recovery was marginally higher at 11.49%. The decline in crush is due to heavy rains, water logging and inclement weather in certain regions and the associated proliferation of red rot disease in the plant cane of Co238 varieties.
In the Alcohol business, in view of feedstock restrictions on the supply of surplus food grains from FCI, this is FCI rice that I'm talking about, and the limitation of the use of B-heavy molasses, the production and sales volumes were less than earlier estimated. The overall margins declined in view of lower margins on maize operations as well.
The Power Transmission business recorded a record turnover and profitability. Turnover increased by 30% and segment profits by 40%. An intense CapEx program is being executed currently. Segment profits in the Water business increased by 29%, due to cost optimization and savings in various projects that were executed during the year.
Looking at the business highlights. The sugarcane crush, as I mentioned, was lower by 11%. And this was primarily due to lower crush in 4 of our sugar units: Deoband in West UP, Chandanpur, Rani Nangal and Milak Narayanpur in the Central UP. So 4 out of our 7 sugar factories actually contributed the majority towards the decline in sugar crush in the season that has just transpired.
The chief reasons were climatic factors. I've spoken about heavy rainfall and water logging in certain regions. There was also the absence of sunshine for long periods during the winter months. And of course, the spread of red rot disease, which reduced the yields, especially in the plant cane across the 4 performing factories. There's also a notable point that there were no winter rains and a little bit of rain, not too much, but a little bit of rain is absolutely essential for the final growth stage of the plant to crop and to add to the maturity. Also, a little bit of rain is a central [indiscernible] the process, et cetera. And the absence of that limited quantity did have a decremental impact on the crop.
The last reason, of course, was the higher diversion towards kolhus and crushers. In fact, it was claimed that there are several articles about the export of [indiscernible] sugar out of India that has been accounted for by the [ FCI ] as well. This trend of lower sugar cane availability was witnessed across Central and Western UP. Our factory, these 2, of course, did not face any of these problems that I have just spoken about.
I should also mention, since I've talked about the red rot disease, our 2 units towards the southern part of Western Uttar Pradesh is Khatauli and Sabitgarh had virtually no red rot. We're talking about 70,000-odd hectares of land, where we purchase sugarcane from and the incidence of red rot in these 2 factories was lower than 100 hectares. So an absolutely insignificant amount. But that does not mean that we're not fully cognizant of it, tracking it and have a plan to eradicate and eliminate this disease.
The sugar cane development teams have chalked out, as I mentioned, multi-pronged strategies to contain the damage by uprooting the diseased crop, limiting the spread and carrying out a comprehensive varietal substitution program to reduce the proportion of the vulnerable Co238 variety, especially in the low lying, water logged prone areas, substituted by high sucrose and high yield varieties, of which we have substantial and [indiscernible] of seed as we have found during the planting season, which is almost about 99.5%, 99.9% of all planting across the areas where Triveni purchases sugarcane from is over.
In our Alcohol business, the company faced several feedstock challenges that I spoke about at the introduction of the call, such as the abrupt stoppage of surplus rice by FCI and the restrictions with usage of B-heavy molasses. And a very interesting introduction of maize as a feedstock. And I've spoken about this in previous calls as well. Triveni was the first organization in the sugar industry that...
Sorry to interrupt you. Sir, we are losing your audio.
Right. Hopefully, this might be better?
Yes, sir.
All right. Thank you. Let me repeat that, I was talking about maize. And Triveni as an organization was one of the first few organizations in the country to experiment with maize, and we are now very comfortable with using maize as a feedstock and have had great experience in supplying ethanol produced from maize to the oil marketing companies. After the restrictions that were placed on B-heavy molasses, the sugar operations were carried out largely with C-heavy molasses as compared to our budgeting of B-heavy molasses. This has led to lower operating capacities and hence, lower production in the distilleries. So the margins in maize operations were slightly lower despite the price corrections made by the central government.
In our Engineering businesses, the Power Transmission business reported a remarkable performance with new milestones with respect to revenues, profitability and order booking. This year also marked a period of extensive international customer outreach and continued investments in research and development and infrastructure aimed at enhancing our business share, our market share and to capitalize on global trends and opportunities around the world within the Power Transmission landscape.
Coupled with strides that we've made in Defence, the Power Transmission business is on a sustained growth path. In the Water business, the year went by -- the year that has gone by was muted in terms of market activity and the finalization of orders. I think a great consequence was the general election, which we are still going through in the country, and the fact that no orders were finalized for substantial periods of time. And even the start of this quarter has had the same kind of trend. But we're very hopeful that post the 4th of June, we will come back in an aggressive manner to a period of [indiscernible] and all the backlog will be cleared.
Looking at the detailed financial performance of the company. The turnover during fiscal '24 has declined mainly due to Sugar, a 12% decline; and Water business, a 30% decline. And the turnover of the Alcohol business, net of excise and Power Transmission business has increased by 9% and 30%, respectively. Profit before share of profits for the associates and exceptional items is 3% lower at INR 529 crores. Despite lower sales volume of 16%, the segment profit of the Sugar business are at the same level as the previous year due to higher contributions arising from a 6% increase in average sugar prices. The profitability of the Alcohol business was adversely affected due to restrictions imposed by the government. I've spoken about that over the last few minutes.
The total gross debt of the company on a standalone basis on the March 31, '24 increased to INR 1,324.7 crores compared to INR 825 crores at the same point in the previous corresponding year, due to higher sugar inventories that are held by the company. Standalone debt for the period under review comprises of term loans of INR 277.8 crores. And all these loans are with interest subvention or at a subsidized rates of interest.
On a consolidated basis, the gross debt is INR 1,411 crores compared to INR 913 -- INR 914 crores on 31st of March '23. The average cost of funds is 6.5% during fiscal '24 on a standalone basis compared to 5.1%. And it's important to mention that during the quarter, the company's long-term credit rating was upgraded to AA+ (Stable) by ICRA.
Looking at the highlights of -- the financial highlights of the various businesses. During fiscal '24, the company's Sugar segment reported revenues of INR 3,857 crores, which were lower by 11.6%. The blended sugar realizations improved by 5.8% to INR 38,175 per tonne, almost mitigating the impact of lower dispatches and cost increases. The segment's PBIT was largely flat at INR 306 crores.
As of the 31st of March '24, sugar inventories stood at 58.94 lakh quintals, valued at INR 35.3 per kilo, which includes the impact of sugarcane price increase in the state through an increase in net [indiscernible]. Current sugar realizations today stand at approximately INR 3,950 per quintal, refined sugar at INR 3,900 for [indiscernible] sugar. And I have to say, despite the large quarters that have been released over the last couple of months by the SPV, the sugar realizations have remained reasonably buoyant, and we're very confident that this is an excellent sign for the times to come. However, I will talk about our perspectives on the future in just a few minutes.
Looking at the industry domestic scenario, we had a hike in the FRP and a hike in the SAP that was anticipated, and we've talked about it in previous calls. The sugar production estimates for season '23-'24 have also been given, and they're pretty much in line with what we had spoken about on the last conference call. And we're looking at an increase in sugar inventories at the end of this sugar year coming in just higher than 9 million tonnes. As a result, as I'm sure you all know, ISMA has written to the government requesting exporting 2 million metric tonnes, which we hope is under consideration.
Look at the international market, we've seen record price for raw sugar and white sugar during the year as compared to the last 10, 15 years. That's been very encouraging. There's been a positive outlook in sugar production in Brazil with the estimates of between 42.5 million to 44.5 million metric tonnes. We believe it will be towards the higher end of this number. There's an improved production outlook for Thailand as well coming in between 10 million and 11 million tonnes of production. And despite all of that, we've seen very buoyant prices, although prices internationally have come down a little bit over the last few months.
Moving towards our Alcohol business. During the year, the company did face several feedstock challenges that I've spoken about. We also experienced reduced availability of sugarcane based feedstocks for our distillery as operations changed during the season from B-heavy to C-heavy molasses as per the directives of the government. This, of course, led to lower generation of molasses impacting the overall operational and financial metrics. Accordingly, the sales volume of ethanol produced from higher-margin molasses and FCI rice was substituted by lower-margin maize operations, which impacted the profitability of this business for the year under review.
We achieved a production very much in line with what we had reported in the last earnings conference call of approximately 18.5 crore liters and sales also just under that amount during fiscal '24, both higher, of course, than the previous year. The net turnover of the Alcohol business increased by 8.6% compared to the previous year due to higher dispatches of 1.3% and higher average realization of 2.9%. During the year, the revenues of the distilleries contributed to 24% of TEIL's net turnover. Ethanol constituted 93% of alcohol sales during the year.
Looking at the domestic scenario for ethanol supplies during '23-'24, the OMCs floated a tender of 825 crore liters, with a 15% blending target. And I have to say that despite many -- a lot of concern all of this targets, given the fact that we were in election year, I think the government has done a remarkable job of almost achieving this exact percentage, and we're very hopeful that this will be continued during the course of this supply year.
Till, the 28th of April '24 contracts for 321 crore liters have been executed OMCs. And the OMCs have procured 270 crore liters out of the required 824 liters for the ESY '23-'24. And within this procurement, the Sugar sector has contributed approximately a little more than half, 145 crore liters, while the balance is coming from the grain sector. And we've achieved the blend percentage higher than 12%, which is very much on track as of the end of April.
Turning towards the Engineering businesses of the company, the Power Transmission business has increased its turnover in fiscal '24 by 30%, driven by growth of products as well as the aftermarket segment. The PBIT of the business grew faster than revenues at just over 40% -- 40.1% to INR 107.1 crores with PBT -- PBIT margins of 36.7%, up by almost 2.75% -- at least more than 2.75% from year-on-year -- compared to on a year-on-year basis.
A strong share of the aftermarket has been sustained, and this helps maintain the overall profitability of the business. The fiscal '24 order booking grew by 42.3% to INR 375 crores, while the closing order book increased by over 10% compared to the previous fiscal year. The company saw excess demand for its products, including high technology, compressor gearboxes, high-powered small hydro turbine applications and high-power API, which is the American Petroleum Institute, gearboxes, et cetera. The outstanding order book, as I mentioned, on the 31st of March stood at INR 287 crores, including some loan duration orders of just under INR 90 crores.
The business is currently executing a CapEx program, which enhances the capacity of our Gears business from INR 250 crores to over INR 500 crores. This does not include our Defence production. The investments are aimed towards a new bay, and equipment in that new bay manufacture gearboxes, both for power transmission and for some defence products. The expansions include establishing a large dedicated multimodal manufacturing assembly and testing facility in Mysore for defence products.
Turning to our Water business. The revenues declined due to the delayed slow execution of certain projects and the delay in receipt of new projects, where our bids are the lowest and we're waiting an award. As I mentioned in the opening remarks, it has been impacted with the onset of national elections. And we are hopeful that post the 4th of June, there will be a swift return through the award of projects, where we are L1 and also projects which where we have tendered where the bids are remain -- waiting opening.
Despite weaker revenues, the PBIT for the year improved to 29.4% year-on-year, due to cost optimization and savings and in the various projects that were executed during the year. I think this is a huge achievement by the business. The PBIT margins stood at a healthy double digit of 12.8% for the year, up by almost 600 basis points year-on-year. The outstanding order book on the 31st of March stood at INR 1,223 crores, which included INR 880 crores towards O&M contracts for a longer period of time. I should mention that there is no further -- no fresh CapEx that has been considered at this particular point. It is all the previous CapExs that I've spoken about in previous conference calls, which is under execution by the company.
Looking at the outlook. As far as the sugar business is concerned, I would like to start off by saying that we have come off a relatively difficult season in North India in Western Uttar Pradesh and Central Uttar Pradesh compared to the last 7, 8 years. And it's been a great learning experience. And we've learned actually quite a lot. And one has had that -- the company has had its resources stretched in terms of combating it and ensuring that we will be able to rectify any of the issues that we have faced, including climate change, including tests, including disease, et cetera, for the following season and for future seasons as well.
We continue to make judicious investments in our facilities to enhance crush rate, sugar quality and improve efficiencies, including steam efficiencies across our 7 sugar manufacturing facilities.
In the Alcohol business, we hope that the government will address the feedstock and profitability challenges in fiscal '25. And we believe that the government is completely and unequivocally committed to the ethanol lending program and its targets of 20% by '25, '26. And as a result, I think that post the elections, we do anticipate some good news is definitely for the next tender, both for grain as well as for molasses based feedstocks, which both impacts -- both of which impact the distilleries of the company.
I should also mention that the Rani Nangal distillery is now functioning at full capacity. It is commissioned at the very onset of this quarter and is running extremely well. We have started these operations on grain and intend to continue with this for the next few months.
Looking at the Power Transmission business outlook, we are exercising our strong relationships with multinational companies that are present in India and have operational internationally and leveraging them to grow in their home markets. The potential to grow is immense in Western Europe and the United States, where the maximum majority of OEM customers are based.
In addition, the overall economic growth, the market share gains are likely to be major drivers of growth for new products within the Power Transmission portfolio. Power Transmission business enhances -- we're looking at enhancing and adding value to all of our customers by reduction in life cycle costs. And there are several research and development initiatives underway to ensure that this offers sustained benefits to our customers, both domestically and internationally, and it benchmarks ourselves to the very, very best standards globally.
In the Defence segment, the business expects increased order booking from the key segments of gas turbines packaging, propulsion gearboxes, propulsion shafting and special application pumps. And we expect that post the elections, there will be several tenders that will come up and be opened, et cetera, and we hope to be placed favorably across a large number of those centers.
Looking at the Water business, the long-term prospects of water and wastewater treatment in India and in international markets remain intact. And there is a tremendous positive outlook on this business. We anticipate that post-election results, there will be a surge in business opportunities, and new funding is expected to flow from both central and state governments as very little actually has transpired in this segment over the last 4 to 6 months.
The new opportunities that are emerging include reuse and 0 liquid discharge businesses and also EPC and HAM model opportunities in the Water segment. The business is also actively targeting foreign projects, wherever it possesses the prequalification and funding is ensured through multilateral and reputed agencies.
I'd like to offer a quick update on Sir Shadi Lal Enterprises Limited, where we -- the company has made an open offer in compliance with the applicable regulations, and the approval is awaited from SEBI for the same. We will make the relevant disclosures to the stock exchanges to update on the progress of this transaction as and when we receive information from SEBI.
In conclusion, the company is hopeful for an improved performance in the coming year through a combination of policy decisions, favorable macro environment, while addressing all the challenges that we had to face in the fiscal year '23-'24.
Thank you very much. I'd like to open up the floor for some questions.
[Operator Instructions] First question is from the line of Sanjay Manyal from DAM Capital Advisors.
Just wanted to understand on the ethanol front, I mean what could be our volume number for FY '25, given the fact that there is an expectation that the government might relax or lift the restriction on the -- ethanol from B-heavy sugarcane. And as you mentioned that there would be an aggressive sort of approach post elections. So what do you think about the ethanol volumes for us in '25? And we, I think earlier deferred the CapEx plan, what is the status on that?
Sure. I think we are -- our estimates remain unchanged. For the present fiscal year, we expect our total alcohol volumes to rise quite substantially to approximately 21.5 -- 21 to 21.5 crore liters. And that is a combination, of course, of our new distillery as well as changes in government policy for the next step in all suppliers. Referring to the distillery decision that has been put on hold, I think that position remains the same today. What can change is if we see a potential INR 2 -- or if we can achieve double-digit realizations on grain in terms of margin, we will certainly be able to reverse that decision. That will allow us to have a payback on the distillery of under 5 years, which again makes this a very viable business decision. And one is hopeful that, that again will follow you post the elections.
Right, sir. One thing on the sugarcane front, our crushing has been down this year substantially. And what exactly work we have done in terms of seed replacement? How our dependency on an overall basis on Co238? And what would be the status, say, from the next season onwards, how much it could come down? And what will be the proportion of the new seeds and new varieties?
So very good question. Sanjay, the point here is that the state -- we have 7 sugar factories that cover Uttar Pradesh. So it is not a general answer that will suit each and every plant. Our plant in Eastern Uttar Pradesh, the percentage of Co238 is minimal. And frankly speaking, whatever replacement has to be done, the broad majority has been done, and the quality of seed of Co238 is actually very good, and it's demonstrated in the results today. Within the 6 factories that are in Central and Western Uttar Pradesh, 4 of these factories, as I mentioned during the call, were impacted by red rot, 2 had very -- any impact at all. So we will be judicious in terms of our seed replacement over there as well.
It is important to mention that the massive impact of red rot was really on the plant cane. And the fact that we -- not only was the plant cane impacted by it, but also the yields went down quite precipitously. But to take you through the journey, over 2 years ago, we had approximately for the entire group about 98% of our cane area was 238. Last year, it was 77%. In the coming year, it will be just below 50%. And we expect that in 2 years' time, we'll be at absolutely optimal levels. We don't need to go down more aggressively for the simple reason that not everywhere is impacted by red rot. It is still giving us reasonably good performance. However, we are very conscious that this trend is extremely fast and vigorously, ambitiously as a disease is brought upon, potentially even airborne in some certain circumstances.
And therefore, what we have done at the factories, where there has been infestation, we did a massive seed change and replacement program. We've had the seed. And what seed we haven't, we've actually brought that in. But the majority of seed was with us replacing 238 for other high sugar, high yielding varieties, et cetera. And the entire gamut of low-lying areas, while there was infestation in plant, has been uprooted and replanted. And the [indiscernible] crop, where there's fresh planting that has to happen has been planted with other varieties. So therefore, there's been a significant reduction in the overall quantum of 238 at Triveni, as I mentioned, from about 77% last year to below 50% this year.
Next question is from the line of Sudarshan Padmanabhan from JM Financial.
My question is to understand, you had mentioned that there were issues getting rice as input from the [ SGI ]. And I believe the fourth quarter was a confluence of a lot of miscommunication and uncertainty with the ethanol blending program and the offtake. As we move to the new financial year, one, how do we see this part of the issue getting resolved? And with respect to the earlier comment that you made on the feedstock, I mean, one is we realized that at least when we came, I mean we have a cost that is basically in place. Is the government looking at creating a minimum spread or some kind of cost structure by which the player -- the sugar player can actually move to gain feedstock seamlessly?
Okay. So FCI rice, at the very end of last summer -- summer '23, actually, the government banned the availability of FCI rice for conversion into ethanol. Damaged rice and rice from the open market was available, but it slowed in prices, which did not make sense for distilleries to procure. And therefore, grain distilleries, including Triveni's grain distilleries migrated to maize. That was a learning process because when we started adopting maize, it was at the point in time where the second harvest was almost over and prices started going up. This year, harvest of maize actually is 20% -- is anticipated to be 20% higher. And therefore, we've already seen a significant reduction in maize procurement prices already, and we believe this year, the margins from maize will be actually higher than what the margins were in the previous year. That's point one.
The second point that you talked about was the government looking towards some kind of mechanism of prices. The actual formula for calculation of prices has not been disclosed by the government. However, one has to understand that the government does look at a wide variety of issues and considerations in the governing price. So last year, the prices from sugar cane-based feedstocks stood the same. And this was actually because the government considered that there may be a shortfall in sugar in the country. And therefore, that was a consideration in that decision. However, the prices of grain ethanol were increased quite substantially, which gave a little bit of flexibility.
However, a lot of that was captured by the trade because grain, especially maize, is procured through open markets. So as of now, there isn't any kind of fixed mechanism that the government is contemplating. The representations that the industry makes to the government, especially [indiscernible] government are in light of sugarcane-based feedstocks. And we have been unequivocal in terms of showing that we do need a substantial increase in ethanol derived from sugarcane feedstocks during the next campaign.
Sure, sir. Sir, my next question is to understand on the export side. So now I understand that the worst year in terms of availability of sugar, which I think largely is getting addressed as we speak. Are we -- now in this scenario when we look at it, there is a fair amount of inventory available globally and the prices are coming down. Even if the exports are now open, do you think that if the government allows exports, it will be a little too late -- too little?
No, I don't think it's too late. Export prices, while they have come down from all-time highs, are still very, very robust, despite -- in fact, that is what I was talking about when I gave the global industry scenario, that despite record productions in Brazil of sugar and a return to record productions in Thailand, which is very close to India, we are still seeing very robust raw and white sugar prices. If India does decide to enter export markets with a small quantity be it 1 million, be it 2 million metric tonnes, my view is that it does not face the international market at all. And it can be done more profitably than sugar sold in country, quite a big difference even today.
One final question before I join the queue is interestingly, on the high [indiscernible] business. Can you talk a little bit more about the traction that we are seeing on the export side? Because, I mean, that is something which is driving growth and looks exciting to say from a 2-, 3-year perspective.
Yes. So we don't really give any export numbers, but we're seeing substantial growth in export markets, especially over the last year or so. And a lot of that has to do with new capacities that are coming our way, new hires and aggressive HR program domestically and internationally to be able to service our customers and partnering with our global OEMs in terms of supplies to their manufacturing locations around the world, be it in the Americas or Europe or in other parts of Asia.
So the first thing, of course, was to get the capacity. That, of course, is a way the CapEx has been improved and has been implemented as we speak. The next thing, of course, is leveraging on the relationships that we have with customers. And that move is clear. So without actually attributing any numbers, I think we are confident to say that over the next year, definitely, 2 years, we will see substantial revenues, especially order booking that will come from export markets. The majority of it are from our existing customers.
[Operator Instructions] Next question is from the line of Shailesh Kanani from Centrum Broking.
So my questions -- a couple of questions around distillery division. There has been a year-on-year decline in margin, right? And I believe that is, as you cited in the opening remark, with respect to higher feedstock prices and in general, increasing cane prices. So how do we see this going ahead? And also on ethanol volumes. When we are guiding for around 21 crores volumes for FY '25, we are at probably less than 75% capacity utilizations. So how would that also impact the margins, if you can give some guidance on that?
So good questions. I think in terms of production, it could be 21 crores, 21.5 crore liters production, which is still lower than the total. But the capacity utilization numbers decline with the percentage if maize is used as the feedstock. And if I talk to you on previous calls because the same distillery capacity if it is running on maize, even at 100% is operating at levels lower than 20%, 22%, 23% lower in terms of overall output. So that has an impact.
For this fiscal year, we're looking at approximately an even split between sugarcane feedstocks as well as grain feedstocks across all of our manufacturing facilities. But there are 2, 3 points, which are important to consider. Yes, while processing, grain will give you a lower quantum of output, we believe that there is already discussions underway for rice to be available to distillers. And the rice availability of India, as we know, historically, is actually very, very good. And therefore, if that is available, the quantum numbers change quite dramatically, number one.
Number two, I anticipate that the pricing, of course, will change both for grains as well as for molasses-based or sugarcane-based feedstocks for the next supply year as we embark again on a more aggressive program because we may not touch 15%, the next year's target will be higher, and we're 2 years away from the 20% target as the Honorable Prime Minister had announced a few years ago. And for that to happen, we need some more distillery capacity to come underway, and we do need a slightly better pricing to be available.
You should also be aware that we do have the capability and flexibility to move between sugarcane feedstocks as well. And therefore, the balancing is required. And if the economics suggest will allow for higher production levels as well. We do have the flexibility to do syrup, ethanol at 3 of our distilleries. And therefore, if the pricing actually changes, we will consider migrating from B-heavy molasses to syrup, which will, of course, enhance the total output of the distilleries.
So all of these things are -- it's very challenging to actually come up with definitive numbers right now because there's a lot of dependence on the government. But I think a lot of this will be clear as we go through the summer, post elections and through the summer. But what you should consider is that Triveni is extremely well positioned to be able to take those decisions and to migrate. And I think our strategy to have that flexibility for inputs and for outputs leaves us in a unique position in the industry.
Fair enough. So just to sum it up. So this current margin level that is around 14% for the division, at the EBIT level, it seems to be tough. Is that a fair enough assumption? Means all the worst scenarios are kind of factored in this? Is this a fair assumption, sir?
So there is -- you see the scope of improvement is in maize. As I had mentioned just a few minutes ago, the cost of maize, when we started procuring it in August, September '23, started trending very, very high very quickly because we were at the end of the harvesting season of the second crop of maize, and therefore, we were paying absolutely top rupees to be able to procure maize over the winter months. The maize crop this year is 20% higher. The prices have fallen quite dramatically. And the prices that we are seeing now for the first crop, what we're procuring from Bihar, is substantially 10%, 12%, 15% lower than the prices that we were procuring earlier. And we anticipate that, that will also hold true for the summer crop or maize, which we will [indiscernible].
Okay, sir. Just second question was with respect to realizations. This year, we have seen a good jump in sugar realizations. So how do we see next year in terms of realizations considering that if export quota is not going to come in the next few months, so how do we see that? Currently, it is 39, which is remunerative. Will you see it to hold off for the year?
So I don't think there's any fear of sugar prices declining. Given the quantum of sugar that exists in the country right now and the fact that there is no export, so we're actually building up stocks. I think this is a very favorable for 2 or 3 reasons. Number one, it gives me great confidence that the government will come with a very aggressive [ EBP ] program. Very, very aggressive because their fear last year was sugar shortage. Now the sugar shortage doesn't exist. Therefore, there is no hesitation in being very aggressive in terms of meeting blending targets. That's number one.
Number two, given the fact that you've got this kind of sugar inventories domestically and in country, you still have very robust sugar pricing at a point in time or during the calendar year where sugar prices are usually at the lower levels. As we go through the summer, sugar prices tend to improve. And when we go to holiday season, festival season, we see prices actually hit their highest before the next season starts. So I think at these levels, which are substantially higher than what they were at the previous corresponding point last year, I feel encouraged that we do have some tailwinds in these prices.
Fair enough, sir. Sir, anything on Power division, where our order backlog is a little lagging. I know the order booking is matching our revenue growth. Any input on that, if you can provide?
Typically, the orders that we have, the execution is 6 months. Okay. So I don't think it is necessarily lagging. And we've got fairly aggressive internal estimates for growth. And I mentioned it before, I don't think we see our growth levels disappointing at all, nor our profitability level is disappointing. But I think the order booking is in line with what [ we invested ].
Yes, the PTB division has been doing really well, especially on the margin front. And I assume our guidance of around reaching INR 500 crores in next 2 years stand in terms of revenue, right? Is that a right thing?
No, no. We've never given that guidance. I said -- we said that it's a minimum capacity, the investments that are underway will increase the capacity to above INR 500 crores.
Next question is from the line of [indiscernible] Mehta from Ficom Family Office.
My first question is, sir, what is the reason for having a 70% domestic market share in the high-speed gear segment? And the second question is what exactly separates you from your district peers on the EBIT margin front? So if you see your EBIT margins, they range about 35% to 37% compared to about 20% to 25%. So what exactly is the differentiating aspect?
So our market share is much higher than what you have mentioned because we don't have any domestic competitors as far as several years, also known as high-speed gears. I assume your question is related to our Power Transmission business. And therefore, the answer to that is our market share is higher than that, the high market share is in the high 19%. We don't have -- we only compete against exports. The companies that you're comparing us with, which do manufacture gears, typically manufacture industrial, low-speed gears, some catalog products, et cetera. The fundamental differentiation is on technology and uniqueness. So the gears that Triveni manufactures are all wait for order. They are highly engineered. They are high-speed engineered products versus what some of the other companies do, which are low-speed products, multi-stage products, catalog products, et cetera, which offer a different margin. It's a different business.
Next question is from the line of V.P. Rajesh from Banyan Capital Advisors.
Most of my questions have been answered. But just one, in relation to the changes in the commodity prices, both for sugar as well as maize that you were talking about, what kind of volatility have you seen or you expect with your, let's say, EBITDA per liter in the ethanol business?
I'm sorry, you'll have to repeat that question, please. A little bit louder.
Okay, sure. So my question is regarding the volatility that you see in your EBITDA per liter kind of realization in the ethanol business, given what you were talking about sugar prices fluctuating and maize prices fluctuating depending on the time of the year.
Right. Okay. So in terms of the future projections, I think there are -- let me divide this up into 2 sections. As far as sugarcane-based feedstock is concerned, you'll have to appreciate that we've had an increase in cane tax during the year under review. While we have not had any increase in the output, ethanol derived from sugarcane-based feedstocks. And therefore, I fully anticipate that for half of this financial year or the start of the next ethanol supply year, that dynamic will certainly change. It's too early to discuss cane price. But it's not an election year, so I don't think that there's any real reason for cane prices to increase next year. But what I do and anticipate is a return to an aggressive ethanol policy, and therefore, a supportive government allowing an increase in ethanol derived from sugarcane-based feedstocks, number one.
Number two is of greatest concern. There are 2 pieces of good news here. The first is with respect to maize. With respect to maize, as I previously mentioned, the total output of maize of the nation is 20% up, anticipated to be 20% higher this year, which, of course, as supply and demand would dictate. Since maize is not really consumed, it's not a part of the Indian diet. It really is used as animal feed, direct animal feed, primarily. We will see and have already started to see softening of maize prices, number one.
Number two, maize procurement by industry is a very new phenomenon. It's such a large scale. And therefore, the systems, the supply chain systems to have taken some time. I anticipate that during the course of this year, those supply chain systems will be far more effective in terms of storage, in terms of procurement, et cetera. And therefore, all those efficiencies will then percolate down to companies like Triveni that procure maize in a larger quantum.
What I would also like to say on grain is that rice. Again, there has been multiple proposals that have been made to [indiscernible] on rice, et cetera. The constraints, in my opinion, came just after elections, et cetera, and due to various sorts of concerns. I read in the papers yesterday that export of non-basmati rice may be considered straight after elections. While export of non-basmati rice is allowed, I certainly don't see the government not allowing distilleries to be able to procure quantums of rice as well. And then it becomes an equation of price.
And therefore, to have rice, which gives us an ability to produce more alcohol for the same facility, capacity and the margin structure of rice that existed earlier, which is better than maize, all of these are great positives. So I can't offer you any definitive numbers. It's too early. I think post elections, we will be able to have better numbers. The next time we have this conversation at the next earnings conference call, there will be more data to share. But everything is positive as far as the margin structure is concerned.
Next question is from the line of Manish from Fiducia Capital.
I would like some color on this acquisition of some 25-odd percent followed by an open of a fellow sugar company, Sir Shadi Lal Enterprises. If you can share some color on that, your strategy, what is the status right now, so and so forth?
Look, as far as the target company is concerned, they are exactly in the same business as we are in. And also, their units are in the vicinity of our units. So there is a lot of strategy in terms of taking over the unit. We have made the first move by acquiring 25% stake. And now as per the SEBI regulations, we are in the open offer stage.
And as we hear more from SEBI, we'll inform the stock exchanges, and you'll be able to get that information from our disclosures.
Okay. So the open offer is still in the play, is that what it is right now?
Very much so. We're awaiting SEBI approval to formally launch the open offer.
Ladies and gentlemen, I now hand the conference over to the management for closing comments.
Thank you. Ladies and gentlemen, thank you very much for joining us this afternoon for the Q4 fiscal '24 results for Triveni Engineering & Industries Limited. The last year was a challenging year for some of our businesses, but I think we've come out a bit much stronger. We learned a lot. There's a lot of hard work that has been done over the last few months ago to combat some of the issues. I think when we look forward, we hope for a good monsoon and for a limited impact of testing disease as far as our agro businesses are concerned and a more favorable government policy as far as the ethanol business is concerned. The Engineering businesses hold great promise and potential, as I talked about, and I look forward to discuss that with you over the next few calls as well.
Thank you for taking the time this afternoon. Look forward to speaking to you in about 3 months.
On behalf of Triveni Engineering & Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.