TD Power Systems Limited (533553) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the TD Power Systems Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Devrishi Singh of CDR India. Thank you, and over to you, sir.

Thank you. Good morning, everyone, and thank you for joining us on the Q4 and FY '21 Earnings Conference Call of TD Power Systems Limited. We have with us Mr. Nikhil Kumar, Managing Director; Mrs. M. N. Varalakshmi, Chief Financial Officer; and some of their colleagues in the management team on this call. We will begin the call with brief opening remarks from the management, following which we will have the forum open for an interactive Q&A session. Before we begin, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties. Documents related to the company's financial performance have already been e-mailed to all of you earlier. I would now like to invite Mr. Nikhil Kumar to make his opening remarks. Thank you, and over to you, sir.

Thank you. Good morning, everyone. Thank you once again for joining us today on our earnings call. I trust all of you would have received our results and investor presentations. Now let me move on to discuss with you TDPS' financial performance for the year ended 31st March 2021. Stand-alone. Our full year total income was INR 512 crores versus INR 494 crores the same period previous year. Profit after tax, including comprehensive income, was [ INR 17.94 crores ] versus a profit of INR 16.9 crores for the same period in the previous year. The previous year included an exceptional income of INR 2.16 crores from the sale of land. Total manufacturing revenue stands at INR 485 crores versus INR 455 crores. Exports and deemed exports contributed to 61% of our manufacturing revenues. Manufacturing order book, including our Turkey operations, stands at INR 1,095 crores, which is INR 337 crores, manufacturing business; INR 686 crores, railway business; and INR 72 crores from our Turkey operations. Our order inflow statistics, full year order inflow is as follows: TDPS manufacturing business, India, INR 470 crores versus last year, previous year, was [ INR 468 crores ]; Turkey, we had an order inflow of INR 69 crores versus INR 88 crores in the previous period; total INR 539 crores versus INR 556 crores. Our projects business, our full year projects business revenue stands at INR 20 crores versus INR 32 crores same period previous year. Our order book for this business currently is INR 16 crores. On a consol basis, our full year total income, including exceptional items, is INR 610 crores versus INR 542 crores for the same period previous year, an increase of about 12%. Profit after tax, including comprehensive and exceptional income, is INR 43.67 crores, including INR 7.18 crores coming from write-backs of payables from our subsidiary company, DFPS. This is compared to a profit of INR 28.85 crores in the same period in the previous year. In the previous year, when we had INR 28.85 crores, we had an exceptional income of INR 14 crores, which was INR 2.16 crores from sale of land and INR 12 crores write-back from our payables from our subsidiary, DFPS. If I take out the exceptional income from both the years, our profit has increased actually from INR 14.8 crores to INR 36.49 crores. Our consol order book stands at INR 1,111 crores, and we continue to maintain a strong cash position of INR 184 crores. Now order book, market situation and guidance. We have a very strong order book for the current year, with -- including the railway business with Alstom. We have confirmed orders at the moment as of date of about INR 475 crores. We have earlier given a guidance of INR 550 crores, which is easily possible for us to achieve the strong current demand for our products all over the world. On the export side, we have more than forecast orders in steam turbine and gas engine. We have also been officially approved with a new engine -- by our customer that we have been working with for the past 1.5 years. They had made a worldwide announcement about this, and this means that orders will start flowing in. This is a major development for TDPS. On the domestic side, we saw a strong demand from steam turbine manufacturers until end of March. But recently, effects from COVID have started to be felt. Hydro was expected to be lower, but we got some good orders recently in Q4, and so the overall reduction of our business from the previous year will not be so steep as expected. We have a number of projects also in the pipeline currently under negotiation, especially on the export side, which will compensate also good business for us next year. We're also very happy to announce that we have won a trial order for about 15 machines for the most popular model of the traction motor from the Indian Railways to be delivered in Q2 in this year. And after that, our intention is to get the full approval by the end of this financial year. Once approved, we can start bidding for all the projects with the Indian Railways and start getting a larger market share. At this point in time, I would like to also mention the difficult environment that we are in with raw materials. All our steel raw materials are up 60% to 100%, from steel, special steel and copper. This has affected the cost of generators drastically. It was a good decision the company took last year when we booked a lot of copper and steel when the prices were low, and this has cushioned the impact for us for about 4 to 5 months of this financial year. Other than that, we have also booked euro at very favorable rates compared to the previous year. And in addition to that, we also have priced for variation clauses on some major contracts that also provides us with some cushioning. These 3 major factors will largely nullify the raw material cost increases for the current order book. But we also have orders in the pipeline, especially those booked by OEM customers and not yet passed on to us, and that's when the story gets a little complicated. We are in intense discussions with our customers on the best way forward, especially with customers that we have a high market share and long-term relationships. There could be an effect on margin to a small extent in Q3 and Q4. If these cost increases persist, ultimately, the end customer has to pay for it. But I am of the opinion that inflationary pressures are building up and corrections should happen in the next few months. Of course, I could be wrong also. But our approach is clear, we want to protect the long-term relationships with our customers, but also ensure that we don't lose a great deal of money in the short term. Our approach is also to do what is right to do in the short term and also what is right to do in the medium term and long term to protect our business. Coming to Turkey. We have confirmed business of EUR 8 million to EUR 8.5 million this financial year, which is around 30% less compared to last year. This I have already indicated in my previous call. And the market in Turkey is pretty slow at the moment since new incentives and policies have still not been officially announced. But we know that once the incentives are announced, the market will bounce back once again. Let me just now move to guidance. For this year, TDPS India manufacturing business, we, as mentioned earlier, we already have sitting on INR 475 crores, so INR 550 crores earlier guidance is easy for us to do. So we are, at this point of time, seeing INR 550 crores plus something. We see Q1 to be INR 125 crores, a little bit lower than what we have earlier forecast since lockdowns have definitely affected domestic sales, and lockdowns have also -- these current lockdowns will have an impact also, to some extent, on manufacturing in this particular quarter. But we don't see this coming down below around INR 125 crores. We'll have INR 145 crores in Q2, and H2 will be a minimum INR 290 crores. We will have fairly consistent quarter-to-quarter performance. But as always, Q2 and Q4 will be much stronger compared to Q1 and Q3. TDPS Turkey. Top line would be around INR 80 crores plus, depending on the exchange rate. And total manufacturing business would be INR 630 crores plus, depending on how much more we can do from India. Projects business. Top line is expected to be around INR 25 crores. All our subsidiaries will be profitable. This brings me to the end of my initial remarks. I will now be happy to address any queries that you may have. Thank you.

[Operator Instructions] Our first question is from the line of Himanshu Upadhyay from PGIM India Mutual Fund.

Congratulations on a good set of numbers, and we hope the momentum continues, okay? So my first question was on the domestic market, okay? Over the last few months, we have seen some -- or the commodity companies, the pricing have been better, and some of the companies are trying to far hasten the projects, getting -- or at the manufacturing stage and all that stuff. And let us suppose the CapEx items really starts next, which has not been there for a long period of time. Do you think the power -- or captive power plant will be, again, the driver for you? Or do you think the waste heat gases would be the driver for you? What is the sense you are getting from the customers? Or -- and your own thought process on what you can do to get some 5-year incremental pie on the CapEx, which might happen in the Indian market over the next 2 to 3 years. So some thoughts on that would be helpful.

What we are seeing that -- is that for every greenfield project, there is a captive power plant. Still, whether it's cement or steel, or sugar or you name it, all industries which require power as a major part of their input cost, all industries are definitely going in for captive power plants. In addition to that, there is waste heat recovery, which is a big thing, to be a bigger and bigger market. There's this garbage [ integration ] plant, which is also a big market. And of course, there's sugar co-gen and burning of other biomass materials, which is a smaller part of the business, but definitely, it is still there. So the captive power plant business story for India has still not gone away and continues -- it will continue to be here. The power situation in the country has not dramatically changed in any way to say that captive power plants are not required anymore. We're not seeing the increase in renewables, which is -- which was what people were talking about some time back, but it has not happened. So those -- any company that requires a stable source of power supply will go for a captive power plant.

I see one thing. If I remember, a few quarters back, we had a similar discussion, and we -- our view was that a thermal power plant is the story, which is not going to come back that strongly, okay? But do you think, for us, let's say where we are in captive power plant, we can again get back to the similar business, what used to be there 7, 8 years back if the CapEx cycle recovers? Or should that be the thing, what you are trying to say?

Yes, the large thermal power plant business is definitely a decline in business. There's no doubt that, that business has been dramatically affected. But that -- the bulk capacity -- bulk addition of megawatts into the grid has to take place in some way or the other. So if it's not taking place in renewables, then there's always going to be a power shortage in the country. So I believe that if the CapEx cycle really picks up, we will get back to where we were 10 years ago.

And globally also, that is the way, these captive power plants that remain, you would be looking at...

Globally, we are seeing that captive power plants, I mean, we're getting a lot of steam turbine business and export market, like what I mentioned a little bit earlier. But we are seeing that steel plants in Europe, whether it's steel, paper, cement, everybody has a captive power plant. Despite having very stable grids and having very stable -- having surplus power in the overall system, everybody has a captive power plant.

And are you seeing increased inquiry in the current market? And are you seeing the CapEx revival or some hope? Or do you think...

We were -- this is -- unfortunately, this is a story which is repeating itself for the second time. It was a very, very good situation until, I would say, end of March. And then we had the second wave in India, the COVID wave in India, and that has definitely impacted everything. I'm not saying that it is derailed. It's not derailed for sure. But at the moment, I think the people are -- I mean, there's a slight hold in everything at the moment. We are feeling it, there's a slight hold in everything, and so people are just waiting for the second wave to maybe subside a little bit and then business activity will definitely come back in a strong way. At the moment, we are all in the middle of the second wave, and it has definitely impacted the sentiment of the country.

Okay. Okay. And I think this is a slightly longer-term question, okay? So in most capital goods, when we see the company, the innovation, whatever we see, innovation kind of keeps on happening or the technology keeps on changing. So -- and people need to keep on innovating on different products to -- and we had a tough problem, where we were concentrated only in very few products when we went into the crisis last time, okay? But let's say, 4 or 5 years down the line, okay, what would be the areas where more you would like to explore near our products, okay? And how do you think the company will evolve from hereon in 5 years, let's say, more on the product side and your thought process on the products because what we have seen is to focus on a single product, most of the capital goods companies have, at some point of time, had issues or let's say, what we are seeing even in the case of everyone, okay? A few companies have tried to diversify into different products or geographies and all that...

So I think this is a larger issue, not a -- it's a larger issue, probably not an earnings call subject. I definitely appreciate the question. All I can say is that we have a number of new products in the pipeline. And we have built up a lot of products in the past 7 to 8 years, expanding our geographies, expanding our product range, expanding different verticals that we are addressing in the market. And we have a number of new products also in the pipeline. But to talk about the specifics and I would think that is, I think, beyond the scope of the earnings call, so we can have a separate discussion, one-to-one, whenever you want.

Okay. And one small suggestion, in the presentation or at any -- if you have the data, you can just share. See, if I want to understand, let's say, in the revenue contribution, the products introduced in the last 5 years, what would be the revenue contribution from those products and even geographies? So just to understand how has been our evolutionary strategy, so let's say, FY '17 x percentage from the products, which were, in the last 5 years, in FY '21, how much was the revenue from products introduced in the last 5 years? Similarly, geography? So that just we know how fast we are evolving and because a lot of work has already gone. Every quarter, we see new segments entered. So just to get some better idea on this and how the numbers are evolving on the revenue from those contributing areas. It would be helpful.

I understand. Yes.

The next question is from the line of [ Rohit Balakrishnan ] from [ IPAT BMS ].

So Nikhil, congrats on a very good year for TDPS. And also, congrats on Caterpillar being an official customer. So I just wanted to understand your guidance, what you have taken. So I mean, how -- so in terms of this customer getting -- giving us orders, how do you see this customer evolve for us in FY '22 and beyond? If you can just talk a bit about that.

Yes. So the announcement has been made. So orders will start flowing in. We have -- we will give a forecast about this business in the next quarter already. We are under discussions with them about this very subject.

Okay. Okay. And Nikhil, you also talked about winning some trial orders, about 15 machines from Indian Railways. So these are, over and above, these are directly with Indian Railways, if my understanding is correct, right?

Yes. Yes.

These will be over and above with what we have with Alstom.

Yes. These are direct -- this is the most fast-moving, most commonly used traction motor by the Indian Railways for their electric locomotives. They buy -- as I said, this would be something like a INR 500 crores, INR 600 crores business, this product itself, per year. And so we want to get approved. We have the first order. We have to deliver it in Q2. Then there's a 6-month trial on the locomotive that Indian Railways will -- they will conduct the trial after 6 months of successful running, then we will be officially approved. And then once we are officially approved with a regular vendor, then we get a major -- then we start getting the bigger chunk of the overall business automatically.

Got it. So this business will probably start flowing in from next year, if everything goes well?

Yes, yes. Yes.

Understood. And Nikhil, I also wanted to understand, in terms of the hydro market in Europe -- so you've seen some countries sort of beginning to open up. So I mean -- and you said that the hydro market is largely, I mean, a physical market as because you need to go there and stuff. So I just wanted to understand how do you see that, not for this year, but for next year, how do you see that for FY '23 because the order book will start getting built now?

No. There are some orders in the European markets which we are running after. Let's see whether we're successful or not. We hope we are. But major markets for hydros will continue to be in Southeast Asia and Nepal. So we -- those are still the major markets. And major demand is coming from this part of the world only. So to some extent, the hydro market is definitely at a lower level compared to pre-COVID, mainly because this kind of business requires travel, requires face-to-face meetings. And especially since travel is really hard right now for Indians, in general, it is hard for us to go and meet these customers.

Right. And in the last call -- in the last couple of calls, you've talked about some sort of CapEx, some opportunities which you still wanted to sort of wait and see and then talk about. The other question is on capital allocation because we have a fair amount of cash. So I mean, between CapEx and repaying shareholders, what is the thought process at this point of time?

Yes. So we are definitely going to grow our business. And we are going to make -- we are waiting for some things to come into place. And once those -- we expect to use our money to invest in our own business and to make capital investments and to grow our business. So at the moment, we are keeping our money waiting for those opportunities to fructify.

Sure. And in terms of any other big opportunities, like what we have done with these new customers, something similar, anything that you would want to share? Maybe we are in some discussions, or something within the pipeline that you want...

No. I'm not going to share that right now, Rohit. I mean, of course, we're doing a number of things. We have a number of projects in the pipeline, but it's too early to talk about it.

The next question is from the line of Dhwanil Desai from Turtle Capital.

And congratulations for a good year. So 3 questions. The first question is with respect to prices and the scenario that is evolving that you talked about. So last time then, [ the situation ] had come, 2, 3 years ago. There was a margin pressure from our side on -- especially on the gross margin side. So -- and you indicated that we have some price revision clauses with -- in some contracts, and some OEM contracts are still not covered through that. So how do you see that is -- this time, will we be less impacted, one, because the supply side situation has improved in our favor? And secondly, probably, we would have preempted this and included price revision clauses. So how do you see that vis-a-vis the last time when [ the situation ] had come?

Yes. I think, compared to last time, we are definitely in a stronger position in the market overall. And we have very close relationships with some of these -- our relationship has strengthened with many of these OEM customers. So on one hand, it definitely gives us a better -- it gives us a better chance to talk to them, but it also -- on the other hand, there's a high core dependency from both sides, which we have to keep in mind looking at the long-term view of the business. And especially, as I said, for orders which are in the pipeline, which they have made or they have negotiated or -- and won and we're still waiting for contract signing or waiting for advanced payment to be made. There is a certain chunk of business, which is not yet in our hands and not yet in their hands, but it is finalized. And that's the -- that is what I'm calling as being the short-term problem that we had to talk to our OEM customers and we had to see what is the best way forward. And we're doing that. At the moment, we're doing that. And intense discussions are going on, so I'm not in a position to tell you whether it's -- what is the result of that. I'm just keeping the market informed that this is a situation where the company is in right now. And as I said earlier, our current order that we have on hand is INR 450 crores -- INR 475 crores, is not severely impacted because of the steps that we have earlier taken. So it's really what is going to be coming next from now onwards that we have to discuss and find solutions with our customers. And as I said also, long term, when I say long term, I mean, beyond 6 months. Obviously, the entire cost has to be passed to the market. Nobody can take this kind of increases on their [ hands ]. So that is also very, very clear, and we will do that. It is the next -- it is a short-term problem that we have to address in a very, I would say, [ that's I would just say ], a holistic way. So I'm not in a position to give you any numbers at this moment.

That's okay. That's okay. I mean directionally, we are in a much better position than what we were in -- when the first thing happened last time, is what you are saying. And then quantitative impact maybe we'll come to know as you talk with us in your discussion. So...

Yes. As I said, we are in a much stronger position, but there's also, as you know, conversely, we also -- there's a high level of core dependency also from both sides. So we have to be careful how we go about these things.

Got it. Got it. Second question, Nikhil, from all our past conversations, one thing that, at least, I'm able to infer is that INR 750 crores, INR 800 crores is a sweet spot in terms of capital utilization, margins, return on capital, everything. So I mean, from current year, we are expecting around INR 630 crores, INR 640 crores kind of a business. So how do we see, apart from that number, to INR 750 crores, INR 800 crores? I'm saying what are the levers that you think will take us to that number? If you can -- if you have any thinking around that and if you can share [ an idea ]...

I think I mentioned this in a number of -- in the past 2 calls, that we have some big things in the pipeline. One is a major Indian customer that we have now reached a point where we have been officially approved and they have made a worldwide announcement. So that's a big driver of growth. I have not been able to answer [ Rohit ], who has really asked what is the number. So -- but that is going to be a big driver of growth. The Indian Railways will be a big driver of growth. And we have some other products which are also under -- in the pipeline. So it is definitely going to come through new products, new products, new markets, new customers.

[Operator Instructions] The next question is from the line of V.P. Rajesh from Banyan Capital.

Nikhil, congratulations, and I hope [ all is fine at your end ]. [indiscernible] So I just wanted to get your sense on -- yes, I hope I can get your comments on... [Technical Difficulty]

I'm sorry to interrupt you, Rajesh, your voice is breaking up. May I request you to move to a better reception area, please, if you can?

Sure. So Nikhil, I was just asking that your comments on the opportunity that we see would be ethanol plants that all the sugar companies are putting up. If you can just comment on that.

So I have my colleague, the Head of Marketing and Sales, Vinay Hegde, with me also on this call. Vinay, would you like to comment on this question?

Pardon me. Can you just repeat that question?

Would you like to comment, yes?

Yes.

The question was how is the ethanol policy of India, how is it resulting in the business of new ethanol power -- ethanol plants? And what is the impact on the generator and turbine business in India?

Yes, it is definitely giving us quite a good number of business because all sugar plants are going for new distilleries. But even though the ratings are small, maybe 3- to 5-megawatt range, but a lot of new clients are coming up, and we are seeing a good track in this segment.

So do you see it being a growth driver in, let's say, fiscal year '22 or '23 or after that? What's your sense on that? Like will it become, let's say, 10%, 20% of our business?

It is not really going to be a growth driver, but it is going to increase the business in the steam turbine segment. Already, it is an ongoing business, and the number of plants are going to be more. It's not really a growth driver.

Okay. Okay. Great. And my second question is on the CapEx side. What is the CapEx plan for fiscal year '22 and fiscal year '23?

So other than the new projects which we may, if successful, which we may have to invest, okay, which we are not disclosing to the market as yet, other than that, we have a INR 12 crores to INR 15 crores CapEx plan.

I see. But that INR 12 crores to INR 15 crores is more maintenance type in nature, correct?

It is maintenance. And as I said, we are constantly investing in automation. Every year, we're putting in money into automation, and part of it -- about half of it will go into automation.

The next question is from the line of [ Amit ], an individual investor.

Nikhil, I wanted to understand what is -- what are your thoughts on the dividend distribution policy because even when you say that you were looking to use the existing cash for the business, we are still generating about, even right now, INR 10 to INR 15 of EPS per year and expect it to go up. So why are we so stingy in terms of distribution -- distributing dividend?

I think we've been increasing dividend, [ Amit ], year-on-year. It's been a steady increase and just being a little conservative at this point of time with our capital because, yes, we do have some plans which are yet to fructify. But if they do, we will use -- we will make some big investments. And that is the main reason why we had just put a hold on increasing dividends in a big way or going in for share buybacks at the moment. So this -- the cash, we want to deploy into our business, which will give us the best returns.

Okay. But we've been sitting on, on average, INR 150 crores for the last 3, 4 years. And we haven't done anything with it. That really depresses our return ratios, and it just looks like the organization is not doing particularly well. So even if we were to give some of the money away, and then later on, if we need money for growth, we can always raise capital. So that's not something that you're open to?

Okay, giving it away is, I mean, I don't understand that. So we have not [ considered ] this option. Let me put it that way.

The next question is from the line of Ankit Gupta from Bamboo Capital.

And congratulations for -- of the 8th year, Nikhil. Nikhil, on the capital allocation part earlier in our conversations with you, over the past many years, we -- our current existing capacity, we can stretch up to INR 750 crores, INR 800 crores of revenue with existing facility. And we do have some spare land available at our existing plants as well. So for the first time, we are hearing about your plans for capital investments and using the cash on hand for deploying in a future expansion or some other maybe acquisition or something. So if you can -- I know you won't be sharing the plans, the detailed plans about what is the way you'll be using this cash. But what has prompted you to change this policy because earlier, we have used cash for buybacks, dividends and all? So what are you seeing now? And if you can throw some light on this.

So I think what -- yes, it is a really good question. And I think the answer is that we have really put together a plan for the next 3 to 5 years, this direction that we want to go into, what are the new products that we want to introduce, what are the new markets that we want to get into, what are the new technologies that we need to acquire or need to develop by ourselves. And we have a fairly -- we have developed a good plan for ourselves. And so if -- and so we are working on all these areas quite intensively. And if some of them start to fructify in the next year or 2 -- in the next year, I guess, we will start seeing the necessity to start deploying some of the cash into these projects, into these new products. So that is definitely the shift. I've always said that when we come to the stage when our capacity starts filling up, we will start looking at the next step of what is to be done next. I've always maintained that. And the first priority always was to fill the existing capacity. So we are definitely -- we put those bricks into place, let me say. So those things are in place. But now, we have to think about what is next beyond that. And the thinking has already started. Some time ago, the plans are getting finalized. And as I said, we have definitely identified specific products and specific markets that we want to get into. And that may need cash for the future and will need cash for the future. So that's the change in our thinking.

Sure. Sure. That's good to know. And secondly, on the Railways part, we do understand that of this INR 500 crores, INR 600 crores annual market, is highly concentrated with few players. So over the long term, let's say, if we get [ in banner ] with Railways, how do you see this business shaping up for us? Like what are your expectations of annual revenue from this business?

Yes. I've mentioned this a number of times before. I said around 10% would be a good starting point for us.

The next question is from the line of Manish Goyal from Enam Holdings.

I just want to get a perspective on the steam turbine market. You did mention in your initial remarks that the market is quite strong. And also, a lot of greenfield plants, steel, cement, sugar have captive power requirements. So maybe if you can provide some insights as to how is the market, has the inquiry pipeline in volumes grown. It would be really helpful.

Vinay, do you want to answer this question?

The steam turbine market has come back, and there are a lot of -- steel and cement plants are going for expansion, and mainly heat recovery plants are coming up. And after maybe almost 10 years, we are seeing a very good surge in the demand for the steam turbine market. And our major customers are really doing well. And this year, we were expecting -- we have a very good order book, and we are also -- we have a very good pipeline of inquiries. And we are seeing a very good year this year for the steam turbine business.

So would it be possible to maybe quantify in terms of like what was the market last year and inquiry pipeline and what is it now? And ideally, are you seeing like the demand for higher-range generators as well?

No. It is not the high-range turbines, and high-range turbines are very few, but most of the orders are below 25 megawatts and mainly in the heat recovery plants. And the biomass and waste heat recovery -- municipal waste burning, there are a lot of inquiries in the pipeline and small distilleries as well. No big steam turbines, about 30 megawatts.

But like is it that, from, say, the last couple of years, what a market inquiry pipeline was? Is it that -- is it the inquiry pipeline is 40%, 50% up? I do recollect that in peak time, in 2011, '12, the overall market size used to be 2,000 megawatts, which had fallen to some 600 megawatts, 700 megawatts. So if you can put some numbers [indiscernible] perspective.

It's coming back to the same level. Yes, you can say that it's coming back to the same level of 2011, '12.

The next question is from the line of [ Majeon Brokna ] from [ Committee Securities ].

Congratulations for a decent set of numbers as for last year. I joined a bit late, so maybe the question can be repetitive. So do you have -- we are already seeing the commodity prices as spiking, and a few of the players in the competition have indicated that it might have some impact on the margin. So it will be helpful if you could guide something because we have been on the 11% to 12% kind of margin in the last year trajectory. So what impact it could have on our margins because top line, I think you've already guided that INR 550 crores plus is doable even in this year, despite some hiccup in the first quarter. But especially, on the passing on the inflated prices of commodity, how it will impact our business? That will be helpful, sir.

Yes. I think I've spoken extensively on this already. I think you must have missed it. But I'll just try to give a quick summary for your benefit, that I've said that we are largely -- we have largely been able to notify the pending -- the order that we have on hand with some of the actions that we have taken in the past, like buying raw materials, hedging the exchange, also price variation clauses. And for the rest, what is coming new? We are under discussions with the -- with our key customers. And I'm not in a position to tell you exactly what is the impact at this point of time, but we are under discussions. But there will be some -- there could be some small impact is what I'm saying because that is what we're talking about, could be INR 125 crores, it could be impacted, so we need to see how much we -- what could be the impact of INR 125 crores.

Okay. INR 125 crores out of the current order book of INR 475 crores, correct?

No. No, no. If the -- if INR 475 crores we have, now that I'm seeing another INR 75 crores minimum, we will do and we could even go to INR 600 crores. So the actual listing, we said INR 550 crores plus. So we are currently talking to our customers for about INR 100 crores, INR 125 crores of business on the price impact.

Got it. Got it, sir. And on INR 475 crores, the order book that we are having, that will not be impacted because we might have back-to-back arrangements when we got these orders, correct?

No. I have given the extensive replies to these answers -- these questions a little bit earlier, so I mean, I think...

Okay. No issues.

[ If I'm going to repeat ] the whole thing once again...

No. No, no. No issues. No issues, sir. I'll go through the transcript later. No issues.

Yes. Thank you. Yes.

Any other questions, Mr. [ Brokna ]?

No, no.

The next question is from the line of [ Mitim Espernavit ] from Aurum Capital.

So you mentioned that you might be doing, well, some CapEx in the future. So -- and you're still under -- in the discussion mode within the organization. So I just wanted to know what are the areas in which you are evaluating? Will it be export-based? Or will it be a more domestic kind of opportunity that -- for that you are planning?

It will be both. It could be export as well as -- but it's -- I would say, it's skewed towards the domestic side, definitely.

Got it. And any indication about the size that you are planning in terms of amount...

I'm not in the position to answer these questions at this moment because...

Got it. No problem.

We need to have more -- we need to have some real, I would say, we need to have some real meat on the bones before we can talk about it.

The next question is from the line of Kirthi Jain from Sundaram Mutual Fund.

Congratulations for a very good performance in FY '21. So congratulations. We have doubled our EBITDA in the current year. Good to see, sir, [ your persistence ] and you have done a very excellent job, sir. Very good to see, sir. Sir, my first question is, sir, with the Caterpillar, with the Railway business and some of the new business which you are trying to do, directionally, will we be trying to do a business of INR 10 -- I mean INR 1,000 crores in FY '24, sir, that would be the broad thing in our mind, sir, back of the mind?

'24 is 2, 3 years from now.

Yes, sir.

Kirthi, I -- the question was really why we're not spending our cash. So we're not spending our cash because we want to invest our cash into the business. And we have some plans for -- investing plans for new products and new markets. And we are definitely going to be keeping our cash for this opportunity, which is going to be coming up into the future. I think that there will be a time when I will clearly explain to all my investors, all my shareholders, that this is what we plan to do. And this is the growth plan once we have -- got some sure indications that, yes, the products are in line with the market expectations, we have the right pricing, we have the [ winning ] entry, opportunities are becoming real. And once the opportunities become real, we will present them and we will say, "Yes, this is what we plan to do. This is how much business we plan to get. This is how much money we want to invest. And this is how the company is going to grow." So it's a little premature to ask me these questions. I'm sure that -- I mean, I will communicate with all the shareholders at the appropriate time. And you can be sure that we will be completely -- we're completely open and transparent about our plans for the future. But what we want to really indicate is that we are not in the mode of share buybacks or dividends because we are planning to invest this money into our business. This is what -- the basic message we want to [ give ].

Okay. Sir, my question came because in one of the earlier participants' thing, you had told that we have a 3- to 5-year strategy plan for new product, new market and new geography. That's why I connected these 2 things directionally...

So yes, it is a very logical question, how much money, how much market, how much business, how much sales, totally logical questions. These are the first questions that I should be answering once it is clear. But I think I just wanted to highlight to you how this came about, right? This came about from how are you going to allocate the capital. And so my basic point was that we're not going to -- capital allocation has been reserved for future products and future growth. Now what is the future product and future growth? I will inform my shareholders as soon as possible.

Sure, sir. Sir, like calendar year, this opportunity should fructify, right, sir?

Yes. We will keep you posted on the earnings call to earnings call, and we are definitely working. But on the -- the one -- the opportunities which are fructifying rather quickly, I can say, at least, which will have an immediate impact is, one, is the engine business and the other one is the Indian Railways business. Those we will see faster results because those are things which we have been working on now already for the past 2 years.

The next question is from the line of Dhiral Shah from PhillipCapital.

Sir, last con call, sir, you had talked about that you have bidded for private train tenders. So have you had any order?

Vinay, that tender has still not been closed, right? But I think it's July, right, when it's going to close?

Yes. July, July, yes.

July is when the tender will close. And then we will know who are the companies which have won those bids. I think that 2 or 3 companies have bids right now, GMR, plus another 2. And once those companies win, they will start ordering the locomotives. And then the company that wins the locomotive order will -- hopefully, it is our customer, and then if it is our customer, then yes, we will get that business.

Okay. And sir, you -- also, you have talked about that there will be a 10% growth in Railway business for FY '22, right? So how much we did in FY '21 Railway business?

Varalakshmi, how much did we do in the Railway business last year, INR 60 crores, right?

Yes, sir. INR 60 crores.

INR 60 crores. And for [indiscernible] it's going to be -- it's going to go from INR 60 crores to INR 100 crores.

INR 100 crores.

This year, sir?

Yes.

Yes.

The next question is from the line of [ Rajesh Kumar ], an individual investor.

And congratulations on the good set of numbers. Yes. Hope you, your family and your staff are safe and secure in the current pandemic situation.

Yes. We are. Thank you. I hoper the same for you.

I have 2 questions. One is about the engine business, since for the 3 [indiscernible] you had been mentioning about a few different customers, so I just wanted to connect some dots there. The first is the [indiscernible] company, where we have supplied some [ 8 or so ] [indiscernible] last year, and that is where the approval has happened. And we were to replace the current supplier over a period of 2 years. If that is the correct understanding?

I don't specifically discuss customer names on conference calls, but I won't deny that, yes.

No. No, I'm not asking the customer's name. What I'm trying to say is this is one customer where we have done all this process and where we are going to replace the existing supplier.

Yes. Yes.

Okay. The second was the engine. So the other -- there were [ 3 more ], like we have supplied some [ 9 megawatt, 9 numbers to desalination valves ]. And you have talked of some other engine customers based out of Australia and Germany. So they're all different other than what you have got [ to order ]?

Yes.

Okay. Excellent. And my second question is about the order book. As per the investor presentation, it is mentioned INR 410 crores if you remove the Railways order. And now, you are saying [ as and there ], it is around INR 475 crores. So that means in the current, almost 2 months, we have received an additional INR 65 crores orders for the current financial year. Is this correct, [ the count ]?

INR 475 crores is the executable order for this on hand right now, including the Railway business.

Including the Railways. But in the industry presentation, we have INR 410 crores plus Railways [indiscernible]

Yes. So it's a combination of some part of the generator business, some part of the railway business, some part of the Turkey business -- I'm sorry, Turkey business is not in the INR 475 crores. It's some part of the generator business and some part of the Railway business. Put together, what we're telling you is that there are some things that go on hold, some things that go on cancellations, et cetera. Not a cancellation, but really on hold. So the number that we have on hand for execution as of date today is INR 475 crores for this financial year.

The next question is from the line of Ravindranath Naik from Sunidhi Securities.

Hello? Am I audible, sir?

Yes, sir.

Hello?

Yes. You're audible.

Okay. And congratulations for a good set of numbers. Sir, I have -- actually, you mentioned that INR 60 crores of revenue that we have booked for Railways, it is for your part or including the Alstom part?

So these 15 machines that I've mentioned is not -- this is directly with the Indian Railways.

Okay. Okay. So Alstom would be another INR 90 crores or INR 100 crores?

The Alstom business [ is set INR 100 crores ]. This is only 15. This is not a big value. Yes.

Okay. So including Alstom, we got a revenue of INR 100 crores -- INR 160 crores this year in FY 2021, right, sir?

No. Alstom did [ INR 100 crores ] this year.

In FY '21, we had INR 60 crores, yes, INR 60 crores in FY '21 and in FY '22, it will be INR 100 crores as total business.

Okay. Sir, is it possible to give [ an offer by concession ] of the order book in terms of turbine, engine, locomotive and [ still application from ] -- for the revenue [ and the order book, where it is possible ]? Is it possible to buy something, if at all?

I think it's possible, but we don't want to do that.

Okay. Okay. But just one thing, across all the segments, the margin is quite similar or it is different from different segments, like in a turbine, et cetera, a different margin in engine and different margins considering the scope of the work, so whether it is similar or it is different?

It is different from product to product for sure. But overall, it is not that much different.

Okay. Okay. Got it. Sir, this quarter, we have a write-back of 36 lakhs due to some [ scale ] increase provision. So what is the recurring cost of interest cost in this quarter?

Varalakshmi, can you answer that question?

Can you come back on your question, sir, please?

I think 36 lakhs [ is the right debt of the interest ]. So what is the interest cost recurring for this quarter?

No. Actually, what happened is that we have an FCNR loan, and we have to reinstate it at the end of each quarter. So in December, the euro was at 89 versus in March, it was at 86. So the differential, we had to take it back. That's why the negative has come.

The next question is from the line of Adit Shah from Vibrant Securities.

I have 2 questions. Number one is that if I look at the OpEx, I think it has increased [indiscernible] sequentially to around INR 38 crores quarterly, which was around INR 32-odd crores. So have you given sort of hikes to employees? And should we assume this number to continue going forward? And number two is that, in this year, we had fairly strong gross margins. And of course, we have explained about the scenario currently with respect to the commodities and your customer computations. But do you want to hazard a guess about your gross margin for next year? How much pressure can we see in terms of numbers? That would be helpful.

The -- Varalakshmi, can you explain this INR 6 crores difference on -- I don't think this is going to be the run rate for the whole year.

Correct. Yes, there has been some small inflationary increases on the salary which has been given to all the employees. Some portion is coming from there, and some portion is also coming from the exchange loss, what we had, which was just reported in the books. We don't have the actual loss on the -- actual loss in terms of cash, but it's only the accounting entry which has brought in that number.

What is that number, ma'am? Is it -- what is that number, ma'am?

It's around INR 2.5 crores.

Okay. In this quarter itself, okay, okay.

Yes.

Got it. Got it. So should I assume that -- should I remove that number to understand the steady-state OpEx rate?

So you're not audible clearly, sir.

Hello? Is it better now?

No.

Hello?

Hello.

Hello. Hello.

Yes, sir. Please go ahead.

Should I remove the INR 2.5 crores to understand the steady-state OpEx? Is that correct?

Yes, yes. Yes, sir. Yes.

Got it. So around 35 to -- INR 30 crores, INR 35 crores should be the steady-state number on a quarterly basis.

Yes.

Yes.

And second question is, Nikhil, we have been working very hard to structurally improve the gross margin profile of the business. Historically, the numbers tell that we were doing as well as 26%. Today, we are doing, I think, this year, close to 33-odd percent. So just 2 questions. Number one, in the near term, we know that there is a pressure, and the gross margins could be under pressure for the current year. But over the long term, do you want to comment about the initiatives that you are taking? And is it possible for the gross margins of the company to structurally improve to, say, 35%-odd levels on a sustainable basis?

Yes, it is really unfortunate that we have a setback this year because of raw material prices because we were on that trajectory to move to 35% gross margin. And that was really the plan based on price increases and price variation clauses. And all those actions that we have taken to increase the gross margins now are going to offset the raw material price increases. It's really unfortunate from the company's point of view. Of course, it is what it is. At least, we've had those cushions built in, that we are using those cushions that we have had. Now the big question is what is going to be the gross contribution for this financial year. And I will be able to answer that question only after I finish the -- there is negotiations, and we also see some level of stability or certainty coming on the raw material prices for the rest of the year. So I think I've given enough of hints as to what is impacted, what is not impacted. And we will do our best to control it and keep it within -- that we don't have a severe impact on the margins of the organization. Of course, that is our goal, and that's what we're going to achieve.

Got it. Can I push in one last question?

Yes, of course.

Yes. The last question is the guidance has not changed materially, it's been pretty much the same with respect to last quarter. While we have done in some breakthrough developments with a couple of customers, as you have announced in the current con call, so does it mean that a lot of the business will not come -- any of the business is not coming this year and will come in the next year? Or have we lost out on some of the other business? Like I think the Railways, you were saying INR 110 crores in last, I believe, which has I think come down to INR 100 crores. So I think is it that we have lost INR 10 crores because of COVID? And so I just want to understand 2 things. One, are we being conservative in the guidance? Or is it that some of the incremental revenues from new customers has been offset by the losses in domestic market due to the COVID situation?

So we had not lost any business like, for example, Alstom, INR 110 crores, has become INR 100 crores. It's just that they have revised their demand based on the number of locomotives that they're going to produce. So it's not -- we have not lost anything. See, there is a big flux in the market right now with this -- with the raw material prices going so high. That is definitely a situation where a lot of things are under negotiation, so we, with our OEM customers, our OEM customers with our end users, because nobody can -- takes such a huge impact for a long period of time, this is such a -- steel prices are doubled, for example. It's not possible. So we have not been overly optimistic in giving a very rosy picture on the top line because we just want to see how this thing pans out. There's a lot of -- Vinay has also said there's a lot of business in the pipeline, and [ I have seen ] a lot of business in the pipeline. There's no -- it's really a tragic situation that we have so much business in the pipeline that, unfortunately, beyond this situation, where we have this crazy increases of raw material prices, it would have been okay, but let's not talk about, hypothetically, what it -- it is what it is right now. So we have to navigate our way through this, and we are on the way to do it. As I said, the -- our philosophy will be to keep our customer relationships, to keep the business intact because this storm will pass. This raw material price increases today, it's today like this and tomorrow, if you have 1 month or 2 months more of inflation, and then you have, let's say, for example, federal reserves are talking about increasing interest rates, this whole bubble will pop. And then we don't want to be sitting on the other side of the fence with our customers and the bubble pops, the raw material prices come back to some level of normalcy, and then we are saying that we don't have any orders. So we have to carefully navigate our way through this situation, and that's why we are not being overly optimistic about the projections. It is an extremely unusual situation that all of us are in right now. So there's a certain level of caution that we're building in, in our commentary with you.

Ladies and gentlemen, that was the last question for today [indiscernible] Members of the management, you may go ahead with your closing comments.

Thank you very much for joining us on this call, and we look forward to interacting with you at the end of next quarter once again. Thank you.

Thank you. On behalf of TD Power Systems Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.