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 Ms. Lata Kabra of CDR India. Thank you, and over to you, ma'am.

Thank you. Good morning, everyone, and thank you for joining us on Q1 FY '22 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 early. I would now like to invite Mr. Nikhil Kumar to make his opening remarks. Thank you, and over to you, Nikhil.

Good morning, everyone. Thank you very much for joining us today on our earnings call. I trust all of you would have received our results and investor presentation. Now I'd like to discuss with you TDPS's financial performance for the quarter ended 30th June 2021. Before starting the discussion on the performance of the company, I would like to mention to all our investors that we've worked right through the devastating second wave of COVID-19. Thanks to the special permission that we obtained based on our production for the defense sector and also production for the pharmaceutical sector. The management team has worked extremely hard to ensure all deliveries to all our customers all over the world. And I'm proud to say that we do not miss a single deadline. Now moving on to the financial results. Our total income on a stand-alone basis for Q1 was INR 1.28 billion versus INR 0.72 billion, this is for the same period the previous year. Profit after tax and comprehensive income for the quarter is INR 68 million versus a loss of INR 96 million in the same period in the previous year. Manufacturing revenues for Q1 is INR 1.25 billion versus INR 0.67 billion. Manufacturing order book, including Turkey operations is INR 10.53 billion, out of which INR 3.4 billion is our manufacturing -- is a generative manufacturing business, INR 6.47 billion is railway business and INR 0.62 billion is the Turkey business. Exports and deemed exports, excluding a large traction order is 66%. Order inflow statistics first quarter order inflows as follows: total order book for the first quarter is INR 1.32 billion versus INR 0.99 billion from the previous year. Order inflow from direct and deemed exports is INR 0.81 billion versus INR 0.56 billion in the previous year. Project business revenue in Q1 in INR 15 million versus INR 9 million same period last year. Our total order book for the projects business stands at INR 256 million. On a consol basis, our total income is INR 1.67 billion versus INR 0.76 billion the same period last year. Profit after tax and other comprehensive income for the first quarter is INR 97 million versus a loss of INR 98 million for the first quarter of last year. Our consolidated order book, as mentioned earlier, is INR 10.78 billion. We continue to maintain a strong cash position of INR 1.8 billion. Now moving on to the market situation, order book and guidance. We are very pleased to announce a significant upward guidance in our top line. We now expect our manufacturing sales to be in the region of INR 6.5 billion to INR 6.6 billion for TDPS India compared to INR 4.8 billion achieved last year. We are seeing very strong demand from export markets as well as a very significant pickup of order booking and sales in the domestic market. In the overseas market, we're seeing a huge increase in the gas engine segment as well as in the steam turbine segment. The hydro market has also picked up, and we're seeing a big uptick in the executable orders for this financial year. We are now reaching the stage of the year with the majority of the fresh order booking will go into next year's execution. In this regard, we are seeing -- we're continuing to see extremely strong order inflows from all segments of our business, including exports, which is a really good sign that we will grow our generator sales next year from the level that we have projected this year. Domestic market is also picking up in all sectors: cement, steel, sugar co-generation, distilleries, waste heat recovery and garbage burning plants. There's a lot of momentum in the market. And I think we are finally seeing a strong revival of the long-awaited CapEx cycles. At this moment, we are very excited and very positive about the sales growth for FY '23. Last time, we talked about new products, I'm very happy to announce that we have secured an order for large synchronous motors for about INR 180 million. This order will be executed in the next financial year. This is a large market, and currently, we're addressing a market size of about INR 2 billion per year, and we hope to get a decent market share from this segment in the future. We're also very active in more new product segments, and we'll announce our results as and when we achieve success in the market. Our business development is headed by 1 Mr. Kaushik, Swapnil. He was the former MD of WEG India, and he is moving TDPS into new segments bringing his rich 35 years of experience in electrical rotating machines. We are getting more and more orders from our new engine customer in Germany, and this relationship is moving slowly but surely and steadily forward. This business remains on track to deliver the expected volumes in the next 1 or 2 years. The railway business with Indian Railways is also on track. We will deliver the first prototype units in the next 2 months. And then we are expecting full approval for business in the second half of next year. After getting the full approval, we expect to grow this business substantially. The railway business with Alstom is at full yearly volume. We are waiting for news about the expansion of the current order quantity as well as new segments where we have bid with them. This business also will grow substantially over the next years. TDPS Turkey. This year, TDPS Turkey will have a top line of about EUR 9 million and around 10% profit before tax. Unfortunately, the new incentive scheme announced by the Government of Turkey does not make local manufacturing in Turkey attractive. We are seeing a lot of new orders from this market being diverted to TDPS India. While TDPS does not lose overall, the next year, outlook for TDPS Turkey does not look so positive. If required, we will downsize the operation and make sure we do not have any losses. Guidance for FY -- for this financial year, FY 2022. Manufacturing business for India, as mentioned earlier, top line is about INR 6.5 billion to INR 6.6 billion. Now I need to talk a little bit about the margin expectations and the impact of raw material prices on the process of the company. Last time, we had talked about negotiations with our long-term customers, both in India and outside India. Our goal was to preserve the long-term relationship with our customers, not lose market share, but ultimately pass on the full cost increases to the market. In this process, the most difficult part of our discussions was about orders that our customers had taken or about to take the prices that we had in place last year and early this year before the massive increases of raw material prices took place. We took the hard decision to absorb some cost increases in a few cases and share the cost increases in many cases. These 2 categories constitute of negotiated and fixed number of machines. And after this predetermined number of machines, we have agreed for a full price increase for all new orders. This will have an impact on Q2 to some extent and Q3 to a larger extent and again, Q4 to a smaller extent. From Q4, we will start seeing the full price increases that we have finalized with the customers, and we will see a full pass-through of these price increases next year. For this FY financial year, the impact on TDPS is in the region of INR 220 million to INR 240 million, which will bring the gross contribution to about 27.5% to 28% for this year. We are trying very hard to increase the aftermarket business for the remaining part of this year to see if we can improve the gross contribution by another 1%. But as mentioned earlier, this is a short-term effect and we will definitely return to the normal gross margin profile of the company of around 32% next year. This hard decision was taken to preserve the long-term relationship with our customers. The major cost sharing has been done with Indian OEM customers and to a lesser extent, with international customers. Despite this, we still expect to have the same level of profit as last year on a consol basis because of significant increases in the top line. As mentioned earlier, and I would like to repeat, the impact of the higher sales prices will positively affect the margins from Q4 onwards -- Q4 this year onwards and from Q1 FY '23 fully. And I'll repeat once again, we will increase the gross contribution of next year's business to at least 32%. TDPS Turkey will deliver a top line of INR 0.8 billion, and the total manufacturing business top line will be between INR 7.4 billion to INR 7.5 billion. Project business will deliver a top line of INR 0.25 billion. All other subsidiaries will be profitable. This brings me to the end of my initial remarks. I'll now be happy to address questions and queries that you may have. Thank you.

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

Congratulations on great set of results and also on a very strong commentary. It seems there is buoyancy all across. Can you elaborate as slightly more when we are seeing buoyancy, is it only in the power plants or thermal power plants or you are also seeing buoyancy something like waste heat recovery and, let's say, the locomotives and railways, gas engine, what we have entered? And the way the company is moving or if we have moved, how much would the dependence on a single particular segment, let's say, coal-based power plant, which used to be the largest revenue contributed to us. Today, what it would be? And the way the order book is getting built, what would be our exposure to that segment? And what would be to those new segments like we -- something like a windmill, railways, what we have tried. But can you give some idea on how the order book is broken up today?

So I'll just -- I'll answer this question partially. And my colleague, Vinay Hegde, the Head of Global Sales and Marketing will address the question on the buoyancy of the market and what he's also seeing. So approximately about 25% of our business is steam turbines. And then we have hydro, which is about 15%. And then we have the engine business, which is about 15%. And then we have...

Staff engine, diesel engine, traction.

Diesel engine. We have traction, which is about 16%. So you can see that we are not overly dependent on any single sector. Let me say steam turbines, it means basically capital power plants, which will be running for the primary power generation for the industry. There is a waste heat recovery, there is sugar cogeneration, there's garbage burning plants. So approximately, you can say the mix in the steam turbine business as we see it is something like 50% export, 50% domestic. The domestic side will be something like 50% will be based on coal, 50% will be based on renewables. Export business, about 80% will be renewable and 20% will be using traditional fuels. So large proportion of the steam turbine business is also heading towards the renewable sustainable segment. So that's why we see a trend that there's an increase and more and more businesses coming this way. So it's difficult. So these percentages vary year-to-year, okay? So I'm not going to say that it's fixed. It varies. So sometimes some sectors go up, sometimes some sectors go down. But overall, our goal has always been, over the past 5 to 6 years, to diversify the business into as many segments as possible with related products so that we can not only grow but we can also compensate the drop in 1 segment versus the increases in some other segments. So this is, in principle, our strategy of our company. Now regarding the buoyancy of the market, I'll hand over the mic to Mr. Vinay Hegde.

Sure. Good morning. Mainly the engine steam turbine market is growing significantly. This is coming from -- mainly from the steel plant, cement plant, sugar plant and distilleries. There are a lot of distilleries plants coming up because the demand for the ethanol. And there are a number of waste heat recovery projects, which is garbage burning plants, where the detailed project reports are being done, and there's a huge pipeline of such projects. So I think that this is going to continue and the significant increase this year, what we are seeing, is coming from the steam turbine segment and the gas engine segment.

And globally also export order, can you tell what would be the sectors which are doing well. And add to that, see we had some of the large global players on the BTG side who are going away from some of the smaller segments and again, coal-based generation plants and everything. So do you think your competitive position today is much better than, let's say, what it was in 2012, '13 and especially in Europe where I think some of the larger players stocked that business or has defocused from that business. So can you elaborate on your competitive position and where the demand is strong in global markets?

See mainly people are now shutting the coal plants and they're going for this gas-based power plants. So that is why we are seeing a huge increase in the gas engine business segment. And export business, what we sell the steam turbines there maybe less than 10% are going for the coal-fired power plants. Majority of them are for renewables.

And I'll just add to the competitive position. So basically, we have strengthened our position in all the international markets, main international markets, strengthen our position by being known as a quality manufacturer, and we are being approved across the Board for both of the new projects. In some cases, they are still not, but I would say majority we're getting approved. And we are winning the orders. And the larger entrenched players are receding from this size of below 50-megawatt and opening up and because it's not possible for them to compete against people like us.

And international market, what the acceptability issue was there a few years back, is no more there now. So everywhere the acceptability is that for the TDPS brand.

Okay. Yes. I'll join back in the queue. Best of luck for the future, and I hope the hard work will now really bear fruits for everyone in the company.

Thank you.

[Operator Instructions] The next question is from the line of Bajrang Bafna from Sunidhi Securities.

Congratulations for a good set of numbers.

Mr. Bafna, your voice is breaking up. May we request you to move to a better reception area, please.

Is it audible now?

Yes, sir.

Sir, congratulations for a good set of numbers. Just want to understand on the -- you guided that next year, perhaps the margins are going to go towards the normalcy of 14%, 15% kind of range. But this year due to this -- especially the steel cycle, it will not be possible. But what sort of revenue guidance that we could see next year? Because this year, perhaps you have guided that things will be in the vicinity of INR 6.4 billion to INR 6.5 billion. So considering the capacity that we are having right now, what sort of revenue that you would see next year and maybe any CapEx which will be required to augment the capacity considering the demand which is coming up in the system?

So we are saying that this year, we'll do INR 6.5 billion to INR 6.6 billion. And okay, I will put a number right now that we'll see -- we'll do at least between INR 7.25 billion and INR 7.5 billion next year. We will -- that's the initial guidance I'm giving, and it could -- if we know all the things that we are doing, I really expect it to be much better, but I will give you a revised guidance as time goes by. It's really early for us to give a very firm guidance for next year. As I said because order booking is just starting for next year, but the flows are very good, the flows are very heavy inflows and all the new potential areas where we have developed the customers over the past few years, those are really opening up, and we're seeing increased flows from those new areas. Plus, there are -- in addition, there are new areas which we are just tapping into. So those also will contribute. So very conservatively I'm giving a guidance of about INR 7.25 billion to INR 7.5 billion for next year. And then let's see, I'll be happy to upgrade this guidance as time goes by. No big CapEx. And as I said, we are investing about INR 10 crores to INR 15 crores a year. Every year, we're investing in productivity, in automation, in upgrading our plan to keep it at the state-of-the-art level. And that will continue to be our focus to keep debottlenecking the plants through automation, productivity improvements but -- and to really get the benefit of this higher sales volume with approximately the same fixed cost. That is our clear goal. We can push this capacity. At the moment, we are saying that we can take it to INR 900 crores, even INR 1,000 crores. Let's see how it goes.

Okay. And any further increase in steel prices or maybe other raw mat prices. Now the orders that you're taking that are having complete pass-through or we might again see the kind of volatility that we have seen this year can further derail our margin trajectory, which we are hoping for?

No. We have very clear agreements where there will be a pass-through of raw material. If the raw material prices go up further then we will talk. But at the moment, we have booked a lot of material at the current prices to secure some predictability in the margin profile. And with all the new prices which are -- as I said in my opening speech, we have a certain fixed number of machines, which have been agreed with all our major customers where it will either be a small number, we will take the full cost, most of the rest will be shared basis. And then after the fixed number of machines, it would be a complete pass-through of the raw material costs. So this is -- so basically, all the new orders from approximately now are going to be with the new price plus/minus a few weeks here and there. But for raw material price future trends, I don't know. So whatever it may be, we're not worried because we are -- if the prices go up, then we'll again have another pass-through.

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

Congratulations for a very strong performance and outlook also is looking good. So Nikhil, I've been following our company and investors for a long time. I have never seen you -- such a strong commentary from your side. So I mean -- so I wanted to understand that -- hello? Yes. So wanted to understand what is actually has changed so drastically in last 3, 4, 5 months where suddenly, our guidance is revised upward. Even on that pace, we are expecting growth in FY '23. Can you elaborate on that?

I'd say, I guess, it's all the things we've been doing is struggling to do over the past 5 years is everything is just coming together one by one. And this is what we all expected to happen, it is not happening and then now it's happening. And there's always a potential to grow certain businesses to a certain size. And we were not -- we were moving slowly towards that potential. But suddenly, some things have opened up, like, for example, this gas engine business, it's now going to be INR 100 crores plus for us this year. And it's going to continue like this. And maybe it's going to grow with the second engine customer, it's going to grow. So this is INR 100 crores with the existing customer. And we have another 1 which is growing. And so far, things are going well. And so the potential with the second one is also INR 100 crores. So suddenly, it may just pick up. And then we'll see this INR 50 crores or INR 60 crores, INR 70 crores of additional business coming from this 1%. So this is the kind of thing that we have been, I guess, dreaming in the past and now it's coming true.

Okay. But a significant part of this upward revision is because of the export market, right, not because of the domestic...

And the domestic also. As I said -- Vinay said a little bit earlier, I mean, he'll -- once again, he can just tell.

Yes, there is a significant increase in demand in the domestic market and especially, as I said, heat recovery from steel plants and sugar plants, mainly there are a lot of distilleries coming because there is a huge demand for ethanol. And this -- and there are many projects for waste energy, which is coming from the garbage burning plants. And now they have a plan for putting up a plant in every district. So this demand is going to continue and this is not a bubble anymore. So whatever we were expecting the Indian market to grow and it has started now, and there is a huge demand for the small power plants below 20-megawatt.

Second question, Nikhil. I think you indicated in your opening remarks about kind of railway, the existing business, there is a potential to go up anyone some newer areas with the same customer. So can you elaborate on that?

So their existing contract is about -- is around 1,000 locomotives with the existing customer. and India Railways is negotiating with these customers over an increase of this 1,000 to another number, okay? I don't want to tell you what it is, but in another number, a larger number. So that's under negotiation. They are definitely -- Indian Railways will definitely buy more locomotives, electric locomotives. The product which our customer has made has been extremely well received. And with the completion of this railway freight corridor also, it's the utilization of this locomotive is at a very, very high level. Second is -- second major area which we are expecting the business from this customer is these high-speed private railway tenders which Indian Railways has floated. I think the tenders are closed in July. And soon we will know which are the private operators who have won some of those bids. And then they will have to start ordering their locomotives to run on those tracks because there'll be a fixed term, fixed period in which they have to get operational. And this particular customer of ours is probably the only 1 who can make these high-speed trains in India. So -- or even if they lose some business, they'll get the majority of the business.

And they've also taken a Bombardier so...

And they've also taken a Bombardier and they're very well placed, and we are very well placed in this whole supply chain. So yes, it's another big area where we are expecting the expansion of the business would take place. It will take a little bit of time. But as I said, we are very well -- we have positioned ourselves well in this system.

Okay. Okay. Got it. And last question, Nikhil. So I mean, the copper prices have been going up and up. But how will it have an impact if it starts going down in terms of the materials, yes, we have booked negotiations, that we have done with our clients, how better is...

So there's going to be a fairness in this whole system moving forward. That's all I can say at this point of time, right? So we have taken a certain hit and when the things -- we have been fair and now we have things which are going the other way. I'm sure our customers are totally fair. And so we've got to play this game with a fair spirit, okay? And our customers also will play. We are long-term -- we have long-term relationships. Everything that's done, it will be done with a spirit of fairness on both sides.

The next question is from the line of Chintan Sheth from Sameeksha Capital.

You mentioned on the existing capacity can be in up to INR 900 crores to INR 1,000 crores revenue without any major CapEx. But the commentary from what we are -- from the initial commentary, it seems we'll run out of that capacity also in from plus 3 years from now, given the guidance we are giving for the next year at INR 720 crores being conservative. So any plans to further scale up the capacities, say, in the next couple of years in terms of larger CapEx given the opportunity you're seeing right now?

See we'll start thinking about it next year is all I can say. We are already thinking about it, but we'll start acting on it next year. So it's not difficult to put up new capacity. So it's -- we have money. We know how to do it. We'll give another 12 months, and then we'll give you more concrete answers on this question. Putting up capacity is the easiest thing, but once you put it up, you've got to be sure you're going to fill it up.

Yes, yes, yes. I understand that. And in terms of pricing, you did mention that for this year, it's been negotiated and we kind of take a bit of hit. But from next year onwards, we'll see passing on or get the full benefit of the price increases this year. So going forward, is the agreements are in place? You did mention about it, but you also mentioned that you have to go back to the customer and negotiate. But are we secured in terms of agreements with our customers to at least pass on a very significant sharp rises in the prices. How should we look at it. Do you want to face the similar situation which we are facing right now?

We are -- we have clear agreements of further price rises, further price reductions, everything is fairly clear.

The next question is from the line of Rohit Balakrishnan from iThought PMS.

Hello, am I audible?

Rohit, yes.

Congratulations and very heartening to see your very bullish commentary. Congrats to all the team and your hard work.

Thank you, Rohit.

So Nikhil, just a couple of questions. So one, I wanted to just get a view from you. So in the last con call, you were talking about some specific opportunities in terms of CapEx. So just wanted to get a sense, is there something that you have formed out? That was one. And the larger question being, so I mean we have close to INR 200 crores of cash and given what we are saying for this year and next year, there would be a significant accrual in terms of cash. So just wanted to get your view, how are you thinking about deployment of cash? Is there a buyback that you're thinking about or anything else. So that was the first question. Hello? [Technical Difficulty]

Mr. Rohit, we request you to please stay connected. Requesting all the participants to please stay connected, we are reconnecting the management. Ladies and gentlemen, the line for the management is reconnected. Thank you and over to you sir.

Sorry, Rohit, you were saying about the new products. You can just maybe start the question from the beginning.

Sure. So Nikhil, so what I wanted to understand is you had talked about a certain opportunity where you were thinking of doing some CapEx. I wanted to just get a sense from you and update. My larger question actually was around like we have about INR 200 crores of cash. And given what we are saying in this year and next year, hopefully, it should be very good from a cash accrual point of view also. So just wanted your sense about how you are thinking of deploying this cash. Are you thinking of buying back or dividend or anything just getting your view.

We are focusing on using all our resources to fund the growth. And this kind of growth will need significant demands of working capital. And as I said, some CapEx also not major CapEx, but INR 10 crores, INR 15 crores, the CapEx will be required. So all put together, I think we'll be consuming much of the earnings in just funding the growth. So this is the strategy, at least for the next 1 year to fund the growth, and then we will see after that.

Got it. Okay. Fair enough. Nikhil, just -- I mean, so this year, you're saying close to INR 740 crores at a consolidated level, right?

Yes. Manufacturing. Yes, say INR 7.5 billion, yes, all put together, INR 7.5 billion, INR 7.6 billion.

So -- and you've also sort of given an initial mark for the next year. And this would be -- again, I mean, you are assuming Turkey to be almost negligeable, right? Next year?

Yes, that most of the revenues will come from TDPS India from the manufacturing side. Probably Turkey could just be, I think, around EUR 1 million to EUR 2 million.

Got it. Got it. So I mean that's, again, commendable on your part to be able to fill up that kind of a big gap. So I mean I remember in 1 of the con calls, a few quarters back you mentioned that you will sort of get to INR 180 crores, INR 200 crores kind of a run rate on India, then we can do 15% margins. Now given there has been some changes, I'm again not saying this year. I'm cognizant of what you mentioned in the opening remarks. But I'm saying next year and along with like commodity prices going up, do you think that we can progress -- and also on the other side, you said you've been investing a lot on automation and stuff. So can we probably touch 15% EBITDA margins if we do INR 180 crores, INR 200 crores of quarterly numbers, let's say, few quarters down the line?

Rohit, you guys -- all the guys on this call are all great in calculating results. So I've given the indication on the gross margins, top line and the fixed costs are not going to go up that high. So yes, it's possible, definitely.

Okay. And just last question, if you said about a large synchronous order, I missed that part, can you -- sorry, if you can repeat that?

This is -- synchronous motor is basically constructionally almost identical to a generator. But it's used a lot in the industry, where you need to have large pumps or large compressors or large equipment that need to be driven with the constant speed and very, very good speed control. So this is -- but constructionally the machine is almost it's exactly identical to a generator. So this was -- this has logically been a very good segment for us to get into because from a manufacturing point of view, it's exactly the same as a generator, but a lot of design capability have been built in. And we have done that. We got the first order, and it's a large market. And this is what I'm talking about INR 200 crores only domestic. If I talk about the international market, it is, I don't know, I'm not even -- it's huge. It's really, really big. So we grow -- we'll first put on a few machines over here in the domestic market, and we'll try to get a good share. And then we can also grow this business internationally. So I'm very upbeat about this product line. And there are more coming up, and we will talk about it as and when we enter. We get orders from certain segments. We'll talk about it and we'll talk about the market potential when we actually realize success in the market.

Sure. So just 1 follow-up on this. So this is INR 18 crore machine that you just mentioned?

Machines of -- 6 machines around INR 3 crores per machine.

Yes. So INR 18 crores order. Understood. And this is for which industry, Nikhil? Which industry?

This is going to be used in a large pumping station.

[Operator Instructions] The next question is from the line of Adit Shah from Vibrant Securities.

My first question is on the gross margin. For this year, Nikhil, you have guided broadly for 28% gross margin. And to that, the profit may not go up significantly in the current year basically. Is my understanding correct?

Yes.

Got it. My second question is on the gross margin. Next year, you're guiding for 32%, which we basically did in FY '21. So we'll revert to that kind of margin profile. My question is that when we are deciding the pricing for a product. Are we -- so this 32% the number wherein we will stabilize or this business inherently has the potential to increase the pricing and potentially move the gross margin profile higher than 32%?

That's a really hard question to answer in a simple way. It's a mix of -- the 32% is a mix of a large number of different things that we do and certain segments are more profitable and certain segments are not as profitable. But overall, we -- the business is generating this. We are trying and we are putting a lot of effort to see how to increase the aftermarket business. And part of the -- it's a big push from our side to increase the aftermarket business. And there's a lot of potential in this area. We'll talk about it more, hopefully, next time because we are very close to winning some orders and then we will talk about this a little bit more next time. That kind of business will improve the overall gross contribution for the company in a significant way. The new product business is always competitive. And we got to remain competitive in this business. Our OEM customers also are demanding, the demand competitive prices. So it's hard for us to push this significantly. Let me just put it that way. Here and there, yes, but significantly, it's hard.

Got it. I think that's very fair. In terms of aftermarket, I want to understand right now, do we have any kind of revenues in aftermarket? And number 2 is...

I said -- as I said, it's a push from our side. And when we win some orders, we will definitely inform the market. But I'm upbeat about it because we have some really good potential sectors that we're going after, and we have been working on this for the past 7, 8 months. We're close to winning something. When we win, it's not going to be some small stuff. We'll win. We'll talk about it. Next -- probably mostly next call.

The next question is from the line of Manoj Dua, an Investor.

Nikhil, congratulations on your updated guidance. And of course, you have performed last 4, 5 years remain more than that to begin faithful. I'm so glad for that.

Thank you, Manoj.

And my first question is regarding -- we have on Navy shipments in Q1. It was delivered in Q1 or it was in Q2?

That has been shipped. So in this Q1.

Okay. Okay. And my second question is that we have taken some hit on the margins for our OEMs. So do you think this kind of -- what we have done -- sacrifice in terms of margin will cement our relationship and future and we can increase our positioning with these clients and this kind of thing will be taken as now more cementing our relationship with our new clients?

Yes. It is basically with these clients, what we are talking about, where we have the rate contract. We have a 20-year-old relationship, and we have 100% market share with them. And if they grow, automatically we grow. This is to keep their business intact and not losing the market share. These kind of things we have to do in this kind of business because we have a limited number of customers.

The next question is from the line of Himanshu Upadhyay from PGIM Mutual Fund.

Nikhil, I had a question on the Turkey facilities where you said that we may reduce the capacity or we may have to bring down them. And last year, you also said that there are ForEx issues in that country. How easy is to get back our money what we have invested and what is the value of investment plus cash in Turkey geography as of now?

Yes. So in Turkey, we have not put in much of investment. It could be around INR 3 crores to INR 4 crores as such.

And if the cash we are able to get back, means the profits what we generate.

Yes, that we will have to call back as dividend or something. We will have to do that.

See, this is about -- we had INR 21 crores last year as the earnings. We are expecting, as I said, this year around INR 80 crore and 10% PBT. So we may have about INR 6 crores, INR 7 crores coming in net. So totally about INR 27 crores, INR 28 crores. We can bring it back.

It's all repatriable.

Of course, we can bring it back. But we just want to wait and see whether the Turkish market opens up again or not before we bring it back.

Okay. Just a thought here. When the market goes back, the money also becomes difficult to get out of that country. This is what we have seen in many geographies. In good times, getting money is easier than in tough times.

Yes, but you paid huge tax, right? So let's see. So let's see.

Okay. Okay. And we said that we have brought some senior person for the move -- rotating machines, okay? Are we just focusing on those motors business? Or you are think -- we -- are there any other adjacencies where you are working on? Okay?

I said electrical rotating machines as to what specific word I used. Generator is also in electrical rotating machines. So Kaushik has come from our competitor. He's got 35 years in electrical rotating machines is what I said. So he's come from the motor background, generator background. And so we are going after a number of niche products where the technical ability is high, where our manufacturing, high manufacturing capability can be utilized to get into -- get better pricing and supply technology products in this segment. We're not going after the mass market business where it's commoditized and low-margin business, I'm not interested in that. But this is a huge market and the number of little, little niches. And with Kaushik's experience we're trying to get into those niches and come up with products that can deliver the margin growth company, utilizing our technical ability.

The next question is from the line of Sanjay Doshi from Nippon India Mutual Fund.

First of all, I mean, the kind of optimism that you are seeing, it appears like a fresh start for the company. I have a couple of questions, sir, with your permission. One is in the international market, if you can give us some better color about -- I mean where in terms of number of customers, say, 3 or 4 years back as a brand and as a supplier process today. So that does give us some sense. And the next is, on the new areas like moving apart from a proper generator to, say, a railway opportunity or the synchronized motor that you have moved in, what kind of mapping you would have done on the market size and where you could cater to. So these are the first 2 questions. And then I have 1 follow-up question, sir.

So we've not added a significant number of new customers in the international market, Sanjay. But the -- we have always talked about each of these customers having a large potential. So for us, the growth would have -- for us, they've always been targeting, okay, what could be the market if we cut deep into these customers and get more and more market share from these customers. And for example, I like this gas engine manufacturer from Austria, I mean they buy a large number of generators every year. And we always knew that there was a potential for us to get a very large business from them. So we have focused more on cutting deep within existing customers and to get more market share. And there are also just -- there's a concentration of buying power in our business also with the turbine manufacturers or engine manufacturers, whether turbine from steam turbine or hydro turbines. So there are a few large guys, and it's good to be -- it's more important -- we thought -- or more important for us to get larger market share from the big guys rather than have a very wide number of customers. So that's been -- so that's part of our strategy, which is now working. And the second question was regarding this motor is at mapping and yes. As I said, the synchronous motor market that we're addressing right now is around INR 200 crores. It's early domestic play. Internationally, it could be at least $1 billion. Railway business is also -- it's huge. It's a massive business. I said earlier the Indian Railways business is itself around INR 1,000 crores per year, and we hope to get around 7% to 10% of that business once we are fully approved. So INR 100 crores segments, you can say, would be at the moment, what we're looking at the potential to grow much larger. I guess that's what I can say at this point of time. I don't want to also get overly carried away some of these things, we are aware, there's a lot of potential to grow, but all these things happen and we have seen step by step by step by step by step and we're just going to take those steps one by one by one.

Sure, sir. Just 1 follow-up, sir. You mentioned about capacities. I mean I understand you can -- plus within the current setup with the minimal CapEx. But on the maximum and talent side, can you highlight what has been done to ensure that the company can scale up further? Just 1 last question on that.

We have an incredible, really incredible talent in our organization right now. Lot, we have a bunch of young, talented engineers, managers, male and female who are coming up inside our organization and showing incredible capability. Right now, there are -- there's more talent and opportunity. That's where we are right now. This is a unique situation for our company. And -- but we are putting this challenge in all the new opportunities. And at this moment, I would say that we are very, very well staffed. And by getting an experience something like, for example, getting in Kaushik from outside, bringing in some people with decades of experience also helps not only to open up new markets, but also give some guidance to the young talent on how to learn. And of course, the management team from TDPS, the founding members, all of us are there and guiding the young team and we're in charge of where we're seeing it right now. So I would say that we have a lot of depth right now in our management capability, a lot of depth.

Ladies and gentlemen, we take that as the last question. I now hand the conference over to the management for their closing comments.

Thank you, everybody, for being with us on this conference call. If you have any further questions, please reach out to us, and we'd be happy to have further discussions with you. And we look forward to interacting with you at the end of H1. Thank you very much.

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