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

Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Earnings Conference Call of TD Power Systems Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on the date of this call. These statements do not guarantee the future performance of the company, and it may involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nikhil Kumar, Managing Director of TD Power Systems Limited. Thank you, and over to you, sir.

Thank you. Good morning, everybody. Thank you once again for joining us today on our earnings call. I trust all of you would have received our results and investor presentation. Now, I would discuss with you TDPS' financial performance for the quarter ended 30th June 2022. I would like to start the call by mentioning that we have now sold our generators to 100 countries worldwide, and our total supplies reached 5,400-plus generators. Now, let me come to the results. Our total income on a stand-alone basis for Q1 was INR 2.06 billion versus INR 1.28 billion over the same period in the previous year, an increase of 60%. Profit after tax and comprehensive income for the quarter was INR 194 million versus a profit of INR 68 million for the same period previous year, an increase of 186%. Manufacturing revenues for Q1 was INR 2.05 billion versus INR 1.25 billion last year, an increase of 61%. Manufacturing order book, including Turkey operations is INR 13.77 billion, out of which INR 4.06 billion is our generator business, INR 9.46 billion is the railway business and INR 0.25 billion is our Turkey business. Export and deemed exports from generator business is 56%. Order inflow. We are very happy to report a big increase in the order inflow during the first quarter over last year, an increase of about 81%. Our total order inflow this current year, TDPS India is INR 2.03 billion. Order inflow from direct and deemed exports is INR 1.09 billion versus INR 0.81 billion over the previous, increase of 34%. Project business revenue for Q1 is INR 12 million versus INR 15 million in the same period of last year. Order book for the projects business stands at INR 459 million. Consolidation performance, our total consol income was INR 2.11 billion versus INR 1.65 billion in the same period last year. Profit after tax and other comprehensive income for the first quarter was INR 204 million versus a profit of INR 97 million, increase of 111%. Our consol order book is INR 14.23 billion. We continue to maintain a strong cash position of INR 1.88 billion. Now, I'll come to the order book, market situation and guidance. In the first quarter, we have seen a substantial increase in the inflow of orders from all segments of the market. Both domestic and international markets have contributed to the big increase in order inflow. We are seeing continued order inflow in July as well as for Q2, which will not only ensure that we reach our previously guided top line, but also start filling the order book for next year. Let me talk briefly about each segment. Steam Turbine, strong demand from India and rest of the world. In India, it is CapEx-driven and globally, it is driven by an increased investment in waste-to-energy, biomass and garbage burning plants. Our positioning in this segment is strong, and we see sustained order inflows taking place even for next year. Only a small fraction of the inflows from now on will be executed this year, and the majority will go into next year. We have reached our target for this year in the Steam Turbine segment. Gas Turbine. We are not seeing the big investment taking place in the shale gas industry as expected. In fact, the shale gas industry has not increased output and is enjoying the high prices and do not want to increase supply. Investments have also been subdued due to save gas. However, we have got good orders of power generation from our Gas Turbine customer in USA and the inquiry book is really strong. Hydro, for this year, we have crossed the internal target. We have picked up a large number of orders execution for next year, and the inquiry pipeline is also very strong. We'll close out a few more big orders in the next quarter for execution next year. The main markets continue to be Southeast Asia, Europe and Latin America. Gas engines, we have very good orders and forecasts from both our engine customers. They're selling all over the world, and there's no concentration of any orders in any market. Wind repairs, we have got 3 orders in the last 3 months, and we have firm inquiries for a few more large orders. This outlook is becoming stronger. About 55 megawatt generators. The market in India has been very active in the past quarter -- in last 2 quarters. We have recently booked an order for 90 megawatt machine for delivery next year, and there are a number of other active jobs in the market. Our TDPS personnel are right now in Germany for training to make a complete rotor in India, and this 90 megawatt would be the first complete made in TDPS generator. Earlier, they were importing the rotor from Germany. Other new segments, railway business is on track with the Indian Railways. However, it will take time. I think we can only see the business results next year. Synchronous motors, we have a lot of inquiries and negotiations. But unfortunately, we have not been able to report any finalizations to you. On raw material prices, we are seeing a slight pullback on some commodities, but we have booked materially for the whole year according to the forecast of our customers, and we will not see any benefit this year -- any further benefit this year because we kept in mind an inflation [indiscernible] to be high, transport costs, wage pressures are still at high levels. Rupee weakness against the dollar has also increased the cost of imports, offsetting some of the release in commodity prices, but special steels, forgings, [indiscernible] short supply and available only at higher prices. TDPS is focused on price stability with customers and margin stability for investors. Naturally such strategy cannot benefit from small, short-term reductions in commodity prices, nor will we get hurt from sudden price increases. For next year, with the CapEx cycle in India firmly on the expansion mode, the increased investments flowing in the area of renewables internationally and as well as the new verticals that TDPS has entered will ensure a solid platform for growth in the next year and the following years. Guidance. As indicated in our previous earnings call, we continue to hold the guidance which is at below. Manufacturing business, TDPS India top line of INR 8.2 billion, TDPS Turkey top line of INR 0.2 billion, total manufacturing business will give a top line of INR 8.4 billion. Projects business will give a top line of INR 0.5 billion. We expect to have a gross contribution level between 30% and 31% for this year. All our subsidiaries except Turkey -- TDPS Turkey will be profitable. TDPS Turkey will report operational profits, but continued depreciation of the Turkish lira to the Indian rupee will impact TDPS with the profitability due to foreign exchange loss in translation from Turkish lira to INR. This brings me to the end of my initial remarks. I'll now be happy to address any queries that you may have. Thank you.

[Operator Instructions] We take the first question from the line of Mr. Mohit Kumar from DAM Capital.

And congratulations on a very, very good set of numbers. Sir, my first question is, how do you see the opportunity arising from the Indian Railways locomotive and Vande Bharat tender? Is there any tie-up you have done with some OEMs to bid for this particular opportunity?

Yes. We have currently a supply agreement with a major player in this business, an international company, who has won the 12,000 horsepower electric locomotive project currently being produced in Madhepura. And they are bidding for all the new projects of the Indian Railways, the new 12,000 horsepower, the new 9,000 horsepower and as well as for the Vande Bharat trains. So the winners are yet to be announced for these packages. But if our customer wins, I think we have a very good chance to also get benefited from their success.

Sir, is there an opportunity for us to tie up with the other OEMs? We don't need to stick to one particular OEM, right?

We are currently focused on this one OEM because we think they have the best chance. And let us see how it works out.

Understood, sir. Secondly, sir, is it possible to give us the breakup of motor and generator in the top line for TDPS India? Is it possible?

Yes. Right now, it's overwhelmingly generators, there are just a few less than INR 5 crores of motors. I mean, the railway business is -- traction motors and that, as I said, would be around INR 160 crores for the whole year. So it's about INR 40 crores per quarter for the railway business, traction motors. The other motor business is less than INR 5 crores.

We take the next question from the line of Jiten Parmar, Aurum Capital.

Congratulations for excellent numbers. And the guidance you have given, I would just like a clarification on that. So around what you said, consolidated, you're guiding for INR 900 crores. Is that right?

Varalakshmi, is that correct?

Yes.

Yes.

Yes.

Okay. So I have a couple of questions. What is the maximum revenue you can generate from the existing facilities? And if there is any plan for any expansion or CapEx?

Yes. At the moment, we can push our utilization capacity to about INR 1,200 crores. And we are continuously investing in automation, productivity improvements. So we will push till INR 1,200 crores to a larger -- higher number. At the moment, we have no plans for any greenfield production facility.

Okay. So my next question was actually on automation and robotics. What are the -- I mean, employee cost, can it be reduced further? And to what extent due to automation and robotics?

We are increasing our top line without having a proportional increase in the employee cost. We're not hiring any fresh people. And that's how we will get the benefit of the higher sales without increasing our employee costs substantially. So, of course, the current set of employees, we will have to increase salaries year-on-year, that's given the market in Bangalore, especially for engineers and other management staff. It's very competitive. So we have to remain competitive to retain our talent. So those kinds of increases will take place with existing people, but we are not going to add people to increase our top line, that's when the investments in productivity and automation will start showing.

Great. So my final question is on the INR 900 crore guidance you've given. How much of it will be exports and how much will be domestic?

So maybe it would be around -- if you take out the traction motor business, it will be around 60% exports and 40% domestic.

Great. That's all for now. If I have any other questions, I'll come in queue. And best of luck.

[Operator Instructions] We'll take the next question from the line of Kunal Pawaskar from Tata Asset Management.

The question was around the situation in Europe, especially after the geopolitical issues there. With respect to energy security, as it is changing there and every nation having to look for substitutes, how is it helping company? Are there initial discussions that are moving in that direction? Considering that the company was already strong in Europe on, say, things which were in waste-to-energy, et cetera. But how do you see discussions shaping up? Are you seeing early signs of business because of those specific reasons after Russia-Ukraine specifically?

We're seeing increased inquiries in the [indiscernible] business that I mentioned in the introduction, waste-to-energy and biomass and garbage burning facilities. So these are the 3 sectors that predominantly use steam turbines. We're seeing increased number of inquiries, increased amount of business coming from these sectors. So interestingly, we are also not seeing any reduction in the gas engine business. So that's a bit contrary to what could be expected given there's a shortage of -- expected shortage of gas in the market. But we -- it's -- actually, we're seeing growth in these sectors and it's a little bit contrary to our expectations. We have also discussed in detail about the prospects for next year. And we don't see -- we don't have any feedback from our customers that there's going to be any reduction of business. In fact, both our engine customers are predicting steady and strong growth even for next year.

Okay. And last question on diesel engine generators out of Europe. I mean, there are news reports of costs through diesel engine power generation being at parity with natural gas. These things may not last, but people are looking at substitutes and backups. Diesel engine generators in particular, any comments there?

Yes. Basically, the gas engine generator, diesel engine, all these -- diesel will be easier to burn compared to gas. So people will definitely go for dual fuel engines, they won't just put all the money into diesel and then later on next year find that their total investment is a total waste. So they will go for dual fuel and those fuel engines, multiple fuel engines and switch depending on which fuel is the cheapest in the market at a particular moment of time. So as far as the generator is concerned, it is the same machine. So I don't think that they're going to get affected by that.

We take the next question from the line of Mr. Karthi, Suyash Advisors.

Very impressive commentary. So a couple of clarifications there, sir. One is in the context of segmental outlook, you referred -- you said that you're not taking any orders for the current year anymore, and then we're only accepting orders for next year. So what part of this would be based on...

I did not say that.

So you did not said that?

Most of the other -- yes, I said most of the orders coming in now would be for execution for next year. And a small proportion we will still execute this year.

Right. Is that -- okay. Why would that be, sir? I mean, the 8 to 9 months would be a reasonable time frame for delivery. So I'm assuming...

Yes, it would be -- so 7, 8 months is a normal delivery time. We already come to August 10. So we have 7 months for this year -- by end of August we'll have 7 months left of this year. So a lot of the orders are going into next year.

Yes. Right. The second question would be on the larger capacity generators that you spoke about, above 60 megawatts. So, obviously, that's an interesting market, but how do you assess the size of the opportunity over there? And what plans over, say, 1- to 3-year time frame for that business?

That's an interesting question. So this market has been dead for a long time. And it has revived recently due to CapEx taking place in the metal sector. So we are seeing that a lot of waste-to-energy as well as basic power generation, baseload power generation requirements are coming in from the metal sector. So I think I can answer this question to you in a different way, as long as this sector remains healthy, and this CapEx cycle continues, I think this part of the business also will keep -- the power generation requirement or putting up power generation facilities at these larger sizes will continue. So it is an active power plant game. It is still a waste-to-energy game. So for example, using the waste heater, waste heat gases from the blast furnaces and things like that. Those are the kind of applications where we're seeing these larger machines being used. But this is not -- we're not seeing any market for these machines in the areas of RTPs and things like that. So it's still a captive industrial.

Sir, what is the maximum capacity you can offer, sir?

We can go up to 200, 250 megawatts.

Okay. So as and when you could even service UPT sized orders if need arises?

Yes, but there is no -- captive power plants will -- we're seeing maybe up to 150 megawatts very large captive size power plants, which use multiple units of 150 megawatts. But it's very rare that you would find captive power plant above 150 megawatt size.

No, I was saying utility orders, sir. Assuming that BHEL utility are getting your orders.

Utility orders would be -- I don't think the market is going to come in this 200, 250 megawatt size for utility. It's going to be only that's hypocritical 500, 600 megawatts. And I don't think any power plants are going to come up in this size for utility application.

[Operator Instructions] We take the next question from the line of Dhwanil Desai from Turtle Capital.

Congratulations for a very strong set of numbers. Sir, 2 questions. One is, apart from our synchronous motors, we were also developing, I think, a couple of new products. So any updates you can give on that front, that would be helpful.

So the synchronous motors basically go into large irrigation projects in different states in India. So we have -- there's a very, very large inquiry pipeline running into INR 100 crores number of negotiations are also taking place. But we're not seeing -- at the moment, we're not seeing any finalization. So it could be due to funding issues and things like that. Projects are there, inquiries are there -- inquiries are live. But they're not getting finalized. They eventually will. So these projects, they come and they go. So eventually, all of these things will get finalized over the next 6 months to 1 year. And then we will see a large amount of order inflow coming in from, hopefully, we'll get chunk of these orders coming in and we have to execute that. So I'm pretty upbeat that we will see a good chunk of orders for next year. I'm pretty upbeat about it. We still have time. And as I said, the number of projects are under negotiations. So 1 or 2 of them will click and hopefully we will win and we will see a good amount of business coming from this segment for next year sales.

Okay. Again, you were developing a couple of new products other than synchronous motors, right? So I was referring to that. If there is any update on that?

No. At the moment, we have no updates on that.

Okay. And second question, Nikhil, so we have cash balance of INR 188 crores, and we are seeing good times now and probably as per our expectation, maybe a couple of years we will be good where we'll generate INR 80 crores to INR 100 crores kind of a cash flow. So any thoughts on what we want to do with the cash sitting on the book?

So first priority would be to deploy the cash in the business. Second priority would be to give the money to the shareholders. So when I say give them -- deploy the cash in the business, that means CapEx, working capital, all the things put together. So the second priority would be to return the money to the shareholders in different ways. So dividend, share buyback, things like that. So all these things are on the table. Right now, we are focusing on the first priority to see how to use the -- how the business needs the cash. And then as cash -- if the cash is building up, then, of course, we will go to the second priority.

[Operator Instructions] We take the next question from the line of Himanshu Upadhyay from o3 Capital.

Congrats on good set of numbers. My first question was on aftermarkets, okay. So we were thinking about getting significant orders from replacement orders of older generators, okay, for windmills and all these things. What is the progress there? And are we seeing increased traction or it will take more time? Any thoughts on that?

So I've given an update on the wind repair business. I said that we are executing 3 large machines right now, and there's a strong pipeline of inquiries for the next few months. So I think it is a little bit slower than what we expected, but definitely, the market is there, and we are actively retain in the market. So I'm not disappointed. I think I'm very upbeat about not -- about the new and large inquiries which are there, which we will surely win a part of it.

Okay. And how significant can the size of that business? Can you give some light on that?

I don't want to -- I've given the projections of what has happened about the size of the market is in the past. I think it's hard to say exactly how much is going to come because in this wind repair business, the machines have to fail and then only it comes for repair. I can't predict how many machines are going to fail.

Okay. And in case of Turkey, what is the progress and the tax and all those things had changed in Turkey and hence, the orders were not there much? But are we seeing the market now starting to see some amount of traction or it is slow-moving only, the Turkey market?

Yes. So good question about the Turkish market. So this year, we'll make an operational profit, but we continue to have the problem of the exchange translation loss, which is, of course, a notional loss, but nevertheless, it clears in the P&L statement. That's one problem. The other problem is that, the Turkish market due to the continuing currency depreciation is not as large as it is to be in the previous year. It's significantly strong, but just a few others in the market. So we are actually evaluating what our plans are going to be for next financial year. We might even just take a pause and maybe just keep the factory at a very, very low level. Of course, just open just on a token basis, but not actually do any operations and wait until this market recovers and see what happens. But at the moment, it's -- the market is really bad. And there is no signs of any recovery or revival in the market from a macroeconomic point of view also. We continue to have extremely high inflation. They continue to have problems with their currency. So I'm not so upbeat about Turkey for the short term.

And one thing on Turkey. I had asked this a few quarters back about the money what we have, we said that we have kept the money in Turkish currency only, okay. But is the money...

We have the money in euros. We have the money -- we have all the money in our Turkish operations in euros.

So the profit has been now shifted to euros?

All our transactions in the Turkish market have been in euros. We take the orders in euros, and we received the payments in euros. It's when we report the earnings, we have to report the earnings in the local currency.

Okay. So on our cash balances there, it does not impact much?

No.

Of the depreciation? Okay.

No. One thing...

No, it does not because when we bring them also it will be in euros only, not in Turkish lira.

Okay. And one last thing. In case of motors, we had wanted to be in the large motors, okay? So it will be, again, an engineering means approvals and all those things? And how many approvals or is it first only for domestic market or even exports you would be looking for large motors? And how many vendors or what is the model you are trying to build for motors business? Some thoughts on that will just help in understanding your movement ahead on that business?

Okay. I'll make this -- I'll try to answer this very briefly because this is not so much a question for an analyst call. So basically, we are in the markets with the larger-sized motors, yes, we have to get consultant approvals, and we have to get approval from certain large government companies like -- and we are in the process of getting, for example, we have the approval from Nuclear Power Corporation. We will get the approval from NTPC. So we are in the process of getting these approvals. And as I mentioned, we are focusing on the large specialized motor business. And we will get a few orders for sure next quarter.

And the focus is Indian market only currently?

The focus is Indian market only.

We take the next question from the line of Rohit Balakrishnan from iThought PMS.

Yes. Hello. Am I audible?

Yes, sir.

Yes.

Nikhil, many congratulations on good numbers. So Nikhil, just a couple of questions. You alluded to it earlier in the call that despite whatever is happening especially on the gas side, we still are seeing very good traction. So can you sort of explain it a bit more? Why is that? I mean, your -- and you've also said that you've spoken to customers and the focus for next year is also strong. So, I mean, can you just explain that part? Because whatever one is reading in the media and newspapers and all seems counter-intuitive. So just wanted your views on that, if you can share?

Vinay, do you have any comments on that?

Yes. Basically, initially, there was some problem with the supply, but we had a major customer for gas engine in Austria, they supply a lot of sets to Russia. And now there is absolutely no embargo or sanctions on supplying to Russia. So rather it has increased -- the business is increasing. So we are not seeing any problems because of this.

But it's also -- it's not in Russia, but we're also seeing business coming from the gas engine segment from both our customers also for the European market. We're also seeing business coming from other places like North America, Australia, some countries in Africa. So it's -- I mean, it's counter-intuitive, but it's -- people are going ahead with their plans for putting on gas and that's for power plants, a small gas power plant [indiscernible] size.

Yes, due to the shortage of gas in Europe, the many countries are going for large biomass plants. So we recently got one big order for installation in U.K. These are all biomass and garbage burning plants. Now they are expediting those projects because there is a shortage of gas in countries like Germany.

Okay. So biomass and waste-to-energy would be more on the steam side?

Yes.

It's hard to explain, Rohit. It's hard to explain. We don't have -- we can't give you a clear answer as to why this is happening. So it's just that we have raised the same question with our engine customers. And we're not getting -- nobody can give such kind of clear answer as to why it's happening. They said this is the forecast, and this is our expectation, and we're not complaining about it.

Sure. Second question was, Nikhil, the -- so I -- we would be give about a lot of -- I mean, obviously, in the country, there are a lot of metros also getting commissioned or -- for various cities, Tier 2 as well, so non-metro Tier 2 cities. Alstom is also winning many orders. So are we also in the play for -- in one of the calls in the past, you've mentioned a few quarters back that, that could be an opportunity. But I just wanted to get -- I sort of get a view on that as well if there's an opportunity there for us for the induction motors for us? Sorry, I mean, in the traction motors?

Yes. There is an opportunity. I don't want to say there's no opportunity, but I think we are going to be focusing with our locomotive partner, you could call it more on the freight side and the high-speed train side. And that's where we see our strengths for the larger size traction motor. So still -- I don't want to say that the metro business is a closed chapter for TDPS, but there is a lot of more discussions taking place on the larger freight -- on the freight side and the high-speed train side.

Okay. Understood. And Nikhil, I missed your commentary in the inning on the shale side --. Hello?

Yes, hello.

Nikhil, sorry. I was just saying that I missed the commentary that was mentioned on the North American market on the gas side, and the same if you can just repeat that, sorry, there was some issue at my end.

So what I said was that we had expected to get a large -- we expected the shale gas industry to put in a lot of CapEx and that -- and we're not seeing that happen. We expected them to also increase supply in a major way, that's not happened... Yes. So as I said, the shale gas industry in the U.S. is not increasing supplies, they are not making the mistakes of the past of increasing supplies, which will then cause a price reduction. They're enjoying the higher prices, and they're also being very careful in CapEx. So we're not seeing that boom what we expected from the shale gas industry. But we're seeing our business increasing in gas turbines in general on the power generation side, both in the European market as well as the U.S. market. These would be larger gas turbines of 15 to 20 megawatt size.

Okay. Got it. And, Nikhil, last question. I mean, we've held on to our guidance. And I mean, Q1 is usually the leanest of quarters for us. So any chance of probably overshooting what you said? Just wanted to get your view on that. All the very best for next year and the remaining quarters.

We stick to our guidance. If we have any changes, we will inform everyone in the next -- in the upcoming phone calls.

We'll take the next question from the line of Alisha Mahawla from Envision Capital.

I just wanted to reconfirm the ex railways order book, will all be executed in this year?

No, the railway business, it will be around INR 160 crores per year.

Yes. I'm saying the ex railway order book, excluding the railways, the balance order book, will all be executed in...

The balance?

Yes.

No, no, no. It will be -- part of it is executed for this year and part of it will go into next year.

Okay. And the after sales revenue would be over and above this? The repairs and...

The after sales revenue is included in our generator order book. After sales order book is reflected in the generator order book.

Okay, sure. And in the projects business, this quarter has obviously been lean. So is it a more H2 heavy segment?

Yes, it will be H2, ma'am.

Yes, H2. Exactly, H2 will be heavy.

Because for a guidance to INR 50 crores, we've done only INR 1 crore this year. So I just wanted to read...

Yes, it is more towards H2.

Sure. And is it fair to assume because we have raw material book for the rest of the year, the kind of margins we've done in this quarter will be sustainable for the rest of the year?

We have booked our raw materials, as we have mentioned for the whole year. So we are not -- and we expect profitability in the market. So, yes, we stick to our guidance on the gross contribution.

We take the next question from the line of Mohit Khanna from Banyan Capital Advisors.

Congratulations for good set of numbers here. I just wanted to understand a little bit more clearly. So seeing the trend on the margin side and as the aftermarket business is now also increasing its share, would it be fair to assume that the margins that you have reported in the last 2 quarters, the double-digit margin is the new normal or the new base for the company here on?

At this level of sales, where we are around INR 200 crores per quarter, one could certainly expect this could be the new normal, because we are talking about doing INR 820-odd crores for the year, it's about INR 205 crores per quarter. So Q1 is more or less exactly at that run rate, 25% of that number. And we are certain about our order book and certain about our top line performance for this year at INR 820 crores. So we could have small variations quarter-to-quarter, but ultimately, we'll hit our target. So this level of capacity utilization, this level of raw material costs, this level of gross contribution, you could say we will see stability in the earnings.

Right. I'm not looking for a particular quarter or so. I'm just looking at the longer-term trajectory here. And given the order book remains on the solid turf. So, I mean, is it a fair assumption?

Longer term I've already said. Longer term I've said there is a yield, we have -- I said earlier -- to an earlier question that we have the capacities to do more within this plant up to INR 1,200 crores, INR 1,300 crores. And we're not going to add manpower. We're going to go for more automation and obviously, we will see expansion in the EBITDA margins taking place are better capacity utilization for sure.

Right. Fair enough, sir. Sir, one more thing.

That's the plan and that's the thing we have to -- we will use our operational leverage to increase EBITDA margin. That is clearly in the direction that we're going in. The -- even if we don't expand the gross contribution by a large level, the major increase in the EBITDA margin will come from the capacity utilization and operational efficiency. So if there is a limit, and we can't just keep increasing the prices in the market and expect the margin expansion will take place through price increases. I think we are reaching -- we have reached a limit on that. So future is really going to be on how we're going to be able to manage our operations in a more efficient way. And that's where we're going to see the margin expansion taking place.

Right. Sir, just taking a little bit longer-term view here. What's your sense that in our business in the next 3 years with the upcoming opportunities? And what segments do you think should contribute or should have a larger contribution to the revenue line in the next 3 years down the line? I mean, from INR 820 crores that you are talking -- that we are here today, what's your internal target?

So I don't -- I think that we -- I can't give that number to you. But all I can say is that, we have a baseline business, where we're talking about INR 800 crore, INR 900 crores where we are today. And there are a number of large opportunities on the table in the railway side and also on the synchronous motors side. And also within our existing business to expand the business, there's a larger generator, 2-pole generator, which we talked about. So that's also increasing. So there are a number of opportunities clearly visible to the company and to the management, and we are well placed and we're going after everything. How many of these succeeds and how many of this, to what extent? That will become in the final top line growth of -- and top line and the exact, I would say, exact numbers of sales and profitability. But if you want me to give a number right now, I can't. The opportunities we're talking about, all of them are large, and they delivered great results for the organization, even the successful [indiscernible] a few of them. We don't have to be successful in all of them to get great numbers. One or 2 or 3 if we get also you see big growth taking place in the overall sales.

Right. Sir, just the last thing, if I can just push it here. What is your sense in the market currently regarding the sub-100 megawatt or 30 megawatt generators, especially on the distillery side in the domestic market?

It's booming. It's booming right now. It's really -- our distillery side is booming, and it's smaller machines, less than 10 megawatts, which will continue to boom because India is talking about higher and higher percentages of ethanol blending in the fuel. So as long as that policy continues with the Indian government, there's going to be almost unlimited demand for ethanol, this would continue at least for 2, 3 years, and then let's see.

And how much is this contributing to -- this segment contributing to our order book currently?

I can't give that number exactly at the moment, but it's good.

We take the next question from the line of Ankit Gupta, Bamboo Capital.

Congratulations for a great set of numbers. Sir, Nikhil, I wanted to understand one thing on some of the new initiatives on the traction motor side on the railway side, the wind generator refurbishment side and other new initiatives that we are taking, although they might not be contributing significantly to top line this year. But let's say, on a combined basis in FY '24, can we expect all this new initiative to at least contribute around INR 100 crores to our top line? Or it will be like too far of a number? Will it be possible to have INR 100 crores from all these new initiatives?

I'm going to avoid that answering this question seriously because it could be a lot more. It could be less. It is really -- it could -- we are working to close out some of the deals. And let's see when we actually close out the deals, what those numbers would actually end up being. It could be a lot more, right? And I don't want to put that number on the table. So if they take a little bit more time for finalization, then it may not be INR 100 crores. So the deals are not going away. It's all there. The market is there. It's just it may take a little bit more time. So I don't want to answer this question. I think I will -- let's just be a little bit patient, and I think we should have some -- we will definitely have some information for the market and for ourselves by definitely built into this calendar year. So let's just be a little bit patient for a few more months then we'll have all the answers.

Sure. And on the gross margin side, you have -- in earlier calls, you have expressed your aspirations for reaching or targeting 34%, 35% kind of gross margins. So in current year, we are looking at around 31%. So where are we in our journey to reach those kind of 34%, 35% kind of gross margins? And do you think that it will be possible to achieve such margins, let's say, in a 2-year or 3-year horizon?

Yes, it would take that long. We can't -- we have to improve our margins, I would say. We are in to the service business. We have to reduce the cost of our machines. We have to -- there's a limit how much we can keep increasing prices in the market to achieve these higher gross contribution levels. So it will be incremental year-on-year. But we will manage -- the goal of the management, as I said, is to keep increasing the gross contribution marginally. The greater emphasis will be put on operational efficiency and trying to achieve higher sales without increasing the cost.

Sure. And my last question was on, we have been hearing a lot of news about the locomotive opportunities which are coming up and Alstom can be one of the major like parties for -- to get this contract. So do you think that -- if Alstom get those orders, we can get a lot of new orders from them as well, apart from the existing railway order that we had from them?

So there are more guarantees in life, but we are the front-runner being the existing supplier to them.

And is Alstom also the front-runner in getting those contracts?

I hope so. And I think so, yes.

Okay. And can that order be as big as the existing order that we have in hand or it will be a smaller one?

Potentially, they are at large. So the 12,000 horsepower tender is as large, the 9,000 horsepower tender is also as large. So let's see who wins.

So any tentative days of order finalization from the existing product?

Vinay, could you give some light as to when the tenders are going to be due and when they are expected to...

The tenders addition is in September end. It may take maybe 6 months from that.

Sure. Okay. Wish you all the best.

[Operator Instructions] We take the next question from the line of Dhruvesh Sanghvi from Prospero Tree.

Yes. First, I would just like to comment on the amazing way you have steered the company from 7, 8 years from single product India dependence to multi-product, multi-country. The way you have done it is amazing. And in the past, we used to sometimes comment that in spite of doing so many things, the sector was not probably supporting and your voice was sounding to that arena. And the way you described in the con calls now has completely changed. So it's really amazing to hear you. Just one part here that, the way you have expanded across the globe, what is the -- like have we already reached to wherever we were supposed to reach in the strategy of touching basically customers? Or if you can give some sense on where are we there, that how many more customers are to be tapped where we can reach and potentially further penetrate over the next couple of years?

The overall market is huge, and we don't have -- we have maybe just a single-digit world market share in our ranges. While the number of OEM customers may not be significantly larger, we do supply smaller quantities to all of them. It's more about how we can cut deeper into them and how we can increase our market share with each of these guys and increase our overall business. So there are still a number of challenges that we face in terms of acceptance of our products in many parts of the world. And I would say that's #1 hindrance. So we're constantly working on how to improve our marketing, how to improve our reach to the customer directly to end users and try to increase our acceptance level. And as soon the acceptance level increases, more and more -- it's difficult for our competitors to compete with us on the price quality metrics. So I would say the challenge is still to cut deep in the market, a long way to go, lot of scope to grow. I'm not worried about the market size. We just have to keep working hard.

We take the next question from the line of Mr. Dipen from DS Investments.

I had a couple of questions. Firstly, just from an understanding perspective, is there a ballpark figure in the sense that per megawatt of power, what is the kind of revenue which we would be generating in terms of supplying our generators? So maybe per megawatt, is there an average that just for a broader understanding perspective?

No, we don't have that measure in our company because there are a number of factors that can influence the size of the generator, complexity of the generator. And this is not related to the megawatt rating. So we don't actually have that metric in our organization.

Okay. And the second question is relating to your guidance. It's a 2-part question. Firstly, we have done about a 25% growth in the first quarter, and we are probably guiding towards a 15% overall growth for the current year. So maybe just as I thought what is going into it? And the second part is that, we said that we have a capacity where we can reach a revenue of INR 1,200 crores. And you also mentioned in the earlier part that now all the orders which we are taking will be coming in the next year because they generally take about 7 to 8 months to complete the order. So just trying to understand if you already have a capacity to do INR 1,200 crores, can't we finish a larger number of orders in the current year? All the very best.

Okay. Let me -- I think I would like to just once again comment on things like all. It's not all, right? I do not say all the orders are going to go for next year. I've always said, that's part of the orders are going to be executed this year, part of it is going to go for next year. So we're still booking some orders for this year. And whether we should deliver the machine this year or next year depends on the customer requirements. Also, what our steam turbine -- what our turbine customer, or a engine customer wants. So if they can deliver the turbine this year, customer wants machine this year, we'll deliver this year. It's totally dependent on what the market wants and what our customers want. But in general, I've said, a lot of the orders that we're taking in from now are going into -- the majority of it is going into next year and a smaller portion of it is coming into this year. That's number 1. Number 2 is, our guidance is based on our current order book that we have on hand and as of date. And what is the expected inflows for -- we have a smaller number of relatively small number to -- has already flows to reach our target. And after a lot of discussions and the discussions with our OEM customers, our own internal discussions, they come up with the guidance. So our guidance is something that we don't want to give negative surprises. We like to give positive surprises. So let's see how it works out.

[Operator Instructions] We'll take the next question from the line of Rajesh Jain from NB Investments.

Sir, I had 3 questions. The first one is regarding the gross margins. In your introduction, you had alluded that you would be maintaining 30% to 31% during the year. But in Q1, we have already done more than 32% gross margin. So any particular reasons why you are expecting these margins would be lower for the remaining 3 quarters?

Varalakshmi, can you answer that question? Is it not more than 32%? Can you please answer that?

Yes. Actually, we have told that we will achieve around 31% to 32% gross contribution over the year. It could be that in some quarters, it may be 30.5% and in next quarter, it could be 31%. So on an average is what you will have to see our nature of industry.

Okay. So would it be 30% to 35% or...

See, I have given the guidance of 30% to 31%.

Correct. And we have done already 32.5% during the current quarter. So I know these keeps varying every quarter. Is it that we are not in a position to pass on whatever the fluctuation in the raw material prices to the customer or something like that?

No, we have already passed on is what we have told. We've already passed on and we are saying the benefit...

Yes, we have passed on, but basically, the historic gross contribution levels of the company and the best of times has been around 32%. So we are reaching around -- reaching that -- we are coming close that number once again. But that's where the stability should take place on the pricing front also is what I have been trying to allude in a number of questions over this call today. There is a limit on what we can do in terms of increasing prices. So we're coming to a region of price stability, which we would like to keep and maintain the market share. So this is -- we can't expect that gross contribution expansion is going to take place through price increases anymore.

Okay. My second question is regarding the direct business with railways, where we were to supply some engines for the trial. If you could share what is the current status of that?

The generator -- the motors have been cleared for dispatch, and we are waiting for the final departure for the railways is packed in boxes. They are just waiting for that final document and then they will be shipped out. Then they have to be demonter on a locomotive, and then they have to be -- they have to run for 6 months, then we get approved to bid in a preferred category. They will get higher prices and a higher share of each and every tender.

So all that could happen only after H2 of next financial year?

Yes. About a year, I can say.

My third and last question is regarding the CapEx path. You have already given how much we can do it from the existing facilities. Just for the information, in case if you have to put up a facility on a short notice, how much time would it take for you to put up that facilities in the land, which you mentioned that we already have a land? So how much time would the company required to put up a facility, let's say, to make INR 300 crores of...

8 months. 6 to 8 months.

Thank you. Ladies and gentlemen, that was the last question for the day. I now hand the conference over to Mr. Nikhil Kumar for closing comments. Over to you, sir.

Yes, thank you very much for joining us on our call today, and we look forward to communicating with you further over the next few months and definitely at the end of H1. Thank you very much.

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

Thank you.