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

Good morning, ladies and gentlemen. Welcome to the Q2 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 beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks 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 for TD Power Systems Limited. Thank you, and over to you, sir.

Thank you. Good morning, everybody. Thank you once again for joining us for our earnings call. I trust all of you have received our results and investor presentation. Now let me start by discussing with you the financial performance of TDPS for the 6 months ended 30th September 2022 standalone. Our total income of standalone basis for H1 INR 4.14 billion versus INR 3.21 billion versus same period of last year, an increase of 30%. EBITDA for H1 was at 15.89%, including other income. Profit after tax and complementary income for the 6-month period was INR 388 million versus a profit of INR 169 million in the same period of last year, an increase of 130%. Manufacturing revenues for the first 6 months was [ INR 3.92 billion ] versus [ INR 3.03 billion ] over the same period last year, an [ improvement of 30% ]. The order book including Turkey operations stands at [ INR 20.67 billion ], out of which, INR 4.43 billion is the manufacturing business and [ INR 9.04 billion ] in the Railways business and INR 0.2 billion in the Turkey business. Export and deemed exports, excluding the resi business stands at 61%. Order inflow, we have a total order inflow for the first 6 months and [ included 22% ] over the [ 1-year ] order period, the previous period. Our total order inflow was INR 3.83 billion in the current year versus INR 3.14 billion in the previous year. Order inflow from exports and deemed exports is INR 2.16 billion, which is INR 1.2 billion in the previous year.

Mr. Kumar. Sir, your audio is sounding a little muffled.

The order inflow from direct and deemed exports is INR 2.16 billion compared to INR 1.63 billion in the previous year, an increase of 32%. Project business revenue in Q1 was INR 0.1 million versus [ INR 0.12 billion ] in the same period last year. Our total income on a consol basis is INR 4.3 billion versus INR 3.95 billion in period previous year. Profit after tax of comprehensive in terms of consolidated to INR 385 million versus a profit of INR 242 million. Last year included INR 20 million exceptional income [ of INR 2.3 million ]. This is an increase of 59%. The consol order book stands at INR 14.08 billion. We continue to maintain a strong cash position of INR 1.97 billion. Now let me move on to the order book, market situation and guidance -- market conditions and guidance. Overall, demand for our products are very strong in India and across the world. The market penetration that we have been able to achieve over the past few years have been instrumental, ensuring that we have an increasing order flow. In addition, the macro conditions are favorable with power shortages, both in India and Europe and increased trust on renewables. For this financial year, we are on track to have around INR 8.05 billion to INR 8.2 billion manufacturing sales from TPL India, and around [ INR 12 million ] from TDPS Turkey. We expect gross contribution to be in the region of 30% to 31% for this year, which will result in EBITDA, including other income on a standalone basis of around 16%. EBITDA for H1, as mentioned earlier, is 15.89%. We expect to keep EBITDA at the same level as H1 while slightly improve to 16-plus percent. In Q3, we continued to see a robust order book, which ensures good growth for the next financial year. In general, my commentaries on this point will be more forward-looking in the next financial year since we had clear visibility for this year. I've already given you a guidance of this year's performance. So now I would to focus into next year's business plan. Let me talk about each segment briefly. Steam turbine. We have strong demand from India and then through the world. This year, we will achieve our highest sales ever in the steam turbine segment. The order book for next year is also very strong with all our major turbine customers to come in strong [ builds ], which applies to both India and out of India. Segment of our [indiscernible] plant, process industry, waste recovery and to a smaller extent, in India within the traditional captive coal-fired power plants. We also have 3 numbers of large [ geothermal ] generators of above 60 megawatts for next year and expecting an order for at least 2 more. We have completely indigenized the rotor production related to the [ binder rotor ] from Germany. And in this, we are competitive as well as profitable. Hydro. Next year order book is selling now. We have a pending order book for next year, which is almost included this year's sales in hydro. There are plenty of new opportunities in the market, and they're actively competing in all parts of the world. We've seen a good year next year for Hydro, politically in Europe and the big push for small hydro and the inquiries have increased dramatically. Gas engines. We have very good ordering forecast from both our Indian customers. This year, we will have achieved our highest sales that have been in this segment since [ inception of ] the company and next year's forecast are showing a significant growth over this year's period. Aftermarket. There's been a lot of effort to leverage the aftermarket to prepare not in the other issue, but also an issue with some competitors. This year, we will be having the highest sales for the aftermarket business, and we will further expand our footprint next year. Other segments. Railways, with Indian Railways on track, we have [ attached ] the Indian motors, the [ first 6 motors ] in Indian Railways. The next step will be to mount the motors on the locomotives, which we are now arranging. And in the next 6 months, after successful performance, we will have reached the approval stage, after which we can start bidding in Indian Railways for all their tenders. [ We are inundated ] with new projects all either now on this 9,000 horsepower automotive bid. We are hopeful that our [ partner ] customer will win this order. This -- the tender will be open in about a month from now, which is the fast track project and production should begin in about a year. This project, once again, we gave a 10-year revenue outlook for the winner of this bid. In terms of motors, we have 1 order on hand, another one is booked. With this, we expect core [ synchronous motor ] sales [ with negotiations for ] next year. There's still a large pipeline of business in this segment, and we will report new order wins as and when we get them. Market development for special motors are also producing at a good -- also progressing in a good pace. We have our security approved by a nuclear power operation. A number of jobs are in discussion. We had reported getting approvals from NTPC. We are focusing on special applications and large motor capacities. With all these developments, we have really excited about growth for next year that we can achieve. The company is well positioned in many segments, new markets, all over the world, and we will see steady and strong growth. [ Competitively ], we're projecting a growth of around 30% next year with a big upside potential. We will continue to invest in automation and productivity to ensure operation leverage to grow EBITDA, margins and PAT. With the growth expenses next year and further authorization language, we will see expansion of EBITDA margins. We will give forecast preview in the next few quarters. All our subsidiaries will be profitable except TDPS Turkey, which has shown an exchange loss. However, due to back office business and deteriorating economic conditions in Turkey, we will suspend operations in Turkey from 30 April 2023. This brings me to the end my initial remarks. I'll now be happy to address all the question that you may have. Thank you.

[Operator Instructions] The first question is from the line of Jiten Parmar from Aurum Capital.

Congratulations on a good set of numbers. My question is basically on the Indian business. We see that domestic is down from comparable quarter last year. May I know the reason for that? I mean, the sales are down, so 7%. So this side having such a strong order book and were there any execution challenges or what has happened in that? If you can throw some color on that?

We can't really measure quarter by quarter. There could be some deliveries that were required in the following quarter and things like that, but absolutely that there is no weakness in the domestic markets and it could just be a function of when we deliver the required as per delivery dates.

It's clearly due to some postponements. That's all. Nothing to worry.

Okay. Okay. Great. And I couldn't hear properly, but have you -- are we looking at higher margins for FY '23, is what I heard? Is that correct then the 16%, which you are guiding for this year?

We have growth around -- I already mentioned we're going to have growth 20% plus. It's also an upside potential. We are in many parts of the market, many segments and system categories. And we have [ something in many enterprise ]. So as and when we are able to book orders and report the business that we have won, we will see further growth taking place. We're not having any -- putting any investment for new capacity, so we will see operational leverage taking place. And so we will have expansion of EBITDA.

Great. My final question is basically on the global slowdown. Are we seeing any challenges because of that? Or are we going to actually gain market share because of us being cost competitive? If you can throw some color on that?

So actually, we are seeing a very, very strong demand for our products internationally in all segments, in steam turbines, in gas engines and hydro. We are seeing very strong demand, and the forecast given by all our OEM customers for next year are even stronger than what we have seen this year. So there is a push towards the kind of products that we make, thematic direction. The winds are favorable, I would say now on our side. And our position also on [ turbine engine ] basically the acquisition really well across the world in many, many areas and many, many segments. So we are ready to capture the market gains, that it is taking off right now. So we're going to capture that in one of those segments that we operate in. So we're very upbeat about what the forecasts are like for next year.

[Operator Instructions] The next question is from the line of Pritesh Chheda from Lucky Investment Managers Private Limited.

Sir, just 1 clarification. Until last quarter, we were mentioning that the margins in the business will be about 13%, 14%. Are we saying that margin now will be about 16% for consol for the year? Considering the fact that I think first half, we have done a similar 13%. So I was not sure there. And second, on the top line growth, did we mention a 20% top line growth next year? Because your lines were not clear.

Yes. EBITDA margins are -- the months that I mentioned was on the standalone basis, not on a consol basis. Because if you take consol basis, there are -- we do have our sales office, our sales offices in Japan and in Germany and U.S. So we're not going to see the same kind of EBITDA margin from our sales office. Manufacturing business we have said, it is 15.89% for H1. And I have projected based on the [ ramping ] we will have next year, the EBITDA margins will expand. I've also mentioned that in H2, we will have a slight expansion of this current EBITDA margin. We're hoping to cross 16%.

That's specifically for H2?

Yes, H2. And for H2, we told 16 around -- around 16-plus percent. And next year, based on the 20% growth in the projection, it will go even further.

So basically, half of your business will operate at plus 16% margin next year. And the other half of the business operates at whatever 13% -- well, 13% margin that you're doing. That's how we should read it, right?

Actually, the blended -- it's a blended...

Yes, when you look at the consol basis, manufacturing business is the main business of the company. And the sales offices are for the generators, but when we report on a consol basis, the performance of unit sales -- the subsidiary companies [ within the consol ] we also take into consideration. So you have to look at the EBITDA margin of the manufacturing business [ as it relates ] to India standalone business to really get the performance of the organization.

So I'm a bit confused because see, the difference between your stand-alone and consol is hardly anything. And if you mention that stand-alone itself will move to 16% margin. Then obviously, the overall margin itself looks even that number, right?

[ M.N. ] , can you please answer this question?

Yes, yes. So the difference between margin on standalone and consol is around 2%. So if the margin of the stand-alone company improves, the consol margin also will improve.

Yes, perfect. That's what I was looking. So you're looking at 16% for half year and better than 16% next year.

Yes. In short, yes.

Yes. On a standalone basis, and this will also help in improving the margin on a consol basis.

On standalone in terms of the large difference, obviously that will affect [indiscernible] and consol.

Yes, around [ consol ].

Okay. Now what is the driver of this margin in second half? Is it the gross margin number or is that the execution number, operating [ leverage ]?

It's both. It's mainly coming out of operating leverage to a lesser extent, gross margin expansion.

It's coming from operating leverage.

Yes, mainly.

And my last question is, sir, what is the progress on that wind turbine business side?

Yes. I have mentioned that in the aftermarket business, we have done good business this year. I'm not giving the number. I'll start giving the projection for the aftermarket business from the next earnings call onwards. But we have got a good number of machines, and we have a projection for a good month, very good [ estimation ] for next year also. The progress has been extremely encouraging, and now we are well entrenched in the market.

[Operator Instructions] The next question is from the line of Himanshu Upadhyay from Oaktree Capital.

I had 2 questions. One was on [ 13% ], we have a pretty concentrated revenue. The top 3 contributes nearly 40% of our revenue, so [ 13% ]. So if the market situation is improving, is pricing power -- what pricing power your OEMs would be getting? Are you able to also get better -- gives you better pricing orders from your OEM vendors? Or how will it happen? Because just some thoughts on that gross margin can be improved dramatically from here on.

I don't think that we will be able to increase the prices further in the market at this point of time. So it's -- we will have to reduce the cost, and we will have to work on operational leverage. This is not -- the market has reached the stability on raw material prices and other costs, so there is no question on increasing prices to offset cost any more. But we will improve the gross contribution, as I said earlier, by cost reductions. But most of the expansion of EBITDA margin will take place through operational leverage. And we are investing in -- aforementioned, we're investing in productivity to further expand our capacity so that we can continue to deliver higher sales within the same capacity and then further increase gross -- sorry, EBITDA margins. This is the direction in which we are going. So we want to remain cost competitive in the market. We want to keep market share, and we want to increase EBITDA margins by being more efficient in the factory.

And slightly -- to follow up on the same question. The top 3 customers who contribute 40% of our revenue and top 10, 80% of the revenue. Who would be the exclusive suppliers to how many of these customers?

And we are -- no, we don't have any exclusive contracts with anybody. We have good market share with these customers, but there is no exclusivity. We have to be competitive and have to deliver high-quality products, and that's how we keep our market share with these customers.

And what will be our market share -- is there a scope to continue to grow our market share at these 10 OEMs who are our launch revenue contribute...

There is a lot of scope to grow.

Okay. Would we be above 50% for all the 10? Or we will be below or some?

No, this is a difficult question to answer like this. Each customer is at a different percentage of the penetration that we have, and it's hard for me to give a generalized answer in that this is 50 or 40 or 30. There is scope to grow the market and it's got to increase our market share with specific OEM customers, and we're continuously working on that.

Okay. And then last question, then I'm going for the follow up. The Turkey business, it will be completely shutting down in 30th April. So will there be...

I mentioned the word suspend the operations, so that means we're going to basically cut our costs down to 0 or to a minimum level. All our assets are going to remain there. We're going to keep our factory over there and -- but we're not going to shut down. We're going to suspend the operations until we see better market conditions. We're going to wait for some time to see if the market conditions improve or not. If the market condition don't improve after, let's say, 6 months or a year, then we will take the next decision for what is appropriate at that point of time.

What is the number of employees in Turkey business or Turkey subsidiary?

Right now. Less than 10.

Less than 10 employees are there?

Yes.

[Operator Instructions] Next question is from the line of Rohit Balakrishnan from ithoughtPMS.

Congrats on the good number, good quarter. Nikhil, I just wanted to understand the synchronous motor part, what you mentioned. Can you repeat that? I could not hear it properly? You said you have 1 order in hand and something I could not understand. Could you repeat, please?

Yes. So I said that we have 1 order on hand. We have closed another order at this, and we expect to do around with these 2 orders around INR 50 crores of business next year in the synchronous motor segment. And I also mentioned that there is a large number of orders in the pipeline under active negotiation. Some of them may get finalized in the next 2 or 3 months. They may or may count for execution next year. So -- but what we have on hand, we will execute next year. For the orders that we win, may or may not count for execution next year, but orders that we win that don't for execution next year, we plan for the execution for the following year. But there is a very strong, big, large pipeline of orders in the market.

Understood. I mean would you -- I mean from an order book point of view, would you think that this could be -- the order book could be as big as the Railways business? I'm not asking the current order book of business, but the early booking that we do for TDPS at this moment. Can it be as big in terms of what?

Railways business is not a steady business, where we can say a few do exactly INR 120 crores, INR 130 crores, INR 140 crores per year. But it's more like there could be a very large order and sometimes we could even with INR 100 crores order in this business. So it's -- it depends on what's in the market at that point of time. But it's -- we are in the market. We have got orders now and they're actively bidding for the future quarters in the pipeline. And so it's taking a little bit of time that we have established ourselves in this segment and we are going to be very actively getting orders in this segment in the future.

And just to understand this a bit more, what are the drivers for this? I mean, in the sense for this -- for your synchronous motors. What drives the end market orders eventually? I mean what activity in the economy? Is it agriculture? Is it general infrastructure? Or...

These are mainly large pumping stations required for pumping the water out of rivers and into reservoirs. So this is a litigation mainly. So they pump out the water from the river during the raining season and so in reservoirs that the farming community can use a water literally all season. Especially now when we have had too much such good rain in India over the past 3 years, there is a huge push to take as much of water from the river as possible. Otherwise, it all flows up to the sea. So we are seeing a very, very strong demand for this product at this point of time.

Got it. Are there other use cases also for this? Or -- and are we planning to get into that? Or is it largely whatever use case you mentioned?

[ There is not as a whole ] sales in the industry, but to a larger extent, but not a deep sized order and not this volume of orders. And -- but this is the main business.

Understood. And my second question was on the Indian Railways parts. You mentioned that now they will get mounted on the locomotive and it will take 6, 7 months. So do you expect FY '24 to contribute some business from Indian Railways, assuming everything goes right? Or it will be more...

We'll see. We need to get those motors mounted on a locomotive. So if you take, I don't know, if you take -- when we're on the job, it should happen soon. Six months after that, let's say, we get to maybe get the motor on June, July next year. And then there is enough of time, then we'll get to it in the end of Q1. So it depends on the tenders that are there in the market. But yes, I am optimistic that we should be able to add some revenues to our business in Indian Railways -- from the Indian Railways direct in Q3, Q4 next year. That's what we're gunning for. Let's hope it happens. Of course the main step is to put the motor on a locomotive, it integrates a huge large organization. So it all depends on how fast we can get that the next step done. The sooner we get it done the sooner we get approved, of course, we promoted work correctly for 6 months. I think more interesting for us is right now is to wait for the outcome of the 9,000 horsepower tenders, and we are expecting the results to come in by the end of this calendar year. So we are hoping that are our current customer wins this order.

And how big is that from your perspective?

That will be as big as the current order.

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

Congratulations on the result. My question is if you can talk a bit about the -- qualitatively about the impact of what is happening on the Europe energy side on the -- one is the demand for small hydro switch to energy and [ gasengy for electricity ] negative, whichever way.

So at this moment, energy prices are at an all-time high in Europe, extraordinarily expensive per kilowatt hour prices in the market. Of course, this is determined by the fact that gas prices are really high. And so electricity produced from gas is driving the overall market price because all the prices are set by an exchange. So at this point of time, it is very profitable to have hydro power plants and [ bid to ] energy, anything that you're supplying into the grid. So one part of the market is very bullish and there's a lot of money now going into this segment because it's so lucrative. Other part is this segment also benefiting from the fact that they have to -- we'd have to come up with alternative energy production to reduce the dependence on gas. So -- and also driving demand for all hydro, [ bid to ] energy, [ garden ] impregnation plant and so on, so forth. On the gas side itself, I mean, we are seeing that there is a huge requirement for [ gas ] power plants. So smaller [ gas ] power plants that people want to be independent on the grid. And just in case there is a blackout, just in case there is contraction of power. So people are investing in the small gas engines. And so that's also driving demand. At this moment, I think, as I said earlier, the macro conditions are favorable and we are well positioned in the market.

Okay. So this increased contraction that we have seen demand in these 3 segments in Europe, it's largely because of the macro part? And -- or is it also that we are gaining market share? Or it's a combination of both?

Yes, a combination of both. I would say larger growth is coming from the expansion of the market, and we are also benefiting from being -- our production costs are still not so high in India compared to increasing production costs in Europe. So we'll probably be gaining market share also, but it's a combination of both. I cannot determine or tell you exactly how much, what is x and what is y. It's hard for me to tell you that.

And second question, Nikhil, I think you mentioned about -- something about the larger megawatt -- 60-megawatt turbine orders and our ability to manufacture that in [ India ]. And you also talked about some nuclear power-related development. So I mean typically, our forte has been less than 30 megawatt. Our focus has been less than 30 megawatt. So has something changed why we are focusing on larger megawatt turbines in terms of market potential or the market activities?

We're not in the below 30 megawatts. I mean, of course, our GDP is generated on technology go up to 60 megawatts. This has been our core business. About 15 megawatt, we have a license to be in [ this space ] and we had made an investment a long time ago to produce the larger-sized generators, but that investment did not materialize into good sales. However, we do have the products. And so I'll let Vinay now speak a little bit how the market is now developing for these larger machines and where we are positioned. Vinay, maybe you can shed some light on which way this market is moving and what we are seeing as the business for the next year at least?

Yes. So we already have the 3 orders as Nikhil said, and there are good number of inquiries for 2 Pole. Approximately for the last 10 years because of the store stamp, mainly -- the people business was not good. So that's why we do not make good business in the 2 Pole segment. But for next year, we are really seeing a good business in the 2 Pole segment, mainly from our major customer in India.

So just a follow up on that. So you see this as a onetime event? Or do you think that's something which has changed in the mills which will lead us to have different from sustained offers? How will you guys look at it?

We are seeing the sustained growth in this segment. Now I think that...

It was 30 machines a year, it come -- it went down to [ 0 ] now. It's about machines, 8, 9 machines per year, I think, which will be sustainable.

And see, our main competitor is BHEL since now we have 100% indigenized the product. Earlier, we were reporting the rotors from Germany. Now we are making it here. So we have been competitive and we can compete with BHEL. That's how we are getting orders.

[Operator Instructions] The next question is from the line of Alisha Mahawla from Envision Capital.

Just 1 question. What is the reason for the sequential decline in gross margin that [ you have said ] at the start of the year?

Hello? We can hear you.

Yes. Just wanted to understand the even sequential decline in gross margin.

So there is a small decline. I think quarter-on-quarter, there could be some small variations in gross margin depending on the product mix. But overall, we have given the guidance for the year. And we will see improvement in the gross margin in Q3 for sure. And I've already given the guidance for the whole year. So quarter-on-quarter, there could be variations due to product mix mainly.

And for the full year, we're expecting it to be in the range of 31% to 32%.

No, I said 30% to 31%.

And this is excluding other income because the presentation has other income before cost when calculating gross margin?

Yes.

Sorry, is this excluding other income?

This will include the operating income -- it will include the other operating income but will not include interest income.

And other operating income, it means things like foreign exchange gains and [indiscernible].

Yes.

The next question is from the line of Ashwani Sharma from ICICI Securities.

Sir, my first question is what would be our current utilization level? Because what I see is that given the strong order book and the inquiry pipeline also looks very encouraging. But then if you look at the guidance of around INR 800-odd crores for full year, that looks a bit conservative. If you can throw some light on that, sir?

No. So this year, we are still keeping our guidance. One of the reasons why we've not been able to move our -- increase our sales for this year is there has been a small -- there has been a reduction of the production -- temporary reduction as of this year -- [ limiters ] of the Indian [ daily gas ] producer. So that knocked out a big chunk of what we could have done above INR 800 crores, INR 810 crores, INR 820 crores for this year, [ above the ] next year. But in terms of capacity utilization, I said we have capacity around INR 1,200, INR 1,300 crores. And we're constantly investing to push it even further to INR 1,400. So I don't see capacity problem coming next year or if at all.

Okay. Secondly, if you could just put more light on the opportunities from your car motor business, especially from the Indian Railways and [ auto ]. If you can throw some light, how are you looking at opportunities from these 2 segments?

Yes. The railway business is divided into 2 parts. One is the business that we get from our large customer. Of course, it depends on which bid they win. And we are currently executing the 12,000-horsepower locomotives for them, making the motor to 12,000-horsepower locomotive. And there are 2 more bids in the Indian Railways [ impact ] in the market. So one is for the 9,000 horsepower. There will also be 1,000 locomotives. And there's another 12,000 horsepower, which is also going to be open for bidding, to be open sometime early next year. So these are the 2 major segments. So this is one major thing. So we're currently executing the 12,000, we're hoping that our customers would win both or at least 1 of the 2 new ones which are coming. That will give us for each of the geographies, that will add revenues equal to what we have right now from this particular customer. Then there is the Indian Railway segment. The Indian Railways produces electric locomotives themselves. And they buy about INR 1,000 crores worth of electric motors per year, and we want to get a chunk of that. We want to get -- my goal is to get 10% of that business, at least. So it's going to be a step-by-step process. The first step is to get the approval. That's the most critical step, so that's where we are right now. Once we are recruit that, we will start bidding and hopefully in the next 2 or 3 years, we will get to my target.

[indiscernible]

Sorry, I missed that.

And the [indiscernible], sir?

Yes, [indiscernible] is also in play, but whether we will make or we will not make this is not 100% sure. The technology level is high for 3 motors and it could be that our customer wants to keep it to themselves with [ 45 weekends ].

Sir, from a longer perspective, what's the next 4 to 5 years, where do you see your Motor business going in terms of absolute number?

I'm not going to give a forecast actually about this. We can take this conversation off-line, and we can talk one on one on this. But I don't have a number right now. I can't talk about the Motor business for the next 4, 5 years perspective to share on this call.

The next question is from the line of Rajat Setiya from ithoughtPMS.

Sir, we get INR 6 crores to INR 7 crores of other income every quarter. So what is the nature of that? What is the mix of that?

So we have interest income of around INR 2 crores, INR 3 crores. Interest income on an annual basis to be around INR 8 crores. And the other income is because of the foreign exchange gain on account of our forward hedging of the euro.

So how much of it is usually considered in the -- is considered operational income and not the typical other income?

Interest income is not considered as operational income to all the other defense. [indiscernible]

I mean how much is that part? And just...

INR 4 crores is the interest income, foreign outflow, this is not considered as operational.

Sorry, what's the number?

INR 4 crores.

INR 4 crores on a quarterly basis?

No. Half yearly basis.

Understood. And talking about the cost structure that we have in place right now. So how do you see the employee expenses and the other expenses growing over the next 1, 2 years?

So we see the employee-related expenses growing on an average between 7% to 8% per year, which is, I guess, an industry average. The other operational expenses could grow around 5% to 6% per year, depending on the increase in production. So -- but the growth in expenses will be far lower than our overall increase in sales. So that's how we're going to get the operational leverage.

Okay. So this other expense that you mentioned 5%, 6%. So right now, it's INR 15 crores on a quarterly basis. You're referring to the same number, right?

[indiscernible]

The employee cost is INR 46 crores and other expenses of INR 40 crores on a hedging basis.

So Nikhil, you are referring to this INR 30 crore number, which will grow at a 5%, 6% rate, right?

Yes. There's not much of variable cost here, basically. Some very good cost is there, but it's not somewhere we get to partially right.

And sir, finally, did we see any decline in the international business in H1?

I'm not -- do we have the number right now?

No. I don't have the number right now, but we can take this call offline.

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

Congratulations for good set of numbers. On the domestic side, how is the situation going to? How are you seeing orders coming up? If you can throw some light on the domestic situation?

Vinay. Please take this content.

Mr. Vinay, hear this?

Can you hear me?

Yes, sir. Please proceed.

Yes. So domestic side, there is a very good order inflow and good inquiry pipeline also. So market is doing really well in the steam turbine segment.

Sure. And how do you see the domestic side of the business products in FY '24?

Yes. As Nikhil said, we did the highest business this year in the [ printer ] segment. And also, we have seen a very good year next year with some good -- 2 coal orders coming in. So we're expecting some good growth in the domestic market.

Sure. And if you can talk about the full orders that we have, how much revenue can be contributed towards?

Pardon me?

Yes. How much revenue can the 2 full orders that we have brought contributed to our total top line doing FX in the books?

About INR 50 crores.

It would around INR 60 crores.

Yes. Sure, yes. And you also talked about the nuclear power, some developments that you can talk a bit more about this.

Now we are approved by [ NTPC ] segment.

In our operation, of course, there is a large variety of products and a large number of projects that we have in the pipeline. but they're going to put up a large number of these power plants. So each of these power plants require a variety of highly specialized motors. So we are now approved and we are bidding for a large number of these specialty motors for nuclear power operation. In addition to that, they also require [ high speed ] power generators. And we are also approved for that. So as and when the nuclear plants ordering for this new equipment, we will surely win some of these orders. It's a good -- and it can be a very -- it's not a huge business, but the [ fairly big ] business with very good margins.

Sure. And maybe how big can this order be, let's say on an annual basis for us?

I'm not going to -- I can't give a number to that.

The next question is from the line of [ Reshad Conseda from Molecule Venture BMS ].

So I just wanted one clarification. Maybe my line is not so clear enough. So in the last quarter, you mentioned that for FY '23, you'll look a top line of around INR 890 crores. So that remains unchanged currently also. Correct?

On the consol basis, yes.

Okay. And the 20% field growth guidance that you gave, that is for FY '24?

Yes.

The next question is from the line of Manoj from Geometric.

Am I audible?

Yes, sir.

Okay. Sir, can you just go light on the new initiatives that you have...

Sir, there's a lot of static from your line. Mr. Manoj?

I can hear him, it's fine. I think we hear him. That's okay.

How is it? Is it better?

Much better. Okay.

Okay. So whatever like synchronous motor and all other things, new initiatives, they are more gross margin dilutive than our core business or similar?

Around similar, sir?

Around similar? Okay. And second, this nuclear, I don't hear it properly, is it domestic thing or exporting?

No, no, 100% pure domestic.

Okay. Can this turn into an export initiative also in future?

Not likely, sir. Nuclear business is -- it's going to be domestic, sir.

It could be domestic?

Purely domestic and only domestic.

The next question is from the line of Nikhil from SiMPL.

Am I audible?

Yes, yes. Yes.

Just 2 questions, sir. One is on synchronous motor. Now it's been a year, 1.5 years since we launched the product. Based on the performance and the costing, do you see that in a sustainable way, we can maintain a 15%, 20% market share in the domestic market? Or how do you see the opportunities and market share gain for us?

Market share it's in fact -- I think it really could be good -- we could be around 30% market share. And that would be a good achievement [ to be perfectly clear ].

Okay. And secondly, on the retail -- on the maintenance part of the wind turbine for our own installed in an competitors, we had launched this new initiative last year. So where we were looking at the refurbishment and interim. So any progress on that side? Have you won more orders or -- because I think a...

We have won more orders. We have won more order in the [ turbine repair ] business. It definitely increased our overall aftermarket business. I've not given the numbers to this, I'm targeting a number to this for next financial year. How much are we going to do on the overall aftermarket business. But thanks to the wind business, we have the [ turbine repair ] business. This year, we are doing the highest aftermarket business in the history of our company, and we are planning to grow this even further next year.

Okay. And lastly, in Europe, during the quarter, you mentioned that because of the issues which are happening, there is a lot of investment for ITP kind of projects and [ ways to gain ] a complete change in terms of the energy dynamics. Now if the situation starts improving in terms of the gas cost coming down and things improve, do you see this can sustain for 2, 3 years? Or is it more of a -- like is it more of a knee-jerk reaction because of the things which have happened in the near term and probably it will sustain -- stabilize at a much lower level? Just to get a sense how you are reading the things or what's the feedback you are getting over a longer period?

The gas infrastructure in rural has taken 30 -- 20, 30 years to date. And replacing the gas infrastructure will -- or even replacing a part of the gas infrastructure will take, say, not 30 years, but it will take at least 15 years to replace a part of it. It's such a huge dependence we have on gas. So this is not a knee-jerk reaction. They want to reduce the dependence on gas. It compromises the overwhelming part of the overall energy mix. Wanting to reduce it, they have to make big investments in other areas with a large number of megawatts, which have to be put into the market to replace this. It's not going to happen in 1 year or 2 years. So there's going to be -- just in the beginning of the cycle, I think it will continue at least for 5 to 10 years. We're just in the beginning of it.

Okay. And incrementally, our market share in [indiscernible] seasonal [indiscernible]?

Your voice is breaking, so I couldn't hear your question.

The question was that if you look at the [indiscernible].

Sorry, sir, your voice is breaking up. Mr. Nikhil is not able to hear you clearly. Your audio is breaking up.

Hello? Hear me now?

Yes. Now we can hear you.

Just one last thing. If you look at the incremental order flow, which is happening, are our market shares and incremental market share will be sustained? Like there are more new, other competitors or large -- any smaller players who are coming in the market? So are our market shares are sustaining? That's what I wanted to understand.

Sustained market share would have increased slightly. I mean we are seeing almost a 22% increase in the overall order book, 30% increase in the overall order book. So definitely, we will see a 22% overall increase in order book. So we see part of this market growth, part of it is increasing market share.

The next question is from the line of [ Roland from Goldfish Capital ].

I have 2 questions. One on the export side and the second one on the domestic side. I will start with the export part and where the last question ended in terms of market share. Now in the past, you have mentioned that there is still some apprehension amongst our customers to use our products, right? And that is, in a way, a limiting fact, despite the fact that our price and quality proposition is second to none. So just wanted to understand who are these competitors? And are we also facing some supply side challenges, which is helping us gain market share? Or I think has tracked some of these customers who had under -- earlier apprehension about using our products?

No, nobody is having any supply-side constraints anymore in the market. There is enough of steel and copper and other commodities in the market right now. Our competitors still remain [ Siemens, the BBBs ] all of the big guys in the market. So for us, that is a question of gradually taking away market share by convincing customers to buy our products. And we have a large number of references, and we are steadily working on overcoming those barriers. It's not going to go away immediately. I think it's still going to take some time. We're not a global brand like Siemens or BBB. So we still have a lot of work to do. But there is a lot of scope for us to grow. And this is our job. This is what we have to do to grow our sales.

That is very clear. The second question is on the domestic part. On the question of exports and whatever is going on macro, you mentioned that there is greater focus on captive power. Now in domestic also, I mean, India also, we have seen some power shortages during some of these seasons, right? So do think that the focus on captive is coming back, let's say, for example, some of the core industry of cement or metals? Are they looking to put a higher capacity of captive power and demand later to an extent on grade versus what they would have done, let's say, 2, 3 years back?

Yes. Nobody right now is going to put a greenfield or brownfield investment without total captive pipeline. Nobody. That's the situation in India today, and nobody can take up a decision for the risk even for the next 4 to 5 years. There is power shortage and volatility of power prices. So people who are putting in greenfield, brownfield pursuant to our core industry will put their captive power plants, and they're doing so.

Sure. And I think it's slightly working, let's say, 2, 3 years back or 4 years back and maybe were not a power deficit and there was some profit for some. Is that also what you are seeing on the ground there?

I don't know if power surplus is -- I never give the sort of surplus contracts. India is a power shortage country and will continue to be so for a long time.

Ladies and gentlemen, that was the last question. I now hand the conference over to management for the closing comments.

Yes. Thank you for being on this call. If there are some pending questions, we'll be happy to take them after the call on one-to-one basis. If you have any other queries, please get in touch with investor relation and we'll be happy to answer your questions. And we look forward to interacting with you at the end of the next quarter. Thank you very much.

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