Transformers and Rectifiers (India) Limited (532928) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Transformers and Rectifiers (India) Limited Q2 and H1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference call over to Ms. Krishna Patel from EY. Thank you, and over to you, ma'am.

Thank you, Iqra, and good evening, everyone. A warm welcome to all participants joining the Q2 FY '27 and H1 FY '27 Earnings Conference Call of Transformers and Rectifiers (India) Limited. Joining us today from the management team are Mr. Satyen Mamtora, the Managing Director and CEO; and Mr. Mehul Shah, the Chief Financial Officer, who will discuss the company's operational financial performance for the quarter and half year and address your questions thereafter. Before we begin, I would like to remind you that certain statements made during this call may constitute forward-looking statements. These statements are based on management's current expectations and are subject to risks and uncertainties that could cause actual results to differ from those expressed or implied. With that, I would like to hand over the call to Mr. Satyen Mamtora, Managing Director, CEO, for his opening remarks. Over to you, sir.

Thank you, Krishna. Good evening, everyone, and thank you for joining us today to discuss the performance of Transformers and Rectifiers (India) Limited for the second quarter first FY '27. TARIL's Q2 FY '27 performance reflects better execution improved capacity utilization and operating leverage across manufacturing facilities. As of 30th September 2026, our unexecuted order book stood at [ INR 7,275 crores ], up by 32% year-on-year, providing strong revenue visibility over the medium term. The link is executable over the next 18 to 24 months. During Q2 FY '27, we received order inflow of INR 1,169 crores 97% year-on-year growth over low base of last year this time. Major orders received during this quarter were first ever order of [indiscernible] power sector certain generated transformers for NPCIL, [indiscernible] units 5 and 6. marking the strategic adding to high-level infrastructure and high-value infrastructure segment. Received large transformer order from Mega Engineering and Infrastructure limited in August 2026, with execution scheduled over the next 35 months. Received [indiscernible] from AP Transco in August 2026, for Power Transformer manufacturing with deliveries planned within the next 13 months. Won the large order from [indiscernible] Value Corporation in October 2026 for manufacturing and supplying [indiscernible] new transformers to be executed in the next 15 to 28 months. Secured a large order from GETCO in October 2026 for ATM reacted [indiscernible] auto transformers with the delivery of next 24 to 36 months. This demonstrate the breadth of our capabilities across large power transformer auto transformers and contractors. We shall currently -- we currently have INR 21,000 crores of inquiry under negotiation of which bidding for 80% is domestic orders and 20% export orders, with the equal mix between the government and private customers in utilities and industrial customers. Other quarter updates. During the quarter, we successfully complete dynamic short circuit on three transformers, a significant technical milestone that values our products, our ability to withstand extreme electrical and mechanical stresses under all conditions in order in the strategic international started. Our ongoing platform manufacturing expansion at Changodar is near completion with the commercial production expected to commence around Diwali. The additional capacity will further strengthen our capability to execute our growing order book and support the next phase of the revenue growth. Backward project are progressing as per time line. In September 2026, we established a subsidiary in U.K. to strengthen our customer support and expand our presence in the U.K. and European markets. Over time, we plan to develop a local SMB and sales capability with the potential to evolve this operation into manufacturing base serving the region. Following our Q2 performance, we remain confident of achieving FY '27 guidance and continue to remain on track with our growth plans for the full year. Our focus for the remainder of the year of FY '27 will be our clear priorities, accelerating the of our existing order book and ramping up expanded manufacturing capacities. Progressing our backward integrated initiatives and maintaining discipline and sustainable ramping up and progressing our backward integration initiatives and maintaining simple and sustainable profitable growth. From an industry perspective, the underlying demand environment continues to remain supporting India [indiscernible] the significant investment of horsepower generation, transmission infrastructure. Renewable MFG integration and grid modernization, emerging areas such as data [indiscernible] liquification infrastructure and energy transition projects are creating additional sources of electricity demand and consequently, opportunities for the [indiscernible] industry. With our broad product portfolio, manufacturing capability to establish customer relationship and presence across more than 40 countries, [indiscernible] positioned to participate in the multiyear opportunity across domestic as well as international markets. With this, I hand over Mehul Shah, our CFO; [indiscernible] performance, managing results and have [indiscernible].

Thank you, sir. Good evening, everyone. I will take you through the financial performance of Transformers and Rectifiers Limited for the second quarter and first half of financial year '27. Let me begin with our stand-alone performance for the quarter. During Q2 FY '27, revenue from operations stood at INR 709 crores, 66% year-on-year growth and 27% quarter-on-quarter growth. Revenue growth during the quarter supported by improved capacity utilization and execution. EBITDA for the quarter stood at INR 114 crores, 203% Y-o-Y and 53% quarter-on-quarter growth. EBITA margin improved to 16.1% compared to 8.8% in Q2 FY '26 and 13.3% in Q1 FY '27. This reflects the benefit of higher operating leverage and improved utilization level during the quarter. Moving on, our performance for the first half of the year for H1 FY '27, revenue from operations stood at INR 1,268 crores, a growth of 35% year-on-year. EBITDA stood at INR 185 crores, a 47% year-on-year growth with EBITDA margin improving to 14.3%, from 13.4% in H1 FY '26. Coming to the balance sheet, our leverage profile remained comfortable as of 30th September 2026. On a standalone basis, total debt stood at approximately INR 575 crores, comprising long-term borrowing of around INR 125 crores and short-term borrowing around INR 449 crores. The debt-to-equity ratio stood at approximately reflecting a manageable leverage position as we scale operation and invest in future growth. Standalone cash and cash equivalents stood at approximately INR 77 crores as of 30th September 2026. In addition, the company continues to have access to other bank balances and unutilized QIP proceeds earmarks for its backward integration initiatives, providing funding flexibility for the planned capital expenditure program. Working capital remains a key area of focus. As of 30th September 2026, stand-alone inventory stood at approximately INR 654 crores, while trade receivables stood at around INR 1,053 crores, out of which INR 825 is current and rest is the noncurrent debt. Net working capital days stood at around 154 days, comprising inventory days of approximately 93 days, receivable days of around 117 days and payable days of approximately 56 days. The working capital cycle reflects the nature of the transformer business, which involves long manufacturing cycle, milestone-based billing, testing requirements and project linked customer approvals. We continue to focus on collection, inventory planning and milestone execution to improve capital efficiency as the scale of operation increases. To sum up, TARIL continues to operate from the position of financial strength. The growth in revenue and profitability during Q2 FY '27 and H1 FY '27, together with a manageable leverage profile provides a sound foundation. Our financial priorities remain disciplined capital allocation, tighter working capital management and the timely funding of capacity expansion and backward integration initiatives. Thank you. I now hand it over back to the moderator for the Q&A session.

[Operator Instructions] The first question is from the line of Harshit Sachdeva from limbus Capital.

Congratulations on a great set of numbers, so really impressive. Sir, could you just elaborate a bit more on the CIG orders and the [indiscernible] order that you received that part on I mean size and what are we supplying and who did we compete against? So did they greatly come to you? And second, a new company, [indiscernible] just got listed, I mean, so do we compete with them in any segment? So that's two questions, sir.

Yes. So sorry, I thought it couldn't get your name, could you please.

Sir, my name Harshit Sachdeva.

Yes, Harshit. So the NPC order for [indiscernible], we were competing with from 10 other large Transformer manufacturers. These are basically generated transformers for the nuclear power project. And as far as [indiscernible] concerned, yes, we do compete with them in the segments of [indiscernible]

Okay. Sir, on the [indiscernible] order, I mean, any MBA or any order numbers that you could give? Is it repetitive in the nature that now that you qualify?

Yes. Yes. This is repetitive in nature of native transformers. And the PCR is putting a few more projects of DKA power in India. So yes, it will be repetitive in nature and a rating of the transformer is 400 KV-plus.

Okay. And sir, just last clarification. I mean, if, let's say, INR 100 crores nuclear plant, I mean, I'm just doing a random number there, what would be the value of the transformer components of the goods that we supply on any new greenfield nuclear project?

So Greenfield new projects would be close to about 15% to 18%, the cost of the transformer.

Next question is from the line of Vignesh Aya from Sigman Investment.

Sir, congratulations on a great set of numbers. Just one question from my side. If you could share the mix of order in terms of how many -- how much percentage of the total outstanding order book would be 400 kV plus and before than [indiscernible]?

Yes, Mehul, please go on with the numbers.

Yes. Sir, roughly, we have around 55% of order, which is having a high voltage class. 55% to 60% is a high voltage class, 400 kV and above.

Okay. And what would that number be for quarter 2 FY '27 out of the total executed number?

So roughly, we have executed around 56% of the power transfer in this quarter. So ...

Next question is from the line of Mihir [indiscernible] from Nina Research.

I just wanted a quick clarification on our cash flow. Can you give some guidance from when can we expect positive free cash flow?

Mehul, please.

Yes, Yes. So see, currently, since we are into the stage of the capacity expansion as well as the backward integration, and we are targeting end of this financial year to start reducing our working capital cycle days and that will give us a positive cash flows.

What is the internal target of working capital cycle days, if you could share?

It would be roughly 120 days.

It should be below 120 days. We are trying to reach at 120 [indiscernible], we reach them. We would like to see close to about between 110 and 120 days this year.

Next question is from the line of Yash Gupta from Asit Kotecha Family Office.

I just want to understand on the inventory. How the inventory is moving now earlier in last two quarters? We have purchased a lot of inventories due to the pricing disruption due to wars going on. How are the things looking right now?

So see, things are looking sort of, say, similar right now. But as you are aware that we are putting our backward integration plans. And also, we have enough inventory for until this year quarter 3 this year. So we are pretty much [indiscernible] places in terms of manufacturing and expansion of capacity utilization.

And is that the copper wires and all those things, what we have purchased at a higher rate has been utilized and the billings and everything has been done? Or do you think maybe the -- some impact will be there on margin in next FY '28, '29?

No, I don't think there should be any impact on the margins because FY '28, '29, we should have our own that titin plant fully functional. So we will see a slight advantage there.

My next question is on the competition, how the competition intensity right now earlier, we have seen like a lot of your competition intensity was there. How is the thing going on right now?

See, like we said, that we have close to about INR 21,000 crores already in hand these are inquiries that have been tending to be finalized. So we are pretty much sure in the competition for I don't see there is a huge price war of loaning of margins by competitors. Everybody has orders in hand.

Okay. And this INR 21,000 crores, which you are talking about on which we have bid has been placed?

Yes. Bids have in place. Now impiries are all, and they should be finalized in some time.

Okay. And this INR 1,100 crores of order inflow in this quarter, is there anything, any exceptional thing? Or do we think like this will continue to flow in next two quarters also for this year?

Yes, it will continue to flow. And like we have been saying before, we are trying to limit ourselves to orders executed order book first, not beyond 2 months or 8 months. So we are trying to keep that in check.

Okay. So this INR 7,000 crores will be booked in the next 18 to 24 months. Is this correct?

Yes. Will be build, yes. Will be build in next 18 to 24 months.

Next question is from the line of Anubhav Mukherji from Preston Capital.

Sir, just one question. There was a clearance in sizes of some of the key areas that [indiscernible] the fourth quarter. So how is the situation now?

You are -- there is a lot of echo in your voice. Can you please -- it's not very clear.

Sir, just one question. Sir, in the past quarter, there was a flare up in prices of some of the key raw material like transformer or in CRG and also how is the situation now, like sequentially?

Mehul, please.

Yes, yes. So sir, the prices, et cetera, are still on the higher side. But what we have, we have a majority of order, which is having a price variation clause. So mainly does not affect our margin in a big way.

Okay. And so -- like do we have some like retention money for like any orders we have, like like is that part of our balance sheet?

Yes.

Okay. Can you quantify that?

It is the retention on roughly yes, retention money is always there in the order. So roughly, it is 5% to 10%. It ranges from different customers, but it can be from 5% to 10%.

And currently, what is the total amount?

I need to check, but roughly around it would be around INR 200 crores.

Next question is from the line of Deepak Poddar from Sapphire Capital.

So just first, I wanted to understand now this Changodar expansion is expected to come next month. I just wanted to know what is the capacity there? And what's the CapEx involved in this expansion?

So the capacity is close to about to 35,000 MVA. And CapEx Mehul, how much of the CapEx?

Yes, CapEx is around INR 150-odd crores.

INR 150-odd crores. So this will take our total capacity to [ 75,000 ]?

Yes, more than that. More than that, yes.

Okay. Okay. And what's the per MV realization generally on an average? I mean I understand it will be different for different type of transformers, but some average MBA per realization?

Mehul.

Yes, it is different for a power transformer distribution transfer. But on an average, we will be realizing around INR 7 lakh per MVA.

And sir, just wanted to understand now your all backward integration plan is expected to get completed by first quarter, right? And that would effectively mean on this expanded capacity, 80%, 85% backward integration. Would that be a right understanding?

Yes, yes.

Okay. Understood. And sir, what sort of valuation we can have in terms of cost benefit or a percentage to revenue, what sort of benefit we expect once all this backward integrated plant -- integration plan.

We are looking at 100 basis points to 300 basis point margin expansion through this backward integration.

And this will likely come by what -- second half of FY '28 or FY '29, this improvement?

So you will see entire firstly, it will cater the entire need of the TARIL and then do the third parties. So FY '28 and then the FY '29. So it will gradually increase.

Okay. But the full effect will be seen by FY '29?

Yes. Yes, okay, yes.

Okay. Understood. Understood. And on your -- this year, we are talking about 25% kind of a growth with a PAT margin of 9% to 10% rate. I mean given the growth that we have done, I mean, are we being conservative here because we are already at PAT margin, I think last 2 quarters, 11% plus, right? And you're still talking about 9% to 10% PAT margin for the entire year. So how should one look at?

So our target is to reach a growth of 25% and beyond. So we are keeping our -- it is the same.

Come again, sir? I didn't get you.

Our forecast is the same.

So you kind of maintained the forecast that you have been saying in 10%, 25%. Okay. Okay.

Next question is from the line of Vinil Shah from the line Roche.

Congratulations on a great set of numbers. I have two questions. I can just get the proportion of exposure in our order in place and the revenues for Q2 FY '27. And second was, if you could just give us some color about how much price rise has been taken in Q2 FY '27.

Mehul, please.

Yes. So in Q2 FY '27, our export is around 8% of the total revenue. And in the order book also, we have around roughly around 15-odd percentage with the export. And mainly this quarter, this margin expansion as well as revenue, which has come from the higher capacity utilization of the Moraiya plant. So margins, et cetera, is on the similar lines what we have guided, around 16-odd percent of EBITDA.

And sir, any price rise we have taken in this Q2 FY '27.

No.

What do you mean by price rise?

Since the raw material that have [indiscernible] the less data prices, if we have passed [indiscernible] customers?

Every quarter, it is a phenomena. So every quarter, whatever we do the billing to the customer, we pass on the price variation also. So this is not a onetime thing or anything. It is every quarter whichever billing we do, we also do the price variation billing also.

Yes, sir. I just wanted to understand that how much of the revenue growth can be attributed to the price hike?

Mehul.

Roughly 7% to 8%.

Next question is from the line of Derek Pande from ICICI Securities Limited.