Transformers and Rectifiers (India) Limited (TARIL.BO) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to the Transformers of Rectifiers India Limited Q3 FY '26 Conference Call hosted by Nuvama Wealth Management Limited. Please note that this conference is being recorded. I now hand over the conference to Mr. Vikram Datwani from Nuvama Wealth Management Limited. Thank you, and over to you.

Thank you. Good evening, everyone. On behalf of Nuvama Institutional Equities, I welcome you all to the Third Quarter FY '26 Results Conference Call of Transformers and Electrifiers India Limited. We are joined today by Mr. Satyen Mamtora, Managing Director and CEO; and Mr. Chanchal Rajora, Director, Finance. I would now like to hand over the call to the management for their opening remarks. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. A very warm welcome to all of you, and thank you for joining us today for Q3 FY '26 earnings call. I'm Satyen Mamtora, Managing Director and CEO of the company. We truly appreciate your time and your continued engagement with our company. It is a pleasure to connect with you once again as we continue our journey for transformation, disciplined execution and sustainable growth. Earlier today, our Board of Directors approved financial results for quarter ended December 31, 2025. These results have been duly submitted to the stock exchanges and are available along with our investor presentation. Let me begin by sharing some of the key highlights and strategic developments from the quarter. In Q3 FY '26, the company delivered revenues of INR 704.21 crores with an EBITDA of INR 11 crores. The performance during the quarter has been exceptional and marks a clear inflection point in our operational momentum. Improved execution, better project conversion and enhanced capacity utilization and tighter cost controls across the organization have contributed meaningfully to the performance. These results clearly demonstrate that we are back on stride and well positioned to achieve our stated revenue profitability objective for the year. Particularly significant milestone during the quarter was the receipt of exceptional HVDC repair order from Power Grid. This order is strategically important as it makes TARIL the first Indian origin company to receive HVDC repair order, underscoring our growth, technological capabilities, engineering credibility and trust from marquee customers. This achievement reinforces our position in the high voltage and advanced transformer segment and opens new long-term opportunities in HVDC ecosystem. As communicated earlier, during the first half of the year, we consciously moderated fresh orders intake. This was deliberate as strategic decision aimed at aligning with new orders with extended delivery schedules, strengthening execution discipline and ensuring optimal capacity planning. I'm pleased to share that this approach is now yielding results. Looking ahead, we expect strong order inflow during the second half, supported by a robust and diversified UEOB close to INR 8,000 crores across domestic and international markets. In parallel, we are making steady progress on our backward integration, which is a critical pillar of our long-term competitiveness, margin sustainability and supply chain resilience. We have planned 6 backward integration facilities and execution is progressing as per schedule. The CTC plant is targeted for commissioning in FY '26, '27, followed by press facility in quarter 3 FY '26, '27 and RIP bushing plant in quarter 4 FY '26-'27, along with the first phase of our fabrication facility during the same period. I'm happy to share that civil work of all these facilities has already commenced and equipment orders are firmly in place. These initiatives will significantly announce our in-house value addition, reduce external dependencies and improve cost efficiency over long and medium term. Alongside backward integration, we also continued to expand our core manufacturing footprint through organic capacity expansion. Our Changodar facility expansion is on track and completion on quarter 1 FY '26, '27. While Moraiya is expected to be operational in quarter 2 FY '26, '27, these expansions will support higher volumes, improved execution flexibility and enable us to cater to strong demand visibility, we see across all our order pipeline. For the full financial year, we remain confident of delivering at least 25% revenue growth over FY '25 we are targeting revenues approximately INR 2,600 crores, along with EBITDA margin of around 16%. This confidence is underpinned by strong execution visibility healthier order mix benefits from operating leverage and structural improvements that we are making across the organization. Equally important, we continue to strengthen our governance framework and internal processes, corporate governance, compliance and transparency remain at the heart of everything that we do. I am particularly proud to highlight that we have declared our audited financial results within 8 days of quarter's close, reflecting our processes, discipline and commitment to best-in-class disclosure standards. Before I conclude, I would like to sincerely thank our customers for their trust, our employees for their dedication and resilience, our suppliers and partners for their continued support, our Board members for their guidance and the most important, our investors for their continued confidence in our long-term vision. Together, we are building future-ready organization with the ambition to emerge as a global leader in the transformer industry. I now shall invite Chanchal to take you through the financial performance in greater detail. Chanchal, please.

Good evening, everyone. Thank you, Satyen sir, for your insight, for leadership remark and for setting the strategy contest stop for the quarter. It gives me a great pleasure to address you that today as we discussed our quarter 3 FY '26 performance, a quarter that clearly reflects the strength of our execution capabilities and resilience of our business model. and the benefits of the strategic initiatives we have been implementing over the past several quarters. I'm pleased to report that and quarter 3 has been a strong quarter for the company, marked by a sharp improvement across all the key financial parameters. Revenue on a stand-alone basis from the operations stood to INR 704 crores as compared to INR 428 crores a quarter to FY '26. The growth was driven by the improved supply side normalization, higher plant utilization and timely execution of the projects across the key segments. The momentum seen during the quarter relates to our confidence in a strong second half of the year. EBITDA for the quarter comes to INR 114 crores with a margin expanding to 16.18%. The margin improvement was preliminarily led by the better operating leverage a higher share of execution from the healthy margin orders and early benefits of the cost optimization. Profit after the tax is INR 271 crore reflecting not only the strong operating performance, it's also the disciplined financial management across the organization. Further, on a consol basis, remaining of the revenue for the quarter stood INR 737 crores against the INR 460 crores during Q2 FY '26, EBITDA stood INR 229 crores and pared to INR 76 crores. Importantly, quarter 3 also marks a turning point in terms of the structural margin improvement. We are confident that margin sustainability will improve going forward. The backward integration facility under developments are expected to further and as the cost efficiencies and reduce external dependency over the medium term. Looking forward, we enter to Q4 and the next financial year with the strong visibility. Our order book payments, robust execution pipeline are healthy and the plant utilizes levels are expected to remain elevated. For the full year FY '26, we've been confident of delivering the revenue of around INR [ 2,600 ] crores, along with the EBITDA margin of around 16% to 17%. Beyond 2026, our focus remains on the profitable growth, return ratio improvement and disciplined capital allocation. Before I conclude, I would like to express my sincere appreciation to our team across operational finance, supply chain and projects for their relentless focus and execution excellence. I would also like to thank our Board and investors for their continuous trust and support as we work towards building a strong more resilience and a future-ready organization. With that, I conclude my remarks. Thank you once again for joining us today. We're now happy to take your questions. Thank you.

[Operator Instructions] The first question is from the line of [indiscernible] from Global Consignment Research.

So I just had a few questions in mind. Last quarter, I remember you were telling that we had about a deferment of INR 100 crores in revenue because of the monsoon. And if we adjust this quarter's revenue to that, the adjusted revenue growth comes to about 13%. Is this the normalized that we're looking at going forward?

It was not INR 100 crores, it was INR 70 crores, INR 70 to INR 72 crores? And that benefit, we've got it in this, but also we are around INR 40 crore of the same revenue, which we could not be able to take in this quarter also.

Okay, sir. Okay. And one more question on that. And if we are targeting a $1 billion revenue by FY '28, '29, it means that we are targeting about 48% CAGR in top line from the current level. Can you help us understand what will drive the growth from here?

Look, Vijay, we have been guiding about the $1 billion or INR 8,000 crores is revenue for FY '28,'29. This has got the various factors into that, not only the growth of the transformer business, but also the growth of the backward integration facilities what we are putting up. The backward integration facilities itself are going to give us a robust business as well as the growing demand of the industries is going to give us the user amount of the new businesses. As we see that today, we are at around INR 4,000, INR 5,500 crores under execute order book and by close of this year, we'll be having around INR 8,000 crores of order book and we expect the same growth is in coming years, and that is driving us for that.

Okay, sure. If I may just squeeze in one more question. May I?

I would appreciate if you can join again because there are lots of people in the line.

The next question is from the line of Manish Ostwal from Nirmal Bang Active Private Limited.

My question on the -- our order book and the inflow number. So I'm confused with that number. So like -- it is mentioned Q1 number because Q1 is also INR 665 crores only. So the typo error or you can confirm this quarter 3 order inflow was INR 665 crores only?

It is INR 665 crores. There's no typo error.

Okay. Sir, if you look at the order book of last quarter, it is INR 5,478 crores, and we executed the order revenue in this quarter is INR 737 crores. So if you knock off that and take the closing order book, the order inflow works out to INR 708 crores. So why this is in the mathematics?

So this is not a mistake in mathematics. Basically, when we do the order book, we have -- there are certain price variation factors also there. And there are certain -- the bought-out items there, which generally does not reflect into the order books. That is why this difference comes.

Okay. And lastly, sir, on this order book, order pipeline, which was in quarter 4 was INR 22,000 crores. Now it is INR 16,500 crores. And the YTD basis compared to last year 9 months versus this year, 9 months, the 18.4% decline, the order pipeline is down by 25%. So how do you see the visibility and where will be ending the order book, sir?

Manish, we have -- as I pointed out in my speech also, we have taken a deliberate decision that we sell pace ourselves in taking an inflow of orders so that we do not have our order book beyond 18 months. We want to limit ourselves to an order book of 18 months. Beyond 18 months, it is not very viable because we have seen in the past also, we faced some issues. So 18 months is where we are limiting ourselves at 18 months is the highest time limit where we want to execute a certain order. So we have been pacing ourselves in terms of taking orders and also pacing in terms of new capacity that is going to come. So we are very confident that with the -- when we closed this year, we will have INR 8,000 crores order book in hand.

The next question is from the line of Samarth Khandelwal from ICICI Securities.

Am I audible?

Yes.

Congratulations on the HVDC repair order. May I know going ahead, once we complete the order, which technology of HVDC would we be bidding for?

It will be our own HVDC indigenously, mainly HVDC. So currently, we are preparing this transformer. Once we have to prequalify for any tender that comes in future. So once we repay this transformation, which has successfully been commissioned, we shall qualify for our own technology of HVDC.

So right now, there is LCC and VSC based. So it will be a different one from that.

Yes.

Okay. Sir, my next question is, if you could list out the capacity that we have right now. And when and how much would it be getting commissioned? If you could just confirm that one.

Look, at present, we have the capacity in our Moraiya plant is around 27,000 MBA. Changodar is around 12,000 MBA and Odhav is around 1,200 MBA. So that is our capacity at this moment. And the capacity now, which we are going to add up in the next financial year is 15,000 MBA in Changodar in quarter 1 and 22,000 in Moraiya in quarter 2.

Okay, okay. And sir, lastly, how does the prices or increase in the commodities will affect our margins going ahead?

We have the price variation. Most of our orders are protected by price variation clause. So we shall be protected but it is, again, one of the reasons why we do not want to book our sales beyond 18 months. So we are protected with price variation clause. So there is no problem there, but we still want to protect our -- we still want to not take orders beyond 18 months.

Basically, the reason behind that is that we don't want to block the capacities at present when we see the good business and the higher margins. So we just want to leverage on that.

The next question is from the line of Vedant Sarda from Nirmal Bang Securities Private Limited.

My all questions have been answered.

The next question is from the line of Akash, an Individual Investor.

Sir, congratulations on very good results. I wanted to understand your views on like the current rumor or the news, which is going on. Basically, routers have seemed that the Chinese companies would be allowed in power sector or may be allowed to participate in the electricity or power sector related business. So my question, I think at this stage, it will be difficult for you to comment whether that come through or not. But my question is on the price competitiveness like how well we are positioned domestically and globally? And how do you see it like if this rumor comes actualized in a few months, how well prepared?

Akash, from what I have read, the Chinese companies will still have to manufacture in India. So there is only one Chinese manufacturer by the name of TBA who is operating in India in the transformer industry. And they are pretty much booked themselves with orders from Adani and Reliance and other companies, other EPCs. So I don't see there much -- that much affecting us in the long term or in the short term.

And sir, my second question was on the need of Mr. [indiscernible] recognition coming through and Mr. Satyen Mamtora stepping forward. So what is the management plan going forward? Like would Mr. Satyen continue? Or would you look for external resources for hiring.

We shall -- I shall continue as the CEO and the MD of the company till such time that we decide that we are ready for a CEO now.

The next question is from the line of Amankumar Jain from FinWave Global Opportunities Fund.

So sir, congratulations on strong set of numbers. In the last call, you mentioned a shortage of Bushings that led to supply chain disruptions. You have indicated that your new facility is expected to become operational around June this year. So could you share what capacity you're targeting initially?

So we are targeting -- you're talking in terms of number of bushings or KV or bushings?

Both, sir.

SS we are -- in the first phase, we are going up to 245 kV bushings. Then we are working on way forward in the second year of manufacturing to 400 KV IP bushings. And we are close to about 7,000 bushing in the first year of operation.

Okay. And sir, also, as per my understanding, acceptance and qualification of such critical components usually take significant time. So how should we think about ramp-up and customer approvals in this context?

I think there is one caveat there. If we start getting our bushings tested and -- it is just a test type test that we have to do. Our bushings pass all those type tests, we should be we should be approved by all -- our OIP bushings currently are approved by almost all electricity boards and PGCL also. So getting RIP pushing approval is not going to be very difficult for us. And if you look at in terms of the wherewithal to get the approvals, we also have that. In terms of -- we are a transform manufacturer, there is a certain credibility behind tail. So we have all that wherewithal also in terms of transformers in terms of bushings.

Up until what time do you expect an optimal capacity utilization?

By second year of operation, we should be at 70% to 80% of capacity utilization.

The next question is from the line of Sandeep Agarwal from Naredi Investments Private Limited.

Sir, my question is what is the cash flow position for 9 months? A 6-month cash flow operation is the cash from the operations is minus INR 34 crores. So what is the cash flow question?

Sandeep, we are in the cash flow positive at this moment, right? I don't have the right figure right now to give you, but yes, around INR 30 crores to INR 35 crores is on the VR projective. Apart from that, we have around INR 275 crores of the cash deposits with the bankers. So that way we are quite okay in that way.

Okay. Sir, my next question, what is our margin visibility in the next 1 to 2 years? What is [indiscernible] margins...

Margins will stay stagnant at between 15% to 16%. We don't see much variation in margin, though only variation that can happen is 1% or 2% in margins. That is in terms of our operational excellence that we are looking at. So that is the only place where we would be able to get a better margin. Otherwise, the 15% to 16% margin is where we will be at.

Okay. And sir, just last...

Sandeep, I just had up into that, that 15% to 16% margins, which what MD sir is mentioning is on the product side. And once we will work out on a better operational efficiency and better leverage of the resources, the margin is going to be increased, as you said, by around 200 basis points.

Okay. Sir, just last question related to the industry. So what is the lag time between the -- between order and supply? Just want to know currently 3 months, 2 months...

The lag time is close to between 24 and 28 months. We want to bring it down back to 18 months so that is the reason why we are, again, being very cautious now. So currently, the lag time is around 24 months.

The next question is from the line of Anupam Goswami from SUD Life.

Congratulations on good set of numbers. Sir, my first question about the expansion in Changodar and Moraiya. I believe it has got delayed by further by 1 quarter now that we are seeing the first quarter. And on that note, given the order book, shouldn't we be able to execute the entire order book by way in 1 year, I mean FY '27, given our now expanded capacity by then?

It will take some time. Very honestly, you will get -- you will expand the capacity in terms of manufacturing of transformers. So where will you get the CTC from where you get the bushing from where will you get the CRGO from. All that capacity is still not fully capable to cater to whatever expansion that we are doing. So it will take time to gear up again to -- for us to achieve what we want to achieve. And the best thing for that is put our backward integration plans to come into action very soon.

Okay. So current order book is, again, about 18 months of execution time?

18 to 24 months, not 18 months, 24 months.

And sir, just last question on this. You mentioned 15% to 16% margin. And then 200 basis points on improved above that due to backward integration efficiency?

Yes, yes.

So hopefully, by FY '28, I think the expansion will also come into good utilization and that where we can see some.

Yes, yes.

The next question is from the line of Venkatesh, an individual Research Analyst.

My only one question I have. How would the World Bank [indiscernible] think? Can throw some light on it because they had given a deadline until this, if I'm not wrong, till January 15 or something like that.

First of all, I'd like to tell you that there is no department from the World Bank as of now on us. Second point is that World Bank has given us the time line to reply the inquiries by 12th of January. We are filing our reply in this particular week, probably today, only we are filing the reply. And we hope that in next 2 to 3 weeks' time, this will be settled.

The next question is from the line of Nikhil Abhyankar from UTI Mutual Fund.

Just one question. I'm not sure if anyone has asked. Sir, there are reports coming in today that government is thinking of allowing our Chinese imports power for power equipment. So just wanted to understand your views on this. There is any traction to this idea or is the government actually thinking of allowing Chinese imports?

Nikhil, so I just answered that question earlier. Probably you were not there on the queue. Under any circumstances, these Chinese manufacturers will have to make transformers in India. And currently, there is only one plant, one Chinese plant, which is making transformers in India. And that Chinese plant already has enough -- is also fully booked for next 16 to 18 months. So I don't think there is going to be a lot of variation in anything in terms of transform manufacturing.

And I also add, Nikhil, these remotes keep coming actually.

It's not rumor. It is...

And they will also take -- one more thing is there. If any new foreign player is coming, they need to take the approvals of the product. That will also take plant and product both. That will take time.

So at least for 1 to 2 years, you believe that, that won't be a problem.

Yes.

The next question is from the line of Balasubramanian from Arihant Capital.

Sir, what is the current revenue contribution and the growth outlook for transformer renewable and green hydrogen applications?

Okay. Then first of all, green hydros and application demand actually has not started coming up in India as of now or anywhere in the world also. Probably we are a little away from that. So once that will start coming up, we would be able to tell or anybody would be able to tell more about that. Renewable energy, our portion is increasing now. And once our Canada facility will be in place because we are putting up a dedicated line for there, then we have -- we will have a major higher portion of renewable energies from that.

So my second question, could you please share our working capital situation in Q3 and goes to be net debt free in the next 18 to 24 months. So what is that planned mix of operational cash flow or any equity raises are affecting to achieve these debt free detail?

As working capital is concerned, we are in a little better position than what we were in the quarter H2, we were having a working capital of around, say, around 125 days or something. We are now nearly up to around 120 to 22 days time. And second portion is this net debt free, yes, 18 to 24 months is the time line, which we wanted to become net debt free and we are working on that. And first and foremost, emphasis on that is to through the internal resources. And our working capital, I understand you need to understand one thing. It is a heavy capital intensive product. So working capital has to be a little bit higher side and particularly when we are importing the materials, then this will be on the little higher side. Though our goal is to reach 200 days level. But we will see that how do we reach into those levels. But yes, we will be keeping by this year-end, should be some -- we should be near to 120 days levels.

On the debt side, sir? Actually, our goal is to be net debt free in next 18 to 24 months.

As I said, that is, in fact, where we are working on that. We will be a debt free in the next 18 months' time.

Okay, sir. Sir, my last question, I think only to qualified vendors for a specialty furnace transformers. And why only 2 qualified enters in this industry? And what are the technical barriers to increase here and what is the opportunity size and how sustainable the pricing power of the qualified under?

So furnace transformers, the load rating on these furnace transformers is very different. So the furnace starts with very high power, high current and the voltage is very less. So a lot of people avoid taking this risk and sudden jerks to the transformers. And that is the reason why -- and the other thing is if a furnace transformer is the whole furnace production goes -- and with the investment that people have done in their factories for melting steel, it is very difficult for people to cross that barrier and let anybody else in. That is the reason why we are able to sustain in this market because of our credibility and quality of our transformers.