Triveni Engineering & Industries Limited (TRIVENI) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 and 9 months FY '22 Earnings Conference Call of Triveni Engineering & Industries Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar from CDR India. Thank you, and over to you, sir.

Good day, everyone, and a warm welcome to all of you participating in the Triveni Engineering & Industries Limited Q3 and 9 months FY '22 earnings call. We have with us today on this call Mr. Tarun Sawhney, Vice Chairman and Managing Director; Mr. Suresh Taneja, Group CFO; Mr. Sameer Sinha, CEO, Sugar Business Group; as well as other members of the senior management team. Before we begin, I would like to mention that some statements made in today's discussion, may be forward-looking in nature, and the statement to this effect has been included in the invite, which was sent to everybody earlier. I would also like to emphasize that while this call is open to all invitees, it may not be broadcasted or reproduced in any form or manner. We will start this call with opening remarks from the management, following an interactive Question-and-Answer Session. I will now request Mr. Tarun Sawhney to open the call. Over to you, sir.

Thank you very much. Good afternoon, ladies and gentlemen, and welcome to the Q3 9 Months Earnings Call for Triveni Engineering & Industries Limited. The overall performance of the company during the 9 months ended December 31st has been quite satisfactory, keeping in mind the COVID related challenges and the climatic conditions during the start of the sugar season '21-'22. The increase in cane prices by INR 250 a tonne for the sugar season under review, have been largely offset by the recent increase in sugar prices, and for the 9-month period, the company's gross revenues from operations stood at INR 3,501 crores, a with a profit after tax of over INR 315 crores, which is a growth of approximately 50% over the corresponding period of the previous year. The net turnover declined by 1% in the quarter and 8% in the 9-month period, due to lower sugar sales volumes, at 18% and 22% in the aforesaid periods. No exports have taken place with respect to season '21-'22, and all other segments have registered increased revenue in turnover, except for the 6% lower turnover in the water business for the 9-month period. I must mention that the lower sales volumes are directly relevant -- directly related to the monthly sales quotas that are received from the Department of Foods. And given the fact that the 2 periods of comparison have had greater production in Maharashtra and in the South, that relates to somewhat of an explanation to the lower allocation towards South India. We remain excited about our Engineering business, which has largely overcome the impact of COVID on its operations and the consumer base -- and the performance of the customer base has improved tremendously over the past quarter. A broad-based economic recovery, which is underway, is likely to keep demand strong for both our Engineering businesses. Looking at the sugar business, India Sugar production, for sugar season '21-'22 is estimated to remain at 31.45 million tonnes, with a diversion of 3.4 million tonnes for ethanol production, by means of sugarcane juice or B-heavy molasses. This is 64% higher than the previous season. We witnessed a delayed start to the sugar season '21-'22 due to an extremely high rainfall in Uttar Pradesh in the month of October. However, the improved weather conditions over the last month or so, and what we forecast hereon, refacilitated uninterrupted crush and improved recoveries as the season continues. The company continued to pursue the change of varietal balance and vastly reduced our dependence on the Co-0238 variety. Sugarcane crush in quarter 3 stood at 2.49 million tonnes, with a recovery of 10.08% after the diversion of sugar in B-heavy molasses. The gross recovery before diversion was 10.97. The distillery segment continued its strong performance, driven by higher sales volumes and realization prices due to improved product mix. Owing to some approval delays, inclement weather and COVID related constraints, we are now expecting the first tranche of the 220 KLPD distillery expansion to commence by March of '22. I mentioned the fourth quarter, so basically, the 250 KLPD facility will be in production in March of this year. The balance 120 KLPD, which was expected to be operational during Q1 of fiscal '23, that remains very much on target in quarter one of fiscal '23. The company's overall capacity after those expansions will rise to 660 KLPD. The aggregate sugar and distillery segments, including the quarter and 9-month period, achieved an increase in profitability of 22% and 12%, respectively. There's been a substantial increase in sugar pricing in the quarter, which has helped sugar operations maintain the profitability. In respect to distillery operations, both sales volume and high realization prices have contributed towards an increase in profitability. Turning to Engineering business; the businesses have reported a 12% increase in turnover, primarily driven by the Power Transmission business. Both Power Transmission and water have registered marked improvement in profitability and have ended the quarter with an order book of INR 1,808 crores, which is a reasonable increase over the last quarter [indiscernible] certainly over the previous corresponding quarter. The Engineering businesses have reported strong revenue increases of 38% and 12% and profitability of 114% and 76% in the quarter and 9-month period. Looking at the financial highlights of the quarter; as I mentioned, our EBITDA margin for the company stood at 19%, which was 4% higher than the 15% of Q3 fiscal '21. The total debt on a stand-alone basis for the company stood at INR 525 crores versus INR 550 crores of the previous corresponding quarter, and this INR 535 crores comprised of term loans of INR 385 crores and almost all such loans were with interest subvention or at subsidized rates of interest. The cost of funds average for the company stood at 4.17%. We can expect this average to go lower in subsequent quarters, as the rating of the firm has improved as we announced during the past quarter, and we benefit from better rates in the market. A more in-depth analyses of our businesses, if we turn to the sugar business and review it, during the October-December quarter, the company crushed 2.49 million tonnes of sugar, as I mentioned, which was 11% lower than the previous year. The gross recovery, if we normalize recoveries and convert everything, without B-heavy or raw sugar, stood at 10.97% for the quarter, which was 0.4% higher than the previous corresponding quarter. During the quarter, we also dispatched 2.2 lakh tonnes of sugar, which was 18% lower than the previous corresponding quarter. However, the realization price stood at INR 36,452 per metric ton, 11% higher than the previous corresponding quarter. As I mentioned in my opening remarks, there was expected rainfall in the month of October. And that, of course, resulted in the lower sugarcane crushed. However, we believe that during the course of the year, it will certainly make up for the loss in crush to a better daily crush capacity of the factories and a better performance this year versus last year, and we anticipate that we will be ending our total crush numbers a little bit ahead of the previous year. Looking at the quarter that has gone by, the lower sales volumes were certainly offset by improved realization prices, and this was on account of the amount of export that was entered into from across the country. We ended the quarter with sugar inventories of 26.21 lakh quintals, valued at INR 33.7 per kilo.

Requesting all the participants to please stay connected, while we reconnect the management. Ladies and gentlemen, the line for the management is reconnected. Thank you, and over to you, sir.

My apologies for the disconnection. As I was mentioning, the cogeneration operations of the company achieved external sales of INR 33 crores during the 9 months of fiscal '22 against INR 39 crores in fiscal '21, a decline of 16%, primarily due to the lower operating days. Sugar prices -- recent sugar prices on the yesterday, stood at INR 34.25 per kilo for sulphitation sugar and INR 35.5 per kilo for refined sugar. This large delta for refined sugar, certainly augurs very well for the company's production of 45% of refined sugar across its sugar factories, and we will certainly look at improved quality of sugar, when we look forward to the next sugar year, from Triveni Engineering. If I turn to the industry scenario, for the domestic industry, as I mentioned, we are looking at a sugar production of 31.45 million tonnes. However, the estimated production in Uttar Pradesh is expected at just above 10 million tonnes, to 10.18 million, according to survey, which is almost 1 million tonnes lower than the previous year, and this is due to lower sugarcane yields, recoveries, climatic factors and larger diversion towards ethanol. It is estimated that 1.25 million tonnes of sugar will be diverted towards ethanol in Uttar Pradesh, compared to 0.69 million tonnes last year. So net-net, the overall production of sugar or the sugar value for Uttar Pradesh could still be slightly down compared to last year. Maharashtra is expected to produce 11.7 million tonnes versus 7.65 million tonnes produced in the previous year, and this is primarily due to better yields and better recovery. Maharashtra will divert 1.13 million tonnes of sugar to ethanol is our expectation, versus 0.71 million tonnes last year. Similarly, for Karnataka, we expect production of 4.5 million tonnes of sugar versus 4.47%. So broadly, the same year-on-year. However, we expect the mills to divert 0.74 million tonnes of sugar towards ethanol versus 0.5 million tonnes in the previous year. With no export assistance announcement for the sugar season '21-'22 our estimation for exports are between 5 and 6 million tonnes. We have [ saved ] about 4 million tonnes of contracted values as of today, but the 5 million to 6 million tonnes is broadly in line with the government's expectation of 6 million tonnes, but lower than the 7.1 million tons in sugar season '20-'21. Of course, that sugar season was aided by export subsidy. We must note that during Q3, we've seen fairly buoyant international market prices. I'm going to cover that, and that is really assisted the bulk of this contracted value of over 4 million tonnes of sugar. Turning towards ethanol, the government of India has announced for the sugar season -- for the season starting December 31 till November 22, an increase of almost INR 1 in the price of B-heavy molasses to INR 46.66 per liter, an increase of INR 1.47 per liter for B-heavy ethanol from B-heavy molasses to INR 59.08 per liter, and ethanol and sugarcane juice has increased by INR 0.80 per liter to INR 63.45. Ethanol from maize and damaged food grains stood at INR 52.92 per liter and ethanol from surplus rice supplies available through the SPI route stood at INR 56.87 per liter. The increases bodes well certainly for the overall ethanol program, the outlook of the ethanol program for the nation, but also for the sugar industry. The oil marketing companies have allocated 369 crore liters of ethanol for supply during the ethanol year, against the requirement of 459 crore liters to meet the 10% blending target that has been set by the Government of India. 41 crore liters has been lifted up to 16th of Jan '22. The average blending percentage for the country till the 16th of January stood at 8.43%. As you all know, the recent announcements of an additional excise duty on non-blended petrol, augurs very well for this industry. In fact, it points very clearly, to the government supporting the 10% blend target for this year and beyond 20% by 2025. I'm happy to discuss this further, when we come to the Q&A part of this conference. Looking very briefly at the international sugar scenario, we can see that there's a deficit in the '21-'22 season of 3.9 million tonnes of sugar, which is higher than the deficit in the previous year of about 1.4 million tonnes. This, combined with the fact of greater diversion towards ethanol in Brazil, has resulted in quite a lot of buoyancy in Q3 in international sugar prices. However, since then, we've seen both New York and London have come down quite substantially. We've seen a great [indiscernible] impact. As of last night, New York close stood at $0.1793 per pound, whereas London White stood at [ 489 ] per tonne. Now this is certainly below the prices that were prevailing in the last quarter, and definitely below the prices where Indian sugar was contracted for export, and this was all without any subsidy. And so if we are to see any more sugar to be contracted, beyond the over 4 million tonnes that has been contracted, we will need to see some amount of buoyancy and some amount of appreciation in international sugar prices. However, with 8 months to go before the end of the sugar year, I think we stand at a very, very good scenario for additional export. Turning towards our alcohol business performance; the production was 3% lower in this quarter versus the previous corresponding quarter and stood at 34,713 kiloliters. The sales was of course higher at 26,600 kiloliters, 18% higher than the previous corresponding quarter, with an average realization of INR 55.2 per liter against 16% higher quarter-on-quarter. The higher sales volumes and improved prices due to the product mix, have led to a stronger growth in turnover. During the quarter, the company produced 86% of ethanol from B-heavy molasses, compared to 43% last year. Likewise, ethanol produced from B-heavy menaces constitutes 88% and 80% of sales volume in the quarter and 9-month period. This year, Sabitgarh sugar unit is also following B-heavy molasses. It followed C-heavy molasses last year. The company, under its alcoholic beverages vertical, started producing IMIL towards the end of Q3 fiscal '21 at its bottling facility in the premises of its existing distillery in Muzaffarnagar. The company has expanded its distillation capacities, as you know, and we're expecting that by March, 160 KLPD will be operable at Milak Narayanpur, which is a flex fuel capability to operate with multiple feedstocks, and the 60 KLPD grade facility within our existing distillery complex of Muzaffarnagar. The estimated CapEx that I've mentioned to you in the past stands at INR 280 crores for these 2 projects. In Q1 of fiscal '23, we expect the further expansion from 540 KLPD to 660 KLPD and this would be through-to to a low capital cost incidental expansion, and some debottlenecking at our existing 4 distilleries. Turning quickly to our Engineering business; the Power Transmission businesses had an [ excellent ] quarter under review, with revenues increasing by 66% to INR 35.41 crores and PBIT increasing by 96% to a shade under INR 11 crores. It's important to note that the order booking increased to INR 88.5 crores, a 163% increase, this is our highest order booking in any Q3 in our history, and the closing order book stood at approximately INR 214 crores. This includes long duration orders and INR 42 crores of orders received during the quarter. And this INR 42 crores is defense orders received during the quarter, which will be executable in subsequent years. The operations during the 9 months have been hampered, and even during the quarter, through [indiscernible] state lockdowns, they have been hampered, yet the power transmission business has reported excellent revenues and profitability. The scale of operation and cost optimization has been the primary result for this performance. Turning to our water business; we've seen a 28% increase in revenues to INR 77.3 crores in the quarter, with an improved PBIT of INR 12.1 crores 133% improvement versus the previous corresponding quarter. We have received a very healthy INR 133 crores worth of orders, which is one large project plus some equipment orders during this quarter. The closing order book stood at a shade under INR 1,600 crores. The above results are on a consolidated basis, which includes our SPV executing the Mathura project, awarded under the Namami Gange program. The profitability is due to better cost control and certainly due to exquisite quality execution, in both areas where the company has made a great deal of emphasis, given the fact that over the last 7 or 8 quarters, we've seen a fairly tumultuous rise, lots and ups and downs with respect to execution, COVID, et cetera. And I think this augurs very, very well for the water business for the future. As far as the outlook of our businesses are concerned, as for the sugar business with stocks, closing stocks estimated at just about 6.5 million tonnes in the country. We forecast that prices are going to remain robust, sugar prices has in robust for the remainder of this sugar year, certainly. And we're going to see a continued diversion of sugar towards ethanol, not just this year, but certainly into next year. We hope that the government addresses the long pending issues with the MSP of sugar. As you know, this is something that we obviously have taken up quite vigorously with the government. However, we have not had an increase in MSP for quite some time, and we hope that, that will be rectified perhaps in Q1 of the next fiscal year. On the pricing side, though prices have come off their recent peaks in both domestic and global markets, we are expecting them to improve as we move forward for the next couple of quarters. In fact, the month of February has seen an improvement in prices already, compared to the month of January. With global deficit anticipated again this year, as I mentioned, we expect sugar prices to stay firm and it appears that without any export in systems, we will probably achieve between 5 million to 6 million tonnes of export, mostly from the coastal states of Maharashtra, Karnataka. Looking at the Engineering business, the domestic economic recovery is certainly underway, especially in sectors such as steel, cement, oil and gas, which includes petrochemicals, fertilizers and chemicals, this bodes very well for the business. We've been focusing quite vigorously on exports, as well as on our defense vertical, and we expect to see great improvement in the coming quarters for export revenues, for Power Transmission, as well as for the defense vertical. Water business has participated in a number of tenders that we expect coming up to a stage of fruition during this quarter and in Q1 of the next fiscal year. We stand very well poised in those orders. However, of course, they are tenders, so they are subject to be the lowest. But we think we stand very, very well with the number of orders that are coming up for finalization. And therefore, I think for the Engineering businesses as a whole, at this particular point in time, it's a very comfortable scenario, with respect to overall growth. With that, ladies and gentlemen, it comes to an end to my opening remarks. I would now like to open up the floor for questions.

Thank you very much. We will now begin the Question-and-Answer Session. [Operator Instructions]. The first question is from the line of Resham Jain from DSP Investment Managers. Please go ahead.

Yes Hi. Good afternoon sir, and congratulations on very strong set of numbers. So I have 3 questions. First is on the new ethanol capacity, which is going to come over the next 3, 4 months. Given that there has been some delay, will there be like -- when the new distillation plant will start, will the ramp up -- will be optimal, or will it take time to reach optimal levels because you have some delays in starting the new plants?

Mr. Jain request you to please stay connected. We have lost the line for Mr. Sawhney. Ladies and gentlemen, we have the line for Mr. Sawhney connected. Mr. Jain may please proceed with your questions once again.

Yes. So my question was ramping up of new plants, given that there has been a delay in the commissioning of those plants. So will the ramp up and the utilization be at the optimal level from Q1 onwards?

So I assume you're talking about our ethanol plants? Yes, we -- yes, we had always -- yes, we had always said that our ethanol plants, the 220 KLPD would be online in Q4 of this fiscal year. So there has been a small delay. I mean, ideally, we would have expected that the plants would have operated by the end of January, we're now expecting about a 30, 35 day delay, and this is primarily due to COVID and some supply chain issues at vendors. But it's not a substantial delay, because we had this sort of forecast that we would be operating with in this quarter. From the first quarter of the next fiscal year, we expect a slow and steady ramp up. I would say that we would be at 100% capacity at both the new facilities. But certainly, by the end of Q1, we would be touching 100%, at both facilities.

Okay. Understood. And sir, in terms of diversion from sugar to ethanol, once the capacity will be fully operational, how much sugar will be sacrificed, and how much ethanol in terms of crore liters will get added?

So it's an interesting question. I think it's not just ethanol. We can look at total -- we can look at -- I can give you the numbers of -- actually it includes -- it will include a little bit of grain as well. But we're anticipating that from next year, we will be in a much more improved position in terms of our total diversion, with both juice, as well as B-heavy being diverted towards the manufacturer of ethanol. And I will ask Suresh to come in with the exact numbers for diversion in terms of quintals.

In this year -- last year, we diverted approximately about 7.5 lakh quintals of sugar, and this year, we are looking at more than 10 lakhs, it will be close to 11 lakhs, in fact. And -- 10 lakhs yes. so this is the kind of a diversion we are planning this year. And obviously, when we go to next year, our total ethanol production is going to increase to about 18.5% to 19%. So the diversion would be more at that particular point of time.

Okay. I was asking at the full optimal level, not talking about seasons, so how much -- how many crore liters you will be able to manufacture?

Yes, we'll be doing about 18.5 crore liters for the coming year and the subsequent years on the same capacity, we should be somewhere around 21 crore liters, that's one. The second point was about the feedstock. Now, the feedstock, we will definitely experiment with cane juice. But at this point of time we believe, this facility, as Mr. Sawhney mentioned in the beginning, has a great flexibility in terms of having both grain -- utilizing grain as a feedstock, versus cane juice and B-heavy molasses, everything can be used in this. And depending -- and we believe that while gaining experience on cane juice, the cane juice contribution is at the lower end compared to the other 2 feedstocks. So we will be doing more of B-heavy and depending on the grain prices, a portion of it will also be on grain.

Okay. Got it. And sir, my last question is on the overall utilization of cash over the next 2, 3 years, the large part of sugar CapEx seems to be coming to an end, and you'll be generating maybe more than INR 1,200 crores, INR 1,300 crores over the next 2 years. Generally, your thoughts without giving any numbers, will the capital allocation be more towards Engineering business over the next, let's say, 3 to 5 years compared to sugar business? What we have seen in the last 5 years, it has been -- sugar has taken up a large part of CapExes. But now going forward, will it be Engineering business? Just your thoughts?

So it's a very interesting question that you've asked, and while the Board has not considered, we can't specifically talk about the capital allocation towards our various businesses. But I think the demands -- you certainly touched on a very interesting point, that the demands from the Engineering businesses will rise, as the market environment improves. I want to also mention, that within the overall agriculture business, there are a variety of new opportunities for value addition, direct and indirect value addition, that the company will evaluate. At this point in time, we have no specific plans of investment, but there are a multitude of opportunities, as the diversity within the sugarcane business extends out towards other industries. So it's difficult to evaluate right now, but I certainly look at new businesses, I certainly look at expansion as viable investments for all of our businesses, agriculture and engineer.

The next question is from the line of Pratik Tholiya from Systematix.

Just wanted to know, what is the transfer pricing for heavy molasses in [indiscernible]?

We've only transferred B-heavy molasses at INR 1,000 per quintal.

Okay. And sir, that -- and before it was, I think INR 700?

Sorry. I'm sorry. We -- I would like to mention, that this was lower in the previous corresponding quarter, and we are fairly happy at this level. Sorry, what was your next question?

No, my question was that only, in the previous quarter, it was around INR 700 or INR 750, right?

Correct. It was INR 850 in the last quarter, we have increased to INR 1,000, based upon increase in costs, as a result of increase in cane price.

Sure, sure. So does that basically extend the lower margin that we are seeing in the distilleries?

The -- very much impact is not felt in this quarter, simply because of the fact, it started with a new season.

Sorry, I didn't get that.

I said the full impact of that is not felt in this quarter. To some extent, it has definitely been felt, because the season has started only in the month of November.

Okay. Understood. And sir, can you just give the volumes that you have done in the B-heavy in Q3, in volumes?

Yes. So in terms of production, our B-heavy production is about 86% in Q3 of the total production of about 247 lakh liters. And in the 9 months, it is about 79% of 789 lakh liters, which has been produced. So that's the production. But on dispatches, it's about 88% is B-heavy, out of the 266 lakh liters, which we dispatched and about 80% in the 9-month period of the 910 lakh liters that's dispatched.

Okay. Got it. And sir, lastly, on the sugar prices, you mentioned that it is somewhere around INR 34 currently, and refined is INR 35. How do you see these prices moving, because I think ISMA has also guided for a slightly higher production to what you are initially estimating. So do you see that the prices now should settle in this range, or can we expect the price to go up to INR 37, INR 38 on the crushing end?

So at this particular point in time, prices have risen, as I mentioned, from January to February. For Triveni, the prices are slightly higher than what you had mentioned INR 34.25 per kilo and INR 35.5 for refined. But going forward, I think with a positive bias, the prices will certainly be ranged out. While the slightly higher production levels, as mentioned by ISMA and also with our own internal estimates are probably a reality. We are seeing a healthy export. We are seeing healthy diversion numbers. We anticipate the total diversion of sugar into ethanol will be, as what I have mentioned, about 3.4 million tons of diversion towards ethanol, and that's pretty good. So the closing balance, the reduction is about 2 million tonnes in closing balance, we think is going to be chief reason for the stability in pricing, along with what we anticipate for next year. Higher levels of sugar being diverted towards ethanol, which I think is a reality that we will have to accept. And plus, of course, I think a lot of sugar pricing, any buoyancy towards the levels that we talked about, a breakout will be dependent on monsoon as well.

Okay. Understood. And around the global also, you also mentioned that the prices have now corrected to around $0.18 and below. So how do you see those prices move, and do you think that prices can go up to $0.19, $0.20, which is the price at which our Indian exporters will be comfortable. And suppose, if that does not happen, then we are staring at a 2 million tonne of inventory lying in the country, and the whole [indiscernible] of a lower inventory at around 6.5 million, 7 million tonnes, which is initially we expected, considering that 2 million tonnes actually get exported?

You see, that's a very good point. There are a lot of moving parts in that question with respect to international prices. What I would like to mention is, not just fund flows into sugar, which are expected to improve as we move into this calendar year, but also the ethanol-sugar balance in Brazil, which is certainly moving towards ethanol and higher levels of ethanol. The large 3.4 million tonne deficit that we see globally will offer huge opportunities for Indian exporters, I believe, over the summer months. There will be spot opportunities that will be offered. So it's not going to be directional and purely based on #5 on #11, but it is going to be supply chain issues in certain parts of the world, that India as an exporting nation will benefit from. And I think that's something for us to remember for the future. We play a very important role geographically being in the Northern and Eastern Hemisphere, and supplying sugar to our neighboring markets, which are sugar deprived and tougher to service from the Southern Hemisphere exporters. So I think that, that is the million-dollar question, really about our closing stocks, but I think that our predictions of having closing stocks just in excess of 6 million tonnes, is something that we are willing to back, at this point in time.

[Operator Instructions] Next question is from the line of Rajesh Majumdar from B&K Securities.

And again, congratulations on a great set of numbers. So sir, my first question was on your ambitious plans on the alcohol front, that grew from somewhere around 10 crore liters last year to about 21 crore liters. So as per my calculation, this would entail a kind of 20% sacrifice -- around 20% sacrifice of our current sugar capacities, sugar production capacities. So in order not to sacrifice our domestic quotas, do we have to -- how are we looking at this picture in terms of additional cane area or recoveries? Because we see some challenging situations in Central and Eastern UP, particularly on the CO-0238 varietal, which is leading to lower yield year-after-year for the last 2 consecutive years. So that is my first question, sir.

So I think you've asked there are about 6 questions in that one question, I'm going to try and take all of them. Firstly, in our move from 10 crore liters to a steady state of 21 crore liters of total spirits, it is not just sugar being diverted towards ethanol, there is an element of grain within that. So yes, of course, the total quantum of sugar that is diverted towards ethanol will improve, but the total quantum is not represented only by molasses or sugarcane juice, and that's important to remember. The second thing is that the company has worked quite aggressively

Request all the participants to please stay connected, while we reconnect to Mr. Sawhney. Ladies and gentlemen, we have the line for the management reconnected. Over to you, sir.

My apologies for this constant problem. But let me get back to the question. We have moved very aggressively in our cane development initiatives to move away from 0238. Now we have to recognize, that it is a wonder variety for the farmers of Uttar Pradesh, and the move can only happen if we offer a reliable and an equally good solution. However, let me report, that the company's development teams, have got a sufficient number of options that are available to our farmers. So we ourselves are going to be moving consistently away every year, in a reasonable capacity away from 238 to other high maturing varieties as well, and high-yielding varieties. Now the 238 variety in certain parts of Uttar Pradesh, as you know, has been impacted by a terrible disease called red rot, which impacts yield and it certainly impacts recovery. This signals the broader end of the life span of the variety, maybe a few more years. And therefore, as far as the yield is concerned, we're very much ahead of the game. We've got a lot of work happening across the 7 new sugar units in terms of offering our farmers, other sugar varieties that will offer, certainly matched yield, if not higher. For us, it is about maximizing that yield and maximizing our crush. So going forward, the company will, of course, explore all initiatives to be able to maximize crush in subsequent years.

0kay. Sir, are we also looking at acquisitions in terms of small sugar mills, in terms of increasing the cane command?

I'm sorry, that was -- I could not understand that question. Can you repeat it please?

Are we also looking at acquisitions in the small sugar mill space to increase the command area or any other initiatives to increase command area?

You know what, at this moment in time, we're not looking at any acquisitions. But if there was anything that was compelling and attractive, I'm sure everybody would look at it. But at this point, we're not evaluating anything.

Okay. Okay. So my second question was on the IMIL business. So essentially, we are now compulsorily selling 18% of molasses, as I understand, to country liquor manufacturers, as per the norm. So through your IMIL business, how much additional value will you be able to capture over the same time, what is the size of the business you're looking at? And what is the investment?

Sameer?

Right. In terms of IMIL, you see it is a question of establishment of your brands over here, and creating a demand for it, for it to generate value for you on a sustainable basis going forward. So therefore, this year, while we sold about, let's say -- we are planning to sell in this financial year about 18 lakh cases, which we feel that we can double it for next -- double it by next year, which means we might go to about 40 lakh cases. And another jump in the subsequent year, and slowly, we'll enhance the margins in this play, as the brands get established.

So what does this mean in terms of revenue and profitability in 3 to 4 years down the line, for that business?

So definitely, I can't give you a number straight away offhand, but definitely, there will be a significant profitability coming out of this business. As you can see in the results of the top 2, 3 players who are well established, whether it's India Glycol or Radico or Shadilals, et cetera. We believe that in '23-'24 in, let's say, Q3 around that period, we should be touching breakeven, and then going forward, we should be earning very attractive margins, considering the huge -- as I have mentioned about, let's say, 40 lakh cases this year next year. And then if we look at going to even 60 lakh cases thereafter, you will notice that we would be sitting on a market share of about 8% to 10%, and we could be in the top 5 players of the industry, and therefore, earning sustainable margins going forward.

So when you say market share, you refer to market share in UP?

Right now targeted only for UP.

Okay, okay, okay. And on the current sale of 5.38 lakh cases, what would be the turnover, because that figure is not clear from the presentation?

Could you repeat? 5.38 lakh cases, what's the total?

Turnover for the business? Because there is...

See, it is -- net of excise duty in the quarter would be about INR 12.62 crores.

Okay. Thanks. Thank you.

Thank you. The next question is from the line of Riya from Aequitas.

This is Pratiksha from Aequitas. Okay. So my first question is, in the part of the opening commentary, what I understand is that you're expecting to close retail with better recoveries as compared to last year. So and right now, as I understand, they are marginally lower. So I wanted to understand, what was the assumption that make us feel, that we will be able to catch up?

Right. Okay. In my opening comments, I had mentioned that actually on a normalized basis, our recovery this year is slightly higher than last year. On a C-heavy basis, our recovery this year is 10.97%, which if you normalize it for last year would stand at 10.93%. So we're about 4 units higher, 0.4% higher this year versus last year. We expect that the inclement weather that we have faced during this season, which has led to a lower recovery in our own estimation, what we had forecast, that period is over. And the weather, as we look forward for the remainder of the season, looks pretty stable. And therefore, we expect to go back to our budgeted recoveries, and we see that this difference could potentially expand. And that is the basis for making the statement, that we believe that we will end at a higher matched recovery. And the reason why I equated back to C-heavy, is because the constitute elements in recovery this year versus last year are very different. And so you can't just do an apples-to-apples comparison. Last year, we manufactured a lower quantity of B-Heavy. We also manufactured raw sugar last year. This year, we are not manufacturing any raw sugar. Raw sugar leads to a slightly higher recovery. B-heavy molasses is much higher this year, which leads to a slightly lower recovery. And so balancing all of that out in normalized C heavy terms, we are ahead of last year, and that gap will continue to grow.

Okay. All right. And my next question is for the distillery division; I think margins on a sequential basis [indiscernible] on a yearly basis seem to be reduced. And I guess part of this could be attributed because of the transfer price of molasses. But is there anything other than that, that's significantly impacting margins for that segment?

I'm sorry, could you repeat that question again?

Yes. Apart from transfer price, is there anything else that is significantly impacting the margin for distillery segment?

Not really. I mean we had better operations that contributes very slightly towards it. But otherwise, it is -- that would be the transfer price, you are correct.

Let me just add over here -- let me just add over here, in the distillery segment. Also, we have the IMIL operations included over here. So to that extent, there could be a small impact.

The next question is from the line of [ Ritika Gupta ], an Individual Investor. Please go ahead.

My question is regarding the Engineering business. I wanted to know what is the outlook for execution that we have for the Gears business next year?

Right. we don't offer a specific outlook for our Power Transmission business, in terms of revenues, et cetera. But with the growth that we're seeing in the market, not just domestically and internationally, especially with respect to gearboxes, I think we can see a very healthy number of orders that are coming towards the business. And now the total quantum of export revenues have seen a fairly reasonable jump in terms of order bookings, and this is -- in parallel with the markets or the industries that we have seen growth in domestically as well. As I have mentioned, steel, rubber, petrochemicals, all petrochemicals especially, have seen quite a robust demand, as about a year ago, their order cycles were impacted due to COVID, both in terms of aftermarket and in terms of new order intake. So we're seeing on both levels, a real bounce back. While I can't offer you specific -- yes, while I can't off to a specific number for next year, we see that these industries will really allow us to grow the business domestically and internationally.

Okay. So out of the INR 214 crores, how much would be exports? And what would be the execution period for INR 214 crores? As we -- a certain amount is long term, right?

That is correct. So of the -- yes. So of the INR 214 crore orders, we've got approximately INR 100 crores that is executable in the next 12 months. INR 102 crores is long term. Out of that long term, INR 56 crores are our defense orders. That's important to also consider, because those are -- those will be executed over a small period of time. The balance orders are orders that are executable in the immediate 12 months. And out of that, approximately 20% plus is export orders.

So 20% of INR 100 crores is export orders, approximately?

Yes, of INR 110 crores.

Okay. And INR [ 56 ] crores of defense orders you mentioned, is short-term execution, right?

No. The defense orders of INR [ 56 ] crores are slightly longer term execution.

Longer? Okay. And sir, what is the capacity...

A small portion will come next year, the balance will come in subsequent years.

Okay. And what is the capacity utilization from your -- doing some capacity expansion there as well, right?

No, we're not doing any capacity -- we've added a few machines here and there, but nothing -- no significant capacity expansion. At the moment, we have sufficient capacity to be able to meet our growth objectives for the next year.

So what is the revenue?

Ms. Gupta?

Yes?

Ma'am sorry to interrupt, but for any follow-up, maybe request you to rejoin the queue, please.

Sure.

[Operator Instructions] The next question is from the line of Shanti Patel from Shanti Patel Investment Advisors. Please go ahead.

My question is, when the new ethanol capacity will come into the picture, how much profits it can contribute to the company?

Sameer, you want to take this?

Yes. See, we know at the given capacities, as we mentioned, that we are doing, let's say, of dispatches of about 11.5 crore liters this year and a production of about 10.70 crore liters. We know the profitability of this distillery, and you can just prorate it on the 18.5 crores, that's the kind of numbers that we are talking of in terms of the volumes, and 21 crores going forward. And let me say that most of these assets and the capital expenditure that we are making, have a short payback period of about 3 years or thereafter, 3, 3.5 years.

The next question is from the line of Anupam Goswami from B&K Securities. Please go ahead.

My question is on the follow-up of one of the previous participant. You mentioned about 60 lakh cases going forward in IMIL and then previous year -- to that previous year, 30 lakhs. Do you have the bandwidth to -- in terms of cane availability, and we are diverting about 80%, 85% to B-heavy, and they are doing -- they are looking forward to use as well? So all -- considering all of this, do we have bandwidth to do such expansion in the IMIL?

See, this is all coming out of the 18% levy molasses that we have to sell compulsorily, as per the government regulations, and we are trying to add value to that number.

Okay. Okay. So I might understand, till the time we do not reach about 60 lakh cases, we have to do some country liquor, as well as the levy molasses as well? I mean the balance?

Yes. That's the situation till then. And after -- as I mentioned, after the brands get established, that business in itself should turn the corner and make money.

Okay. Okay, sir. And sir, my next question is on the water business, the margin has improved Y-o-Y to the sale. What would be a sustainable margin that you can look at in the water business, because this segment was a little -- and on the margin going forward, where can we look at the margins?

Roughly speaking, in the case of water business, our breakeven is approximately about INR 225 crores. And the moment we are able to increase the scale of business, obviously, it gets much more profitable, as you would have seen in these results also.

So we'll be able to maintain sustainable margin at 10% sort of what we achieved this quarter?

Yes. I mean as a matter of fact, looking at the way we are looking to -- looking at our order position and the kind of orders we have participated in, I think we are quite bullish about the orders we are going to get in the next one or 2 quarters, and which would really keep up the tempo of this total turnover of the business.

Thank you. The next question is from the line of Lokesh Maru from Nippon India AMC. Please go ahead.

Congratulations on excellent set of numbers. I have a very basic question on the sugar business. That is, you had mentioned that last year, the entire production was based on raw sugar, and so the variations for the same, are basically -- of that segment, was the prices. So going forward, like you mentioned you have only 61 refined sugar, just a basic question, what in terms of percentage, how much would that refined sugar be, and in terms of profitability, how does that change the profitability or realizations and spread in terms of that diversion? That 1% diversion.

Sorry, let me just correct you over there. Last year, we had produced about 150,000 tonnes approximately of raw sugar for export. This year, we didn't. But the raw sugar was produced at factories that produce sulphitation sugar. The total percentage quantum of refined sugar that is being produced year-on-year remains the same. What I did mention, is that going forward, looking at the delta that exists for a refined sugar, these are excellent avenues to contemplate on for any further refinements, any further investments for the sugar business going forward.

The next question is from the line of [ Vignesh Iyer ], an individual investor. Please go ahead.

Congratulations on a good set of numbers. My question is predominantly related to the water business. So we have seen good orders being received by the company for a few quarters, and as I see around 60% to 65% of the total order is long-term contracts. Okay. So I just wanted to know, what is the timeframe of this long-term contract, as in -- to understand in times, like number of years over which this revenue would be recognized?

Excellent question. The time frame is [ 24 to 30 months ]

Sorry. Can you repeat it, sorry?

24 to 30 months.

Okay. Okay, fine. So I would -- okay. So another question is like, in the recent union budget, right, around INR 60,000 crores was allocated for the tap water connections. So as we are into water business, like water treatment or even for the wastewater network management, is the business, as in, is the company seeing that some business flows in because of this allocation, as in, for the business?

So we are one of the few companies that have experience in this last [indiscernible]. In Punjab, we have done a very large project, to ensure the very same connectivity into homes. It is a much tougher business, I must add. And while there has been budgetary allocations, I think it is absolutely vital for drinking water connections into the homes of the Indians across the country. The point of course is that, while we do have opportunities to be able to deliver on projects like this, it really depends on [indiscernible] et cetera, and the ease of doing those businesses as well. Typically, it requires a greater amount of efforts and these risks are higher, as you are dealing with as many more end customers and you are dealing with civic infrastructure, et cetera, which is a little more challenging. But overall, to have a large sums of money diverted by the union government towards specific water initiatives. This is just one. There are several other initiatives that have also been spoken about in the union budget. It augurs very, very well for the water space going forward, not just in terms of the last mile connection, but also in terms of newer project, newer sewage treatment, newer water treatment initiatives across the country.

Right. Right. Yes. But don't we -- like the company has done businesses with municipal corporations directly, right? So who can foresee this entire pipe connection for the residence of that municipal corporation. So there is a small chance that the company could have a tie-up with this municipal corporation or any other jurisdiction, as in panchayat, or maybe any other government organization looking for -- overlooking all those businesses?

Absolutely. I think that is a very distinct possibility.

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

Ladies and gentlemen, let me firstly apologize for my phone line getting disconnected on several occasions during this call. It has been a pleasure speaking with you, and I look forward to talking to you in approximately 3 months' time, when we come back with our year-end results. Let me just close the call by saying that I think all 3 business segments of the company have started firing. I know I've spoken about this. The last time that we spoke, that we would look at this quarter very, very positively. Going forward, the aftereffects of COVID are still very real and very near. In fact, in a post-COVID world, I think the company would continue to do well. We're in strong business segments, that are rebounding quite well, and form important constituents for the growth and roadmap for the nation. So thank you very much. I look forward to speaking to you in 3 months.

Thank you. Ladies and gentlemen, on behalf of Triveni Engineering & Industries Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.