Triveni Turbine Limited (533655) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Triveni Turbine Limited Q2 and H1 FY '22 Earnings Conference Call. [Operator Instructions] there will be an opportunity for you to ask questions after the presentation concludes.[Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rishab Barar of CDR India. Thank you, and over to you, sir.

Thank you. Good day, everyone, and a warm welcome to all of you participating in the Q2 and H1 FY '22 Earnings Conference Call of Triveni Turbine Limited. We have with us today on the call, Mr. Nikhil Sawhney, Vice Chairman, and Managing Director; Mr. S.N. San Prasad, President, Global Sales Product; Mr. Lalit Agarwal, Chief Financial Officer; and Ms. Surabhi Chandna, Investor Relations and Value Creation. Before we begin, I would like to mention that some statements made in today's discussion may be forward-looking in nature, and a statement to this effect has been included in the invite, which was emailed 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 which we will have an interactive question-and-answer session. I now request Mr. Nikhil Sawhney to share some perspectives with you with regard to the operations and outlook for the business. Over to you, sir.

Thank you very much, Rishab. A very good afternoon to all of you, and welcome to the Q2 half-year results earnings call for Triveni Turbine Limited. Before I get into the performance of the business, I'd like to talk about a significant milestone, a significant event that the company underwent during the quarter, which is a settlement of its disputes with General Electric and Baker Hughes. There were multiple disputes over the last 2 years between the JV partners and the parties have agreed to terminate the joint venture and fully and finally settle and resolve the disputes. As part of the settlement agreement, TTL has acquired the entire shareholding by DI Netherlands in the equity share capital of GETL for consideration of INR 8 crores, and thus, GETL has become a wholly-owned subsidiary of TTI and is no longer a joint venture with BH parties or GE parties. The name of the company has been changed from GE Triveni Limited to Triveni Energy Solutions Limited with effect from October 21, 2021. And TTL has received a settlement consideration of INR 208 crore, of which INR 190 crores was delivered during the second quarter and INR 18 crores has also been received, but that is in Q3. The parties will now be free to compete with each other and accordingly, TTL will now approach the market segments independently in all respects. We are pleased with this resolution, which is done amicably with respect to TESL. And apart from the settlement consideration, there have been other impacts on the balance sheet of Triveni Turbine Limited due to a higher asset base than the price that was paid for consideration of the shares, which has led to an increase in reserves by about INR 27 crores, and you can see an impact of that in other comprehensive income of INR 19 crores in the reported P&L as well. On the operating side, we remain excited about the prospects of approaching the 30 to 100 megawatts segment independently and it enhances the addressable market of Triveni Turbines, which, as you know, we already dominated the lower than 30-megawatt category. So we are excited by the fact that we will be able to approach this market segment independently with entrepreneurial rigor, and with focus of our personnel. Our technology levels and development have always contributed towards the technology of our joint venture, GETL, which we'll now be able to operate independently in this space. Now on the business of the entire company. We are witnessing a very strong momentum in the domestic market after a sluggish financial year '21. However, the international markets where the company operates are recovering slower than we anticipated. This is evident in our order booking, where, as communicated earlier, we were able to achieve an order booking of INR 4.25 billion in the half-year FY '22, an increase of 86% year-over-year, which is almost equal to the financial year '21 order booking. I must point out that we have been optimistic on our order booking for the last 2 quarters and had given this visibility to our investors at that point in time. We remain equally optimistic on the coming quarters, but I will come to that subsequently. We expect that progressively relaxation of travel restrictions in the international markets, especially in our key export domains of Southeast Asia will enhance the contribution of international markets to our order booking in the subsequent 2 quarters. As a company, we are also seeing an increase in the travel of our sales team in both the product and aftermarket division, which we expect to yield very good results in the coming quarters. As you can already see, our CEO and ED, Mr. Arun Mote; as well as our President, Aftermarket, Sachin are not on this call, and we've always ensured that they were on this call. This is due to the fact that they are traveling internationally. Prasad, who is also our President, International, is currently taking this call from Milan in Italy. During the quarter, revenue for the company grew by 11.4% year-over-year to INR 2.07 billion, driven by domestic sales, which grew by 58% year-over-year to INR 1.4 billion, while the export turnover declined by 31%. Q2 FY '22 revenues were impacted by delays in some orders, which were in transit and could not be recognized during the quarter. EBITDA was lower by 12.1% year-over-year at INR 477 million and EBITDA margins, which declined by 6.2% year-over-year to 23.1%. The decline in EBITDA margin is largely attributable to a higher domestic contribution in revenue as well as a higher material cost due to inclusion of first by GETL now TESL, where the material cost as a percentage of sales were higher due to a fair valuation of interest -- inventory. There's also been somewhat of a impact of higher commodity prices in the higher raw material prices that we have faced in this current quarter. Profit after tax grew by 612% year-over-year to INR 1.74 billion, which was afterward significantly impacted by the exceptional gain, which is reported in the results that's in front of you. The investments including cash at the end of the quarter stand at INR 7.32 billion and as at the end of Q2 FY '22, they are up INR 2.96 billion quarter-on-quarter, driven by this final settlement that I've already alluded to. The mix of domestic and export sales stand at 68:32 in the Q2 FY '22 as compared to 48:52 in Q2 FY '21. The total consolidated outstanding order book stands at INR 8.28 billion as on the 30th of September 2021, which is higher by 14% when compared to the previous quarters, and 24% higher than the previous year. This momentum, as I've already alluded to, will continue in Q3 and Q4 of this year, and we are optimistic of a very good starting order book in 4-digit crores for the new financial year FY '23. The company has achieved a record order booking of INR 3.07 billion in Q2 FY '22, which is the highest in the last several years, as against INR 1.7 billion during Q2 FY '21, an increase of 74% for both domestic and international orders contributed to this growth. The domestic order booking, as you could see, contributed more significantly, and this was higher than our expectations. During the quarter, INR 2.25 billion was the contribution towards the domestic order booking, which is higher by 81% as compared to the last year. And the domestic order booking now stands at INR 5.85 billion, up 27% on September 30 as compared to INR4.59 billion in the corresponding period of the previous year. The export order booking during the quarter was INR 817 million, which is higher by 56% as compared to last year, but it is short of our expectations for the quarter. Most of the orders were booked through virtual interactions. However, export sales continue to be impacted by COVID during this quarter, but we are optimistic in the coming quarters that we would have a greater participation of the international market in our order book. On the product side, order booking improved significantly to INR 2.32 billion, which is higher by 120% when compared to the corresponding of the previous year. The Product segment's turnover was INR 1.51 billion during the quarter, an increase of 6 -- or 9% over the previous year. The Aftermarket segment has also registered an order booking of INR 753 million, which was higher than 6% when compared with the corresponding period of the previous year. Domestic interactions have increased as travel within the country is returning to normal, and international activity has also gained pace. The aftermarket turnover was INR 558 million, a growth of 19% over the previous year. Further, current quarter. The Aftermarket segment contributed 27% of the total revenue in FY '22, and in Q2 FY '22, up from 25% in the previous year. We expect good order booking in the Aftermarket segment as well in both Q3 and Q4 as well as then good growth for the entire financial year. In Q2 FY '22, the domestic market under 30 megawatts is estimated to have increased by 98% year-over-year, while international market has largely remained flat for us. In megawatt terms. The company continues to focus on design and development and technology. We believe that this has been the main stay of the company by which it has been able to achieve its market dominance as well as low-cost position. We will continue to spend money on organic research and development, both within the company as well as with our partners and educational institutions to enhance the value proposition that we bring to our clients for a better, efficient, and more cost reliable solution. These will also include further developments in the API segment, which we'll continue to invest into from a technological perspective, but also further investments into decarbonized solutions such as supercritical carbon dioxide. This investment will continue for the foreseeable future, and we believe that we would look at certain opportunities to acquire technologies as well, which may be able to provide us the visibility as a company to enhance revenues in the years to come. So far, in H1 financial year '22, we've witnessed a heightened investment activity in many end user industries such as sugar, distilleries, food processing, chemicals, pharmaceuticals, paper, steel, cement, et cetera. And with the threat of COVID-19 subsiding across the country and its vaccinations reaching the milestone 1 billion mark, we believe that we will witness improved growth trends in the quarters to come. Our international market is significantly skewed towards the renewable side of the business, which is not so much in India, but we believe in the coming years, we would find an increased participation of areas such as municipal solid waste incineration, waste-to-energy plants, which would capture a greater share of our inquiry and order books. Inquiries in the domestic market have increased by 40% in Q2 and 67% in the international market. We believe that this foretells a very optimistic sign for us as both markets continue to grow. Input prices have increased significantly over the past year. We've seen MS plate prices top up forging units which are significantly based on chrome, increased by over 50% and some even more than 70% over the past year. There has been some pressure on margins, but the company itself is not worried because we believe that within the prudent mixture of cost rationalization as well as passing some of these costs on to customers, we will be able to weather this. We will, of course, I presume be questioned about the decline in EBITDA level on this current quarter. And as we have talked about in the past, no one quarter should be seen for Triveni Turbine because that is a reflection of the mix of orders that we dispatch within that quarter as well as between different geographies of international versus domestic. We are optimistic and continue to maintain that Triveni Turbines will operate within an EBITDA margin of 23%, 24%, or maybe 25%, and we would maintain a PPT in excess of 20% to 22%. Lastly, the company continues to maintain a high cash balance, which was increased by INR 2.96 billion in this current quarter, which has contributed significantly by an exceptional item of about 190 billion -- INR 1.9 billion. We also had good increases in cash due to operational efficiencies as well as increased customer advances. As we go forward, the company has -- the Board has decided to issue a dividend for this current quarter, a 40% interim dividend and a 60% special dividend to shareholders. Given the cash in hand, the company will be looking very aggressively at areas and ways for it to diversify. But in a prudent way, we believe, and we are currently contemplating measures by which we could enhance our proximity to customers, which we had tried to do through opening international offices in the past. We believe that a more prudent method may be to acquire these customer relationships on the ground, which will impact and be part of our aftermarket business, where we would be able to be closer to our customers, get recurring revenue immediately, and be EPS accretive immediately. These are the type of principles that we would like to use in our further growth. Having said that, the Board has not considered any inorganic opportunity at present but though we believe that there may be opportunities that we arrive in the coming quarters. We, of course, would always maintain a return on equity and return on capital as being our primary factors by which any decisions would get made. And of course, any money that would not get spent in a prudent manner should, in our belief, get returned to shareholders over the medium term. With that, I'd like to open the floor for question and answers.

[Operator Instructions] The first question is from the line of Ravi Swaminathan from Spark Capital.

Congrats on a good order and flow momentum for the second quarter of this year also. My first question is with respect to the market size for the 0 to 30 and 30 to 100 megawatts. You had mentioned about growth in that market. If you can mention the absolute size of the market, both domestic and international areas.

The market size for the domestic market below 30 megawatts is double of what it was last year. It's somewhere in the region for the first half year at 550-odd megawatts. And the international market size is a very -- is a different number because we don't have full visibility. In the domestic market, we have near-full visibility of orders that come through. The international market, of course, visibility is to the extent that we have been able to garner those inquiries.

And the 30 to 100 megawatts, domestic market, how big is it? That's all.

The -- globally, the 30 to 100 megawatt market is about 1.5x the size of the below 30-megawatt market, globally. In India, just given the size of our industry and the fact that we have a higher participation of small and medium industries, we actually have a smaller contribution of about 30 megawatts segment through the entire market, which is possibly about 16% of the below 30-megawatt market.

Got it, sir. But usually, the largest sector, end market in customer sectors like steel, cement, they consume more in the a 30 to 100-megawatt range, right? I think in 2010, '11, it was a pretty sizable market. Do we see that coming back? Also my -- there is also another '20?

Yes. So that's a very good question, actually. But you see the different requirements from the customers, especially the large customers that you've talked about in terms of steel and cement. Within cement, the majority of demand has been coming from wastage recovery, which is sort of greenfield -- brownfield expansion, which is in the smaller megawatt category. There have been -- not as many inquiries and orders that have been placed for greenfield capacity expansion, which may be of a higher capacity size. We believe that those will come about, and we are optimistic on that. On the steel front, you have large integrated steel mills, which would have -- which would be in the hundreds of megawatts in terms of power requirements. But you have smaller rolling mills and scrap and sponge iron mills, which have environments within our range as well as stretching into the 30, 40-megawatt odd category. We, as a company, have the products and solutions, which can adequately cater to all of these markets. We have actually seen good demand from the Steel segment, both in the below-30 megawatts as well as above 30-megawatt segment, especially from East India, our eastern markets. We see actually fixed capital formation across the line. Very frankly, you follow the market yourself. And you know that the Distillery segment has a huge CapEx movement underway, the pharmaceutical and chemical sector has a good CapEx requirement underway, paper has good CapEx underway, you have steel and cement, which have different varies of capital expenditure in the way. And so, we see a large degree of capital expenditure from our perspective in smaller end user markets. Specifically on the renewable Waste-to-Energy segment and Solid Municipal Waste Incineration segment, there has been not that much of a pickup. This has always been consistent in demand in India. All our end user markets, specifically on the renewable waste-to-energy segment and solid municipal waste in generation segment, there has been not that much of a pickup. This has always been consistent in demand in India. But we believe in the coming quarters and years as the government pushes both was the watch virus that we will find municipal solid waste incineration and waste-to-energy picking up, much like we've seen in the international markets. We will all look with a certain degree of optimism with these top 26 discussions, which will probably provide some degree of visibility in terms of government policy on matters like this.

Got it, sir. And my second question is with respect to the joint venture, given the fact that it is largely behind no are what kind of renewed efforts are we putting on the 30 to 100 megawatt range in terms of product range, marketing across different geographies? I mean, outside India market, are we looking at gaining market share in this category now. So if you can touch upon what Triveni is trying new in the 30 to 100 megawatt range now?

Yes, you bring up -- well, one of -- as you point out initially, we do have a very good order book. We have a very healthy order book going forward. And we're very optimistic on growing that order book also as is from its current base of INR 828 crores. The 30 to 100 megawatts segment has always had technology development from our side, which we've done over the last 7, 8 years. And we've had products, which have been installed base already, and we are ready and running references in this segment. So we are hitting the ground -- the ground running. You bring up a point which we find that we have to invest in, which is manpower. Manpower from the marketing side, manpower from technical size, manpower from execution and diversification. This is an area that we will be investing in significantly going forward to but to answer your question on reach of the 13 to 100-megawatt segment, we will ensure that in the coming year that we will have greater visibility. I have our President sales on the line as well. Prasad, if I could ask you to shed some light as to how exactly we will be getting greater degree of inquiries from this segment, which can then translate into orders.

Yes. Yes. So coming to 30 to 100-megawatt range, as our mentioned that, yes, our weak signal some 30 megawatts, our inquiry base is coming from over 110 countries today. In the similar way, 30 to 100 megawatt range, we'll be using the same approach, say, go-to-market strategy, same channel partners, who will be there, they were not dealing with the 30 to 100 megawatt range. Today, once we become 100% subsidiary company of Triveni. So the channel partner arrangement is the same. So we are quite optimistic the visibility of the market will substantially increase for us. And our competitive advantage in our aftermarket support, these are the 2 things, internationally people value for that. So with this unique selling points, we'll be able to address the market's requirements to the competitive product. We are very optimistic on that.

[Operator Instructions] The next question is from the line of Ankit Babel from Subhkam Ventures.

Sir good afternoon. Sir, my first question is on the scalability of your API business. Correct me if I'm wrong, we heard last time that the inquiry level was as high as 1,000 machines. And your company level, current production. Overall, it was around 110 to 120 machines and your capacity is 220 machines. So even if you get a 5%, 10% share from this inquiry level, you can actually double your revenue. So just wanted to understand how are things going in that area? And what kind of scalability you are seeing, say, in the couple of years from this segment?

Let me answer that question in a slightly different way because you see number of machines, maybe the capacity constraints that we have in terms of testing, but not all machines that we make need to be tested in the same way that we run for our larger machines. The difficult size of machine that we sell into the market a non-API would be in the range of between 8 to 12 megawatts. That would be the average size. The average size of API turbines is between is about 1 megawatt. That's the average size. So these are significantly smaller, significantly lighter, significantly machines which can be done in a different production methodology. We have the capacity in place. There may be some incremental CapEx that we need to do. Like you pointed out, of the market size of about 1,000 machines that we have visibility on, Triveni has already garnered good orders from this segment, and we continue to believe that we will get good market share in this segment going forward. Our value proposition of having a cost-effective machine, which is both reliable and robust for these API customers is something that is quite consistent with what they desire. So Prasad, would you like to add on this question on API?

Yes. So as we rightly discussed in API is one of the key segments for us. So as we mentioned in earlier calls, also today, Triveni has been approved by all the international consultants and EPC and VOE, that inquiry pipeline is quite strong. As our Vice Chairman mentioned that this segment of the business is a different way because we were all so 1 megawatt or 1 megawatt average size of the machine. Since our accessibility there globally, coming years, this segment will be one of the key growing segment for us.

Sir, but last time, it was also mentioned that the value per machine in the API segment is higher than the existing machines. So I'm slightly confused that like from value terms, like how much would be a 12-megawatt compared to -- I mean, 12-megawatt normal machine which you're manufacturing as of now and a 1 megawatt API in value terms? Would it be like 112 the size?

No, so. So in general, these all stream turbines are customized and engineered to order. So there is no reference pricing for one turbine for one price because it only variables that go in there in terms of customer requirements. Is it extraction? Is it condensing? Is it back pressure is what is the temperature and pressure requirements that may be -- that may be required by the customer and as well as special requirements from the balance of plant, et cetera. What you find is, in general, as the megawatt comes lower, the price per megawatt is higher. This is just basic absorption of overhead as well as other factors of how the market operates. In the API segment, given the strong push on reliability and safety, these prices are even higher, given certain specific specifications, such as SM316 piping, et cetera, et cetera, as well as documentation that goes along in the segment. So it's not going to be 1/12 but it's not going to be 1:1 also. It's difficult to say. It depends from customer to customer. And so I would encourage you not to look at the fact that it is per machine would give the same revenue as a higher megawatt.

But the profitability would be same, right? As compared -- I mean, in the API segment?

Well, the profitability is higher. You are very right about that. It's very difficult to generalize because you're asking about number of machines versus megawatts versus profit per -- but it will be higher. And so therefore, it's better for us to just talk about the fact that -- that's why we reflect our order books in crores. And I think that is a better way for you to measure it as well.

Okay. And my, sir, second question is the scalability of this 30 to 100-megawatt range business. Now so far, we had the GE brand, which now we won't be having it. So how soon and we can scale this business? And what are your plans for, say, a couple of years down the line? I guess, currently, it is doing some INR 150-odd crores of business at the peak level.

Well, I mean, to the extent that the numbers have been disclosed in the past that'd be fine. The joint venture, as always, in my person opinion, underperformed its market potential. The products were marketed jointly under the GE and Triveni brand. And like I said, technology of both partners was used in applications and installations. And so we have running references in our technology, they have runnier of their technology. So as far as the customer is concerned, we do have the viable and validated technologies available. From a perspective market reach, as Prasad pointed out, we will be using the same market reach of channels that we use for the below 30-megawatt segment. And so I believe at least and in the market segment from 30 to 40 to 50, maybe 60 megawatts even, this would be quite consistent. In the 80, 90, 100-megawatt segment, it might be slightly different. And let's come to that we will also discover what are the challenges on the way? We believe that this is a very vast opportunity for us, especially in the international market. And we will look at it in a very conscious manner with dedicated personnel and with dedicated resources to take that forward.

But sir, any outlook in terms of scalability like can you go to like INR 200, INR 300, INR 400 crores in, say, a couple of years because we have no clue about the scalability of...

Of course. I mean, the fact is that our anticipation is that we would get from a negligible market share right now, we would only increase from there. And very frankly, we believe that -- I think let me get back to you in the next couple of quarters and to what the level would be exactly, but I believe that it should play a significant role in our revenue going forward and possibly equate our product revenue in a couple of years.

And the profitability can be -- the potential is 20% plus kind of operating margins in this business also. Once you reach out a reasonable scale.

Product margins, product margins in general are dependent on geography. The aftermarket segment is what actually contributes significantly towards the overall revenue -- the overall EBITDA of the company. And so the fact that we don't have such a large installed base in a 30 to 100-megawatt category will limit that. But having said it that we anticipate good growth. And for the future, once we have the installed base, we will be able to service these customers for the next 25 to 30 years, and therefore, Ghana, what is somewhere in the extent of 85% or 90% of the life cycle value for customer, which comes from the aftermarket.

Okay. And sir, lastly, sir, just to conclude, I mean, last few years, we have been in that INR 700 to INR 800 crore range of revenue and profitability also at similar levels. Now, the kind of outlook which you are giving and the opportunity size which you are looking at, is it fair to assume that now Triveni is entering into a multiyear high-growth phase from here on?

I would say so because we have a number of avenues for growth. One is the 30 to 100 megawatts segment, which we'll be entering independently, where we already have reference bases, and we will try to build a greater order book in that segment, which will build up over the course of the years. We have the API segment, which we've already talked about in terms of growth. We have an increased push in the below 30-megawatt segment on renewables, which we would think would add to growth, coupled with general fixed capital formation globally, which will aid. And the most important from a margin perspective is our aftermarket. We will be pursuing that market very aggressively for growth in not only existing installed base or repairs and service, but on the refurbishment side, and we wish to spend money on this side because it is -- it has extremely good return on capital and return on investment. So we anticipate all four organic routes for growth to perform well. We, of course, will be investing into diversification and new product lines, such as supercritical carbon dataset as well as certain other areas of rotating equipment, where we should also gain growth. So we are positioning ourselves for growth in the future. We think we have the capacity necessary. We will need to add on capability, and that is very well-positioned at right now.

Next question is from the line of Bhavin Vithlani from SBI Mutual Fund.

Thank you for the opportunity. A few questions. First, the litigation that we had with our JV partner, GE is now all done and dusted, no further pending litigations?

No, no pending litigation, as we have said.

Thank you.

All pending litigation with our JV partners over. We have some other litigations on income tax, et cetera, which are routine and ongoing.

Sure. Thanks. Sure. The second question is on the larger-sized turbines as you kind of highlighted. And this is also in respect to some of the global competitors of yours pledging not to sell turbines when it comes to coal-based power plants. Is that an area where now Triveni could get an edge because in the past cycle, these orders went to your MNCPR set?

Bhavin, I think you built up an interesting point because largely, the large competitors of ours who have stated that they would not be selling for coal use. I think they've been talking about the utility range of turbines. The distinction between a utility range and industrial range and in which Triveni operates in this 0 to 100 megawatt space is that we provide not only power but also heat as a requirement for our industry. And as you know, generating heat for industry through a renewable source is extremely inefficient and extremely cost-uncompetitive. So you have to have on-site generation. To the extent that on-site generation uses renewable fuels, that's great. It works towards the de-carbonization model that we all expect and are working towards. But to the extent that it has carbonized material, then that is what it does take. Competitively, I don't think these companies have stopped offering these turbines for the industrial space.

Yes.

We still see them in the market for the industrial space. But having said that, what we said in the past that we've seen the utility range, which is above 100 megawatts, a decline. The market declined by over 80% to 85% over the last 7, 8, 10 years, the market for below 100 megawatts, both below 30-megawatt and 30 to 100 megawatts, both have grown at about 2% to 5% annually over the last 7, 10 years. So there is consistent demand. There's higher capacity requirements that are coming up from industry and as well as coupled with the genuine renewable energy-based independent power production requirement.

Sure. Fair. Could you also speak about oil and gas, especially in India because that's a sector where, I mean, you are practically absent in the last up cycle. And we are seeing a number of refinery additions, and we will also set up captive power plants. So this is not just the drive turbines, but the captive power turbines. So have you also been qualified by the likes of EIL or the CPPs? And what's the kind of business momentum we are seeing in that space?

Yes. We're qualified by DIL, by PDIL and by other consultants. And largely, like you said, apart from the API drive market, which may be driven by compressors or pumps or blowers, et cetera, there's a need for captive power production within refineries. Refineries largely tend to use gas turbines for the Fabry requirement of power production, but auxiliary requirements such as waste heat recovery and other steam requirements do come from steam turbines. I'll let Prasad comment on the domestic market. Prasad, if you could just comment on the oil and gas captive power requirement.

Yes. So oil and gas captive power requirement, yes, we ready mentioned that there is upswing there. And we have been approved by ElL, PIAL or even captive portion that is generating alternative drive. So right now, all the inquiries, whatever we are having, yes, we are eligible to participate in growth things. But as our VP mentioned that, it is a limited traction in this because the main plant will be a gas-based, the gas turbine based and all I think. The auxiliary plants are gas-driven plants. So we are there in that market. So we'll be participating in all these new inquiries, whatever released by IOCL, BPCL, all these sort of things. Yes.

Sure. Just a follow-up here. Are these potentials like in INR 100 or a couple of INR 100 crores each project?

No. No. I think -- I mean, it depends on what scope we're looking at for us. No.

[Operator Instructions] The next question is from the line of Kunal Sheth from B&K Securities.

Good afternoon.

Kunal, your line is in talk mode. Kindly go ahead with your question please. As there is no response from the current participant, we move to the next question from the line of Ashutosh from Ocean Dial.

Hello.

Yes, good afternoon.

Congrats on a very good set of order inflows and decent numbers in general. I just wanted to understand, I mean, you also alluded to the fact that you would be expecting a decent set of order inflows last quarter as well and this quarter as well, you have done very well. So just wanted to understand how much of -- this is a very sustained base from a demand-side perspective, how significantly do you see the demand for your products changing from, let's say, something like the last 2, 3 years? And as some of the other participants also mentioned, we have been in the range of around INR 700 crores of top line. How significant do you see that run rate changing order inflow and the growth for us in, let's say, next 2 to 3 years?

So the revenue for Triveni Turbines is directly related to the order booking. So let's just focus on order booking to that extent. Apart from the aftermarket segment, which is under a very short cycle, affordable. But the aftermarket itself has grown to now nearly 27% of revenue. And so that is performing reasonably well, and we expect that to continue growing by about 20% a year, 15%, 20% a year. On the order booking side, our optimism stretches multi quarter. While in this past quarter, we were surprised by the greater participation of the domestic market. We had actually anticipated, the international market has contributed more. We believe that this will -- the next couple of quarters, we'll have the international market contributing. As I had alluded, that provides visibility very easily for FY23 in terms of the high-growth that we want to maintain. Following that, we believe the market segments that we talked about increased participation in the 30 to 100-megawatt space, which actually has an order delivery cycle of about 14-plus months, 14 to 16 months, we must keep that in mind. The API, which has an order delivery cycle of 4 to 6 months. I think -- as well as other applications, we'll continue to aid our growth in order booking. So we're quite optimistic that we'll be able to grow at a decent pace in the coming years.

So do you think this is kind of the base run rate, which we are looking at right now, around INR 300 crores kind of a rate?

No. I think this is somewhat on the higher side. This is record. We -- I think about INR 200, INR 250 is something that is something that's quite visible for the next -- well, more than the INR 250-plus is visible for the next couple of quarters. Maybe more, to get more.

Thanks a lot. Thanks for the clearance.

The next question is from the line of Kunal Sheth from B&K Securities.

Hello. Thank you for the opportunity. Am I audible, sir?

Yes, you are.

Yeah, hi. Sir, my first question was relating to the margins. We did make a comment that the margins were impacted because of the higher contribution of domestic in the current quarter. So I was just wondering, is that the trend in terms of our domestic generally a lower margin business? Because one would have assumed, given that domestic, you have a large market share, the margin profile would be relatively better than an international market?

No. The domestic market, I think, not for us but for all capital manufacturers is the lowest if compared to international. For a variety of reasons, the competitive intensity in India is much higher. And so that drives a lower profitability margin. Also, the ability for us to transfer and therefore, then transfer any price increases in the domestic part market are unlimited also. But having said that, we also run our program whereby we'd like to maintain our market share. And by that, we -- sometimes, we have to take lower margin orders.

Okay. So does that really mean that the competitive intensity in domestic market has increased? Because in India, you were the dominant player, and then there were hardly 1 or 2 other players. So has new players come up recently?

No, no, no. I think the predominant competition between Siemens and us, and we have a healthy competition. As you would estimate, the fact is that even though domestic margins may be lower, from a global perspective and I think even domestic perspective, getting margins on the capital good itself is an achievement because nearly 85% to 90% of the value of a customer from a profitability perspective comes in the aftermarket. So really getting that installed base is a very important factor for us because that gives visibility of earnings for a much longer perspective. But having said that, the competitive, we -- there is some movement right now in terms of a huge fluctuation on input pricing. And so we have taken and reflated our costs to current prices. And we are not anticipating any price reductions going forward in terms of raw material. And so therefore, this is where it turns out in terms of how we price and how we position ourselves in the market domestically.

Sure. Sure. And sir, my second question is relating to our international market. Because we have such a wide exposure in the international market, what would be the best way to track -- I mean, what are the variables that one should time because it becomes almost impossible for us to get a handle of your outlook on international markets, I mean, from an outsider perspective.

You see what are the drivers for demand? It depends on geography. Geographies like Europe heavily dominated by renewable energy, both from biomass-based, IPPs, as well as solid municipal waste consideration. A lot of these are supported by government policies. And so therefore, government policies will provide some subsidy to the developer would be a good benchmark for you to Judge Europe, Japan, and to an extent, the United States. But the United States also does as fresh Capex, much like Southeast Asia, Africa, Middle East. Middle East and parts of South America are also seeing required growth in API requirements from our order book perspective. And so actually, it's very difficult to say, but I would say general fixed capital formation stability are what would lead to visibility for you to take on our order book internationally. The competitive intensity has not changed internationally. The players are the same. In fact, we find some of the larger players leading the market because of the pricing that I think we are bringing in. So I think we're quite confident. The bigger issue that we have internationally is reach to be able to ensure that we are able to cater to every inquiry effectively. Our investments recently in terms of being able to get specific technologies in our blades in terms of efficiency and reliability have gone a long way in terms of meeting customer expectations internationally, which are all learnings that we get over a period of time. And so I think we're quite well-positioned going forward in the international market as well. Of course, we hope that there is no third way, fourth way fifth wave of COVID, which inhibits our mode of doing business, which is -- which we are heavily reliant on travel or to be able to get international orders.

The next question is from the line of Manish Goyal from Enam Holdings.

Yes. So Nikhil, just want to get a sense, like in 2011, '12, we probably saw the peak market of 2000 megawatts. So have we come back to that level, at least on the inquiry terms? That is the first question. And second is, if you can also give us a perspective as to like how would be the -- how was the market between 0 to 30 and 30 to 100 megawatt at that point of time. And I was not clear as to -- you did mention about 30 to 100 megawatt opportunity in India. But maybe if you can repeat in terms of what is the dynamics over there?

Okay. Manish, so in 2011, which is the last peak, I think that we've talked about a number of times, we saw the entire market of 0 to 100 megawatts at about 2,000 -- 4,300, 4,400 megawatts of orders placed, which is split somewhere in the region of about 1,800, 2,000 megawatts below 30 and the rest above 30 megawatts. Of course, at that point in time, that was significantly driven by fixed capital formation in duties, such as cement and steel. As we sit today, in the first half year, we've had orders in the below 30 megawatt range of about 550-odd megawatts, and we anticipate the year to end somewhere in the region of about 1,100 1,200 megawatts. So we still have growth from a potential perspective of people who remember the gross birth in that period of time. In the 30 to 100 megawatts segment, India has -- we've expanded our capacities of industry in general. And so people who are ordering the 20, 25 megawatt turbines will now order 35, 14 megawatt turbines. And so we anticipate the fact that even though the market size may have been over 2,000 megawatts back in 2011, it's currently somewhere in the region of about 400-odd megawatts on the half year, maybe 800-odd megawatts for the full year. So this is -- this is an area which will grow in our opinion quite significantly going forward.

Sorry, you mentioned 400-megawatt was the market in the first half of the current year?

Half year for about 30 to 100.

Okay. Okay. And globally, you -- so -- and for...

So the 30 to 100 is about 1.5 times what it is in India. To give you an idea, as like I alluded to earlier, the inquiry levels domestically in the second quarter increased by 40% and internationally increased by 67% -- 67% because there wasn't as much finalization as we anticipated. And the inquiry level as a whole for the half year increased on a year-on-year basis from about 2.3 gigawatts to about 3.5 gigawatts. And the domestic part of that was from about 900-odd megawatts to about 1.5 gigawatts. So there'll be good growth.

Sorry, can you repeat the domestic one?

I think now you're going to get me into trouble because everyone's keep asking for these numbers every time, which I've been a little hesitant to do. But suffice to say that the domestic inquiry level contributes about 1/3 to 40%, 1/3 of our entire inquiry book.

The next question is from the line of Nilesh Jethani from Envision Capital.

Sir, thanks for the opportunity. So my question was on the capacity utilization levels and thereafter margins. So I wanted to understand, at present, what is our capacity utilization levels? And second part of the question is, so going forward, once we -- once the operating leverage kicks in because of the strong order inflows in the recent past, will this operating leverage help us to more than offset the impact of commodity prices? Or you expect margins to remain stable going forward?

Like that, there's going to be 2 separate questions, actually, that you asked was on the capacity utilization space, over the period of time, and if you looked at our balance sheet, we operate in a very asset-light model. And we've consciously moved further into a more asset-light model by encouraging only graduates on our top floor who will be multi-disciplined and be able to do multi-tasking. And so we want to move more into manufacture only IT sensitive and critical value-added products and largely stick on the assembly testing space. So for growth in the -- or the capacity that maybe you required for our order book going forward, we'd have to use a prudent mix of vendors and a variety of other means by which to achieve our production levels. And we're cognizant of it, and we planned on it. So there may be a little bit of investment like INR 7, INR 10 crores here and there. But I think that the capacity is really not a constrained for Triveni Turbines.

Second one is, so the capacity utilization today currently would be at what levels?

It's difficult to say because, like I said, the majority of our capacity is measured on assembly and testing. So with that, you have to base it on the heretical number of ships that we may run, which may be 3. And the fact that we're running possibly 1 plus shift right now means that we have ample capacity. So it's not fair to say that we're in 30%, 40% capacity utilization, but it's not fair to say that we're at 70%, 80% capacity utilization also.

Got it. So this incremental order inflows won't help to add too much an operating leverage.

There will be some overhead absorption, especially from the fact that higher revenue will -- we have a fixed overhead in terms of R&D and marketing. And those are the more expensive overheads that we have. So that is a higher revenue always that give us operating leverage and something that we will benefit from.

Got it. So on the margins front, so going ahead with this, so we -- as we largely do the short-cycle products, this operating leverage, of course, won't help to the margins, but will the margins improve going ahead?

Margins are a reflection of where the product order is from. And this is something that it's difficult to explain why there's such a sharp difference between domestic orders, margins and international orders. But having said that, we believe that we have factored in price increases into our pricing at the current point in time, we'll not -- we don't want to pass full prices into our customers. And so there may be a margin impact on the negative side for the domestic market in the coming quarters. But overall, given the fact that it'll be in higher participation of the international market in revenue as well as the fact that we will have a part of good revenue from our aftermarket. Margins should be somewhat the same. I think right now, what would be a greater focus for us is to expand revenue as was the question earlier. Actually, we're quite confident that we'll be able to maintain -- at least maintain margins, if not slightly better than.

Got it. Okay. On the exports trend, sir, are we also facing some price-related issues, the cost going back? So going forward, the next 6 to 9 months for the NTSA because, of course, the sports are a higher-margin business for us, like the freight cost going up, will we be able to get that kind of margins as enjoyed in the past?

No, freight is -- we generally have freighter actual. So the customer usually take the freight cost into his consideration. We will create to the extent that our supplies are impacted would impact us, but it's largely pass-through. So container and costs have gone up, but most of our containerized prices have gone up because of non-availability of containers. But a lot of our supply goes on skids is not containerized. Some parts are containerized of course. So it's not -- we start fully a matter for Triveni Turbines to be worried about. But having said that, our clients also cognizant of it, and we cost in all prices at the time of order. So we don't really take open risk much like we do for currency hedging, et cetera. So we don't think it's our business to risk all these fluctuations in market. And at the time that the order is taken, we try to mitigate that risk immediately for the customer who has it.

And one last question, sir. I guess I was asked initially also, but this sharp jump in the order inflow. So what percentage you would attribute to the volume growth and what percentage would be value growth?

Oh no, it's pretty much all value in terms of orders growth.

Sorry, I missed it.

It's pretty much all of it is volume growth.

[Operator Instructions] The next question is the follow-up from the line of Ankit Babel from Subhkam Ventures.

Hello?

Yes, yes please.

Yes. Sir, just wanted to check any execution challenges you might face in your existing order book in that 30 to 100-megawatt range in the company which you acquired because at the point of placing orders, GE was a partner and a lot many customers would have placed an order because of GE and now GE is not there. So any -- I mean, complaints or anything from the customer side? Are you addressing that?

Yes, yes, yes. So firstly, the joint venture, the way that it was operated was that all manufacturing was done by Triveni Turbines itself. And marketing was done by respective partners, GE, Baker Hughes, did it internationally Triveni Turbines for India and technology was contributed by both partners. So given the fact that we have acquired that company, the executing resources are now part of Triveni Turbines from a project management perspective. Of course, the manufacturing was always with Triveni Turbines. The nature of the settlement, which was amicable has also specifically catered to these two variables, which is that all support will be given by both partners and whatever technology is required on executing the current order book, which may be on their technology, would still continue. A number of orders that the company is still executing or executed in the rate near past has been 2 they have produced and GE as related parties. And so they continue to support us visited in their best interest as well. But I think that very frankly, we have all the resources necessary. The customer communication that is necessary has also been we've ensured that we keep the customers and the customer satisfaction in mind in terms of execution.

Okay. And sir, my second question is, how you arrived at the valuation of this buying the stake, 50% stake at just INR 8 crores, I mean, the -- over.

That's the core value. That's face value of the shares.

No, I agree. But from -- I mean, a company which was making a profit of, say, INR 7, INR 8, INR 9 crore, well in that at INR 16 crores. So what was the basis of that?

Well, I wouldn't go into those details, but it was a comprehensive settlement. And so all the numbers were combined into -- so it's better for you to look at it as one whole net settlement number rather than differentiated settlement.

Okay. And this INR 200-plus crores also which you get was because of some -- I mean, some losses which you could have incurred or -- I mean, these INR 200 crores.

Yes, this number was just a settlement of dispute. So it's a question for us to put what are the issues that we had behind us and move forward. We have a lot of things to do from Triveni Turbines' perspective, where we are very excited to be approaching this 30 to 100 megawatts segment independently and with the vigor and entrepreneurism that we have shown in the below 30 megawatt segment. We have other growth avenues that we need to spend time on. There's a lot of technological investments and interventions that we're making. We also have good money in the bank, which we need to find prudent uses for. So we didn't want these disputes to take up so much of our time. So it's better for us to move on and ensure our shareholders would agree with that as well. Thank you very much, and thank you, everyone, for joining. Are there any more questions? Or should we wrap up now?

No questions. So over to you for closing comments.

Thank you very much. Thank you very much, ladies and gentlemen, for joining the call. As I said, we're very optimistic on the future for Triveni Turbines. The order bookings in the next couple of quarters, we anticipate to be quite robust. So as we lead to a very good and a record order booking starting FY '23, which should, of course, then lead to an increased and enhanced revenue and on our expectations. We will continue to keep you informed our decisions on utilization of cash, which the Board will make. And we look forward to being in touch with you. Thank you very much.

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