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Edited Transcript of TRITURBINE.NSE earnings conference call or presentation 7-Nov-19 6:30am GMT

Q2 2020 Triveni Turbine Ltd Earnings Call

BANGALORE Nov 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Triveni Turbine Ltd earnings conference call or presentation Thursday, November 7, 2019 at 6:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* C.N. Narayanan

Triveni Turbine Limited - Media Relations Contact

* Dhruv Manmohan Sawhney

Triveni Turbine Limited - Chairman & MD

* Nikhil Sawhney

Triveni Turbine Limited - Vice Chairman & MD

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Conference Call Participants

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* Abhishek Pamecha

Vibrant Securities Private Limited, Research Division - Research Analyst

* Adil Khan

* Anand Bhavnani

Unifi Capital Pvt. Ltd. - Analyst

* Chirag Muchhala

Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst

* Dhaval Shah

* Harshit Patel

Equirus Securities Private Limited, Research Division - Associate

* Kirthi Jain

* Manish Goyal

Enam Holdings Pvt. Ltd - Investment Analyst

* Payal Lad

* Ravi Swaminathan

Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP

* Sreemant Dudhoria

Unifi Capital Pvt. Ltd. - Manager

* Rishab Barar

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '20 Earnings Conference Call of Triveni Turbine Limited. (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.

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Rishab Barar, [2]

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Thank you. Good day, everyone, and a warm welcome to all of you participating in the Q2 and H1 FY '20 Earnings Conference Call for Triveni Turbine Limited. We have with us on the call today, Mr. Dhruv Sawhney, Chairman and Managing Director; Mr. Nikhil Sawhney, Vice Chairman and Managing Director, along with 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 a statement to this effect has been included in the invite, which was mailed 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 invite Mr. Dhruv Sawhney to share some perspectives with you with regard to the operations and outlook for the business. Over to you, sir.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [3]

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Thank you very much indeed, Rishab. Good morning, everyone, and welcome to the H1, Q2 FY '20 Earnings Call. It's a very good morning here, even though the -- this is a small business and the solution is a little less, but our results, I think, make up for that.

We have an exceptionally good quarter and an exceptionally good half year. We've achieved the highest ever turnover and PAT for the quarter and the -- and the half year in the history of Triveni Turbine. And this is quite credible -- creditable considering the overall environment in -- domestically and internationally.

Our income from operations have a growth of 19% at INR 4.6 billion and PAT has an exceptional growth of 65%. These are on account of improved margins, improved turnover and, of course, a reduced debt provisioning from the recent changes in the corporate tax. The improvement in margins is in line with what one has mentioned during the previous earnings call and is back to the levels that we feel we can sustain over the long term and what are the expectations, I hope so, too. And these are, as you know, quite exceptional in the capital goods industry, and especially in the rotating machinery industry, not just in India, but internationally, for both products and overall company.

We -- I would like to just take you through some of the points that we have right now and also then discuss the future outlook, which is very bright and good considering that the environment is still quite tense in the international sphere and in the domestic sphere in the power generation area. Our outstanding order book at INR 6.97 billion is very good. We've declared a 50% interim dividend, and we see very good traction to sustain this optimistic forecast, not just for the balance part of the current FY '20, but into FY '21, both for order booking and execution is concerned.

Just to look at the domestic market first. Our main areas of orders and -- in the future are in the distillery segment, as you know, there's a very big push in India for ethanol and this is really taking off. Governments have got extremely good pricing, and they have an encouragement on funding, subsidized funding for the industry. They have also encouraged the oil companies to come out with tenders and a very large tender has already come out, and this will be supplied.

So this augurs very well. And besides this, we are seeing very good traction in the pulp and paper both in the half year that has gone by and in the inquiries that we have in hand. The sector that has also been good, sustaining in the process sector, which is mainly in the chemical, pharma and a little bit in fertilizer. Inquiry based on this also during the first half year and Q2 has been very good. Inquiries are okay in the textile sector, but I think they're taking time for converting. And this is mainly due to the export push, which government is now focusing on. So we think that this will also be a little bit of a growth sector in the next 6 months and definitely in FY '21.

Internationally, our --our concentration has been good, and this is because we are diversified geographically, very large diversification orders in 70 countries. And the main sectors for us internationally are there -- which are waste-to-energy, Biomass, waste heat recovery and surprisingly, pulp and paper as well. Now we have orders from these and have very good inquiries from these.

These are sectors where we believe we can sustain our growth. And there is -- it's over a wide area. We've seen for ourselves revival for inquiries from Central and South America has just been very nice. Waste was not too large there. And so that's very encouraging because we are seeing very good traction and order intake. We have good traction in Southeast Asia and believe that this will sustain. We feel that some parts of Africa are good, and this will also augur well for H2 and FY '21.

Europe is having a slowdown. But there is scope in the waste-to-energy market and in -- also in limited Biomass, and we hope to have better traction there. Turkey has been exceptional for us, even though it has had problems domestically. But power order, there has been -- inquiries have been diverted into orders, and we expect that to continue because we have a very good market share there. I think the exceptional point here is that Triveni Turbine probably is unique in Indian capital goods and manufacturing companies to have a strong global market share.

We continue to be #2 and third competitor is quite far behind. These are from international organization databases and this has to do with our spectrum of products. We've been able to attack the segments that are in the market today. So we have the product for waste-to-energy, for Biomass and for waste heat recovery, which is still very good growth areas. While economies may be going down, but these are certainly places where more and more orders are coming in over a diversified range.

And secondly, our R&D now had plateaued in terms of its testing capabilities. As I mentioned in the last call, we've had our new generation high-efficiency blades and other stages of the turbine tested in the best laboratories in Italy and our tester bed is now fully operational and has been testing our new range in both lines from 10 megawatts all the way up to 45 megawatt. So our R&D facilities have come to bear. The next 2 areas where I see we have succeeded well is in our cost control. Inventory management is extremely good now, and we feel it's -- we will be able to have better cost controls going forward.

Value engineering is the key, which differentiates us from others and helps us to preserve our margins. That is also continuing, and we are having good traction in finding diversified supplier bases and improving productivity in the 2 plants that we have. The 2 areas I'd like to touch upon for the future, which has come for us is, one is oil and gas. We have a very low share. These are drive turbines mainly and some power generation. And we have been fortunate in having a breakthrough with the Kuwait National Petroleum Company with Fluor Daniel as a consultant.

Now these turbines have been delivered. The customer -- commissioning them was delayed for a while, but in the next 6 months, we hope to get them delivered. But this is an area where there is a huge potential. They are probably at the 1% level there or even less. And so limited competition. And -- but the problem is getting registration. So we have now managed -- we've got registration from Abu Dhabi. We are getting registered with SABIC in Saudi Arabia. We are moving very fast domestically with EIL.

So this is a long process, but the growth for the next few years in this line is very, very high. The other line that we find extremely good is in the waste-to-energy line. So we have been able to tackle the various parts of waste-to-energy in both core countries and (inaudible) countries and the equatorial regions. So our products are now sticking in very much better with the customer requirements and with the same efficiency and margin levels that we expect. I'd like to mention, looking at the range of what is happening to power generation 3, 4, 5 years down the road. This globally is going to move and look at supercritical CO2 turbines, where the -- where the costs are maybe 1/4 to 1/3 of what they are today, the steam -- of steam turbines. And our work -- now we've solidified our work with the Indian Institute of Science. So our research projects there, which are 2, 3, 4 years to come to fruition for commercial operations in a big way are proceeding at a world-class level. So we are really looking at the 2 or 3 players globally that maybe doing this, and we've solidified our relationships formally with the Indian Institute of Science. And I think that is also another area which we are contemplating on.

We are looking very much so at the defense sector in turbines, and we are having a unique dialogue with the -- especially the Navy and we are the primary focus for them, both for current line and for the future. So we would really say that -- we feel that we will be able to have our projected growth in the top line and preserve our margins. We hope to end the year at similar margins and the growth in turnover, which we've experienced in H1, we feel will get through to the full year.

Order bookings. We expect at the end of financial year FY '20 to be good to allow us the same growth for FY '21. So all in all, being a second largest player internationally, having a diversified portfolio and in segments which are there today regardless of the growth of the economies did well for Triveni Turbines. Thank you.

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Operator [4]

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Thank you. Should we open it for Q&A session now, sir?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [5]

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Please.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Ravi Swaminathan from Spark Capital.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [2]

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Congrats for a good set of numbers. Just wanted to know, in terms of the international markets, why there was a sharp fall in order booking? I mean was it just related to postponement of orders or was there kind of a shrinkage in the market also, overall market also?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [3]

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That's a good question. This, as I said earlier, is a lumpy market. Yes, there has been postponement of 2 or 3 projects in diversified territories. Basically, I wanted to cover this point that quarter wise, booking is lumpy. But we are -- our targets for order booking globally, the international, for FY '20 are still the same. We're very fairly confident on that. And that's the good part. Because we are in different areas, the orders that have got postponed is not really in terms of them dumping the project. It is in terms of them actually closing and giving the advance, and that is when we take it into recognition. We have a very strict policy of order booking recognition. So I think we are expecting a much better order booking in H2.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [4]

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Got it, sir. I mean would we end with similar orders like what we had done last year in terms of exports?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [5]

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Yes, we're looking at the overall booking for the year being similar to last year, absolutely. That's what our target was. And I might say here another thing. Sorry to interject. The inquiry base is pretty good. The inquiry base actually has gone up. So this to me is very encouraging for order booking in FY '21 because even with -- on a postponement because of the spread of these orders and in the segments that I mentioned as well as the orders geographically inquiries. That is pretty good.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [6]

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Got it. How much is the inquiry pipeline, sir, international and domestic? And how much was it relatively last year?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [7]

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About the same. But when you look at the inquiry pipeline, and even with figures of 5 gigawatt, it doesn't mean because then you have to start booking at which are budgetary inquiries and which are first inquiries. So we actually categorize them like that. But all I can say is that we haven't seen any dip in inquiry generation because of the sectors we are in, which is encouraging. Now to expect finalization exactly as per our plan is difficult. But overall, for, let's say, half year or full year, there is pretty good growth in the total numbers.

And I might mention here that we are quite happy with the domestic sector both order booking potential and inquiry pipeline. This is -- might be surprising because people are asking us how is it when generally -- because it's a sector that we're in. We're not getting so much in the steel and cement sector, but the distillery, pulp and paper, the pharma and food processing chemicals are still bringing out all the inquiries and creating orders. So this is going to continue.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [8]

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Got it, got it. And in terms of the oil and gas space. So how large is the opportunity there? Will it move big -- is it a needle mover for us? And what is the difference? I mean what is -- I mean from a layman's point of view, what is drive turbine? And how is it different from conventional turbines?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [9]

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You see in the oil and gas sector, which includes refineries and fertilizers and all, these turbines drive pumps, blowers, compressors, they drive them. So all refineries have two, they have a motor and a turbine. So it's a huge field. You know the sophistication in how they place order. But let me tell you the real kicker is the very large spares and service.

This sector has much higher than the normal service and spares, maybe double of the other sectors. So when you look at it in the future, let's say, 3 years from now, it's pretty good.

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Operator [10]

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(Operator Instructions) The next question is from the line of Kirthi Jain from Sundaram Mutual Fund.

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Kirthi Jain, [11]

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Congratulation for a good set of performance. Sir, in the coming half also, do you expect the domestic ordering momentum to sustain, sir?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [12]

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Yes, yes. I can say that with the stage where the inquiries are as the -- yes, I expect that to sustain, and also going into H1 '21. That's as far as you can normally say. I mean going more than that is not correct. It mean -- I'm not wanting it to make any projection of going up or down, but sustain.

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Kirthi Jain, [13]

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Okay. So what would be the catalyst, sir?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [14]

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The sectors, I'd say distillery. The catalyst is the ethanol program. It's a very good investment opportunity and people are going into it. Same thing we are finding in small paper, finding in that -- there's still sectors of pharma, chemical process industry. These are not ways -- waste -- the market for waste heat recovery, which is where you recover some excess steam that you've been letting out and now revise it and more so when there is a stressed economic situation because these are quick returns and people are looking for doing that. So that's the -- there is a movement towards municipal product waste also a bit. I think that will take a little time, but that's a good growth area. As you know, there is a big move on the pollution front, but I don't want -- we haven't taken that into our -- when I say that domestic will sustain.

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Kirthi Jain, [15]

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Sir, our Aftermarket business was a little muted for the half as a whole like we have 1% growth in the Aftermarket. So how you...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [16]

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Yes, it is lumpy. It's again very lumpy because -- it's a good point. We didn't cover that. The refurbishing sector, this got a little delayed. But we've got extremely good inquiry, especially from the international market. Now refurbishment is pretty similar to an order, in fact, except that your margins are good. And so while a number of places don't want to order new components, they're looking at the refurbishment because -- but this is so new in terms of what they did earlier. I guess the decision-making is taking a little longer. So in the international market, the lumpiness is as much, if not more, in the refurbishment sector -- service sector -- Aftermarket sector. But we are expecting our target of bookings in the Aftermarket to be better than last year.

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Operator [17]

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(Operator Instructions) The next question is from the line of [Harish Mehta] from BNP Paribas.

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Unidentified Analyst, [18]

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Congrats for the good set of numbers. Sir, currently, what is your market share in India? Also, if you can give a breakup of product-wise and top 10 countries in terms of revenue contribution?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [19]

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No, now you are...

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Unidentified Analyst, [20]

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Also, the segment wise.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [21]

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You are asking me for very confidential information, market-oriented information that's not really public. The market share, especially product-wise, we don't disclose. But I can say that we have over 50% market share in the domestic market.

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Unidentified Analyst, [22]

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Domestic market. Okay. In terms of segments, sir, can you say that? Globally...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [23]

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I said the segments. I gave you the segments where we are getting orders from; distillery, pulp and paper (inaudible) where the segments we're getting orders from, I don't want to go into what part is in each segment.

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Operator [24]

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The next question is from the line of Sreemant Jain from Unifi Capital.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [25]

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I have 2 questions. The first question is on low inventory level and the growth forecast that you have for H2 specifically. Sir, in the opening remarks you mentioned that H2 is also likely to see good revenue growth. But if I see our inventory level, they are quite low. So how do -- I mean, these 2 seem to be contrasting, can you help me to consign?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [26]

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No. I think the inventory level, which has got lower was some old inventory, which we've used. So I don't think that these 2 things are connected in turbine. The inventory level that we had were not conclusive on future growth, meaning orders work-in-progress, if that's what you're getting to. Also, you must know that 50% of our turnover comes from bought out items in the turbine island. So that's not in the inventory in our books, it's in the inventory of our suppliers. Alternators, condensers, electrical distribution boards, that is with all turbine manufacturers. And now, increasingly -- to increase our turnover and our top line, both domestically and internationally, we're enhancing our scope of supply. We're taking on a bit more because it has -- the customers are wanting us to do it. We are able to preserve the margins in that. And so by taking on enhanced scope of supply in the turbine area, such as piping and other things, we are able to further the top line growth.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [27]

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Sure. Sir, second question, in terms of our order book to an early participant, you indicated that for the full year FY '20, our export order book could be similar as to what we did in FY '19. So this implies that our H2 order book has to be 2.1x the H1 order book and exports. So is my understanding correct?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [28]

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Yes, it's substantially going to be higher. You're quite right. And so that is a question of the orders getting postponed. They've already seen good traction in the month of October.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [29]

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And secondly, on the order book front on the domestic side, here, again, you mentioned that the H1 momentum shall continue. Now if I were to, again, run the numbers, it implies that in the H2 of FY '20, our order booking in domestic would be twice what it was in H2 of FY '19. So am I understanding it, again?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [30]

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No, no. I'm talking about the momentum versus last year. So -- so you look at what we did last year order booking and what we're going to project for this year and similarly, what happened in the domestic market for H1. And again, we may have an exceptional quarter because people decided earlier, it may get slightly postponed to another -- to the next quarter. But we are not seeing any change in the orders that are getting close to finalization or the orders that are active for finalization in H2. So that's how I'm able to make the prediction.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [31]

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So just for my understanding, in H1, the domestic order book was INR 290 crores. Did this have any order which were the ones and would have actually affected in H2, otherwise? Or is it a normal order book as a course of business, this INR 290 crores...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [32]

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Yes, this is a normal order book. Some of them were coming over from last year, and some of the ones of this year may go over to Q1 of FY '21. But by and large -- I don't want to just take a figure and double it like that. But I'm giving a trend and a basis for that. So I don't see any big dip in the order booking in domestic market in H2.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [33]

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Okay. It will be greater than H2 last year?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [34]

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And it will be roughly similar to what we're having in H1.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [35]

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So then it will impact doubling of the last year. Last year, we just had INR 148 crores of orders in H2.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [36]

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Right.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [37]

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And so...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [38]

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Well, I'm not getting into the -- as I said, if you're trying to get me to give you an exact number of order bookings for H2, that's not really possible to project because we are not -- these are not things that you are 100% confident when the customer is ready to place the order. But I can say that overall order booking for the year will be higher than what it was last year. So that's where I want to leave it.

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Operator [39]

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(Operator Instructions) The next question is from the line of Manish Goyal from Enam Holdings.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [40]

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Sir, it was quite happening to see a large order win of INR 76 crores in GE JV. So if you can share some more insights as to -- is it a single order and from which sector?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [41]

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Yes, that's a fun question. It's a single order, and it's a large turbine, and it's in the combined cycle, and it's in West Africa. And it's a very --it's high end. I would just want to say that, you know what, the operations of GETL are normal. Marketing is as it was before, both domestically and internationally. And the inquiries are pretty good. But in the higher megawatt ranges, the time of finalization is even more uncertain because of the economic situation, generally.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [42]

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Right. Okay. So this you said is from West Africa for combined cycle power plant?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [43]

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Correct.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [44]

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Okay. So I would just probably -- I thought that maybe -- so has this order -- share of order being flown through to the stand-alone in the Q2 as well?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [45]

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Yes.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [46]

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Okay, okay. So if you can give some more outlook on in terms of how is the pipeline for this large turbines for the JV?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [47]

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No I think the inquiry type pipeline is quite good. Now the problem is that this particular order has been going on for almost a year, where we were speaking and magazine finalized. It's a long period. I didn't even talk about it because I said it's -- at least 2, 3 quarters, we were feeling that it could have been done in any quarter. Now we have similar ones at, let's say, early stages or medium stages. But so again, even in waste line, there is activity in waste-to-energy in some process industry, limited less now in sugar part. But more so in waste-to-energy, waste heat recovery and Biomass. Similar to what's happening in the 530 megawatt.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [48]

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So what would be our closing order book as on quarter 2 in GE JV?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [49]

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That's 105 -- around INR 105 crores.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [50]

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Sure. Okay. And this order, which we would have got from the JV would be classified under domestic or international in stand-alone order book, sir?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [51]

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Domestic.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [52]

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Okay, okay. So probably this is what is one of the reasons why our domestic inflow has been quite good in Q2?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [53]

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Yes. Yes, though it is actually for international, sure.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [54]

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Okay. And sir, just looking at first half numbers, probably the SKU length is quite large for domestic inflow and international inflow, like domestic inflow is up 32%, while international inflow is down 43%. And overall, we are down 7%. So sir, like for half 2, our order inflow has to be quite good for us to have a growth visibility for FY '21? And are you confident towards that?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [55]

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Yes, yes. That's a good point, and that's what I want to give you. We've done a very detailed analysis, and we have fairly good commitments that we will be able to meet our targets of total order bookings. Now you did point out one of the cases where domestic comes to international -- I mean, international comes into domestic. In EPCs also, sometimes that may happen. While the project is overseas, the order is from an EPC to us. But again, you have a good traction in total order booking. So I would say that I'm -- we're confident of making our numbers of order booking for the year FY '20. So therefore, I'm able to say that FY '21, it looks like with the same growth path that we are thinking of now. And thinking of early double-digit in FY '20 top line, and we're saying the same -- that way the order booking is going.

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Manish Goyal, Enam Holdings Pvt. Ltd - Investment Analyst [56]

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Okay, okay. So ideally, we should hope for FY '21 our revenues crossing strongly by -- crossing INR 1,000 crores, sir?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [57]

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That is the preliminary budgeting now.

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Operator [58]

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(Operator Instructions) The next question is from the line of Harshit Patel from Equirus.

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Harshit Patel, Equirus Securities Private Limited, Research Division - Associate [59]

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I had just a couple of bookkeeping questions. So out of our INR 130 crores Aftermarket order intake, sir, could you give us a split between domestic and exports?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [60]

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Just a minute. I'm getting it from my colleagues here. Any other questions?

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Harshit Patel, Equirus Securities Private Limited, Research Division - Associate [61]

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Sir, similarly on the outstanding order book front as well, so if you could give us a breakup between domestic and exports for Aftermarket, then it would be really good.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [62]

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Narayanan, do you want to take?

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C.N. Narayanan, Triveni Turbine Limited - Media Relations Contact [63]

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Harshit, around 75:25 is the ratio in terms of order inflow.

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Harshit Patel, Equirus Securities Private Limited, Research Division - Associate [64]

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Okay. And in terms of outstanding order book?

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C.N. Narayanan, Triveni Turbine Limited - Media Relations Contact [65]

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Outstanding order book, it is almost 30:70.

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Harshit Patel, Equirus Securities Private Limited, Research Division - Associate [66]

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30:70 you said?

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C.N. Narayanan, Triveni Turbine Limited - Media Relations Contact [67]

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Yes.

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Operator [68]

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The next question is from the line of Kirthi Jain from Sundaram Mutual Fund.

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Kirthi Jain, [69]

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Sir, you had highlighted you have a order booking target, order booking target. So any color on that, sir? What is your order booking target, sir?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [70]

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No, no. I can't give you that. I'm just saying that we are projecting our growth figures. So you look at the order booking target in similar numbers. These are -- as someone pointed out, our order booking this year is really the turnover in FY '21. So this year's orders are mainly from what we had got last year. So keep that in mind and when I'm giving some broad feeling of where our growth is going, that's more for what you could keep in mind rather than a definitive number because these things are not -- these are capital goods. And capital goods can be decided in 1 quarter or second quarter, and the situation is so diversified today that, even earlier, you cannot really have a fixed number.

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Kirthi Jain, [71]

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Sir, in terms of capital allocation, any plans we have, sir, like -- how we could...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [72]

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Good question. Good question. Well, that one very good thing is that here, we have a very good cash situation, which is because of our PAT. Our current cash is probably [150]. It's about -- at the end of the quarter [125], but 150 now. And with reducing inventories that's there. We don't have any capital allocation as such in terms of need for this. We are just using it for our -- keeping our liquidity and -- but we are using some -- we are going in the direction of taking on larger section of orders around the turbine, which we don't really need capital for. The working capital we are managing extremely well. We don't have any borrowings, and we have cash. And even for the increased turnover, we don't contemplate any borrowings. And so some slight usage of the cash that we have on hand is not very consequential.

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Kirthi Jain, [73]

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Okay, okay. Sir, how much like the content increase will happen, sir, because of the captive manufacturing work, which you're highlighting in terms of the higher content you highlighted, sir?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [74]

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Just that -- that's where we are trying to see power growth similar to what I had already said. The low double-digit cost, that's what we are trying to achieve in the long term.

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Operator [75]

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The next question is from the line of Dhaval Shah from Girik Capital.

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Dhaval Shah, [76]

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Sir, just one small understanding. Orders, these actions you've taken in domestic market in the segments which you mentioned, all of them are for waste heat recovery, is it -- is it something for that purpose only?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [77]

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No, no, no. They're not for waste heat recovery only. There are quite a lot. The distillery segment, our new distilleries coming up. In the pharma sector, there are some types of process (inaudible). So it -- I wouldn't just put it into 1 sector. That's why we are quite happy because it's...

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Dhaval Shah, [78]

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Got it. So it is not -- so as you mentioned that when the sentiment is a little weak, people try to save cost, but the demand which you are seeing is not from the cost savings and it's more from the actual expansion side.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [79]

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And where they are able to actually say -- see the waste heat recovery is a cost-saving device. It may need a daily capital, but these are not for large, deeper -- the cost of the turbine island is not that substantial in our range.

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Dhaval Shah, [80]

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Okay, okay, okay. And sir, what is the progress for -- in India with regards to burning of the municipal waste and creating power out of it?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [81]

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Good question. It's slow, but it's a great market for us. Now the million-dollar question is how many times -- how long will it take? The problem here is the collection and separation of waste. People are moving in Delhi. They're moving -- they're asking people to -- our colony is also there putting out presentation. But you need the separation of -- it is going to happen. It has to happen and it's going to happen, and we are very aptly situated to supply a key component in it. But these products have to actually be floated and given out. And for that, you need the collection and separation of waste. The technology and the product for actually incinerating this is fairly simple.

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Dhaval Shah, [82]

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Okay, okay. So first the entire chain of collection, separation has to be established?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [83]

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Yes. And then you get the -- then it's automatic. So I think people who are looking at the projects are waiting for this to happen.

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Dhaval Shah, [84]

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Okay. But from the government side, how is the progress being done to set up this entire chain of collection, is it a priority? Are you seeing some swift moves on that side?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [85]

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Yes. So many municipalities are moving well. Even in Delhi, where we live, now the colonies are getting -- encouraging people to do this. Because you see, you know the pollution and the question of garbage lying around. And India is very firm that it doesn't want (inaudible). So there's only one way of actually disposing of it, it's incineration, which is where we come in. That is the good factor for us as a product supplier.

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Operator [86]

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(Operator Instructions) The next question is from the line of Anand Bhavnani from Unifi Capital.

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Anand Bhavnani, Unifi Capital Pvt. Ltd. - Analyst [87]

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2 questions. One is, our other expenses, they are INR 37 crores this quarter versus INR 35 crores in Q1. So is there some one-offs this time around getting help of the (inaudible)?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [88]

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The other expenses. Yes, we had mentioned to you that we were doing some reengineering and costs last couple of times, which is in -- at Q4 of FY '19. So those have been taken into account. We've fully written them off. And I think the expenses are...what are you saying?

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C.N. Narayanan, Triveni Turbine Limited - Media Relations Contact [89]

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I said H1 is at the same level.

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Anand Bhavnani, Unifi Capital Pvt. Ltd. - Analyst [90]

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Yes. So that's another question, right? Last year also in Q2, you had high other expenses. So is it like whatever these additional expenses are, they will always be in Q2. Is there some cycle to it? So last year it was around INR 33 crores and this year it's INR 37 crores, whereas this year in Q1 it was INR 35 crores. So what's the way of -- the way we book these expenses, is there some cyclicality pattern?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [91]

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I don't think there's any cycle for at any quarter. These are just how it happen, the expenses. I don't think there is a cyclical pattern to this, a fixed cyclical pattern at all.

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Anand Bhavnani, Unifi Capital Pvt. Ltd. - Analyst [92]

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So what should we -- let's say, other expenses, if I were to remove one-off from the Q2 number from the INR 37 crores?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [93]

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You can take the numbers as they were there. It's difficult to forecast. They are not very substantial, the differences in the quarter.

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Anand Bhavnani, Unifi Capital Pvt. Ltd. - Analyst [94]

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Is it also -- then these other expenses would vary depending upon mix of Aftermarket versus product...

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Nikhil Sawhney, Triveni Turbine Limited - Vice Chairman & MD [95]

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The expenses are heavily influenced by 2 factors. One is dispatches, and therefore, transportation and packaging depending on export and domestic. And the other is order intake, and therefore, the marketing commissions that are given to our agent network depending on order intake. So therefore, it's very difficult to correlate on a quarter-to-quarter basis or half yearly, so will depend both on the product dispatches as well as order intake.

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Operator [96]

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(Operator Instructions) The next question is from the line of Abishek Pamecha from Vibrant Securities.

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Abhishek Pamecha, Vibrant Securities Private Limited, Research Division - Research Analyst [97]

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I have got 2 questions. First is just how the growth in the Aftermarket space is driven, that once we see the installations, how does it go?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [98]

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No. There is a cycle of spares that some come with the order. And some come up in regularity of the running of the installation. After a certain amount of time, there are many components that need replacement. And so that's where we are seeing our spares. That is on Triveni Turbine. But we are now very strongly moving into the field of refurbishing other people's turbines, especially internationally. That is a big growth area for us. All the turbines of other manufacturers who are maybe not even in business or not concentrating on it that much, people are willing to want to upgrade those turbines and not necessarily by a downturn because of the economic constraint. So that is a good market. That's also in something Aftermarket.

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Abhishek Pamecha, Vibrant Securities Private Limited, Research Division - Research Analyst [99]

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Okay. Sir, if we can basically segregate in terms of the -- so the refurbishment part would be a lumpy one, but there will be a trend in terms of the Aftermarket space, which is for the already installed base of us.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [100]

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Yes, I don't want to get into the detail of that. That's a little -- these are market-oriented decisions. And so we look at the growth in Aftermarket as a total and give that because when you some time -- when you do the refurbishment, some time ago, you get spared even for that. But the time lag of when they do it and when you can forecast it, it's not -- we are moving in that direction. And electronically, now, we are fairly close to having a remote sensing device, which we are working closely with the information providers to do, where we'll be able to offer this in the next 6 to 9 months to a customer where he will automatically be able to predict when a spare should be ordered.

This is very similar to what's there in the airline industry or with gas engines and stuff. So we are trying to get up to speed with that, which is quite revolutionary in our line. That is just to increase the quantum of spares and the predictability of our own order bookings and the servicing of these customers. And also to help in the differentiation of our marketing. So that is the line that I thought I might bring up, which was also -- just for Aftermarket growth.

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Operator [101]

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(Operator Instructions) The next question is from the line of Payal Lad from Progressive Share Brokers.

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Payal Lad, [102]

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(inaudible)

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [103]

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Can you just say it a little louder?

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Payal Lad, [104]

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Yes, I wanted to understand the things (inaudible) which is due for revenues. What is revenue impact on the current business in terms of technology and marketing?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [105]

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I didn't get that. What impact?

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Payal Lad, [106]

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Yes.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [107]

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Impact of?

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Payal Lad, [108]

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Impact on the current business in terms of technology and marketing assistance.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [109]

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The impact of what? I didn't -- sorry, I don't get the question. You want to know the impact of...

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Nikhil Sawhney, Triveni Turbine Limited - Vice Chairman & MD [110]

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The matter is sub judice right now. I think factors have been taken (inaudible).

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [111]

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If you were talking about the GE Triveni, I would say that, that -- as the Vice Chairman has mentioned, that matter is sub judice right now. But our businesses are carrying on quite normally in the joint venture. As we have seen with the recent order bookings. So operations and marketing and execution are quite normal.

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Operator [112]

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The next question is from the line of Adil Khan from ICICI Bank.

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Adil Khan, [113]

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Sir, just one question from my side. So earlier in the PPT you said one of the focus areas being sugar sector, the distillery segment due to the ethanol push. So what kind of demand are we looking at? And also the future outlook of that, sir? Just can you give us a ballpark number of...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [114]

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Ballpark number is difficult. But you've heard the announcement of the Prime Minister and the Minister in this line. We, as a country, are close to 5%, 6% lending. And the target is to go up to 20%. So it's a huge -- how long it will take and when the -- but the government is very -- pushing it in a lot for obvious reasons. One is that it kept our balance of trade and -- oil imports can go down, foreign exchange. And secondly, it's very environmentally friendly. Thirdly, it allows the sugar industry to diversify and be able to adequately compensate the farmers. So they are able to diversify their income up from sugar into ethanol.

So the encouragement is very much there. The figures that you want are given by the government. They are figures of -- but how long it will take to get there, which is quadrupling what we are today, is not a very easy thing to put down, in fact. But certainly, we see good growth going forward every year, for at least 5 years, if not more.

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Operator [115]

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The next question is from the line of Chirag Muchhala from Nirmal Bang Equities.

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Chirag Muchhala, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [116]

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Sir, 2 questions from my side. So first is, what is the domestic market size now for the 0 to 30 megawatt steam turbine segment? And second connected question is that, that now that we are seeing some kind of better orderings from the domestic market, are we also seeing better pricing and margins? And the cut-throat competitive intensity that we had seen over the past few years, is it declining?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [117]

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I would say that the market size is not the same. It's a little better than what it was a year ago. If we look at the power side in 2014, '15 and '12 and '13, '14, our margin pressures are a little better. I wouldn't say they are anywhere near where we want them to be in the international market. But they're -- to answer that question, they're better than we had experienced in the last few years.

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Chirag Muchhala, Nirmal Bang Securities Pvt. Ltd., Research Division - Research Analyst [118]

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Okay. Sir, market size, can you quantify?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [119]

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I think it...

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Nikhil Sawhney, Triveni Turbine Limited - Vice Chairman & MD [120]

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For the half year, the market has grown by about 30% year-on-year to about 530 megawatts. A little more maybe, yes.

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Operator [121]

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The next question is from the line of Anand Bhavnani from Unifi Capital.

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Anand Bhavnani, Unifi Capital Pvt. Ltd. - Analyst [122]

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Sir, I just wanted to congratulate you first for the -- in the press release, you have mentioned that you are the second largest by a magazine who has done a survey. So congratulations. And again, if you can share most metrics from that survey, how has our market share grown, which is the largest in the world ahead of us and what's the difference? Some data points and then I'll come back to you with my second question.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [123]

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Well, I can't give into specifics. I would say that we are quite close to #1, 1 and 2 are very little difference. The gap between 2 and 3 is quite large.

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Anand Bhavnani, Unifi Capital Pvt. Ltd. - Analyst [124]

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Okay. And sir, with regards to our gross margins, steel prices have weakened quite a bit. And do you see any scope for our margins to be better lower raw material prices?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [125]

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No, our raw material is not much in steel. We are in castings and forgings. So we -- it's not a fabricated item. So we really -- and the -- some of the raw material has been very high-quality blades, special steels and some of these items are even imported because we -- so it's -- supply chain base now is global even for the raw material.

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Anand Bhavnani, Unifi Capital Pvt. Ltd. - Analyst [126]

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Okay. And lastly, sir, with TTL, our run rate has been fabulous for the first half. How is the outlook like for H2 and for FY '21?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [127]

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It's difficult to talk about when these order finalizations will happen. But as I have been saying, we are having adequate traction in terms of inquiry generation and orders that we are pushing in a variety of geographies internationally, less domestically in that line. That I can say that there is not that much of the higher range inquiries coming up. And the sectors you know, which I had talked about, so I expect similar performances going forward.

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Operator [128]

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

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [129]

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Well, thank you very much for joining us on this H1 earnings call. I'd just like to -- we are very happy with our team efforts for achieving this record performance in terms of PAT for both Q2 and for H1. And we -- it augurs well, our orders on hand, our inquiry base, both domestically and internationally, we are happy that we're in the right segments, both in India and overseas, that are not being affected by the so-called global slowdown or problems in various geographies. And our exceptional efforts in technology and R&D and in value engineering is what is making us preserve this growth and good margins. So I expect this to continue well into -- we can see visibility well into FY '21. So with that, I'd like to thank you all for joining me today.

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Operator [130]

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