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Edited Transcript of TRITURBINE.NSE earnings conference call or presentation 5-Aug-19 5:30am GMT

Q1 2020 Triveni Turbine Ltd Earnings Call

BANGALORE Aug 10, 2019 (Thomson StreetEvents) -- Edited Transcript of Triveni Turbine Ltd earnings conference call or presentation Monday, August 5, 2019 at 5:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Dhruv Manmohan Sawhney

Triveni Turbine Limited - Chairman & MD

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Conference Call Participants

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* Dhaval Shah;Girik Capital;Equity Research Analyst

* Kirthi Jain;Sundaram Mutual Fund;Research Associate

* Lalaram Singh

Vibrant Securities Private Limited, Research Division - Research Analyst

* Ravi Swaminathan

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

* Sreemant Dudhoria

Unifi Capital Pvt. Ltd. - Manager

* Rishab Barar;CDR India

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Q1 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 from CDR India. Thank you.

And over to you, sir.

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Rishab Barar;CDR India, [2]

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Thank you. Good day, everyone, and a warm welcome to all of you participating in the Q1 FY '20 earnings conference call for Triveni Turbine Limited.

We have with us today on the call 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. And welcome, everybody, good morning, to the Q1 FY '20 earnings call.

We have a good set of numbers for you this morning. Our net income from operations had a growth of 24% versus last year at INR 2.14 billion. And this resulted in an EBITDA of INR 468 million, which again had a growth of 39% over the corresponding quarter last year. Our profit before tax increased to INR 409 million in Q1 FY '20, a growth of 41%, but what was exceptional was the growth in profit after tax at 62% and resulting in a figure of INR 307 million.

The EPS not annualized for Q1 FY '20 is INR 0.95 per share.

Also encouraging is the strong outstanding order book at INR 7.2 billion. The notable achievement is that our PBT margins are back to the level we achieved in the past years and which is in line with what I communicated to you in the last financial year during our earnings calls. I'll be referring to this a little more further on. The period under review recorded an order intake of INR 2.15 billion. And the mix of exports and domestic is virtually the same as it has been, about 40/60. The order booking is lumpy domestically, and Q1 has been lower than last year. Of course, this has to do with the elections and general conditions, but we feel that the subsequent quarters domestically will be better. And we're having encouraging inquiries from various sectors.

The domestic turnover is higher, substantially higher, at 84%. And this is really owing to the preponement of some product deliveries in the domestic market. As I have mentioned on a number of calls in the past, quarterly results should not be viewed just by themselves because in this capital goods business there are times when there's preponement. And there are times when it just goes into the next months, which you've seen in some quarters last year. We are happy that this time it's a preponement and which resulted in a very good performance. And I'll be talking more about the future a little later on.

Inquiry generation is -- in the domestic market is about on the same levels as we've had in the past. We have not had much any slowdown which has happened in other sectors. Then that is encouraging. The sectors that we are looking at domestically, we are having extremely good growth, and in the molasses-based distilleries. And you'll be reading about this in the press and otherwise. That is very encouraging, and we expect it to continue for the next couple of years at an increasing speed. Also process cogeneration and a little bit in the steel and cement sectors.

In the Aftermarket, again it is lumpy, and some orders have got postponed to the subsequent quarters. And order booking was INR 619 million and which is slightly lower than last year. We expect this to make up by H1 of the current year. The Aftermarket, we feel, is very encouraging in the inquiry sense. And our refurbishment business internationally in the lines of turbines, not just of our range, of other people's turbines, is a major growth area we are looking at in the future and something that we've been trying to break into for the last few years.

The inquiry pipeline in the aftermarket and refurbishment sector internationally is coming from various geographical segments, and that is encouraging. And it's really been due to the efforts we've put in, in the last 3, 4 years of spreading our efforts through offices and through increased penetration in the international markets. The international product order booking has been higher than the previous year, and the orders in hand are good. In -- at the end of Q1 FY '20, the outstanding order book internationally is INR 654 million. And this is versus INR 517 million, so it's a substantial difference in the quantum that we have.

The company's achievement in the international market was commendable at a growth of 26% year-on-year in the product order booking, and this was in spite of a general slowdown. Turnover, as I said, is lumpy, so that -- it has lessened this quarter, but it's we expect to make up in Q2 so we'll be on target at the end of H1. The inquiry book is strong. And we see this coming from a number of areas from South America, where we had a little bit but we've had very good penetration now and especially from the (inaudible) areas, we are getting good response; from Southeast Asia. And very much to our benefit is in Europe, something which we didn't get too much traction last year. And that again is through our efforts in this area in the last couple of years. So these are counteracting some areas which have gone down slightly, but we are still getting substantial business from our main markets of Turkey and some parts in Africa -- East Africa and Nigeria, where we are expecting some good business in the next 2, 3 quarters.

As I'm mentioning, the business is lumpy, but we are seeing order booking in the current year FY '20 to be better than what we got in the last year. And we've made a very good start. So not only is the inquiry book good. Quite a lot of it is active. I think some of this is to do with our substantial design and development efforts. And as I have mentioned in previous calls, we have tackled 2 major areas. One is an increase in our product offerings, an increase in our efficiency levels to meet customer expectations. And it's strong emphasis on value engineering and cost reduction. I think that has been a fairly substantial achievement in Q1, and you see the results in our PBT. More of this is expected in the subsequent quarters, and that is why we can say that we are looking at an increased bottom -- top line in FY '20 versus the last year and an even better increase in the bottom line in FY '20 compared to FY '19. So we are very happy that our margins are now coming back to the levels that we were having in the past. So these are the real efforts of both very strong supply chain efforts and our value engineering efforts in design and development. Naturally this comes through a reflection of we are looking at the material cost, which has come down from 60% to under 57%.

We are also happy to announce that our new test bed is now functioning. This is one of the most modern test beds in -- globally today. And in the steam turbine area, I think we are the -- probably the only one who would put up any new facilities like this. This is to encourage our further developments in R&D and value engineering and test them out before we put them into the market.

Our relationships with international organizations, especially the University of Milan and the Indian Institute of Science in Bangalore, are even stronger than we had in the previous year. And they are continuing, especially in our initial efforts of development of a whole new range of turbines in the future, CO2 turbines, which we are in the same realm as other major steam turbine producers globally. And so we are really on the frontier edge of looking at new technologies coming in the next few years.

I would like to go back to the outlook again and summarize this by saying that we are very optimistic of achieving a better top line and a better bottom line in FY '20. And this has come through our efforts of diversifying our efforts in a wide geographic area internationally and mainly concentrating on the international market rather than just on the domestic, which we did the shift which we started about 3 years ago. On our joint venture GE Triveni Limited, management and investor expectations about the past performance and potential of the joint venture GE Triveni Limited were not resolved with GE. And TTL filed a petition with the company national law tribunal (sic) [National Company Law Tribunal], NCLT, which has given some interim [leads]. And they're on the BSE website, which we put them up on the 13th. And currently the case is being heard. A case was filed by GE in the Bangalore high court, which has heard the petition, and a further matter back to NCLT. The matter is sub judice, but GETL, our joint venture, is pursuing business in both the domestic and international markets. And we have some good potential inquiries which we expect to turn into orders in Q2 or more Q3. The orders in hand in GETL are 92 crores. And the execution orders is going on well. In fact, in the month of July, we had a very successful commissioning of one of our old orders in Southeast Asia and Indonesia. And we expect more business from these areas as well.

I'd like to close my opening remarks by saying that in fairly tough international market conditions both internationally and domestically we have distinguished ourselves by our performance in Q1. And we expect performance in the year -- which is lumpy quarter-to-quarter but for the year to be better than what we had in '19, FY '19; and certainly going forward into FY '21 with the order bookings in FY '20.

Thank you.

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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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My first question is with respect to the...

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Operator [3]

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Sorry to interrupt you, Mr. Swaminathan. Your voice is very low. Can you come a little closer to the phone or increase the volume...

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

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Is it better now?

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Operator [5]

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Yes.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [6]

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Yes, that's fine.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [7]

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Yes. So I just wanted to get an understanding on the domestic market, given the backdrop of slowdown in the automobile sector. So basically -- I mean a slowdown in the automobile sector. So basically do we see a prolongation of pickup in demand in the domestic market, especially from the coal -- core sectors like steel and other ancillary markets and given the fact that real estate is also not doing still well? So probably can there be a postponement in terms of domestic demand for probably another 6 to 12 months? Or are there any other compensating sectors which can compensate the inflows there?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [8]

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Yes. I -- that's a good question. I've mentioned it a bit in the opening remarks, but let me focus on it. Because the first question is that -- I think the general feelings of the -- in the industrial sector is not really comparable to our sector. So that's the first part, especially not the automobile. And second is that our response in Q1 and in the past and the active inquiries that we have in the -- in hand also don't match with what's happening with the sectors generally, even in capital goods. Now let me just go into this a little more. The -- one of the really major growth sectors for us is in the ethanol distillery business. And you see the government is very keen on this, and the industry is very keen. The government has given a substantial amount of funding which has already been approved. So most of these projects, lower funding has already been approved. The Triveni group Itself has got some substantial figures in this. And the number of new distilleries coming up to fulfill the ethanol demand and certainly try and go from our current levels of 6%, 8% up to some 20% in the next 3, 4 years will require substantial orders of steam turbines as well. So that's a very good sector. Secondly, even in the sectors of cement and steel, which will be nontraditional sectors, while we may not be seeing definitely any new equipment or brownfield equipment, the waste heat recovery part is quite good. And the returns there are good for these sectors. And that's why the efficiency improvements that they impart and mark on are not very capital intensive, so don't require lots of funding; and are not having a -- very large projects but have a steam turbine component. So we have -- their inquiries we are seeing from there also helped in balancing what may be happening in sectors, such as the automobile, which have nothing to do with any steam turbines. So looking at both these elements, we don't expect any dip in demand, anyway. We may even see some slight growth, but small. However, we again say that, while this is there, our main PBT growth is going to come from the international market because the domestic market will remain competitive.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [9]

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Got it, sir. And in the domestic market, out of your order book, how much of it would be contributed by core sectors? Even rough numbers is fine. So core here means cement, steel...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [10]

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That is -- that varies. So I think you'll take a broad brush because it changes from quarter to quarter, but what I'm saying, it augurs well for Q1, Q2, Q3, anyway. And that's what is important.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [11]

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Got it, sir. And ethanol, how much would it be contributing? I mean even ballpark numbers, 20%, 30%...

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

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You can come to us, but the more important point is -- in the ethanol is that it's increasing, that it has increased in Q1 and Q4 of last year.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [13]

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Got it, got it. And in terms of the GE joint venture. So basically, now that a case is ongoing, I just wanted to know regarding the continuity of the joint venture. Will this be a threat to that? And will it have any robust effect on our 0- to 30-megawatt range, which has -- which could have seen some very good traction over the past few years because of the GE brand being there on the overall export market? Or is it like there's not going to be any impact on 0- to 30-megawatt range?

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

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Well, I'd like to take this question now. And I'm sure some others also have it. The first thing I have to say is that, as you all will realize, the matter is sub judice. And I've made my opening statement. In that, I'd like to add that business in the JV is continuing as it was. I mentioned an important fact, that we commissioned a substantial order in the international market in July in the joint venture. We are actively pursuing inquiries that are on hand and are receiving more inquiries, and so we are not expecting any disruptions. Orders in hand are there and the performance in Q1 was good. You've seen the impact in the TTL results of Q1. And so as I said, we -- probably we are looking at receiving orders in the JV, some orders, in Q2, Q3.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [15]

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Okay, but I mean, are we as a joint venture seeking for further orders going forward? Or is it, given the fact that there's a case going on, we are not actively pursuing for fresh orders, sir?

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

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No, we're not -- we are pursuing some further orders.

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Ravi Swaminathan, Spark Capital Advisors (India) Private Limited, Research Division - Assistant VP [17]

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Okay. And what is the fixed cost from Triveni's borrowing with respect to the JV as of now, sir? How much will it be?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [18]

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No, we have no fixed costs for the JV.

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Operator [19]

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

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [20]

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I have 3 questions. Sir, first question is in continuation with what the last participant asked. In the joint venture, currently are we managing it solely, or is it currently being managed jointly? And in terms of procuring the business in the joint venture, are they, first, still on? Are -- or is it that we are only doing the existing business?

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

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I think I answered this question that it's an independent entity. The -- and the joint venture is being handled in the way it has been handled in the past. It's continuing. And it's looking for business and it has some active inquiries.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [22]

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Great. Sir, my second question is on our margins. Now I see that margins have improved. And a lot of the times, reason has been lower cost of goods, which has come down to 57%. So if I were to compare, with Q1 of last year, it was 52%. It was 60% in Q4, and it's 57% now. So what is the number that you think is more realistic and can be expected to be going forward?

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

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No, now. You know, this -- as I said, because the business is lumpy, to give a firm figure for the year is difficult. The important point is that the trend that has happened, which is reflected in the lower raw material percentage in Q1, is what is making one be able to give you a question that our margins are back to normal. And that is what is there when you look at the performance in -- projected performance in FY '20, which we feel is going to be better than what we achieved last year.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [24]

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Well, just again I didn't follow the answer. I'm just trying to...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [25]

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I can't give you exact figures of what the figures will be.

(inaudible).

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Unidentified Company Representative, [26]

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No. To answer your question...

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

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But I was just looking -- is it on the higher side, the lower side?

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Unidentified Company Representative, [28]

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It's our expectation is that material costs should be in the low 50s. The reason is that we had certain exceptional costs that were taken, when material costs were at 60%. And as you know, with this current quarter, the booking of Aftermarket as well as the domestic market was higher, so therefore those will also suppress margins. But to give you an indication: The previous exceptional costs that we had taken are out of the way, and as was stated, we believe that margins will normalize. And it will also be supported further by a change in the execution mix between international and domestic as well as the Aftermarket which will further strengthen. But -- and after all, the margins are somewhere in the region that we've always expected it to be this quarter. And it's something that we're confident going forward as well for the year.

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

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And sir, lastly, on other expenses. Other expenses are INR 25 crores versus INR 28 crores in the Q1 of last year and INR 31 crores in Q4. And from what I understand, you had new product introduction expenses. So that was on the higher side, but whether this INR 25 crore number is sustainable -- or is there some one-off gains here and other expenses should rise going forward?

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

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No, there were lower exports in this quarter which is one of the reasons of the other expenses. Otherwise, this is -- we expect to get back to where we were earlier.

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

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Okay. So (inaudible) quarter...

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

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It should not be very significant...

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

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Yes, sure. And lastly, sir, on order books. Generally, order book is more of an indicator of revenues a year hence from the current quarter. So with the order book de-growing, how do you think we -- how do look at, let's say, next [8 weeks]...

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

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No, I want to correct you there. We are expecting an increase in outstanding order book by the -- by H1 and certainly by the end of the year. So there's no decreasing order book. The order booking expectations in FY '20 are going to be better than what they were in FY '19. So we are definitely exactly opposite to what you are saying. There's not a decrease, where it's we -- the quarterly dips are not important. We have very active inquiries. And just like dispatches may be preponed, sometimes order bookings are going from 1 quarter into the next quarter, but I've already given a clear indication of our expectations in H1 and in FY '20 as a whole on increased order books.

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Operator [35]

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Our next question is from the line of [Praveen Motwani] of [SBI Asset Management].

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Unidentified Analyst, [36]

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Congratulations for the good set of numbers. My question again is on the GE JV, the issue. So you mentioned there was order inflow booked in July. Could you give us some color on that?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [37]

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No. I'm sorry. I think you got it wrong. We commissioned an order. It wasn't an order inflow. We -- it was an indication of business carrying on that I said, that the JV is executing on orders normally and we actually successfully commissioned an order, an important one, with an important customer. And then so this is just giving you an idea of where the JV is today and how it is carrying on.

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Unidentified Analyst, [38]

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How -- are the marketing people going and pursuing for fresh orders or...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [39]

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Absolutely, absolutely, absolutely. They are. And we are expecting some success in Q2, Q3.

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Unidentified Analyst, [40]

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Okay. So it's more just to remind the partners about the past promises and this JV will continue with business as usual. Would that be a fair assumption?

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

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Well, you have to understand that my comments are -- should be taken where they are, the matter is sub judice. So we have -- our petition is with NCLT, and their order is on the BSE website. So that's what I'd like to leave you with.

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Unidentified Analyst, [42]

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I understand, but the doubt that we have is would the JV end? Or...

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

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No, not at all.

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Unidentified Analyst, [44]

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Okay. Yes. That was very helpful. The second question is you spoke about ethanol being a strong driver for domestic orders this year. Would -- it would be helpful if you can just help us quantify in megawatt what is the size of the opportunity, what is the market size that you are looking at.

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

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I -- no. You see, one can give some very fancy numbers, if you look at where we are going from 6%, 8% to 20%, but in the sugar and other industries, the timing of how these people approve their projects, get environmental clearance and then place the orders is -- are not easy to project. The important thing is that this is a substantially increasing trend. And we have a product that is ideally suited in this market, and we've had very good success and we have extremely good market share. These are the 2 things that I would leave all -- leave all of you with, that our market share is good. We have the right stack of product. And government is going more and more into ethanol being made from B-heavy molasses, from juice. So -- and so the sugar element of cane is being diversified further and further. And the government wants this to fulfill the demands of the cane farmers and also help the balance of payments and the environmental position by having blended ethanol fuel.

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Unidentified Analyst, [46]

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Sure. That's helpful, sir. Last question is you have in the past spoken about cement waste heat. Could you speak about the waste heat opportunity in the steel part? That's my last question.

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

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A little bit there also. There is a little bit happening there.

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Unidentified Analyst, [48]

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So how large is that? So actually we want to understand how large could be this opportunity on a megawatt [basis].

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

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That's difficult to put out. Again, you know the sector from your other analyses. So the timing -- and there's no point. We don't even go there as to when it happens, but all we know is that there is this demand which is good. And it's appreciated by the customers and they want to look at it. The timing is really very much in their purview, and so therefore it's difficult to answer your question in terms of the quantified demand and when.

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Unidentified Analyst, [50]

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And then what we are looking. You mentioned like 6 to 8 megawatts per million ton of cement plant. Some rule of thumb on the steel side, that's what we were looking for.

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

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I think you could contact our people, but I don't think, as far as I know, it -- so it, because it varies with different types of steel plants, varies from -- and so it's difficult to generalize, I feel. However, you could contact them. But I think the important thing is that this trend is still there.

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Operator [52]

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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;Sundaram Mutual Fund;Research Associate, [53]

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Sir, congratulations for a good performance. Sir, second, my thing is that, sir, with regard to sugar and ethanol CapEx. Currently, like all the Tier 1 companies or who have a good balance sheet have done their CapEx, one round of CapEx at least, like our own company, our own sister company, which has done with their distillery expansion. Given that now the companies which are -- to do with their first round of CapEx are relatively "lower balance sheet quality" companies -- so with this background and given the current cash [position] happening in the system, do you expect the CapEx momentum to continue in the ethanol space?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [54]

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No. I think what I'd like to clarify is that the government has a substantial scheme of funding which they have already approved. And the applications that government have already given, you can say, we had in the last 6, 8 months are very substantial from -- and which they've cleared. So majority of the funding for these is coming from the subvention interests that the government has already approved and budgeted for. And so the clearance from the funding institutions here particularly is not so -- is not comparable with normal funding. So your fear of the fact that they may not be having strong balance sheets doesn't quite apply here because of the viability of the project with the participation of the central government. And secondly, the state government is also very keen on promoting it in terms of offtake of the ethanol. And lastly, the oil companies -- oil marketing companies are also projecting increased listing of ethanol in their -- in the current year and in what they're going forward.

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Kirthi Jain;Sundaram Mutual Fund;Research Associate, [55]

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Sir, in terms of...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [56]

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Yes. Sorry...

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Kirthi Jain;Sundaram Mutual Fund;Research Associate, [57]

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So in terms of Aftermarket, any improvements we should see -- given that we are working on the renewal of -- our -- the accomplished in turbines also we are working -- so we should -- should we see improvements, sir, yes?

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Unidentified Company Representative, [58]

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(inaudible).

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [59]

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Yes, yes. I guess, just a minute. I want to just close my thing on the ethanol so that it's very clear. The increased ethanol for FY '20 and FY '21, this is a demand structure which is -- India is a very small participant than when compared to other nations of the world. So we are coming up a lot in that. So steam turbine demand in as far as distillery production is there and is very good. So this is the natural corollary of the government having taken up the initiative of a big push in the ethanol sector. So that's a counterbalance for us, as far as the general industrial scene is concerned, and manufacturing. As far as our efforts in refurbishment and service of other model turbines, again this is an approach which takes time, but we have dedicated resources now both in the technical design side, in the execution and in the marketing side. And we are seeing good traction coming in, in terms of inquiries. Now one of the fortunate things that we have is that we've spread our geographical and segment-wide marketing efforts for products to a wide range and countries in wide range. So we are tapping this to also help in this area. So we have a dual approach there where we are going now very strongly marketing for the product and marketing for the aftermarket.

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Kirthi Jain;Sundaram Mutual Fund;Research Associate, [60]

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Sir, in the domestic market we have seen order intake for the first quarter dropping. Do you expect that for the full year we should be able to make it out and order inflow should be better compared to last year?

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Unidentified Company Representative, [61]

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I think what we talked about is that, while Q1 was impacted severely because of the elections, where there was inquiry buildup. We see that in Q2. That should -- and Q3 moving forward. That should normalize, but having said that, we are not looking at any demand dip. If in fact we should see a growth in the market, to what extent, I think we'll have to wait till the next couple of quarters. From an ethanol perspective, the company gets between 5 to 6 fresh inquiries every month in the sector, so there's sufficient demand. About 25% of those will be converted.

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Kirthi Jain;Sundaram Mutual Fund;Research Associate, [62]

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Sir, this 5 to 6 number that you are putting, what was it like last year, sir? Just to understand better.

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Unidentified Company Representative, [63]

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No, I'm not saying what the demand is. I'm not certain, but the demand is very strong.

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Operator [64]

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(Operator Instructions) The next question is from the line of Dhaval Shah from Girik Capital.

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Dhaval Shah;Girik Capital;Equity Research Analyst, [65]

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Congratulations on a good set of numbers.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [66]

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Thank you.

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Dhaval Shah;Girik Capital;Equity Research Analyst, [67]

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Yes. Sir. A couple of questions from my side. Sir, first, to elaborate around the domestic demand drivers, can you throw some light on the export side as well, what is driving [it there]?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [68]

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As I said, you see we are fortunate in the export market, which is quite a difficult industrial scene to be in the right sectors. And in calendar year '18, we were an international [market-serving] organization [with classes of the] largest renewables. In the renewables space we were the largest suppliers of steam turbines in the 5 to 30 megawatt market globally. And we were having some 26% of the market that they established in that year. And there are just 2 players in the top, and the third player is about half us. So that's the -- now this market which has waste-to-energy, it has biomass. It's still there. It is growing slightly, but it is not dipping. In fact, more and more people are coming up with these demands of both waste-to-energy and municipal waste and biomass. And it's fortunate that they are in our megawatt size because they are difficult to have very large projects for biomass. That's why we are encouraged in this line, where we are not looking at coal-based demand for -- in the steam turbine area and in the renewables space demand. So we are differentiated very much in that. And that is how the international market is also looking at it both in developing and in developed countries. So this is what I shall leave you with.

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Dhaval Shah;Girik Capital;Equity Research Analyst, [69]

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Sir, yes, perfect. So which geography are you seeing this waste-to-energy and biomass-led demand? So I understand Europe is a good demand. There is coming good demand from Europe. Which other countries or continents you are seeing?

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

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Well, I -- we've -- I can just go from the past. We've -- we are seeing good demand. We're fortunate in having a renewed success and interest in South America, maybe where it's quite far away but we are very competitive and we've got orders. And we have very good inquiries there. Southeast Asia and, as you mentioned, Europe. But there is also some demand coming in, in parts of Africa. So quite a lot of that is adding to it...

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Dhaval Shah;Girik Capital;Equity Research Analyst, [71]

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Sir, is this backed by government's new rule or anything of initiative backed by the government that you're seeing across the board with energy...

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

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Yes. It's both. Some places where they want -- don't want landfills, they're going on with municipal waste. And there may be some issues in -- especially in the developing areas, surprisingly. You're finding it in 1 or 2 countries in Africa which are taking a lead in this. Small demand, but these things all add up where they are wanting to move to be helping the environment. And it's a combination of being -- the project being commercially viable on -- by itself and not depending on government subsidies and government's push in the environmental area for people to not leave the wastes lying around.

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Dhaval Shah;Girik Capital;Equity Research Analyst, [73]

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So can this opportunity give you a sustainable growth for next 2, 3 years? Do you have that sort of visibility, this entire biomass and waste-to-energy segment?

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

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Not only do we have that confidence. We see an increasing trend here. We definitely do. The answer is very positive, and we see an increasing trend.

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Dhaval Shah;Girik Capital;Equity Research Analyst, [75]

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Very good. And sir, last question. On the domestic front you mentioned one is ethanol, which I understood. And the second is the refurbishment demand for waste to heat from cement and steel. So now what could go wrong for your demand driver on the waste-to-heat side? Because the other portion which government backed there is funding secured, as you mentioned, but on the private side, which is at the discretion of the private players, what could go wrong?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [76]

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Timing.

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Dhaval Shah;Girik Capital;Equity Research Analyst, [77]

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Sorry...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [78]

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Timing.

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Dhaval Shah;Girik Capital;Equity Research Analyst, [79]

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Timing, okay, but the demand is supposed to be certain...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [80]

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Yes, absolutely, absolutely.

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Operator [81]

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(Operator Instructions) The next question is a follow-up from the line of Sreemant Dudhoria from Unifi Capital.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [82]

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Sir, in terms of preponement, can you give us some sense of how much was preponed in the domestic market in Q1? And given that there is some preponement, so should we expect Q2 to be soft from the domestic market perspective?

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

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No, I don't want you to go there. This -- as I said, it's not worth looking at individual quarter results. This has been fortunate for us and we've had exceptional results, but more importantly it's to notice my statement of the projection for both H1, which we are confident is going to be better than last year; and the end of the year, which is also going to be better. So that is the -- that's our answer to that, that while the lumpiness in the quarter may remain, as far as dispatches or order booking, the trend is upwards in both top line and bottom line.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [84]

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Got it. Sir, my second question is on the overall other expenses. Now if I see in the stand-alone and consolidated numbers -- this is a bit dated. This is for FY '19 as a whole. I feel that expenses are INR 120 crores for consolidated, whereas other expenses are higher at INR 131 crores for standalone for the full year FY '19. So consolidated having lower other expenses is a bit surprising. So can you help us understand what's the reason for this INR 11 crore difference?

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Unidentified Company Representative, [85]

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In general, what other expenses are heavily influenced by is the demand of exports in a given year. So it includes everything from packaging and other aspects of transport, including certain selling commissions. Therefore, they change from quarter to quarter. The difference, of course, again between consolidated and the standalone will be the difference in the executed orders and the jurisdiction to which they're executed. And so therefore if you're looking for Q1, where there was another question earlier, it is basically based on the fact that you had lower exports in this current quarter. Now of course, in future quarters where exports may pick up, this number would increase, but at the same there's also higher-margin orders. So net-net, at the end of day, this is explained by the revenue mix.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [86]

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No, sir, it's more about, if my other expenses at stand-alone level are X, that at consolidated level for the full year in FY '18 they should be X plus something. They are X minus something, so it seems other expenses are negative for our subsidiaries. So can you help us understand?

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Unidentified Company Representative, [87]

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(inaudible)...

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Unidentified Company Representative, [88]

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Yes, yes. I mean it is something -- it is very simple. There are transactions between the holding company and the international subsidiary companies. And when you drop your consolidated financial statements, these cancel out. Are you with me?

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [89]

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Okay, yes, yes, yes. So there is some translation effect and some cancellation of charges between the companies.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [90]

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That's right.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [91]

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But still they'll go lower. I guess translation would have been a big impact. Maybe we had some currency gains last year due to translation and other expenses.

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Unidentified Company Representative, [92]

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No. Let me -- you haven't got me correctly. Let me explain to you again. And because all these foreign subsidiaries are helping the holding company in India in terms of marketing, so there are some [drops with pricing] between the holding company and the subsidiary company. So therefore, the stand-alone expenses would always be higher. When you drop consolidated financial statements, all such transactions between the holding company and the subsidiary companies, they cancel out. And hence the total expenses of consolidated financial statements will be lower than the stand-alone financial statements.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [93]

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Okay, okay. So this will always happen each year...

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Unidentified Company Representative, [94]

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Always happen, as long as you have foreign subsidiaries helping you in marketing.

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Operator [95]

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

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Dhaval Shah;Girik Capital;Equity Research Analyst, [96]

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Yes, sir, just I have one follow-up question. Sir, you mentioned some source of data on your market share in the waste to heat. Can you please repeat that?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [97]

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McCoy.

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Dhaval Shah;Girik Capital;Equity Research Analyst, [98]

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International markets, sir, you mentioned something.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [99]

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The company is McCoy.

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Dhaval Shah;Girik Capital;Equity Research Analyst, [100]

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Which one, sir?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [101]

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McCoy.

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Dhaval Shah;Girik Capital;Equity Research Analyst, [102]

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Okay. So this releases the data regarding the market share and...

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

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Yes. It's actually they are called McCoy Power Reports. It's global. And it goes from 5 to 1,000 megawatts; and in different segments, small, medium and large; and company-wise and region-wise and everything. It's -- but it's a subscribed base. And we ask them for -- so this is the results of the calendar year which I was giving you, which is very -- yes, it's been something that we are very proud of.

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Dhaval Shah;Girik Capital;Equity Research Analyst, [104]

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Okay. Great. So it'll be M-A-Q-A, right?

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

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Sorry...

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Dhaval Shah;Girik Capital;Equity Research Analyst, [106]

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How do you spell it...

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

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M-C-C-O-Y, McCoy.

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Dhaval Shah;Girik Capital;Equity Research Analyst, [108]

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M-C-C-O-Y, okay, okay, okay. Great.

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Operator [109]

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The next question is from the line of Lalaram Singh from Vibrant Securities.

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Lalaram Singh, Vibrant Securities Private Limited, Research Division - Research Analyst [110]

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Sir, I had a preliminary question on the business. How much percentage of our business in terms of revenue is purely product [which is] turbine? And how much is where we supply turbine and generator together, [SSTG]?

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

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So we are (inaudible) the -- our turbines, we are not in the drive -- we have a very small percentage of drive turbines. And they are almost all in turbo alternators. A very small percentage are drives. The almost -- well over the 90% are in turbo alternators.

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Lalaram Singh, Vibrant Securities Private Limited, Research Division - Research Analyst [112]

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Okay, okay. Got it. So where are you seeing these orders? Typically it is only -- it is generally -- is it standalone for the turbine generates? That's what it means.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [113]

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No, no. When we receive an order, it's for the turbine island, which includes the generator, sometimes the condenser. And there is other ancillaries.

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Operator [114]

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The next question is a follow-up from the line of Sreemant Dudhoria from Unifi Capital.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [115]

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Sir, in the last call, we had a discussion around targeting the oil and gas sector in U.S., which is -- which actually gives a good margin and payments are timely. So any breakthrough for us in the oil and gas sector in the U.S.?

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [116]

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Well, you've talked about a huge potential area for us. It's taking longer for -- in the oil and gas sector, registration is a very long process and that we're having some very good results coming in, but we are not targeting really the U.S. in the oil and gas as yet. And we're targeting the MENA and Southeast Asia at the moment, which have substantial oil and gas production. And we are getting very good responses from the customers. It takes time because the procedures are very lengthy and the various agencies involved in this are quite strong, but the response has been very good. And domestically also we are making a good amount of progress with our -- we've now achieved our EIL and that is our -- onboard. They've okayed our product line.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [117]

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Sir, given that globally in oil and gas space there are only a few kind of companies which do EPC work. So if we get approvals in MENA, would it be right to assume that we might get approvals for -- with the same vendor for other geographies as well? Or it's a separate process altogether for other geographies.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [118]

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It's generally an -- geography-based because the approvals are given along with the customer. So you may have one person, but an Aramco is only for Saudi Arabia. And where you may have the same consultants in another, you can't use the Aramco one in Pertamina, for example. And both are substantial buyers. And the encouraging thing is that the competition is limited and as -- the field is still quite substantial and we are starting from a low base or very low base.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [119]

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Sir, the press release also mentions about a new line that we have in Bangalore which is helping us lower the operating expenses. Can you discuss a bit more about it, as to how many lines total do we have in Bangalore? And this new line, how -- what percentage of our production comes from this new line? And is there any plans to add any further lines to cut down the operating expenses? Any color on that...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [120]

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Yes, yes. It's a good question. We are really redoing our complete -- most of our product lines to the new -- to one with increased efficiency and lower costs. So it's actually -- and so it's both efficiency improvements and value engineering for cost. And so we are expanding it to -- most of our lines in this. And we expect -- so this is an ongoing process. Substantial progress has been made and very good progress is expected by the end of FY '20. Quite a lot of it should be finished by then, most of it in fact.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [121]

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Sir, can you quantify like how many lines do we have and how many you have -- detailed...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [122]

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Well, you see you -- I'm giving you the spread from 5 to 30. This helps more in the -- when actually the full initiative in the lower and middle range and in the higher range. So we are having different opportunities for different market segments, but it's more the philosophy of having better productivity and lower cost.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [123]

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And sir, if we were to quantify these efforts, by what percentage margin...

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [124]

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No, I think you can't really -- it depends on the market also. So it's not possible to give you a forecasted figure of where they would come out. It's I have to leave it at a statement of how we have achieved a better margin and how we expect and why we expect a better margin for the FY '20 than what we've achieved earlier.

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Sreemant Dudhoria, Unifi Capital Pvt. Ltd. - Manager [125]

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Okay. Sir, if I may make a small suggestion: When we chat with you, we get a lot of qualitative insights, but frequently in terms of quantifications we are left with -- we have some sense, but we can't quantify, like for example this particular effort. We can't quantify. So if from here on whenever we do a call, our heartfelt request, kindly give us some quantification of whatever business aspects that we discuss.

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [126]

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No, I hear you, but it's very difficult. So I can't really move on this because it's a very diverse line and it's difficult to actually forecast it with any manner of certainty in the short term. So I think you'll -- it's a type of business where you can't go the route that you are wanting to go. It's not a question of the effort. It's a question that we don't say or do things that we're not confident of, and we have to do the diligence on that. So even internally it's difficult to forecast.

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Operator [127]

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

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Dhruv Manmohan Sawhney, Triveni Turbine Limited - Chairman & MD [128]

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Thank you very much, everybody, for a very interesting set of questions. I'd like to leave you with some very positive projections.

Based on our outstanding results for Q1, which have been very good on both the top line and especially on the bottom line, we are looking forward to continuing this trend and having good numbers in H1 on margins and on order booking and our sales, and also in FY '20; coupled with very good initiatives in Aftermarket and the new areas we're moving into, oil and gas, and moving into the aftersales service of other people's turbines.

So thank you very much for joining our Q1 call.

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Operator [129]

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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.