Financial Review

The financial results of the Company for the financial year 2020-21, compared with the previous year, are summarised hereunder:

Triveni Turbines Financial Review 2020-21

The aforesaid summarised financial results are based on the standalone financial statements which have been prepared in accordance with Indian Accounting Standards (Ind AS), notified under the Companies Act, 2013 (“the Act”) and other relevant provisions of the Act. No material changes and commitments affecting the financial position of the Company have occurred between the end of the financial year to which, these financial statements relate, and the date of this report.

Financial Performance

During the year, Revenue from Operations has been significantly impacted and was lower by 13.9% from the previous year. The dip in revenue was expected since the onslaught of COVID-19 pandemic set in at the beginning of FY 21, though the magnitude could not be accurately predicted due to various uncertainties. The Company’s financial performance started getting impacted from the 4th quarter of the year 2019-20, due to nationwide lockdown from March 24, 2021, during which both factories and all service centres could not operate with full capacity. In addition, the travel restrictions, especially international travel and logistic bottlenecks, impacted the performances during the year. The loss was more skewed toward H1. The lockdown and travel restrictions in the international market also severely impacted export earnings. The global economy contracted by about 3.3% y-o-y. Indian economy also experienced a massive contraction of GDP, by about 7.3% in 2020-21. These economic contractions impacted the operations and revenue of the Company. The operations gradually started picking and gaining momentum from H2 of the financial year, yet performance was lower than the corresponding period of previous year.

The Company was prompt to adopt a suitable strategy to contain cost, and preserve margins and cash. Operations continued in factories, observing all mandated safety precautions and with restricted attendance.

Several newly developed cost-efficient and improved models were rolled out during the year, resulting in material cost reduction. Travelling and other overheads were substantially reduced, and manpower was suitably rationalised. Being an exceptional year, increments were skipped for all categories of employees to contain cost. All these actions resulted in reduction of operational cost, which arrested the possibility of significant drop in margins, in proportion to reduced revenue. Consequently, while the Revenue from Operations dropped by 13.9%, EBITDA declined by only 3.7%. However, the one-time VRS payment has impacted the PBIT and PAT.

There was no major capital expenditure or deletion, hence the depreciation and amortisation remains almost at the same level as in the previous year.

Despite the slowdown in operations, the working capital improved during the year. Collections were as per plan, and inventory was strategically kept low without affecting production schedule. The liquidity was comfortable, non-essential expenditure was curtailed, and cash was preserved. The Company continued to be debt-free, barring a small loan for vehicles.

There was no major impairment of assets arising due to the pandemic or any other reason. However, necessary provisions for old inventory and receivables were made as per the Company’s policy.

Revenue from Operations

Revenue from Product has come down by 18.8% for the reasons as stated above, although there is slight increase in revenue from Aftermarket by 2.8%. The Revenue in Product as well as in Aftermarket Sales segment is shown below:

Triveni Turbines Financial Review 2020-21

COVID-19 pandemic, and the consequent lockdown and restrictions, severely impacted Product Sales across all segments, especially exports. Although most of the opening orders in hand were billed and collected during the year, the book and bill hit almost rock bottom, due to steep decline in economic activities in first two quarters of the financial year. Although no orders under execution were cancelled, a significant amount of billing of few major customers was deferred to next year, and thus the sales and margins could not be realised.

The Aftermarket segment, specially Spares and Refurbishment, however, did well as compared to the previous year. The business of this segment revived rapidly after Q1, and specially in the second half of the year, as the economy was gradually opening up. This segment also contributed to profitability, which despite overall lower sales, was not eroded. However, the Service revenue stream was impacted due to travel restrictions and safety reasons.

The break-up of Exports and Domestic sales is shown in the chart below:

Triveni Turbines Financial Review 2020-21

As explained above, both these segments were impacted during the year.

Other Income:

Other Income has decreased by 9.9% over the previous year. Income from investment of surplus fund has increased during the year by 60%, due to liquidation of working capital and good collection, leading to higher Investment surplus despite steep fall in interest rate. Further, the Company received a dividend income of ₹ 65 million in the previous year from its wholly-owned foreign subsidiary, Triveni Turbines Europe Pvt Ltd, UK. No such dividend was received in the current year. Further, there is a reduction of income from change of foreign exchanges during the year, due to lower exports and favourable hedge ratio.

Expenses

Raw Material Consumption

Triveni Turbines Financial Review 2020-21

Decrease in Raw Material cost by 19.4% over the previous year is a combined effect of lower sales by 13.9% and reduction in material costs arising from introduction of new cost-efficient improved models needed in the market. There is a pressure on input cost, which is partially offset through ongoing value engineering initiatives and adoption of appropriate make-or-buy strategy.

The impact of material cost reduction as stated above, and a favourable sales mix with higher content of Aftermarket revenues, improved the ratio of Material cost to Sales from 54.4% in the previous year to 50.9%. The Company is constantly focussing on delivering turbines at competitive prices with improved efficiency and higher customer satisfaction.

Triveni Turbines Financial Review 2020-21

Employee Cost

The Company is in process of higher automation and introduction of various digital initiatives to become a lean and efficient organisation. Various HR initiatives are undertaken towards achieving these objectives. Accordingly, the Company undertook rationalisation of its manpower cost to improve productivity, customer satisfaction, and better outsourcing strategy. A Voluntary Retirement Scheme was also introduced. Further, due to significant slowdown in business operations, the Company has decided to skip the annual increments for all categories of employees, FY 21 being an exceptional year. All these factors reduced manpower cost during the year by 15.9% over the previous year.

Exceptional Item

During the year, the Company announced a Voluntary Retirement Scheme (VRS) for all classes of workmen. The VRS scheme was aimed at trimming the workforce due to automation and improvement of production process, as stated above, and was satisfactorily implemented. The response to the scheme was encouraging, as several workmen opted for the VRS scheme. A total lump sum payment of ₹ 185.2 million was paid as per the terms of the scheme. This one-time cost of ₹ 185.2 million was fully charged off in statement of profit and loss, and disclosed under Exception Item in Financial Statements. Industrial relations remained cordial and the objective of productivity increase was achieved.

Other Expenses

Other expenses include manufacturing expenses, administrative expenses and selling expenses. Manufacturing expenses, such as Store, Spares & Tools consumed and Power & Fuel etc., are semi-variable in nature. The decrease in manufacturing cost is commensurate with level of operations and cost control measures taken during the year. Administrative expenses are lower due to reduction in travel cost, on account of various travel restrictions imposed due to the pandemic both in domestic and international markets. Other administrative expenses are also lower in the current year due to restricted office operations.

Depreciation and Amortisation

There are no material changes in Depreciation and Amortisation expenses as compared to the previous year.

Balance Sheet

Major items, including where significant changes have taken place during the year are, explained hereunder:

Non-Current Assets

Property, Plant and Equipment (PPE), Capital work-in-progress & Intangible assets

There was no major investment in Plant and Machinery or Civil Work made during the year, except capitalisation of extension of civil structure work in Sompura plant. Thus, the Capital work-in-progress now stands with nil balance. Intangible assets under development represent costing tool, and related software will be capitalised by next year upon completion of remaining activities.

Non-current Investment

The figure represents equity investment in Company’s 100% owned foreign subsidiary in the UK and the joint venture in India. There is no further investment or disinvestment in the subsidiary or joint venture during the year.

Current Assets

Inventories

Total inventories at the year end stood at ₹ 1,591.9 million, as against ₹ 1,724.8 million in the previous year, a decrease of ₹ 132.9 million. The decrease is mainly in raw material and components by ₹ 129.0 million, as a result of the Company’s planned efforts to improve working capital and liquidity. Part of the reduction is also due to lower volume of current production.

Trade Receivables

Trade receivables have significantly reduced to ₹ 763.6 million, as against ₹ 1,210.3 million in the previous year. This decrease of ₹ 446.7 million over the previous year is due to lower sales, aggressive collection drive of certain old receivables, and improved realisation of current dues. About 28% trade receivables are secured against Letter of Credit and about 29% is contractually not due. Necessary provisions against doubtful debts and expected credit loss are made after proper due diligence.

Other Financial Assets

Other financial assets have increased by ₹ 38.5 million over the previous year. This is due to increase in unbilled revenue of ₹ 22.6 million, which has been billed subsequently. Further, MTM gain on outstanding forward contract of ₹ 11.9 million on account of hedge accounting resulted into increase in other financial assets.

Other Current Assets

Other current assets have decreased by ₹ 68.5 million over the previous year. Decrease in other current assets is mainly due to receipt of GST refund. All other items under this head, including Export Incentive receivables and advance paid to vendors etc., are also lower as compared to the previous year. These balances are normal in nature and fully recoverable.

Non-Current Liabilities

These mainly comprise deferred tax liabilities (net) and certain long-term provisions towards employee benefits, as mandated by relevant provisions of Ind AS, warranty etc., which are made in normal course of business.

Current Liabilities

Current liabilities mainly consist of trade payable for purchase of goods and services and advances from customers. Trade payable has increased by ₹ 95.7 million to ₹ 733.0 million, in view of purchase of raw material and components to cater to production for orders in hand. The payments to these vendors are not contractually due till the year end, and will be paid by due date.

The other major components of Current Liabilities are advances from customers, which have marginally increased by ₹ 53.0 million.

Consolidated Financial Statements

Consolidated financial statements have been prepared consolidating the results of a wholly-owned foreign subsidiary, Triveni Turbines Europe Pvt. Ltd. (TTEPL), UK, its step-down subsidiary, Triveni Turbines DMCC (TTDMCC), Dubai and Triveni Turbines Africa (Pty) Ltd (TTAPL). The consolidation is made by adding line by line items complying relevant provisions of Ind AS. In addition, the Company has a domestic subsidiary company, namely GE Triveni Ltd. (GETL), which, in accordance with Ind AS, been considered as a Joint Venture, and is accordingly accounted by using equity method for preparation of consolidated financial statements.

Headline figures for consolidated financial statements duly compared with standalone are provided hereunder:

Triveni Turbines Financial Review 2020-21