Q&A With Vice Chairman & Managing Director

The Company has reported an excellent performance during the year in a challenging environment. What were the highlights of this performance and the drivers behind it?

It has been a good year for TTL, and we have reported some historic numbers in a difficult and challenging period. Our revenue from operations grew by 21% as compared to the previous year, with domestic sales showing an increase of 60%. Though export turnover declined 23%, due mainly to the lower order book of the previous year resulting from the pandemic impact, however the new order booking trends have been extremely positive. As a result, the mix of domestic and export sales changed to 70:30 in FY 22 as compared to 54:46 in FY 21.

This change in the sales mix, which was skewed more towards the domestic during the year, has naturally impacted the Company’s EBITDA margins since the domestic market has lower margins than exports. Overall, the margins have declined to 22.5% in FY 22 as against 23.7% in FY 21, with the higher raw material costs also adding to the pressure. Thus EBITDA growth was lower at 15%, however, on an absolute basis was still impressive at ₹ 1.92 billion in FY 22 as against ₹ 1.67 billion in FY 21. I am happy to share that the Company's Profit after Tax (PAT) grew by an impressive 164% to ₹ 2.7 billion during the year, aided by the one-time settlement pertaining to TESL (erstwhile GETL) which has encouraged the Board of Directors to recommend the payment of final dividend @ 85% (₹ 0.85 perequity share of ₹ 1 each) and 2nd special dividend @ 70% (₹ 0.70 per equity share of ₹ 1 each) for FY 22. Together with the interim and 1st special dividend of 100% (₹ 1 per equity share of ₹ 1 each) paid during the year, the total dividend for the financial year 2021-22 is 255% (₹ 2.55 per equity share of ₹ 1 each)*.

A major highlight of the year’s performance is the remarkable increase in our order book, with the total consolidated outstanding order book, as on March 31, 2022, at ₹ 9.7 billion – a 52% growth over the previous year. The domestic outstanding order book stood at ₹ 5.4 billion while the export outstanding order book doubled to ₹ 4.3 billion. I am pleased to report that the Company achieved a total order booking of ₹ 11.8 billion in FY 22, which is the highest ever in its history, as against ₹ 6.4 billion during FY 21, an increase of 84%. Export order booking, mainly in the product segment, largely contributed to this growth. These pave the way for another healthy performance in the coming financial year.

In terms of segments, geographies and sectors, which were the areas that contributed the most to the growth in the order and enquiry pipeline of the year? Are you expecting the trend to continue? If so, how is the Company gearing up to harness the opportunity ahead?

The full year domestic order booking stood at ₹ 7.2 billion, an increase of 66% against the previous fiscal. Export order booking also grew an impressive 122% at ₹ 4.7 billion aided by significant order wins in the 30.1-100 MW segment.

On the sectoral front, in the domestic business, we have seen most of the growth coming from Co-Generation, Food Processing, Distillery, Pulp & Paper, Chemicals and other sectors like Cement, Sugar and Oil & Gas. The West region accounted for a higher enquiry base, followed by the South and North regions.

In the international market, the increased demand has been reported mainly from Southeast Asia, followed by Europe. The sectors that have pushed growth in the global market include renewable energy based Independent Power Producers (IPPs) as well as certain Process industries.

Enquiry generation is also strong in both domestic and international markets on a year-on-year basis. And we believe this will support order booking in the coming quarters. Domestic enquiry grew 57% over FY 21 and the total enquiry book has seen a growth of over 36% over FY 21. International enquiry generation grew by 25% over FY 21, indicating a renewed positivity in the market.

This is in line with the emerging international trend, which is getting more and more favourably aligned to sectors of sustainable development. And these are the segments that we are also strongly focussed on. Our expertise and experience, coupled with our sustainability-centric innovations, place us in an ideal position to harness the growth opportunity in these segments and sectors. The Company’s ability to provide high-tech precision engineered-to-order solutions has made it one of the most trusted names in the business and we will continue to strengthen our value proposition, going forward.

Can you elaborate a little more on the opportunity matrix that you see ahead for the Company’s growth and value creation?

Around the world, we are seeing a powerful shift from conventional energy sources to renewable power. This has led to greater acceleration towards eco-friendly ‘Green power’ solutions across industries. In fact, for the Company, the bulk of the steam turbines demand in FY 22 came from thermal renewable based power plants (including biomass, Waste Heat Recovery (WHR) and Waste to Energy (WtE). A large quantum came from energy-intensive segments like Steel and Cement, besides segments like Distillery, Food Processing, Pulp and Paper, Sugar, Chemicals and Oil & Gas, followed by Independent power generation (using Municipal Solid Waste (MSW) and biomass as fuel).

Going by the current trend, India is also emerging as one of the major contributors to the renewable energy capacity expansion globally. This has catalysed immense potential for growth for companies like ours, which have the first mover advantage in delivering sustainable solutions in the niche area of our offerings. We have already developed a reputation as a trusted player in segments like biomass, Waste Heat Recovery (WHR), Waste-to-Energy (WtE) along with the newly-forayed sector of geothermal.

The Government policies are also extremely favourable to growth in these segments, one example of which is the Biofuels policy. We are further expecting to benefit significantly from the ‘Make in India’ programme, which is pushing growth in the manufacturing sector, comprising Sugar, Distillery, Cement, Steel, Food Processing, Pulp & Paper, Petroleum Refineries, Chemicals, Petrochemicals and Fertilisers etc.

The Oil & Gas industry is another area where we see significant opportunity for expansion. In FY 22, TTL finalised 21 orders (9 exports and 12 domestic), mainly on the basis of our ability to supply API (American Petroleum Institute) 611 and 612 compliant Steam Turbines, ranging from 10 kW to 100 MW. In the API segment of Oil & Gas industry, we finalised orders from international markets such as MENA (Middle East and North Africa), Southeast Asia, Central America, South America and Europe during the year.

Aftermarket is another area of huge potential growth for the Company and, as you will read in other sections of this report, we took major steps during the year to strengthen our offerings in this segment. One key development, of course, is the acquisition of a 70% stake in a service company, TSE Engineering Pty. Ltd., with an existing workshop facility in South Africa. This will enhance our ability to provide faster response to customers in the SADC (South African Development Community) region and build relationships with new customers requiring service and upgrades on turbines of other makes. We see the Aftermarket emerging as a major growth driver for TTL in the years ahead.

To what extent has the Russia-Ukraine war impacted business? Has it affected enquiries from US?

As of now, the impact has been negligible, though it has, of course, led to a general mounting of commodity and inflationary pressures on businesses around the world. We did have to cut down on our order book to some extent, mainly from a few steel mills that were under invasion in parts of Ukraine, but this is not a very large market for us. Even in Europe, which has been significantly impacted by the war, the impact has not been much and investments in renewable-based applications and projects in the region continue to be strong. In fact, we picked up a large waste-to-energy order from this market during the year despite stiff international competition. Even in the US, where there is some talk of recession, we do not see our business getting seriously affected since our presence in that country is very limited.

How are you handling the pressure on margins, resulting from the pandemic as well as the war, and the consequent inflationary uptick?

Despite the large commodity price increases (for example, the price of chrome ingrid went up by over 60-70% during the year while steel and copper prices also saw a jump), we have been able to preserve margins in FY 22. We managed to control our PBT margins for the full financial year at about 20%. The fact is that steam turbine being a customised product, the margins, in any case, vary from order to order. So one sees jumps even in normal conditions. Going forward, we are actually expecting higher despatches in the export market in FY 23 as compared to FY 22, which leads us to believe that the margins are not likely to be a huge cause of concern in the year ahead.

How do you see the two key acquisitions - TESL and TSE, shaping the contours of the Company’s business going forward?

TThe TSE acquisition is primarily meant for our Aftermarket business. The primary objective is to build our refurbishment business, which will definitely support all the customers of Triveni Turbines in the SADC region. Our aim is to better service our customers and give them the confidence that we are closer to them and better placed to take on more jobs, more complex jobs and a variety of jobs in the refurbishment business. So we are looking at a multi-brand service offering with this acquisition. In fact, while helping us grow our enquiry pipeline for the Aftermarket business in the SADC region in Africa, this acquisition will also give us access to the other markets in the African continent with our manpower base in South Africa.

As for TESL, it has opened the doors for us to leverage the opportunity in the 30-100 MW space independently – something which we are well poised to do.

How do you perceive the business outlook for the Company in the near term?

Despite the pandemic and war triggered challenges, the growth potential is clearly significant. The Indian economy is projected to rebound and we see investments continuing across end-user industries such as Distillery, Oil & Gas, Cement, Steel, Fertilisers, Textiles.

Reduced operating costs, self-sufficiency and focus on gaining carbon credits across segments like waste-to-energy, biomass, steel, etc. are some of the key factors driving demand for steam turbines. Further, the demand for high-efficiency steam turbines has gone up at the back of growing importance of efficiency of power generation. With our portfolio of efficient reaction type products from 3 MW to 100 MW, we are well placed to meet this growing demand. In countries like Central and South America as well as Southeast Asia, especially in the palm oil segment, TTL has replaced single-stage with multi-stage machines, complying with the stringent American Petroleum Institute (API) 611 and 612 specifications, to enhance efficiency in the segments of refineries, chemicals, petrochemicals and fertilisers.

Another area showing promise is the Combined Heat and Power Market (CHP) market in the Americas, where we have received an order for an 18.25 MW extraction backpressure steam turbine generator from a Colombian paper producer. The demand for district heating system in cold countries like Europe is another area where we see great potential, on the strength of our ability to provide competitive steam turbine solutions for district heating plants. We also see the sCO2 steam turbines that we are currently engaged in developing opening new avenues for us in near future.

Given our strong carry forward order book at the start of FY 23, we believe that the Company is geared to push its growth levels further. Further, our foray into new segments, such as energy-efficient API turbines for Oil & Gas industry and turbines between 30.1-100 MW, will help widen the net of our addressable market. And I can say with confidence that we are well equipped to expand fast into these new emerging markets, even as we continue to push the frontiers of growth in our existing markets.