Triveni Engineering & Industries Ltd (TRIVENI) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to the Triveni Engineering and Industries Limited Q2 FY27 earnings conference call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Gavin from CDR India. Thank you, and over to you, sir.
Gavin (CDR India): Thank you. Good day, everyone, and a warm welcome to Triveni Engineering and Industries Q2 and H1 FY27 earnings call. We have with us today Mr. Tarun Sawhney, the Vice Chairman and Managing Director, Mr. Suresh Taneja, the Group CFO, and Mr. Sameer Sinha, CEO of the sugar business. 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 has been shared with you earlier. I would now like to hand over to Mr. Tarun Sawhney to make his opening remarks. Over to you, Tarun.
Tarun Sawhney (Triveni Engineering & Industries Ltd): Thank you, Gavin. Good afternoon, ladies and gentlemen. Welcome to the QT Q2 H1 fiscal '27 earnings conference call of Triveni Engineering and Industries Limited. Following the execution of the Composite Scheme of Arrangement, the Power Transmission business has been demerged into Triveni Power Transmission Limited with effect of 1st of April 2026. Accordingly, the financial performance discussed today relates to the continuing sugar, alcohol, and water businesses of the company. The consolidated results also include the company's share of profit from its associated from its associate Triveni Power Transmission Limited based on our equity holding of approximately 30%. The first half reflects a meaningful improvement in operating performance and profitability. The turnaround has been led substantially by better sugar realizations and contributions, a stronger mix
Tarun Sawhney (Triveni Engineering & Industries Ltd): and by byproduct economics in alcohol, the continued cost discipline and a materially stronger balance sheet. At the same time, we are entering into the second half with a mixed operating background. Sugar is supported by tight domestic availability, while alcohol faces a more challenging tender and and feed stock environment and the water business also requires faster execution. I'm going to first cover the consolidated financial performance and then discuss each business in detail, including the industry environment, the operational initiatives and outlook before concluding with the key priorities for the second half and then opening up the call for questions. For the half year of fiscal '27, the consolidated revenues from operations increased by 5% year-on-year to 3,311 crores from 3145 crores. The Q2 fiscal '27 revenue also increased by 8% year-on-year to 1,731 crores. The operating margin for the first half improved by 383 basis points to 6.9% from 3.1% in the previous corresponding period. The PBT improved sharply to 131 crores for H1 fiscal '27, compared with a loss of 25 crores in H1 '26. And that, of course, is the most significant difference in comparing the results. The sugar revenues were higher because of improved realizations and slightly higher sales, and the revenues from DDGS played the enhanced revenues from DDGS played a very significant role in our distillery business segment. The improvement in profitability was primarily driven by higher sugar margins on account of the significantly higher realization, a higher proportion of grain-based ethanol in the mix, and as I mentioned, stronger DD-DDGS realizations, and lastly, operational efficiencies in alcohol and other cost-optimization exercises that were conducted during the quarter and half year under review. The finance cost for H1 fiscal '27 was 20% lower year-on-year mainly due to lower average working capital utilization, improved profitability and a lower average cost of funds. Our cost of funds for the half year stood at 6.8%, whereas for the quarter stood at 6.78%. The balance sheet has strengthened materially. The net debt level improved significantly to 157 crores as of the 30th of September 2026, compared to 702 crores a year ago, and this was on account of higher profitability, lower working capital utilization and the repayment of term loans. Turning swiftly to the business-wise review. As far as the sugar business was concerned, the principal driver of the H1 turnaround was on account of this business. H1 revenue increased 5% year-on-year to 2,497 crores. The average sugar realization improved by 9% to ₹4,428 per metric ton, while dispatches were broadly stable at 5.33 lakh metric tons. The segment PBIT improved substantially to 113 crores from a loss of 5 crores in the previous corresponding half year. In Q2, the sugar revenue increased by 4% to 1,262 crores, and realizations increased by 16% to ₹4,728 per metric ton, more than offsetting a reduction in the 8% in dispatches during the quarter under review. The improvement in profitability was driven by a significant increase in the contribution margin, lower finance costs due to lower sugar inventory and disciplined off-season costs. All three were important contributors in this in this achievement. The closing inventory as of the 30th of September stood at 1.03 lakh metric tons, compared to 1.69 lakh metric tons a year ago, which also, of course, had an impact of reducing our working capital intensity. The sugar in stock as of the 30th of September is valued at ₹38.6 per kilo.
Tarun Sawhney (Triveni Engineering & Industries Ltd): place opening stocks at approximately 3.5 million metric tons, the lowest in more than a decade, against an annual consumption number of approximately 28.5 million metric tons. This makes the domestic balance highly sensitive to the final crop outcome and of course to government policy. I should state that these are TEIL estimates that we are speaking about today. The production estimates are still varying because the crop is still evolving. Our current assessment is approximately 27.5 million metric tons of net sugar production for the season 26-27, with a downside risk knowing that diversion to the unorganized sector is going to be fierce in this year and also recognizing the fact that there will be no diversion towards sugarcane juice, syrup, or B-heavy molasses as far as sugary feedstocks for ethanol. The Uttar Pradesh crop conditions have generally been constructive, and certainly far more positive than those in the southern states of Maharashtra and Karnataka, primarily which have suffered due to irrigation non-availability of irrigation and the the varied rainfall distribution in these southern states. However, the late October spell of unseasonal rainfall in Uttar Pradesh, which included heavy thunderstorms in certain parts of the area, has created some near-term concerns. The rainfall, which was very close to the start of the crushing season, has delayed the commencement of western Uttar Pradesh mills ever so slightly. A few factories have started operations. I'm delighted to inform everybody on the call today that our plant at Chandanpur has commenced operations about 2 hours ago. And this is the first plant of Triveni Engineering that has commenced operations. The true assessment of the impact of rains, the impact on sucrose, the impact on yields will be known in the next few weeks. I would say between mid-December and mid-January, we will have a a clear assessment of the impact of this very, very late rainfall that actually spread not just across the state of Uttar Pradesh, but across North India in quite a devastating manner. But Maharashtra and Karnataka, as I mentioned, remain the larger risk for the national crop. And and I think the estimates from both those states will become very clear as the factories start continuous operations. Right now, there's been a little bit of start and stop. There were some farm protests in Karnataka. There was also some talk of fires and and some other inclement activity that has impacted continuous operations in these two states. Once they get into ready operations, we will be able to then estimate the the production based on current recoveries, etc. The reports at this point are fairly scant for sugar production across the country, and therefore it is a little bit challenging to give early estimates for the production for sugar season 26-27. The domestic sugar prices have experienced exceptional volatility for the quarter under review. Prices strengthened sharply from late June through August as the market responded to the low stocks and crop concerns before government interventions, the higher release of quotas, and the stockholding restrictions moderated the market. Despite these interventions, October realizations have remained firm. In our view, low opening stocks and weather uncertainty should support prices, although the timing and extent of the price transmission will be influenced by quotas, by stock limits, by import policy, and potentially by other government measures. It is important to note that Haryana has announced its SAP very recently. It has increased sugar prices for sugar season 26-27 by 15 rupees to 430 rupees per quintal, and it has also announced sugar prices for the following year of 27-28, a 20 rupee increase up to 450 rupees per quintal. To my mind, this is a very bold decision by the Haryana government and a very practical decision to support farmer incomes, to support growth of the sugarcane crop. And let's hope that this is is also indicative of what might happen in other SAP states across the country.
Tarun Sawhney (Triveni Engineering & Industries Ltd): Before I turn to the sugar outlook globally, I should also mention that our current prevailing prices of sugar for Triveni Engineering are approximately ₹5,800 per quintal for institutional sugar and about ₹5,400 for the trade. And of course, there is a great greater amount of sugar that has been sold for institutions at this particular point in time. We are, as responsible suppliers to the market, making sure that sugar is available to local trade for consumption in areas around our sugar factories, and that is very important from a UP perspective as well. Turning quickly to the international market, international benchmark prices have recovered materially from their 2026 lows. Raw sugar moved from a low of 13 .31 cents per pound in April to highs of about 21.3 cents and settling a little bit lower now, at about 19.5 cents per pound. White sugar moved from lows of $376 a ton in February to a high of $561 per ton and and is currently settled around $520 per metric ton. It is important to share with you the con cost, the conversion costs of of this sugar. At this particular point in time, if we take prevailing prices, raw sugar landed in Delhi, let's say that is the benchmark, because sugar for North India would be would use that as a comparable, raw sugar, including tolling costs and tolling import costs, without any margin, will land at about ₹54.5. So that is without any margin for the trade or for the importer or for the tolla. Similarly, white sugar imports without any margin for the importer is, if we look at the December contract, it is ₹59.15 per kilo, and if we look at the March contract, which you will enter into very, very soon, is about ₹60.7 per kilo. So substantially higher than what the prevailing prices are are today. The outlook globally is is a mixed bag. There is a deficit, a small deficit that is considered for this sugar year. However, for the following year, most industry bandits and trade houses have the Brazilian crop rebounding very substantially. The crop in Brazil was impacted by significant rains that that curtailed sugar production and factory operations and brought about a premature end to the season. A lot of that crop has now been moved to the subsequent sugar year. And given the larger projected numbers for crush from Brazil, one can imagine that there could be a surplus that is offered. However, I would like to point out that there are many factors that need to be considered. Oil prevailing at above $100 will certainly be a detriment to sugar production in Brazil, and this is a factor that that is still very, very nimble, and we are some months away from the start of the next Brazilian crop. The total sugar-ethanol balance could change based on prevailing ethanol and oil prices at that particular point in time. The other point is the impact, of course, of Indian imports. Further Indian imports have not been factored. Neither has has the impact on the El Nino, which may impact the crop in in Thailand for the following year, and Australia, as well. All of these factors will breed to lead to more imbalances in our opinion, especially in the northern and eastern hemisphere, which is where India is. And that is something that is that will play out in markets, in international as well as domestic prices going forward. If India were to import more sugar, I'm absolutely certain that it will have a a positive impact on global prices. The extent of it, we will figure out and it will be based on the quantum of imports that may or may not be required by India. Turning to the operational initiative that we have taken in our in our business, we have doubled down in the quarter under review on field surveillance, where there's been a lot of work that has happened in terms of identification of crop disease and pests to ensure that everything below remains well below the the the target lines that we that we consider. There's also been a lot of work that has happened
Tarun Sawhney (Triveni Engineering & Industries Ltd): to what has continuously happened and the focus areas has been on controlling irrigation by farmers and also controlling the usage of fertilizer which which was the tendency that had started happening in the western part of Uttar Pradesh. And I'm glad to report that a lot of that as of now remains well under control and this bodes very well for the crop. As I mentioned, the post rainfall response and performance is yet uncertain. We will be able to provide more information as months transp- as as a few weeks transpire, but the unseasonal rainfall that has happened in the month of October is certainly a a a risk to the overall UP crop. I think we've also managed to maintain tremendous commercial discipline in order to ensure that our costs over the off-season have been minimized. And alongside, we have ensured that all the factories are ready for operation as as they we stand today. Had it not been for the rainfall, many of them would have started. But as it stands today, as I mentioned, Chandanpur started operations today. We expect Sabitgarh start operations tomorrow. We expect Khatauli to start operations on the 6th and we expect our other plants to start shortly after Diwali. Turning quickly to the alcohol business. The business continued to improve its qua- profitability in the quarter and H1 despite lower production and modestly lower sales volume. The H1 revenue increased by 3%. The PBIT increased by 44%. In the quarter, net revenue increased by 19% supported by a 16% increase in sales volume, higher supplies of maize based and C-heavy molasses ethanol, stronger DDGS realizations, and the Q2 segment PBIT increased to 43 crores from 28 crores in the previous corresponding quarter. The H1 production was 1085 lakh liters, lower by 13% year-on-year, and the decline reflected lower operating days, storage constraints for finished goods, and a shift away from B-heavy molasses ethanol with the ethanol mix of grain-based ethanol grain-based ethanol remained the largest component in our mix for production as well as for supplies. At the industry level, the ethanol blending has reached 20% in ESY 25-26. The public sector OMC allocation increased to 1197 crore liters after the additional allocation. and the supply stood at 987 crore liters until September '26, although there is one full month left for the ethanol supplier. For the ESY 26-27 tender, material changes have been witnessed in this tender document. The OMCs have invited bids of 1100 crore liters, but no offers were invited for ethanol produced from sugarcane juice syrup or from B-heavy molasses. The tender allows maize, broken rice, surplus FCI rice and C-heavy molasses. However, the quantity of FCI rice-based ethanol has been limited now to 30% of the overall tender. This was a notification that came out earlier today. In a nutshell, if we have to divide up the first tranche of 1100 crore liters based on the the present tender document which I still understand is possibly going to undergo further review and further modification because it is, to my mind, a little bit negative for the overall industry. But the balance, if we were to take today's contract as it stands, would be about 150 crores coming from C-heavy molasses, 324 crores coming from FCI rice, and the balance 626 crores split with a maximum of about 160 crores coming from DFG. And as and a simple subtraction would then show 466 crores coming from maize, which is a significant component. And if one were to consider this vast quantity coming from this vast quantity of ethanol coming from maize, I do not see maize prices declining in the near future and thereby impacting the profitability very, very poorly for ethanol that is that is that is from maize. As we know, the prices of maize right now have breached Rs 26 and are coming up to about Rs 27 per kg. This is quite significant as far as future viability of maize-based ethanol is concerned. And the the next big crop that is coming is actually many months away, and this would be the Bihar
Tarun Sawhney (Triveni Engineering & Industries Ltd): followed by the UP crop which will only come in May of 2027. So, we are a good 5 to 6 months away from the next big crop coming. The other very important point to consider with maize profitability is the 3 rupee decline in the present tender for maize based ethanol. So, one hopes that while this tender document is being reconsidered, there may be some reconsideration of price. However, I am personally a little doubtful whether that would happen. The tender supports domestic sugar availability, but it significantly reduces the feedstock flexibility, as I mentioned. I think integrated and multi-feed sugar companies will be beneficiaries of this very constrained policy which gives us the flexibility to be able to move between feedstocks. However, single-feed plants I think will have a very uphill task in terms of trying to achieve profitability over the next ethanol supply year. The overall operational initiatives that we have taken in ethanol have really paid a lot of dividends and will continue to pay dividends. The allocation and product mix working that we have done has worked out extremely well. You can see that from our results of the quarter and half year. The feedstock flexibility has been excellent and our ability to be able to procure maize at low prices for the quarter and half year, and some of the stocks that we have today has been actually quite excellent. And we have maximized our byproduct realization, especially of DDGS, in terms of getting ever so slight premiums over the prevailing DDGS market, which itself has experienced an increase in prices which, to my mind, given the availability, these prices will remain fairly stable with small increases going forward over the next 3 to 6 odd months and maybe beyond that. There's been a lot of work that has happened on energy and process efficiency that we have already started benefiting from and you will see that for the ethanol supply year 26-27 in terms of our cost of production and conversion. I think it is essential to point out that the maize prices in H1 of fiscal '28 will be the biggest contributor to the profitability of the ethanol supply year 26-27. And as I had previously mentioned, that will only be determined by the total size of crop that comes in Bihar and in Uttar Pradesh, in Eastern Uttar Pradesh. Turning very quickly to our water business, the water business continued to be affected by the timing of execution of select EPC projects. H1 revenue dipped by 19- 17%, while the Q2 revenue declined by 13%. The PBT was 3 crores for H1 compared to 13 crores in the previous year and the PBT for, PBIT rather, for Q2 was broadly breakeven. The closing order book as on the 30th of September '26 was 1,452 crores, which comprised of 404 crores of normal EPC and equipment orders and 1,048 crores of long duration O&M contract orders. Turning to the overall outlook and management priorities, to summarize the operating outlook, the three businesses are entering H2 from very different starting points. In sugar, the market is supported by low opening stocks, the absence of diversion to cane juice and B-heavy molasses for ethanol, the uncertainty around production in Maharashtra and Karnataka. Uttar Pradesh remains relatively better placed, but the recent heavy rainfall creates some uncertainty around cane maturity, initial recovery, field access, and the pace at which the season will start. We will also calibrate operations unit-by-unit and focus on cane quality, recovery, throughput, and most importantly, commercial discipline across the Triveni Engineering plants. In alcohol, H1 was strong, but ESY 26-27 and the tender for ESY 26-27 has reset the near-term economics. The exclusion of juice and B-heavy molasses, the reduction in maize ethanol price, the likely overbidding and firm maize costs have put pressure on the contributions from this business going forward. We will, of course, prioritize feed stock economics in making our bids under this tender and also in terms of operating our various distilleries across the group. In the water business, the order book provides near-term visibility, particularly through
Tarun Sawhney (Triveni Engineering & Industries Ltd): For the immediate requirement is for solid execution which we expect will happen in Q3 and Q4 and therefore it'll allow us to come back to our budgeted levels in this business. Across the company, a materially improved balance sheet is an important enabler. We will remain disciplined on working capital, capital expenditure and our return thresholds that I have spoken on many times on our earnings conference call. We will also preserve flexibility because sugar, ethanol and project businesses are all exposed to policy, commodity and execution volatility and therefore it is important to judge each and every business based on their own individual fundamentals extracting the most amount of value which I think we are are capable of doing as this sugar year gets underway. In conclusion, H1 represents a strong improvement in operating performance and profitability. Sugar business has benefited from better realizations and lower inventory and our operational focus is now on executing the the upcoming season with a very strong performance and discipline across all of our sugar factories. I think the work that we have done on sugarcane development will certainly hold us in a good space in this sugar year. As far as the ethanol business is concerned, while there were meaningful earnings delivered in H1, we are responding to the more demanding H2 environment through working on feedstocks, on product mix and on efficiency measures. I would have to say that Q3 is is relatively unabated compared to what we estimated which means we will carry on along a very healthy trajectory as. However, Q4, which is really where the new tender comes in, that is very difficult to determine right now because the tender has yet to be finalized and therefore the estimates of of profitability of of our allocation etcetera are still a little vague as of this time and it's and nebulous, so it's difficult to be able to make that that very final prescriptive prediction at this particular point in time. The water business, the order book looks stable and our immediate priority as I mentioned is on faster execution. A substantial reduction in debt and improved liquidity strengthens our ability to navigate this evolving environment. We remain committed to sustainable growth, disciplined capital allocation and long-term value creation. With this, I'd now like to open up the call for questions. Thank you.
Moderator: Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and then one on that touchtone telephone. If you wish to remove yourself from the question queue, you may press star and then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. A reminder to all the participants you may press star and one to ask a question. We have the first question from the line of Aman Kumar Sonthalia from AK Security. Please go ahead.
Aman Kumar Sonthalia (AK Security): Good evening, sir.
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