Triveni Power Transmission Limited (TRIVENIPT) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day, and welcome to Triveni Power Transmission Limited Q2 and H1 FY '27 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 is being recorded. I now hand the conference over to Mr. Gavin Desa from CDR India. Thank you, and over to you, sir.
Gavin Desa (CDR India): Thank you, Nirav. Good day everyone, and a warm welcome to everyone participating in Triveni Power Transmission's Q2 and H1 FY '27 earnings call. We have with us today Mr. Tarun Sawhney, the Vice Chairman and Managing Director, Mr. Suresh Taneja, the Group CFO, Mr. Rajiv Rajpal, CEO, Mr. Amandeep Sharma, the CFO of TPTL, as well as other members of the senior management team. I would now like to hand over to Mr. Tarun Sawhney to make his opening remarks. Over to you, Tarun.
Tarun Sawhney (Triveni Power Transmission Limited): Thank you, Gavin. Good afternoon everyone, and thank you for joining us for the Q2
Tarun Sawhney (Triveni Power Transmission Limited): '27 earnings call of Triveni Power Transmission Limited. This is our first results discussion following the listing of TPTL, and we're pleased to begin this journey with a resilient operating and financial performance. Q2 revenue grew by 6% year-on-year and improved significantly sequentially. For the first half, revenue grew by 18% year-on-year. Importantly, our portfolio is becoming more diversified with strong growth in aftermarket and defense helping to balance the timing-related moderation in our product business. Profitability remained healthy. EBITDA margins were 36.1% in Q2 and 35.7% in H1. While the margins moderated year-on-year due to base effect, which I will describe later, it remained ahead sequentially reflecting the business mix and disciplined operating costs. We also generated positive free cash flow after capital expenditure in H1, while continuing to invest in manufacturing capability, technology, and new products. From a market perspective, the broader domestic environment remains supportive. India's Q1 fiscal '27 GDP grew at 7.8%, while industrial production grew 8% year-on-year in August with manufacturing up 9% and capital goods output up 16.9%. At the same time, global the global environment remains a bit uncertain because of geopolitical and energy price risks. For us, this reinforces the importance of a diversified customer base, disciplined execution, indigenization, and a strong aftermarket franchise. A more relevant market definition for TPTL's gear business is the specialized global high-speed industrial gearbox market, catering to mission critical applications including compressors, turbines, pumps, and other rotating equipment. External industry research estimates the combined OEM and aftermarket ecosystem at approximately $1.1 billion in 2026, and the two segments expected to grow between 6% and 7% through 2033. Engineering capability, reliability, installed references, and lifecycle support are important, they're essential to the competitive differentiators in this market. India's fiscal '27 Ministry of Defence allocation is 7.85 lakh crores. The capital outlay on defense services is 2.19 lakh crores, 21.8% above the fiscal '26 budget estimates. The government has earmarked 1.39 lakh crores for procurement for domestic defense industries. The policy direction towards indigenous procurement, capacity development is strategically favorable. However, defense programs have long development, approval, and procurement cycles, so we remain measured in translating the opportunity into near term revenue expectations. Turning towards the Q2 and H1 financial performance, our Q2 revenue grew 6%, as I mentioned, year-on-year and 60% sequentially. The product revenue was lower year-on-year because of customer delivery schedules and certain supply chain factors, but this was partially offset by strong growth in aftermarket and defense. For H1, overall revenue increased by 18%, which better reflects the progress across the portfolio than a single quarter comparison. The year-on-year margin comparison needs to be viewed in context of the revenue mix leading to higher material cost percentage and continued investments in people and manufacturing capabilities. However, we continue to focus on absolute profitability and increasing return on capital. It is important that we encourage our investors to look at four-quarter rolling revenues or fiscal year revenues forecast and actual, physical numbers because that will give a more appreciable understanding of the business as a whole rather than one quarter versus the other because deliveries and dispatches can vary of products and all of our products have different margin expectations. Looking at the business update, our industrial gearbox business remains anchored in the engineer-to-order high-speed applications for turbines, compressors, pumps, and other rotating equipment. The quarter saw timing-related softness in product revenue, but our strategic focus was remained unchanged, deepening our global OEM relationships, expanding our international vendor approvals and broadening the application base to improve export participation over the short and the medium terms. As an indicator of continuing momentum, the order book for the products stood at 224 crores at the end of the first half, up 26% year-on-year, reflecting underlying demand across our targeted end markets.
Tarun Sawhney (Triveni Power Transmission Limited): In fact in the quarter under review, we had very significant orders that came in from a from a Middle Eastern customer and also from an African customer, which supports our efforts in terms of not just making it to AVL's, but then translating that into increasing businesses. Over subsequent quarters, I'm confident that this will translate into significant export revenues led by OEM's and, of course, led by some of the strongest third-party customers that we now have the pleasure of serving. From an aftermarket perspective, it continued to be a strong contributor. Q2 aftermarket revenues was up about 41% year-on-year, and the H1 was up 29%, contributing 27% to the revenue. The business is strategically important because it allows us to serve the installed base through replacements, upgrades, spares refurbishment and and field services including equipment from multiple OEMs. This opportunity grows as our reference base and service reach expands. The challenge in front of us is how to expand the export aftermarket base and there are significant efforts being made by the organization, both in terms of hiring talent, and also in terms of fostering and developing third-party relationships to ensure that we can expand that aftermarket business internationally. And this is crucial towards the growth of the organization in the short and medium-term basis. As far as defense is concerned, defense revenues scaled meaningfully in the quarter from a, though from a low base. We are developing a broader indigenous platform spanning marine gearboxes, propulsion shafting, and many other ship related products. Our approach combines in-house engineering and manufacturing with selective technology partnerships. Please note that given the nature of defense programs, the order placement and revenue recognition can and will remain lumpy, reflecting the prototype development, the qualifications, customer approvals, and the overall procurement cycle. However, our objective, and this is important to communicate, is to broad base the number of products, broad base the number of specific initiatives that the company gains orders from from the the from as far as the defense vertical is concerned, to allow us to mitigate the lumpiness of this business. And I think we're doing a reasonable job. Of course, it will take several quarters before this can be significantly meaningful. But I am confident, given the placement of our business, the inauguration of our new defense facility, and the production at said new defense facility, that we will be able to accomplish that in over the next N number of quarters. The order booking for Q2 increased by 48% to 126 crores compared to the corresponding previous quarter. And for H1 it stood at 330 crores, a growth of 95% year-on-year. I think this was particularly important for the business. The closing order position on the 30th of September was 626 crores, up 57% from 398 crores a year earlier. I think this also showcases that despite the variances that we have not just domestically, but globally in terms of the overall market environment, the business is actually gaining a lot of productive traction and all of that, of course, will culminate in revenues in subsequent quarters. This provides the the closing order book position provides meaningful visibility in my eyes, although the revenue recognition, as I mentioned, will depend on customer schedules, on on engineering approvals, and on the execution profile of individual contracts. As the order book gives us a solid base, but we do not want to mechanically translate this into quarterly revenues because our business is engineered to order and the key variables are, as I mentioned, the customer schedules, the engineering releases, and the overall manufacturing cycle, particularly as far as the defense program initiatives are concerned. We generated positive free cash flow after capital expenditure of approximately 13 crores in H1, while continuing to invest in manufacturing infrastructure. Core working capital days stood at 188 days as of September end versus 193 days in March. It is improved further by
Tarun Sawhney (Triveni Power Transmission Limited): working capital can move with project milestones and the inventory buildup. Our focus is on milestone discipline, collections, and inventory management, while preserving the flexibility to be able to execute the order book. Our investment program is directed towards capacity rather than simply adding generic capacity sorry, towards capability rather than adding generic capacity. Priorities include precision manufacturing, marine and defense capabilities, testing, engineering productivity and digital transformation and integration. We intend to remain disciplined on our timing and returns on these investments and currently have a balance sheet that allows us to fund the growth primarily through internal accruals. We are largely done with the long-term capex program, which I have spoken about in previous conference calls, which we undertook approx over the last three odd years. During H1, the total capital expenditure was ₹41 crores, which comprises capitalization of ₹10 crores and capital work in progress of ₹31 crores. With the major capacity and capability investments largely completed, the incremental capex in the near-term and medium-term is expected to be primarily balancing capex, routine capex and capacity enhancement, small capacity enhancements as and which may be required, which will not, and I repeat, not be substantial. So, I'm very happy to say that this entire program has now almost concluded and I think we are seeing the benefits of that in terms of the recognition from our OEMs and customers of the both of both the manufacturing facilities at TPTL. We remain constructive on the medium-term and the long-term and the short-term opportunity, frankly speaking. The strength of our current order book, healthy domestic industrial environment, which is envisaged over the next few quarters, and the initiatives to across our revenue streams to provide a strong foundation of growth with respect to our export markets is all underway and and positive. At the same time, the engineered order to order nature of our business can result in some quarter-to-quarter variability, as I have mentioned, and therefore, I encourage [cough] the analysis to be done really from a annual or four-quarter basis to be able to get a better picture of our business. In the gears product business, our efforts are directed towards progressively widening the opportunity pool across applications and geographies. This is very, very important. As far as the geographical expansion is concerned, I think we have had enormous success as far as Europe, Asia, and Africa are concerned. Our next port of call is the United States, which is a a a very different market. In addition, I think the focus on aftermarket from our global enterprise and network is something that is extremely important by adding resources not just in-house, but also adding partnerships through through a through a network of agents across overseas territories and training said agents with respect to selling aftermarket solutions, which will add to to near-term revenues as well as to meaningful profitability. As far as the product diversification is concerned, I think there is been a lot of development that has happened, especially over the last two quarters. Twofold initiatives that I would like to point out. The first is with respect to research and development, where we expect over the next couple of quarters significant milestones to be achieved in terms of really setting the benchmark for global efficiency as far as our high-speed gearboxes are concerned. The second initiative that I can talk about is our entry into new areas, new industrial areas with a specific focus on getting qualification for space ventures and supporting gearboxes for the space environment. Again, a very exciting development. And also, a second industrial area that we are keenly focused on developing product profiles is for data centers, and so the the team is is is close to have developing solutions and then selling those solutions that opens up a significant opportunity and and certainly we'll be the only person in in in in India providing these solutions not just domestically, but also globally. As far as defense solutions are concerned, we have the potential to emerge as a meaningful it has the position to of potential to emerge as a meaningful additional pillar for the business. The objective is to build
Tarun Sawhney (Triveni Power Transmission Limited): capacities and capabilities that will dress a larger share of the domestic requirements. Over time, positioning TPTL as a supplier for defense and marine products, rotating products of excellence as far as this nation is concerned. Overall, we expect all of these initiatives to result in a much more diversified business portfolio of products, customers, geographies, and end markets. Our focus replete, remains on disciplined order intake and execution, sustainable cash generation, and improving returns over the cycle rather than just pursuing growth at any cost. To conclude, H1 reflects the resilience and increased and increasing breadth of TPTL's business model. We have a strong order book, multiple avenues for growth across industrial gears, aftermarket, and defense and marine. And our focus is now on translating these opportunities into disciplined execution over the short- and medium-term to create value for our customers and stakeholders. Thank you very much, and we're happy to take your questions.
Moderator: Thank you very much. We will now begin the question-and-answer session. Anyone wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 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. Participants, you may press star and one to ask a question. The first question is from the line of Srinivasa Reddy from Yellow Investments Limited. Please go ahead.
Srinivasa Reddy (Yellow Investments Limited): Sir and thank you for the opportunity. Sir, my question is on our order book. Out of 326 crore of order book as of 30th September, how much is scheduled for the delivery in H2 FY27?
Tarun Sawhney (Triveni Power Transmission Limited): Yes, I'm afraid we we don't split our order booking in terms of deliveries in in terms of quarter on quarter. But by and large, what I'm happy to say is the the gearbox orders are primarily the product orders are primarily to be delivered in a six to eight-month cycle. Our aftermarket orders are typically to be delivered in a three to six-month cycle. The defense orders can vary, some of them can be in about 12-odd months, and some of them are of a longer duration. However we do not divide our order book and give categorical numbers for that. However we do believe that as of the as of the end of this quarter for fiscal '27 156 crores is for for fiscal '27 from gears, and 81 crores is for defense. That much I can share with you. We can't give you for which quarter, what will fall in.
Srinivasa Reddy (Yellow Investments Limited): Yes sir, and how much of the delayed STG pump and Middle East product orders mentioned on the business update slide, do we expect to finalize in H2?
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