Triveni Power Transmission (BSE:TRIVENIPT) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Triveni Power Transmission Limited Q2 and H1 FY 'twenty seven 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Gavin Diisa from CDR India. Thank you, and over to you, sir. Thank you, Neera. Good day, everyone, and a warm welcome to everyone participating in Triveni Power Transmission's Q2 and H1 FY 'twenty seven Earnings Call.

0:45 We have with us today Mr. Tarun Soni, the Vice Chairman and Managing Director Mr. Suresh Tareja, the Group CFO Mr. Rajiv Rajpal, CEO Mr. Raman Kumar, the CFO of TPTL as well as other members of senior management team. I would now like to hand over to Mr. Tarun Soni to make his opening remarks. Over to you, Tarun. Thank you, Gavin. Good afternoon, everyone, and thank you for joining us for the Q2 fiscal twenty twenty seven 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.

1:31 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 time 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.

2:18 From a market perspective, the broader domestic environment remains supportive. India's Q1 fiscal twenty seven 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, 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 in digitization 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.

3:10 External industry research estimates the combined OEM and aftermarket ecosystem at approximately $1,100,000,000 in 2026, and the two segments expected to grow between 67% through 2033. Engineering capability, reliability, installed references and life cycle support are important, they are essential to the competitive differentiators in this market. India's fiscal 'twenty seven Ministry of Defense allocation is INR7.85 lakh crores. The capital outlay on Defense Services is INR2.19 lakh crores, 21.8% above the fiscal 'twenty six budget estimates.

3:56 The government has earmarked INR 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 deployment, 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.

4:44 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.

5:44 Looking at the business update, our industrial gearbox business remains anchored in the engineered 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 medium term. In fact, in the quarter under review, we had very significant orders that came in from a Middle Eastern customer and also from an African customer, which supports our efforts in terms of not just making it to AVLs, but then translating that into increasing businesses.

6:36 Over subsequent quarters, I'm confident that this will translate into significant export revenues led by our OEMs 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 field services, including equipment from multiple OEMs.

7:22 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 revenue scaled meaningfully in the quarter from a low base. We are developing a broader indigenous platform spanning marine gearboxes, propulsion, shafting and many other ship related products.

8:12 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 qualification, the 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 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.

9:19 The order booking for Q2 increased by 48% to INR126 crores compared to the corresponding previous quarter. And for H1, it stood at INR330 crores, a growth of 95% year on year. I think this was particularly important for the business. The closing order position on the September 30 was INR626 crores, up 57% from INR398 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 closing order book position provides meaningful visibility in my eyes, although the revenue recognition, as I mentioned, will depend on customer schedules, on engineering approvals and on the execution profile of individual contracts.

10:23 Thus, 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 INR13 crores in H1, while continuing to invest in manufacturing infrastructure. Core working capital days stood at 188 as of September end versus one hundred and ninety three days in March. It has improved further by a couple of weeks since some overdue receivables have been realized during this quarter. However, given the engineered to order nature of the business, working capital can move with project milestones and the inventory buildup.

11:18 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 from 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 over the last three odd years. During H1, the total capital expenditure was INR41 crores, which comprises capitalization of INR10 crores and capital work in progress of INR31 crores.

12:21 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 both the manufacturing facilities at DPTL. 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 positive. At the same time, the engineered order to order nature of our business can result in some quarter to quarter variability, as I had mentioned. And therefore, I encourage the analysis to be done really from an annual or four quarter basis to be able to get a better picture of our business.

13:49 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 quarter of oil is The United States, which is 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 a network of agents across overseas territories and training said agents with respect to selling aftermarket solutions, which will add to near term revenues as well as to meaningful profitability.

14:45 As far as the product diversification is concerned, I think there has been a lot of development that has happened, especially over the last two quarters. Two fold 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.

15:33 And also, a second industrial area that we are keenly focused on developing product profiles is for data centers. And so the team is close to developing solutions and then selling those solutions that opens up a significant opportunity. And certainly, we'll be the only person 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 potential to emerge as a meaningful additional pillar for the business. The objective is to build capacities and capabilities that address a larger share of the domestic requirements.

16:21 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 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 increasing breadth of DPTL'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.

17:20 Thank you very much and we're happy to take your questions. Thank you very much. We'll now begin the question and answer session. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Srini Vasarendi from Yellow Investments Limited. Sir, my question is on our order book.

18:16 Out of 26 crore of order book as of September 30, how much is scheduled for the delivery in H2 FY 'twenty seven? Yes, I'm afraid we don't split our order booking in terms of deliveries in terms of quarter on quarter. But by and large, what I'm happy to say is the gearbox orders are primarily the product orders are primarily to be delivered in a six 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 twelve odd months and some of them are of a longer duration.

19:04 However, we do not divide our order book and give categorical numbers for that. However, we do believe that as the end of this quarter for fiscal 'twenty seven, INR156 crores is for fiscal 'twenty seven from Gears and INR81 crores is for Defense. That much I can share with you. We can't give you which quarter what will fall in. 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? So again, I'm afraid I can't offer you a number, but we certainly expect that to be finalized. Those orders are significant. They're important customers.

19:57 There have been some delays. As you can understand, The Middle East is a little bit of a challenging situation right now. However, the investment thesis for our end customers remains unchanged. I do want to take this opportunity now that you've given me a leeway to let you know that my colleagues have attended actually a very important exhibition in Saudi Arabia just thirty days ago. And they see the market just as vibrant despite the challenges that are happening in that country. So we do anticipate not just in Saudi Arabia, but also in other countries in The Middle East that order finalization, it may move between quarter to quarter, month on month. But certainly, it is not being put into any sort of cold storage or top shelf. It is just a matter of scheduling rather than anything else.

20:54 Okay, sir. And one final question. Like our EBITDA margin has been moved from 45% to 36%. And in the managed commentary, sir, like you have mentioned like it is due to the drop in mix of the products and people cost. Is the people cost increase now largely complete? Are more additions to happen in this year? Yes. A few more additions will happen, but it is going to be small in terms of those additions. I would encourage you, since you've asked about EBITDA margin, which is a more complex question, it's not just about the HR cost. It is important to consider, though, our results at the end of the year because there is a balancing. In certain quarters, you sell more product, fractionally less aftermarket solutions, and that has a way of changing the EBITDA margin. But the overall EBITDA margin that I would encourage you to look at either way rolling four quarter basis or at the end of the year. My preference would be at the end of the year.

21:59 Thank you. Mr. Rade, I request to come back for a follow-up question. I request all the participants, please limit yourself to two questions per participant and rejoin for a follow-up. The next question is from from Finvestors. Please go ahead. Sir, am I audible? Yes. Go ahead. Sir, after h one, FY twenty seven, revenue of $1.89 crore, what is the management's revenue growth outlook for FY twenty seven and FY twenty eight also? What portion of the expected growth is supported by Confirm orders? So I'm afraid we do not give specific numbers in terms of our forecasts.

22:48 However, we do not give revenue or margin guidance. But what I can say is that the underlying indicators are absolutely encouraging. Our closing order position provides us with a very healthy base for the future execution. And beyond this existing order book, there are multiple vectors, which I've already explained in my briefing that are underway and gives us confidence about the growth of this business. So the two things that I want to say is that, yes, there is movement between quarter on quarter. The outlook for H2 looks very positive to my mind. There were certain orders that were pushed out from Q2 to Q3. But I think that Q3 and Q4 looks extremely encouraging for all three segments of our business, for the product, for the aftermarket and for the defense part of our business.

23:43 As far as book and bill is concerned, we do have some amount of book and bill for H2 that is required to be able to meet our targets, our internal targets for H2. But I'm very confident in terms of our management review that, that has been secured with conversations or rather converting inquiry to order and then order to execution. So we're very comfortable about that. From a medium term perspective, if I had to answer your question because I was expecting this kind of a question, our growth ambitions is certainly to deliver growth over a medium term basis, let me say five, seven year basis of over 25% year on year. This does not count I'm not talking about fiscal twenty twenty seven at all. I'm talking about the next five to seven years in terms of growth for this business.

24:36 Okay. Thank you, sir. And one more question, Defense revenue grew 2.3x in Q2 3.7x in H1. Was the contribution from Defense in absolute revenue term? And how much additional revenue is expected from Confirmed Defense and Marine orders in FY 'twenty eight? Yes. Excellent question. Unfortunately, we only give it as one segment. We give our business revenues as one segment, and we do not branch it out. You will appreciate the fact that we have incubated this defense business and it is going to due to the nature of our business, which is Precision Engineering, we have these multiple revenue streams.

25:21 And defense is becoming more important as a growth area for the company, and we're providing investors with increased visibility about the performance parameters of strategic development. At this time, segment reporting, we have determined that, that is not wise at this point to be able to encourage these businesses to grow. However, I think your point is noted. And at a particular point in the future, we will certainly consider that from a management commentary perspective. Thank you, Gaurav. I'll request to come back for a follow-up question. Next question is from the line of Ashish Kolecha from B Ventures. Please go ahead. Yes. Sir. Am I audible? Yes, you are.

26:07 Yes. Hi, sir. Greetings. Very good set of numbers, and we really like the commentary. I'll say my questions, first question, and then I'll come on the second question. As for the presentation, we have highlighted that addressable market is 16,000 to 24,000 CR in Indian level proportion across NGTL, NGV, and p 75 and p 76 submarines. COD LNG and COD AG systems, was that auxiliary subsystems like strapping, wind stabilizers and plug of blocks? This is my first question, sir.

26:55 Okay. Excellent and very detailed question. I'm going to give it in summary, and I would encourage you to contact us offline if you would require a more detailed explanation across what we can give because I don't think we can I don't think we can offer you we can offer you, of course, significant details? But if I answer you generally for the benefit of all the others on this call as well, as far as gearboxes and shafting and fin stabilizers are concerned, we have our project qualification across all tenders that are coming across from the Indian Navy and across all the shipyards. Now I think that is a position that the company is in through our own technologies as well as partnerships with some leading equipment suppliers globally.

27:42 So we have forged partnerships to qualify for each and every gearbox as well as shafting as well as stabilization system order that comes across from all the shipyards. And I think in specific technologies that you would like to discuss, I would encourage you to contact us offline. We'd be happy to take some of those questions. Sir, can I go for the my second question? Please. Yes. Sir, you know, Rank Group AG Germany has opened a manufacturing plant at and the Rank Gears Private Limited. Now I wanted to understand that you also would be knowing that trying to do a collaboration with Elecon. So they are basically targeting industrial high speed gear boxes and couplings for power, energy and process industry.

28:34 Wanted to understand a few things. My question is a bit detailed. Are we witnessing tight competition or OEM relationship displacement in the 10 megawatt, 50 megawatt compressor and gas turbine gearbox segments or high margin drop in replacement aftermarket? And also wanted to understand how would CPCL reserve its vote in high value levels, marine propulsion rates? Okay. Interesting question. This is not the first time that we've had any of our global competitors start business operations in India. I am aware that we have a competitor in the South Of India, and we do see them from time to time. We do not see them across the board. I think our and they have been it's not as if they've just started operations. They've been in the country now for a few years.

29:25 Our market share position has remained unchanged during this time. And I think that speaks to our value proposition to all of our OEMs more than anything else. So I think, let me that probably answers part of your question. Now with respect to their relationships with other gearbox manufacturers, I'm afraid I'm not privy to that. And we will see as and when those industrial relationships get forged. However, I don't think that it is a cause of concern to us because this is a global market that we're in. We expect to see competition, not just domestically, but we expect to see competition globally. And we are global competitors for the same company that you've talked about. Now with respect to compressor gears, very frankly speaking, the Indian compressor gear market is very, very small, extremely small. The real competition for compressors is Europe. And that is where we are now, not just on the AVL of the largest customers, but the OEMs are buying from us increasingly.

30:32 And I see that as a massive growth market for DPTL. So it is not the India market where we'll be competing in compressors, it is actually Europe where we will be competing in compressors going forward. So I wanted to understand how would we see some of more than high value in the level of Marion propulsion bridge going ahead? Thank you, sir. I'm so sorry. I did not understand that question. Can you repeat that? Sir, I wanted to understand when the competitor is also basically there, and we know that our motive is in high value naval marine propulsion bridge. So how would we go in that basically next three to five years? How would we preserve, what you should say, segment position, which we are basically currently leading in India? Right.

31:21 So marine propulsion actually is a new area for the company. It is our history within high speed gearing. Your question, as I understand right now, is about marine gearbox propulsion. I'm glad that you've asked this question. Triveni is the only Indian gearbox company that is recognized across multiple platforms by the Navy and Coast Guard for having its own technologies. In the medium and smaller space, we're the only company that has complete technology and we have won orders from our customers, being the Indian Navy and Coast Guard for these projects. I think this will continue to grow. Very honestly speaking, I think it's a recognition of the technical capabilities that exist at PPT. It is a reflection of the talent and the design capabilities that exist. Now for complex solutions for larger gearboxes, of course, that will be in partnership with global equipment providers, etcetera. And there, we will compete head on.

32:24 Yes, the competition will be in terms of pricing. Yes, the competition will also be in terms of technology. But I think what we have achieved in a very short period of time is to become a domestic complete domestic source, having complete technology. Never before by any company in India has their company had complete technology, Ab Initio as far as marine gearboxes are concerned, and we are marching in that direction. Thank you. Ashish, I'll request to come back for a follow-up. A request to all the participants, please limit yourself to two questions and rejoin for a follow-up question. Next question is from the line of Sanjay Manyal from DAM Capital Advisors. Please go ahead. Hi, sir. I have two questions.

33:11 So one is specifically on the order book side, given the fact that sort of historically order book used to be six to nine months when the gear and gearbox was a dominant part of our order book. And given that defense has become now dominant part, almost 60% of our order book now, how do we see sort of order booking going forward? Will this six to nine months of a delivery or the execution period will I'm sure it will move up, but how do we see that moving up from six to nine months to what period? And also if this at the same time, if you can give some color on the our export order book or the inquiries, how do we see the export part of the business going forward? How this will move forward?

33:58 Yes. Sanjay, excellent questions. Yes, of course, you're right. On a holistic basis, the six to nine odd months average order book that has existed for the company for the last number of years will change. It will increase based on defense. However, we will try our level best to inform our stakeholders all the changes relatively because we are sharing what is defense order booking and what is gears order booking. As a result, the gears order booking is not going to change, whether it be domestic or whether it be export gears order booking. The defense side could change. And the defense side will be longer than six to nine months.

34:45 And it depends on some of the projects are in terms of that we are now tendering for multiple in nature, which will have deliveries over three, four, five years of substantial quantity in every year. And so the numbers of those projects, should we be successful, will obviously be longer. That is our intention in terms of how we would share these numbers with you. Now I hope that sort of answered the first question. As far as your second question is concerned, I'm glad you've asked that as well. We've had an excellent quarter under review. And in fact, in this quarter, we've had a 3x increase in our order booking for export orders, which was INR12 crores and went up to INR36 crores.

35:31 So and I think that, that is just a real start. I think it is going to expand very, very significantly in coming quarters and add very meaningful growth to the business. So I think all of our the fact that we have TPTL, GMPH in Switzerland, the fact that we have colleagues that are selling across Europe, Africa, other parts of Asia, that is having meaningful results and we are seeing that in hard numbers now. Right, right. Understood. Just one more question on the specifically on the margin side, given the fact that our long term margin has been in around 30%, 35% or so.

36:18 Now this, I believe, largely because of really large proportion of our business is aftermarket. Now given the fact that defense contribution is going to go up, move up significantly going forward, and I'm sure that aftermarket proportionately will come down, Do you think that this could be a margin dilutive thing going forward in the medium to long term probably? So Sanjay, in the medium to long term, I do not expect it to be margin dilutive at all. We will try our level best to ensure there isn't lumpiness even in the short term. But certainly, in the medium to long term, very happy that you asked. Again, I do not believe it to be margin dilutive.

37:04 In fact, if anything, we would like to say that our growth ambition is to maintain our margins of 35% of EBITDA plus. And that is how we are structuring and creating this business. In fact, the hiring that the previous gentleman asked about is very much part and parcel of this delivery of growth and profitability. Right, right. Maybe just one last thing on the if you can just give a share a Triveni turbine contribution to our revenue in H1 specifically, I think previous historically, this has been close to 25%, I believe. What has been the number for H1?

37:50 I'm afraid I don't have that number with me right now, Sanjay. You can contact us offline, and we'll be we can see if we can share it with you. Okay. Thank you very much, sir. Thank you. Next question is from the line of Kiveni Campbell Advisors. Please go ahead. Hello, sir. Thanks for taking my questions. I hope my voice is audible. Yes. It is. Yes, sir. Yeah. Yeah. Sir, I just wanted to understand your view on the entire Middle Eastern CapEx reconstruction because I feel the India's feedback on this are actually getting the orders. So are you seeing any delay? And when can we actually expect substantial growth in the order book in coming from The Middle East and CapEx? I think it's very important to understand how India how Indian capital goods companies are going to benefit from the growth in CapEx in The Middle East and the broader MENA area, frankly speaking. I think I would like to take that question from a MENA perspective.

38:55 The turbulence that we've seen in the last three quarters, three calendar quarters has been significant. I will not shy away from that. It has certainly been significant. It has created shock waves, frankly speaking, globally, not just with respect to India. However, our business has progressed, some bit albeit a little delayed, but it has certainly progressed. The fact that we are participating in exhibitions in this area, in these countries that we are getting orders from customers. Our OEMs in Europe are placing orders from important Middle Eastern customers. ADNOC, for example, has placed even more orders from us in terms of pumps as well as compressors. We're seeing that growth in development.

39:42 When that switch turns on in terms of full fledged commitment to capital expansion is a $1,000,000 question. I think I'm not in a position to be able to answer that. We've been encouraging our OEMs as well as our end customers to give us some idea. They remain bullish. They remain positive, but they have stayed clear of giving a definitive goal in terms of when they will really ramp up. I think what is clear is there is a need for significant capital investment in that part of the world. I think that clarity is really upon us. And that would affect DPTL, it's very encouraging because it will be for pumps, it will be for gas turbines, it will be for compressors, it will be for steam turbines, it will be for test benches, it will be across the board for all the prime movement that we work with.

40:40 But having said that, it's difficult to sort of pinpoint when that cycle will really ramp up. It's not as if it is absent. And by no means do I want you to walk away feeling that those orders are not coming. They're certainly coming. It's not as if it's a trickle. It's a steady stream. But I do believe that the market really warrants quite a lot more CapEx. Okay, sir. Got it. Yes, sir. Those are my questions. You. Next question is from the line of Maher Shah from Van Entry Advisors. Please go ahead. Good afternoon. Thanks for the opportunity. Can you just comment on the global industry for high speed gearboxes? How many players will be there and what will be the market share of the largest players?

41:32 And are these larger players, larger incumbent players actively focusing on this segment because it's still growing by 6% or 7%? Yes. That would be the first part of my question. Sure. Yes, I think so we have I would encourage you to read the information memorandum that TPCL published. It's available on the stock question. Then question. And And But since we you've a asked this question on the earnings call, let me offer you a very brief answer.

42:22 We have between seven to nine competitors, not including China globally that we come across for our export orders. The majority of them are European based companies. The largest company would have a market share of about 15 odd percent from a global perspective. So it's a reasonably diversified market space, but it has few companies. The aftermarket portion of the market is, of course, far more diverse with a lot of smaller operators across the world offering just in time solutions, etcetera. And that is a very interesting market space that we are, of course, looking at as far as DPTN is concerned.

43:14 I think there has been a lot of focus on growing the gearbox market. And I think with data centers and space becoming more significant market opportunities that did not exist even twenty four months ago, literally. I think the market could possibly grow at a faster pace than what we have projected. We have taken numbers of a study that we have commissioned. That study was approximately a year old, and therefore, it considered the market at that point in time. We will, of course, undertake a further study in the next calendar year, and that will perhaps hopefully point towards a higher growth rate for the market. But as far as research and development, as far as growing the market is concerned, I'm happy to report that there's been a lot of attention that's been given to this product category.

44:13 Sure. The second part would be, if I'm not wrong, our current market share globally in the high speed clear box segment would be low single digits. So what would be our ambition to grow from here in the medium to long term? What what is the kind of market share that we can gain in the, say, in the next five to seven years? What's the ambition for you as a company, and what are some of the competitive advantages which we have which can lead us to gain market share. I think one of the factors which you mentioned was shorter delivery cycles. So we just wanted to understand what leads us to have shorter delivery cycles compared to our global peers. Okay. As I mentioned to a little bit earlier in this conversation, our focus, our growth ambition is to deliver sustained CAGR of over 25% over the next five to seven years, at least. So you could do the mathematics of where we are and where we would be compared to where the market is growing rather than we work it out for you.

45:16 Let me I think the second part of your question is very interesting. Our manufacturing cycles are faster because of our investments in inventory. In addition to that, our digital transformation that we've undertaken, we continue to enhance our productivity and especially in terms of our delivery days, coupled with other strategic initiatives. So it's a combination of three or four strategic initiatives that allows us to produce faster than our global competitors. We also have manufacturing capability as we have invested significantly at low costs in terms of adding manufacturing capacity that adds further to our delivery cycles.

46:05 That's point one. The second is supply chain relationships. I think those are very, very crucial in terms of being able to roll out product and deliver product faster. And lastly, it's about HR talent that allows us the capability to be able to not just quote faster, not just manufacture faster and maintain our lower cost advantage versus our competitors. The ability for us to be able to work multiple shifts, three shifts, etcetera, during the work week, including weekends, etcetera, that type of flexibility is unparalleled when we compare it to our Western European and North American competitors. And that is the most significant reason.

47:03 You. Maher, I'll request to come back for a follow-up. Next question is from the line of Komal from Vertnable Investment. Please go ahead. Good morning, sir. I just wanted to understand regarding the oil and gas segment where... Komal, sorry to interrupt. Can you speak through the handset, please? I just wanted to understand about the oil and gas segment. We believe that our next set of high speed gear orders are expected to come in whenever there is CapEx in oil and gas. Given that where the crude oil prices are, do you expect that to be big and substantial enough over the next two, three years? Second question, you may ask after that. Very short answer to your question, yes, absolutely. Oil at $120 is a ripe opportunity for people, not just in the oil and gas segment, but in the entire segment covered by the American Petroleum Institute.

48:04 It has downstream effects on all the petrochemical related industries as well as far as their CapEx cycles are concerned. So just to complete this question, have we qualified for that American Petroleum, whatever standards are there? And have you got in parallel with, say, the likes of ADNOC, etcetera? So American Petroleum Institute, or API for short, is a manufacturing standard that is required by a variety of companies in the oil and gas and petrochemical and fertilizer, for example, segments and other segments as well. Yes, we manufacture and have manufactured to those norms consistently for many, many, many, many years, multiple decades. So we have great comfort in terms of all of those compliances that have no issues at all as far as that is concerned.

48:59 And as far as ADNOC is concerned, yes, we are qualified. We are on the area. And sir, coming back to the Marine and Defense segment, our technology partner has been LUCFIN, which has done globally well in this segment. So how have we benchmarked against them? How big is their different segment as a percentage of their overall revenue? Do we seek to become as large as them? Is the market opportunity global for us? Just some thoughts around what we have learned from Luke Finn and what our aspirations are. So I'm afraid I don't know what Lufkin is a part of a much larger industrial conglomerate, Baker Hughes, and I'm not privy to the revenue numbers, etcetera, for segments. So I can't answer your question on that front.

49:47 But yes, we have partnered with them for some marine gearboxes. And I think that's a very encouraging partnership for the long term and one that I hope to grow. My benchmark is not a is following what a European or American company is doing because as far as defense is concerned, it is much more from a domestic perspective. For us, our targeted strategy has to be to occupy the largest market share for all of our products as far as the defense segment is concerned, very similar to our position in high speed. That is the vision and strategy of that particular business. Thank you. Next question is from the line of David Panjabi from Banned Entry Advisors. Please go ahead.

50:38 Yeah. Hi. Thanks. I had two questions. One was, I just wanted to understand with the current defense capacity that is there, what kind of revenue can be done? The other one is, again, related to defense. In the segments that we are competing in, how are the products currently being procured? Is it... Are are they being imported, or is it being done by our domestic players? Just wanted to get some more idea on that. Sure. So the answer to your first question in terms of overall capacity, we operate a multimodal facility. So it really depends on the selection of products that we win and we are manufacturing from time to time. We don't have an exact number to give you in terms of overall capacity in rupee terms, but that is something that we will certainly work out as this business grows.

51:33 We don't see any, as I mentioned, further CapEx that's required either in defense or in our gears business that have any significance for the short term at least. And therefore, we don't really require anything as far as our growth targets are concerned. I know this is a bit of a nebulous answer. It's just that we have not given and shared a single figure for our defense factory at this particular point in time. Your second question was respect to the import, the stages of yes, frankly speaking, under the various VPPs, the move is towards Make in India, Make for India as well. And if I had to go back a decade or two decades, all of these products were being imported. And certainly, the hot sections of all of these products that we were making were being imported and put some minor work happening with domestic partners. When I look at marine gearboxes or look at shaft lines, which are totally imported, some small shaft lines will be manufactured by one company in India.

52:40 But nothing with respect to the larger segment. Same thing with fin stabilizers, etcetera. You had the vast majority of these items being imported, but the focus now is about making India. The focus now is also to buy from India. And that's what really assists the growth of this business for Triveni, for the TPTL. I hope that kind of answers your question. Sure. And I'll answer that. And just one more follow-up on the data center side. Can you help us understand what kind of demand is coming from data centers and, like, roughly what percentage of the order book would it be contributing to? So firstly, we have to have a product that goes in for that or for data centers, which we're hopeful to have in place during this quarter.

53:31 As that happens, we will then work with our OEMs to be able to ascertain what that new market share is and what that segment is. But we all read papers, we all understand what's happening in North America, what's happening in Europe, what's happening in other parts of the world as far as growth in data centers is concerned. It's a very mind blowing numbers, etcetera. We hope to be part and parcel of that ecosystem. As and when we have more data, we'll be able to come back to you with actual numbers. Thank you. Next question is from the line of Neil from Needham Capital. Please go ahead. Hi, good afternoon. A lot of the questions have already been answered.

54:16 I think I have one question right now Is around the CapEx around the gearbox, that 700 crores that we were going to do, is it largely done? That is the first part of the question. Yes, it is almost all complete. Okay. So it's done. Just wanted to understand from you, what are you envisaging for the ramp up on the GEARbox side? Do you think a lot of this will be fully utilized by FY 'twenty nine? Sorry, I just wanted to point out INR700 crores was not the CapEx. INR340 crores was the CapEx. The Gears revenue target... Revenue potential, yes, sorry, revenue potential. Correct. It didn't come across clearly. Could you ask your second question again, please? So do we expect our utilization levels to reach towards full capacity utilization by, let's say, FY 2029 or maybe FY 2020?

55:12 Again, that kind of alludes to giving projections, which I'm shying away from. Let me just say that even before we come even close to that number, when we come to into that vicinity of, say, let's say, 80%, we will then have to start looking at further CapEx of expansion. And that would be the next trigger. If your question is what is the trigger for the next cycle of CapEx, it would be when we are at about 80%, 85% capacity utilization when we start looking at the next phase of CapEx. And we're not there as yet. Towards the question of when we will be there, I would prefer not to answer that question.

56:00 Understood. One small question also on the gearbox, the gears business is that on a quarter on quarter basis, our order book has actually increased, right? Up 15% quarter on quarter? Yes, correct. But there is some movement. There is no degrowth on this or flatlining? No, no, not at I think I was I'll be honest, I was disappointed with the growth. And now that you've asked the question, I can share with you that I was disappointed with the growth personally. And a lot of it has to do with what's happening around the world, etcetera. But there is no question of de growth at all. In fact, it's very encouraging. And I myself in my trips of meeting our OEM customers, I'm very encouraged with the type of growth that they have in their business and the filter down effect on us.

56:57 Understood. So large part of this second quarter growth in order book has come from Gears. In fact, of it has come from Gears, nothing from Defense, right? You expect Defense also to start pitching in from next couple of quarters and beyond? That is certainly my hope. So again, I think the Defense order book is going to be lumpy because we try and win select projects. When those projects get actually finalized so that we can recognize it as a part of our order book, we have no control over at all. And so the short answer to your question is yes. Thank you, Neel. I'll request to come back for a follow-up. Next question is from the line of Malik Chaudhry from Monarch Networks Capital. Please go ahead.

57:46 Hello, sir. Am I audible? Yes, you are. Yes, go ahead. Thank you, sir, for giving me the opportunity. I just have one data keeping question. So if you can bifurcate your order inflows into product aftermarket and defense for the quarter, for the Q2 and the Q1? Sure. Can I encourage you just to I'll pass it over to our Group CFO? Yes. I've got the figures for H1 actually. This is not really quarter wise. Terms of product, the total order booking is crores. Aftermarket is INR64 crores and difference is INR135 crores.

58:35 That's for H1. Domestic and export? No. The only export revenue that we have given is on the product side, which as I mentioned earlier, was INR12 crores in Q1 and INR36 crores in Q2. We do not give it for any other segments. Okay. Thank you. You. Next question is from the line of Harshil Patel from Private Investment Adviser. Please go ahead. Thank you for the opportunity, but my questions are already be as answered.

59:23 So thank you. Thank you. Next question is from the line of Siddharth Shah from SRS Capital. Please go ahead. Yes. Hi. I just wanted to ask more about your international aftermarket expansion. And is that kind of a necessary requirement to grow our direct exports business to either first get into aftermarkets for customers and, you know, show some product experience and technical expertise or to have their aftermarket in place before they'll even purchase orders from us? No, not at all. In fact, I'm glad you asked that question. It not it does not impact our sale of original equipment at all, zero.

1:00:10 It is really a very profitable segment for the company. The reason we want to do this is because it also allows us to develop much stronger relationships with the third party users, the eventual users of our gearboxes. Let me just explain to you how it works domestically. Part of the reason of our market share is almost all industries across India have a Triveni gearbox. And we work with them on not just our gearboxes, but the majority is on other people's gearboxes that historically purchased from around the world. Now having that type of relationship means that when they come about to order new gearboxes, their provided on aftermarket solutions.

1:01:00 You must remember that our aftermarket solutions domestically, the vast majority, overwhelming majority is on third party gearboxes, not Triveni gearboxes. Now to transpose that strategy on an international market is essential if we want to keep pace with our margin profile as well and enhance our margin profile potentially. It is also a low hanging fruit because a lot of this work happens by smaller outfits in countries around the world. Not only does it the strategy is to help us develop third party relationships, but it is also then to capture a business that is, very frankly speaking, not being addressed by our global competitors.

1:01:53 Got it. That's very helpful. And my second question is, spoke about space and data centers. And at least from my understanding is we have a very strong portfolio and up to, say, about 50 megawatts. Will we have to kind of, you know, work in that 50 to 100 kind of range to tap into these markets? No. So we don't have a limitation as far as our gearbox technologies are concerned. It's just that after a certain point, it becomes direct drive. This is with your very large turbine. So far as compressors are concerned, we work with the entire breadth of compressors. With gas turbines, we work with all geared gas turbines. Same thing with all steam turbines. So we don't have any technology limitations as far as high speed gearing is concerned. As you can imagine, this is to provide a change in ratio from what is driving to what is being driven. That is the concept of a high speed gearbox.

1:02:47 Above a certain range, especially when you look at, let's say, gas turbines and steam turbines above 100 megawatt, they are direct drive. So they are coupled directly with the alternator because the rotors function at the same speed. And so there is no need for a gearbox to be added into that powertrain. And to transpose that question to space and data centers, no, these are much smaller. These are not larger. They're well within this range. You. So, I'll request to come back for a follow-up. Next question is from the line of Ravi Prahid from Securities Investment Management. Please go ahead. Yes. All my questions have been answered. Just one question.

1:03:34 In the March quarter, we had mentioned about getting an order for this axial compressor test gearbox. It's more like a test rig or gearbox. Can you just kind of help us understand? Because I think you mentioned about it being a very, very premier order for us in that con call. But subsequent to that, I think we've never discussed it. So if you could just throw some light on that to me. Sure. I'll ask our CEO, Rajiv Rajpal, to comment on that gearbox. Rajiv? Yes. So we have got orders from multinational companies operating in India in testing and significant growth we're expecting in order book from those companies going forward as well. I hope I have answered your question.

1:04:21 Is this a testing that we are going to build or are we supplying comp... You know, the gearbox? It's a component that goes into a... It's a test rig. It's it's a essential component. A test rig is an essential component. I think part of the test rig. The test rig so we are not building a test rig, right? The test rig is being built by the MNC or is it built by By a government somebody else. Okay. And we will be providing the gearbox set basically for the test rigs. By that team. We we are also gaining a little extended scope including gearbox as part of the test rig. But the whole test rig as we said we mentioned is built by the multinational company. Okay. And how significant is this opportunity?

1:05:07 As in I am assuming this is for engines being tested. Right? How significant and how frequent are gearbox or parts of gearboxes kind of required in these test rigs? So, I don't have a market number to share with you, but the gearbox is a central piece of equipment, mission critical piece of equipment for any test gearbox, and it's used not just for propulsion, for power generation, for space, for all host of different applications, as you can imagine. Thank you. Next follow-up question is from the line of Gaurav Shikla from Investors. Please go ahead.

1:05:54 Sir, I'm audible. Yes. Go ahead. Sir, after three forty CapEx, three forty CR CapEx, we... In in gearbox, we have seven hundred seven hundred. And full peak capacity, what is the full peak capacity after this extension? So the crores CapEx is not just for gearboxes, but it is also for our defense facility. The total combined CapEx offers us production of approximately INR700 crores based on the mix, frankly speaking, of just gearboxes. And it also offers us a significant revenue from our defense capability. However, I'm unable to share a number with you at this point in time just for defense.

1:06:45 The three forty crores, let me repeat, was for both broad it was evenly split between gears and defense. Okay, sir. And in FY 2027, how much capacity we will utilize? As you said, that 80% after 80% capacity utilization, we will go for CapEx. Then sir, now in how much capacity we are utilizing? No, I didn't say that. I said at about 80%, we start thinking about it. About the next level, 80%, 85%. And it really depends. It depends because we have very good we have good visibility in terms of the markets and what orders we're getting. But to answer your specific question for fiscal twenty twenty seven, I'm afraid we don't give forward looking estimates. So I'm afraid I cannot answer that question.

1:07:37 Okay, sir. Thank you, sir. Thank you. I now hand the conference over to the management for closing comments. Ladies and gentlemen, thank you very much for joining us for the Q2 fiscal twenty twenty seven earnings conference call for Triveni Power Transmission Limited. It's a great pleasure and honor for me to host this first earnings conference call for the company that as you may have heard me say the company is positioned for fantastic growth domestically and internationally. There's a tremendous amount of work that has been happening in house in terms of capacity building, in terms of research and development, new product development, which really showcases the business potential, not just for this fiscal year, but also for subsequent quarters beyond that as well. I'm excited to come back to you in three months and six months' time and tell you about all the developments that have been made.

1:08:35 And the hope, of course, is that the global climate will continue to improve as it has in Q2 and be much better and more productive. Thank you very much, and have a good day. Thank you very much. On behalf of Triveni Power Transmission Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.