Q&A with the Vice Chairman & Managing Director

The performance has been quite exceptional, with the Company reporting its highest ever profitability. Profit after Tax saw an impressive 43.9% growth to touch ₹ 424.06 crore.

Vice Chairman


Vice Chairman & Managing Director

How would you describe the Company’s performance during FY 22 and what were the key drivers that contributed to the same?

The performance has been quite exceptional, with the Company reporting its highest ever profitability. The Consolidated Profit Before Tax (PBT) stood at ₹ 573.75 crore – a marked rise of 24.8%, while revenue from Consolidated Revenue from Operations (net of excise duty) was ₹ 4,290.9 crore for the year. Consolidated Profit After Tax saw an impressive 43.9% growth to touch ₹ 424.06 crore. We have maintained our sugar profitability despite lower sales volumes, and this has been on account of better realisations resulting from higher domestic sugar prices.

For the distillery/alcohol operations, both sales volumes and higher realisation prices steered profitability. The Alcohol business reported 30% increase in net turnover and 48% growth in profitability, on account of a better product mix, higher despatches, increased realisation prices and better efficiencies. In FY 22, ethanol produced from B-heavy molasses constituted 83% of the distillery’s sales volume, as against 55% in the previous year.

As far as the Engineering businesses are concerned, we notched a 16% increase in turnover during the year. The growth has been driven mainly by the Power Transmission business, which reported its highest ever annual revenues across segments, including the export markets. This has translated into record profitability for Power Transmission, on account of our strong market position, cost controls and operating leverage. In the domestic market, the growth has been mainly driven by capital expenditure on power, steel, refineries, oil and gas, fertiliser, cement, sugar, and mining. These are the primary areas where we have seen substantial order booking.

Our Water business also registered marked improvement in profitability and order booking during the year as the pandemic effects started easing off. Better cost control and efficient project execution are leading growth in this segment.

The Company’s total debt on a consolidated basis was ₹ 1,567.96. crore as of March 31, 2022, as against ₹ 994.02 crore as of March 31, 2021. This comprises term loans of ₹ 460.05 crore. The increase in total debt over the previous fiscal is mainly on account of higher sugar inventory levels and faster sugarcane price payments.

What were the key challenges faced by the Company in delivering this performance?

In our Sugar business, we saw a delayed start to the season due to heavy flooding in one of our sugar factories at Milak Narayanpur, because of release of water from the dams in the Himalayas following heavy rainfall. In fact, across Uttar Pradesh, we saw uncharacteristically high rainfall in several areas even after commencement of season, leading to reduced sugarcane yields and sugar recovery. The impact of climatic change was again evident when unusual heat conditions were witnessed towards the end of the last quarter of FY 22, which were not conducive to sugar recovery and production. Further, in some regions, the crop was infested with red rot (at some units), top and root borers. This resulted in lower sugarcane yields and availability, particularly in eastern UP where our Ramkola unit is located. Fortunately, despite these challenges, the Company is expected to perform well in SS 2021-22, and the decline in recovery and sugar production is estimated to be relatively lower than the average for the state of Uttar Pradesh.

In terms of our Engineering business, the lockdowns across states amid the second wave of COVID-19 impacted raw material supplies and deliveries. These led to slowdowns in both our Power Transmission and Water segments. But we got back on our feet quickly once the situation eased and moved with agility to push recovery, leading to excellent results in the Engineering business.

What is your perceived outlook for the Sugar business for the coming year?

We are optimistic about the outlook for the coming year. We will begin the Sugar Season 2022-23 with closing sugar inventories of around 6.2 million tonnes, which is the lowest in the last five years. In the Sugar business, in view of normal monsoon forecasts, we are looking at similar production as the previous season at ~ 35.5 million tonnes even after higher diversion of sugar into alcohol but the exports are expected to largely consume surplus production over the consumption, keeping sugar prices firm. Being in one of the most productive sugarcane growing areas of the U.P., along with the Company’s cane development initiatives, we expect a higher sugarcane availability and crush (with increased sugarcane drawl) in the coming season, which is expected to be aided by a normal monsoon as forecasted.

With the commissioning of our grain-based distillery of 60 KLPD and further enhancement of capacities at our existing facilities at Milak Narayanpur and Muzaffarnagar, the total alcohol manufacturing capacity will reach 660 KLPD by July 2022.

To gear up for the emerging growth potential, the Company’s Board has approved the modernisation of three of our existing sugar units. We plan to modernise our Khatauli, Deoband and Sabitgarh units in Uttar Pradesh at an investment of up to ₹ 130 crore, which we aim to complete by the third quarter of FY 23. These will lead to higher crush rates, improved quality of sugar with a higher proportion of refined sugar production. We shall also continue to strengthen our sugarcane varietal substitution plan through enhanced R&D focus to further improve productivity.

The Company has been moving aggressively to strengthen its presence in the Alcohol (Distillery) business. What kind of potential do you see in this segment for future growth?

As far as the Alcohol business goes, the Government of India’s sustained push for ethanol blending is propelling growth in this industry. The average blending percentage in the country stood at 10.04% till June 5, 2022. The country is targeting ethanol blending of 10% in Marketing Year 2021-22, and the Government has also advanced the target of 20% EBP Programme to 2025 from the earlier target of 2030 to boost sustainable development and achieving energy security. At Triveni, we have consciously adopted a partnership approach to help drive the Government’s efforts to realise its ambitious targets. We are continuously gearing up additional capacities to meet the emerging demand for ethanol. In April 2022, the Company commenced operations of its new multi-feed distillery with a capacity of 160 KLPD at its sugar mill at Milak Narayanpur in District Rampur, U.P. We have also enhanced capacity at Sabitgarh from 160 KLPD to 200 KLPD. With these expansions, our current distillation capacity stands at 520 KLPD, and we plan to further raise it through greenfield and brownfield projects.

The Company will soon commission its grain-based facility of 60 KLPD to be set up in the existing distillery complex at Muzaffarnagar (U.P.) taking the distillation capacity to 580 KLPD. With further enhancement of distillation capacity of the existing distilleries, subject to receipt of necessary statutory clearances, we are on track to enhancing our capacity to 660 KLPD by July 2022 through low capital cost incidental expansion / debottlenecking. And as we move towards capacity expansion, we shall also focus strategically on multi-feed operations.

What are the growth prospects you are looking at in the Power Transmission business?

There is a marked uptick in the domestic economy, as manifested in the increased order booking. The demand outlook remains positive in key sectors, with capital expenditure in Power, Steel, Refinery, Fertiliser, Cement, Sugar, Textile, Petrochemical, and Mining driving the requirement for industrial gearboxes. Further, as part of its indigenisation drive to build a self-reliant nation, the Government of India has issued three negative lists in the defence sector, which will give significant impetus to the domestic defence sector - a key growth segment for TEIL within its Power Transmission business. The Company has been focussing on business opportunities from Defence and is actively participating in many indigenous development projects. The Board has approved the expansion of the Power Transmission business at a total cost of about ₹ 80 crore, which we plan to complete by March 2023. This will primarily be for a new factory in our Mysuru plant, along with machinery and equipment.

Where do you see the Company headed in terms of its Water business over the next year or two?

I am happy to say we are quite well positioned in this segment and are hopeful of the finalisation of tenders in FY 23 and securing orders of substantial value. We will also, of course, participate in new significant tenders in the coming fiscal. The outstanding order book as of March 31, 2022, stood at
₹ 1,513 crore, which included ₹ 940 crore towards O&M, which are over a longer period. The growth potential is extremely positive, considering the almost dramatic expansion in demand for clean water, both domestically and internationally. And given the fact that we had won an international order (in the Maldives) in FY 21, we are now targeting overseas markets such as South Asia, East Asia and Eastern Europe for new opportunities.

The agreement with GEAE Technology USA is in line with our long-term vision of supporting the Indian Navy in self-reliance. It is also in line with the ‘Make in India’ policy of the Government of India.

So overall, would you say the outlook for the Engineering business is positive?

Yes, definitely. With a strong tendering pipeline in the water business and capacity expansion along with a foray into defence, the overall outlook for the coming years looks extremely promising. We have a strong leadership position in the domestic high-speed gears market. We are now looking at accelerating growth in the export market to aid overall long-term business growth. We aim to strengthen our presence in Power Generation, Compressors, Pumps and Built to Print in Industrial and Oil & Gas segments, majorly from western markets.

In the Defence business, we shall focus on gaining a foothold in multiple indigenous product categories through the development of our technology as well as through technology collaborations. We are also aiming to start a new multimodal facility at Mysuru, dedicated to Defence products and the development of a pool of highly competent resources with required domain expertise.

Talking of the Defence business, can you share some details of the 10- year business agreement the Company has signed with GEAE Technology USA?

This is a very important and prestigious project for us. Under the agreement, GEAE Technology USA has licensed TEIL to locally manufacture the LM2500 gas turbine’s base frame, acoustic enclosure, and lubricating oil skid, besides supplying other source-controlled accessories that go into the LM2500 gas turbine enclosure assembly. The LM2500 is the Indian Navy’s chosen propulsion gas turbine for many of its surface combatant vessels. The LM2500 gas turbines, with power ranging from 25 MW to 35 MW, are best-in-class naval propulsion gas turbines and are in service with over 40 Navy forces globally. Our expertise and experience with indigenous design and development of engineered rotary products for various naval platforms is the main reason for the Company being awarded the project.

The agreement is in line with our long-term vision of supporting the Indian Navy in self-reliance. It is also in line with the ‘Make in India’ policy of the Government of India. We believe this arrangement to be a major step in bringing the high-end technology indigenously to the Indian Defence as part of a long-term plan, and we, at TEIL, are well positioned to contribute to the same.

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